OPEC+ major production cuts . . No, not really. More smoke and mirrors.

[Jabbar + 465]

Let's look at the numbers.

Oil crashed as algorithms linked to S&P  kicked in which made oil price crash October 1, 2018.

The regular OPEC meeting scheduled for beginning of Dec 2018.

Saudi Arabia  average production up to this point steady 10 million barrels day. As soon as talks of additional cuts started Saudi Arabia pumped production over 10.6 million barrels/day 0ctober/November.  

OPEC used this inflated base (now 10.6) to calculate cuts.  In the end Saudi Arabia quota 10.3 million, that's  300k above their real average for the year.

So Saudi Arabia said they will cut even more, down to 9.8 million.  That's where it should have been.  No sacrifice from Saudis. 

Iraq, Nigeria and Russia never complied.  Nobody in OPEC complies. 

Early Aramco IPO financial reported 2019 year-to-date production was 10 million/day. So never cut to 9.8. Liars.

After attack on Saudi Aramco facilities Saudi Aramco increased production up to 10.3 million/day. 

IEA projections for 2020 estimates increase of world production by 2.6 million/day on 2020. OPEC screwed. Now what do they do. 

So, Saudis needed again convince world supply will not exceed demand and still get oil prices up for their IPO. How can they pull that off. 

So OPEC leak rumors of  "additional cuts" and Saudis/OPEC promises enforcement of existing quotas.

How can  they protect Saudi production and get Nigeria, Iraq and Russia to comply with current quotas.

They're so clever.  

This is what they did.  

1. Remember Saudis again production at 10.3 million. This is 300 thousand above their real 2018 average of 10 million/day,   Not below. 

2. OPEC then decided why don't we say Condensate is not oil and does not count as oil production ! Perfect , now Nigeria, Iraq and Russia are in compliance. Condensate is oil just a higher API. Too funny. Even if you don't have enough Condensate to offset just call any crude Condensate.  Nobody knows. 

3. OPEC meeting agree on 500 thousand/day cut when present agreement ends in March and Saudi Arabia will  "sacrifice" and cover most of 500 thousand. Those Saudis are so generous.

In reality Saudis will only be cutting 2 or 3 hundred thousand from thier real average for 2018 and most of 2019 (per their IPO prospectus 2019 average was 10 not the 9.8 they said they were down to) of 10 million.  And if Saudis like Nigeria, Iraq and Russia don't include Condensate per new rule they don't cut anything.  Never have.

Liar, Liar pants on fire. 

The only substantial cuts of oil production are Trump's sanctions on Iran and Venezuela.  

Remember how from January first thru May/June the oil prices went up as OPEC and the "expert" oil analyst all told us how tight the supply was. Well not all, there was one firm, Orbital Insight that said world inventory went up substantially.  Orbital was right.  Prices went up because the "expert" analyst parroted the Saudi/OPEC talking points.  

Now Saudis/OPEC have their new plan ready to put in play next March if warranted and . . . . If traders and investors buy into their bull. 

Back in October said bias to the upside going into and up to the IPO.  I'm out with nice gain. Looks like there is some more upside still. Oil doesn't trade on fundamentals anymore. I'm still put don't need every last penny.

ALL SMOKE AND MIRRORS

Can't wait to see what developed in 2020.

 

Edited December 6, 2019 by Jabbar