ALEXANDER KHURSHUDOV: if oil exporters are not happy with the slow increase of oil price, they will cut quotas in June
IIn February OPEC reduced oil production by 139.5 thousand bpd. Meanwhile Saudi Arabia claims that it was producing 10.011 mln bpd last month, though according to other sources this figure is 214 thousand bpd less. Kuwait and the UAE combined lost 0.8%, while Nigeria gained 3.7%. Iran slightly increased its production, Iraq decreased it.
According to recent reports, the daily production in the US rose by 18 thousand bpd, it has been rising from its autumn minimum for the fifth month in a row. The commercial stocks in the country grew by 0.85 mln barrels, while motor gasoline and diesel stocks combined decreased by 6.1 mln barrels. The oil import in the US slightly declined, but it is still high (7.2 mln bpd).
The active rig count in Canada decreased by 30, but in the US it grew by 15. Four new rigs appeared in the Permian Basin area, the same number in the Gulf of Mexico, the others are spread over smaller oilfields.
The largest Chinese oil producer PetroChina reduced oil production to 2.5 mln bpd (by 5.3%) last year, but, on the other hand, it increased gas production.
The American agency EIA is expecting the average Brent price for this year to amount to $54.62 for a barrel. Its forecast concerning the oil production in the US next year is 9.8 mln bpd, which is 6.7% higher than the current figure.
The Brent quotes reached their three-week peak of $53 for a barrel, and WTI is being sold for over $50. The impulse for this was Kuwait’s oil minister’s statement in favor of OPEC agreement prolongation and production decrease. What is especially remarkable about his statement is that he supposed that the production decrease would be discussed for all OPEC members, including Libya, Nigeria and Iran.
Goldman Sachs increased the forecast oil price. According to the bank’s analysts, a barrel of Brent will cost $59 in the second quarter of 2017, a barrel of WTI $57.5. At the same time the bank lowered the forecast price for Brent and WTI for 2018 to $58 and $55 respectively.
What conclusions do you, readers, think we can draw based on these news items? Can’t you guess? NO conclusions can be drawn. All we have is a fragment of information noise, which contains nothing important. All these “estimates”, “analyses”, “forecasts” serve as the basis to pay a good salary to their authors. That is the only purpose why they are written.
The moving forces of the oil market are hidden in longer-term changes. It’s not about a week, but about at least months, better still – years. Look at the picture showing the production data for the major producers. I transferred it from barrels to tons, because a barrel of American oil is 7-8% lighter than that of Arabian or Russian oil.
The picture reveals that OPEC increased production by 428 thousand tpd (10.5%), Russia by 76 thousand tpd (5.3%), the US by 96 thousand tpd (9.3%) during the last three years. These facts enable us to draw the following simple conclusions:
1. OPEC still controls the oil market.
2. All the rumors that shale companies are about to collapse the oil prices aren’t worth a pin.
3. The further move of oil prices will be defined by the results of the oil exporting countries’ conference in June.
In January-February the leading oil producers reduced production by just 1.8%. With such rates oil prices will grow SLOWLY. If the exporters are not happy with it, they will reduce their quotas in June.