Oil is getting whacked after report says OPEC might boost production

Daniel Fowler
May 27, 2018

Russia's energy minister, Alexander Novak, fanned speculation about a pivot on supplies when he suggested Thursday that Russian Federation and producers in OPEC would talk next month about easing their 2-year-old agreement to reduce production.

The Ministers, along with their counterpart from the UAE, discussed an output increase of about 1 million barrels per day (bpd), sources told Reuters. The contract hit its highest since late 2014 at $80.50 last week. The U.S. government estimates the cushion at just 1.34 million barrels a day next year, below the 1.4 million reached in 2008 when oil prices surged to almost $150 a barrel.

In addition, in March, commercial stockpiles of oil in the Organization of Economic Cooperation and Development countries fell 1 million barrels below the five-year average.

USA crude oil production has risen by more than a quarter in the last two years, to 10.73 million barrels per day (bpd).

But McNally and other analysts cautioned that the sharp drop in crude oil prices Friday could be short-lived and that the November midterm election was still far away.

"The tweet moved the Saudis", said Bob McNally, founder of consultant Rapidan Energy Group in Washington and a former White House oil official.

Saudi Arabia has indicated that it could raise its oil output to offset any potential supply deficit.

Speaking in St. Petersburg, Saudi Energy Minister Khalid al-Falih said any easing of restrictions on pumping levels would be gradual to avoid a shock to the market.

Weekend lie-ins could help you avoid an early death, study says
Fortunately, they found that if you're one of those people who struggles to get a full night's sleep, the damage can be reversed. However, for people who consistently slept for less than five hours through the whole week, the mortality risk is higher.

Russia's oil output reached a 30-year high of 11.247 million bpd in October 2016 and it pledged to cut it by 300,000 bpd to 10.947 mln.

It was also in 2016 that Russian Federation - now the world's single largest producer of crude oil - and OPEC agreed to tighten the supply of crude as a step to reduce the glut of inventory and to push prices up.

Comments from the International Energy Agency that warned of moderation in global oil demand due to high prices as many key consuming nations have stopped offering generous fuel subsidies to the consumers.

OPEC and non-OPEC ministers meet next in Vienna from June 22 to 23, and the final decision is to be taken there.

OPEC's compliance surpassed 150% last month as Venezuela production is at a 70-year low.

Also making headlines over the weekend was an announcement that U.S. Commerce Secretary Wilbur Ross will be visiting China from June 2 to June 4, in another effort to ease the trade disputes between the U.S. and China. The group intends to bring back the compliance to 100% which entails for the members to produce more.

Prices have moved higher not only because of OPEC and its allies' pullback, but also from threatened US sanctions on OPEC member Iran, which has been exporting as much 1 million b/d, along with the energy industry collapse for OPEC member Venezuela, which also has cut into global supply.

Other reports by

Discuss This Article

FOLLOW OUR NEWSPAPER