Is this the end of the OPEC agreement?
On Thursday, the oil price went down in a wall and dropped more than 1 percent news that US inventories jumped, and OPEC could consider an output from the production cuts.
Reuters reports that some OPEC officials cut private thought into expanding production beyond June. So far, the current consensus has been that OPEC + would need to keep the cuts in place by the end of this year to balance the market.
But the speed of rebalancing has surprised most analysts, and has even surprised OPEC itself. Although the group has kept 1.2 million barrels a day (mb / d) out of the market since the beginning of the year (give or take), US sanctions have beaten even more supply offline in Venezuela and Iran. In March, Venezuela made oil production of 289,000 bpd, falling to just 732,000 bpd, according to OPEC's secondary sources. It's a staggering figure. The widespread blackout, the economic and political crisis and hard US sanctions have crushed Venezuelan oil sector.
Meanwhile, Iran's output has remained slightly better, but has continued to decline significantly since last year. The expiry of dispensations granted by the United States to eight countries importing Iranian raw material expires in a few weeks. From now on, Trump officials seem to be split if they are not going to take a hard line by letting the discrepancies go out.
On a sign of how hawkish has become the Trump administration, Prime Minister Mike Pompeo is now seen as in the softer end of the spectrum of Iran policy. Pompeo has a long reputation as a hardliner in Iran, so the fact that his department is the one trying to moderate the White House policy tells. Pompeo's government department is particularly worried about rattling the oil markets if the administration is too aggressive against Iran, according to Bloomberg. Related: Trump's Executive Order is a Gamechanger for Oil Fractures
Meanwhile, OPEC sees all these events very closely. Saudi oil director Khalid al-Falih has repeatedly suggested in recent months that OPEC + production cuts are likely to be expanded. The group seems to have a wrong side of overtightening, especially after last year when OPEC + left production cuts and the oil market crashed.
This time, OPEC + will have the advantage of being able to respond after the mercurial US President makes a decision on Iran's sanctions waiver. Surprisingly, the issuance of exemptions last year is one of the main reasons why prices fell in the fourth quarter.
If the US is taking a hard line and beating more Iranian supplies offline, and Venezuela continues to see supply losses, OPEC could decide to increase production from today's levels, according to Reuters. This report follows comments from Russian President Vladimir Putin a few days before it seemed to indicate that Russia is growing cautiously to keep the supply of the market. Putin said he did not support an uncontrolled price increase. Russia's energy minister Alexander Novak added that there was no need for an extension of the cuts if the market had reached a balance. Related: Goldman: Oil prices won't reach $ 80
Meanwhile, EIA also reported another surprise in the market. On the contrary ̵[ads1]1; Russia's skepticism, US inventories and now the possibility that OPEC considers a production increase – the news took the steam out of the last collection in the prices. "Now there is a suggestion that OPEC can surprise us and increase production preferably if we get price increases," says Phil Flynn, analyst at Price Futures Group in Chicago, to Reuters.
Still, no decisions have been made and nothing is inevitable In a sign that members of the OPEC + mission are not all on the same side, UAE Energy Minister Suhail bin Mohammed al-Mazroui seemed to attempt to speculate that Russia lost the will to cooperate. "Russia will not increase its production, unless in coordination with the rest of OPEC and OPEC + countries, "Mazroui said." I believe in Russia's wisdom, and I think Russia has benefited from this agreement … I see no reason Russia does not continue us. "
The higher oil prices are rising, the more cracks in the collaborative event will emerge. All it will take is another supply disruption in Iran, Venezuela or Libya to kill the deal.
By Nick Cunningham of Oilp rice.com
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