Saudi To Carry OPEC's Water Again

[Rodent + 1,424]

As if Saudi Arabia wasn't already doing the lion's share of the production cutting so that other members can skate by without fully complying (Iraq, for instance), they are now pledging to cut 100,000 barrels per day more, and export less. This week's prices were likely a very motivating factor. Will we see more of this as US shale pumps at record levels? 

[TraderTate + 186]

Because they need stability in Iraq ... 

[sen + 11]

All eyes on Aramco IPO.

https://www.reuters.com/article/us-opec-oil/opec-sees-higher-2018-oil-demand-but-more-rival-supply-idUSKBN1FW14E

Quote

The Organization of the Petroleum Exporting Countries said world oil demand would rise by 1.59 million barrels per day (bpd) this year, an increase of 60,000 bpd from the previous forecast.

Who to believe OPEC or EIA?  Even with shale output, will supply keep up with demand?  If OPEC is right, the price of oil is going up, which would not doubt suit aramco....

Edited February 14, 2018 by sen

[Marina Schwarz + 1,576]

OPEC has a vested interest in every word its officials say. I wouldn't trust their forecasts at all. They only begin to admit the truth about fundamentals when facts press them into a corner. Just a couple weeks ago they were totally fine with shale, not worried at all. Yeah, right.

[Rodent + 1,424]

OPEC should be frightfully worried about US shale. Every barrel OPEC has cut is being produced by US shale instead. Those are the hard math facts. 

One could argue that if OPEC had not done any cutting, the resulting inventory would have been the same as it is now--it would just be OPEC's production and not US shale's. Only if they hadn't done any cutting, OPEC wouldn't have had much to talk about, and prices wouldn't have risen as quickly as they did. It's more about market sentiment, I feel, and less about fundamentals. While OPEC's clout is waning, OPEC's war using words still carries some weight, and people were excited about the cuts. And every month, they tout how wonderfully compliant they all are, instilling even more confidence. What they did essentially is hold production fast, globally (does anyone have that figure?) so that the increase in demand chipped away at inventory.

It's not like world production has dropped overall, I wouldn't think. 

But OPEC is not stupid. I believe it knew what it was doing. Prices HAVE risen. And so while it's true, OPEC is producing less than they would have otherwise been doing without the agreement to cut production, they are getting more per barrel. Russia, in fact, has seen billions of increased revenue from oil even though they "cut" production ( i say "cut" because the reference figure they were cutting from, in November 2016, was a near-record high). Revenues throughout OPEC members are up, even with the cuts. Except, of course, Venezuela. Don't even get me started on that one. 

 

[Rodent + 1,424]

As for who to believe, OPEC or EIA, I agree with @Marina Schwarz. OPEC's figures are opaque. EIA, while still relying on data submitted by oil companies, operates in an environment where falsehoods are harder to pass off as truths. Most of these companies have shareholders and audits to contend with, not to mention Uncle Sam. Not that there aren't people who game the system here (that would be extremely naive) but each oil company individually would have to be collaborating with each other--this is super unlikely, I think. THe EIA itself is no likely to be willfully manipulating data. Whether they are competently reporting the figures is another question entirely, but I think there is enough checks in place to  ensure a fairly accurate result.

 

[Marina Schwarz + 1,576]

EIA also uses its own data, which, I understand, is independently collected, so it has to be more reliable.

[TomTom + 183]

If the Saudis want to keep oil at $70, then I guess U.S. shale will grow at an even faster pace than we've seen so far...
https://oilprice.com/Energy/Oil-Prices/Saudi-Arabia-Wants-70-Oil.html