Oil in Global Economy Series: Key oil market updates

Monday, July 2, 2018 10:46 AM UTC

While the oil market continues to focus on supply/demand fundamentals, these are some key updates that you need to keep a tab on,

U.S. oil rig count: The United States is continuing to see a surge in production. According to the latest report, the production is at 10.9 million barrels per day for the past three weeks. Despite fewer rigs operating compared to 2014/15, the production efficiency has pushed the overall production higher. As of latest report, the numbers of operating rigs at 858, down from its recent peak of 863 but highest since March 2015. The numbers of operating rigs have increased more than 170 percent since bottoming in May 2016.
Venezuela crisis: Crisis continues in Venezuela. According to the latest report, inflation has reached an all-time peak of 42,000 percent. The latest production survey report from Reuters suggests that the production declined to 1.45 million barrels per day in May. Reports suggest that payment starved workers are quitting Venezuela’s oil production, which is likely to dwindle further. However, the country’s leadership is trying to overcome the trouble using cryptocurrencies as a means to fund the country. According to OPEC survey, Venezuela’s production declined to 1.39 million barrels per day in May. The reelection of Maduro is likely to result in stronger sanctions from the United States. In addition to that, Venezuela’s state-owned oil producing company PDVSA announced that it would not be able to meet supply contracts as production dwindle. The latest report suggests that the country’s oil refineries are shutting down due to lack of crude oil supply. In the next few months, Venezuela’s production is expected to decline to 1 million barrel threshold.
Mexico: Despite the higher price, reports suggest that Mexico is struggling to add momentum to its production recovery amid increased gang violence and corruption within the state-owned oil producer.
Libya: Libya’s National Oil Corporation (NOC) declared force majeure on loadings from Zueitina and Hariga ports on Monday, resulting in total production losses of 850,000 barrels per day (bpd) due to the closure of eastern fields and ports amid political violence to take over the control of Libya’s oil.
Iran: Supplies from Iran remain high as buyers store as much Iranian crude as possible before U.S. sanctions get re-imposed on Iran beginning August. Reports suggest that India might curb some of the oil imports from Iran in recognition of the U.S. sanctions and to reach a grand strategic deal with the United States.
OPEC & Russia & Saudi Arabia: The OPEC group agreed to production increase by easing the ceiling. However, confusions remain over the increment size. While Saudi Arabia announced an increase of a million barrel per day, Iran announced easing was to the tune of 500,000 barrels. Kuwait and small producers put out numbers ranging from 600,000-800,000 barrels per day. Russia announced that it would ease production by 200,000 barrels per day.
Saudi Arabia and Trump: President Trump is reportedly pressurizing Saudi Arabia to increase production and push oil price lower in order to make the looming sanctions pinch Iran more.