I made this short video to explain what has happened in the oil markets since last September’s OPEC meeting in Algeria.
Hey, Doug Stetzer from EKT Interactive here. And this is what’s been happening in the oil markets since last September’s OPEC meeting in 90 seconds.
Here we go…
So, In September 2016, OPEC met in Algeria and comes away with a framework to cut 700,000 bpd but had to be ratified at November’s regular OPEC meeting.
Prices jump from the mid 40s to above 50.
At this time, US lower 48 oil production is 8.1 million bpd and the rig count is 425.
The market then fades as a deal was seen as increasingly unlikely due to serious pushback from Iran and Iraq.
However in November a deal was reached – OPEC would cut 1.2 million bpd and major non-OPEC producers, led by Russia, would cut an additional 600,000.
Oil prices head back into the mid 50s, where they would remain range bound for the next couple of months. The CFTC is showing speculative length reaching record levels.
While compliance is surprisingly good, Saudi Arabia is cutting more than it’s share to make up for non-compliant members. OPEC also pumped as much as possible in the months leading up to the cuts, so the market isn’t seeing inventories draw.
At this time, US producers hedge prices going out years and the rig count grows to 617, up 45%.
US production is up almost 500k bpd and exempt OPEC member production from Libya, Iran, Nigeria has grown by 700k since September. Non-OPEC cuts are not hitting their targets.
Finally, things break down. US inventories continue to build and last week’s EIA data is enough to send things lower.
This week the Saudis announce they are increasing production back above 10 million bpd. While still within their quota, perhaps signaling they are tired of shouldering the burden of the cuts while losing market share in key Asian markets.
Next OPEC meeting is on May 25 to determine if the deal should be rolled over to the second half of 2017.
Thanks to the guys at Commodity Research Group for some fact checking!