OPEC and non-OPEC seem confident that their efforts over the last year and a half have been enough to remove the glut from the global oil market, and are correspondingly increasing their exports once again, Director of Commodity Research at ClipperData Matt Smith said in an interview with Azernews.
“We see this particularly of late from Russia, UAE and Kuwait. After ramping up exports in June, Saudi Arabia has reined in its exports once again – perhaps in response to a weaker-than-expected oil market,” he noted.
He went on to say that the oil market appears to be trying to weigh up immediately strong supply – helped not only by higher OPEC / non-OPEC exports, but also by lower Chinese demand – along with the expectation for lower flows in the fourth quarter as Iranian barrels come off the market.
“We are already seeing Iran’s exports dropping off, as demand from parts of Europe dries up,” according the expert.
Smith stressed that given the lack of investment in exploration and development since oil prices dropped precipitously in 2014, it doesn’t seem that rising U.S. production is going to be able to offset the lack of other new supply coming to market in the coming years, adding that OPEC appears more concerned about a supply shortage than another supply glut as we move into the next decade.
“The U.S. appears to want lower oil prices, given it translates to lower prices at the pump. This is a key concern as U.S. midterm elections fast approach in November – hence a sale of 11 million barrels from the U.S. Strategic Petroleum Reserve was announced. This volume is fairly small in the grand scheme of things, and is more of a symbolic effort more than anything – to offset bullish concerns as Iranian sanctions kick in,” Smith explained.
In November 2016, the OPEC summit was held in Vienna, where OPEC members reached an agreement on reducing oil output by 1.2 million barrels per day. In December 2016 there was a meeting of oil producers outside the OPEC. The meeting ended with signing an agreement to reduce oil production by a total of 558,000 barrels per day starting from January 2017.
OPEC and its partners decided to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.