Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Don’t Hold Your Breath For Deeper OPEC Oil Cuts

Commodities / Crude Oil Jul 06, 2017 - 04:28 PM GMT

By: OilPrice_Com

Commodities

The rally in oil prices over the past two weeks came to a halt on Wednesday on news that OPEC is actually exporting more oil than previously thought.

A month ago, oil prices appeared to be higher than they should have been, with weak demand, elevated inventories, and a recognition that the nine-month OPEC extension would be inadequate to balance the market. Oil sold off and dropped to the mid-$40s and below. Oil traders then bought on the dip, and bid prices back up over the past two weeks. Now, prices again look like they could be reaching an upper limit.


"The air is getting thin for oil prices. The price increase just ran out of steam, which is not very surprising, given the newsflow of rising OPEC supplies," Carsten Fritsch, senior commodity analyst at Commerzbank, told Reuters.

According to Reuters data, OPEC exports jumped again in June, the second consecutive month of rising exports. Everyone tends to pay attention to the production data, but the volume of exports is arguably much more important. Reuters says that OPEC’s oil exports rose to 25.92 million barrels per day (mb/d) in June, an increase of 450,000 bpd from May.

More importantly, OPEC’s exports are actually 1.9 mb/d higher today than they were a year ago, despite the highly-touted compliance rate with the collective production cuts. Reuters columnist Clyde Russell calls OPEC’s efforts to balance the oil market “an exercise in self-deception.” It appears that OPEC is exporting just as much oil as it was before the November deal was announced, according to a Reuters analysis of oil tanker data. The UAE, for example, exported 2.8 mb/d in the first six months of 2017, higher than the 2.52 mb/d the country averaged in the same period a year earlier. Iran too is exporting more than last year.

Then, of course, there are the countries exempted from the deal – Libya and Nigeria – where exports are rising quickly. Libya’s exports only averaged 243,000 bpd in the first half of 2016, a figure that doubled to 553,000 bpd this year. Libya’s production recently topped 1 mb/d, so its exports are surely set to rise further.

Ultimately, this means that OPEC’s oil exports are not all that different from last year’s figures even though it has claimed success with the collective cuts.

That raises the question about whether or not OPEC should make deeper cuts, an approach that a growing number of analysts say is needed to balance the market.

And as Bloomberg recently noted, another cut would be consistent with OPEC’s own history. In the past, OPEC conducted multiple cuts over a short period of time, tweaking their output levels in order to achieve a targeted outcome. “In the past if it didn’t work, OPEC would adjust lower,” Mike Wittner, head of oil market research at Societe Generale SA, told Bloomberg. “It’s a process. That’s what supply management means.” It would be an “outlier” if this time they cut only once.

However, the one major reason why a follow-up cut would be more difficult is the presence of rapid-response U.S. shale. Shale drillers have already brought back a lot of production since last year, so deeper cuts could simply open up more room for them. While some analysts are pointing to the possibility of shale production starting to slow, that would support the notion that the industry responds very quickly to changing market dynamics. That responsiveness takes away some leverage from OPEC and undercuts the rationale for steeper cuts.

Moreover, it would be very difficult to get all participants on board for deeper reductions. Russia, a crucial non-OPEC producer that has leant weight to the deal, has poured cold water on speculation about the possibility of deeper cuts. Four Russian officials said they would oppose any proposal for more aggressive action.

The officials even argued that another cut so quickly after the group agreed to a nine-month extension could backfire. The hasty move would be viewed by the market as a panicked decision, a recognition that what they have been doing is wholly inadequate to balance the market. Oil traders might interpret an attempt to lower output as very bearish rather than bullish.

As a result, we will probably be stuck with the current trajectory – muddling through for another year or so with modest drawdowns in inventories, and oil prices stuck in its current range between $40 and $60.

Source : http://oilprice.com/Energy/Oil-Prices/Dont-Hold-Your-Breath-For-Deeper-OPEC-Cuts.html

By Nick Cunningham of Oilprice.com

© 2017 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules