Oil in Global Economy Series: Key oil market updates

Monday, July 9, 2018 1:40 PM 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 four 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. 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 of using cryptocurrencies as a means to fund the country. 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. According to the latest production survey by Platts, oil production in Venezuela has declined to 1.3 million barrels per day in June.
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. According to the latest production survey by Reuters’, Libya’s production has declined to 0.6 million barrels per day.
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. However, reports say, despite assurances from the European Union over protection against the looming U.S. sanctions, many companies have announced that they would abide by the U.S. sanctions voluntarily.
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. According to Reuters’ production survey, OPEC produced around 32.32 million barrels of crude oil per day in June, up 320,000 barrels per day in June.
Saudi Arabia and Trump: President Trump is pressurizing Saudi Arabia to increase production and push oil price lower in order to make the looming sanctions pinch Iran more. According to Reuters’ survey, Saudi Arabia increased production by 10.7 million barrels per day.