OPEC Optimistic | Russell T. Rudy Energy LLC
“World Oil” reports that OPEC Secretary-General, Mohammad Barkindo, feels that production cutbacks instituted by OPEC and 11 other producer nations are starting to reduce the global oil glut. While compliance with the production quota arrangement has been surprisingly good, I think the jury is still out as to how effective it will be between now and its expiration in June. That is why rumors of an extension are helping to bolster prices.
Six OPEC members, as well as Oman, support an extension. Key members of the cartel, Saudi Arabia and Kuwait, think quotas should remain in place until oil inventories fall to their five year average. There are positive indications that stockpiles are falling in the U. S. as well as in China, Japan and “floating storage”, or oil in tankers being used to store crude.
Iraq is an example of surprising compliance with quotas. The country initially sought an exemption from the production cutback agreement, but in March was 98% compliant, and apparently intends to abide by its quota. This, is in spite of the nation’s intention to raise capacity from its current level of 4.7 million barrels of oil per day to 5 million by year end.
Speaking to reporters last Sunday in Baghdad, Barkindo, stated “I remain cautiously optimistic that the market is already rebalancing. We have started seeing stock levels coming down.”
Unfortunately for OPEC and its partners, as they cut back U. S. shale operators continue to increase production. Just as cutbacks put upward pressure on oil prices, increased shale output exerts a downward force. While prices currently appear to be stabilizing around $50 per barrel, stability is a fragile phenomenon. With so many variables driving supply, and so many other factors influencing demand, predicting prices is extremely difficult in today’s market.
To read the article in its entirety, please go to http://www.worldoil.com/news/2017/4/2/opecs-barkindo-sees-progress-in-oil-cuts-as-stockpiles-shrink .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
