Oil in Global Economy Series: Key oil market updates

Monday, July 23, 2018 10:03 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 five 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 46,300 percent. Reports suggest that payment starved workers are quitting Venezuela’s oil production, which is dwindling production further. However, the country’s leadership has been trying to overcome the trouble using cryptocurrencies as a means to fund the country. The reelection of Maduro resulted 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. Oil refineries continue to shut 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 OPEC, oil production in Venezuela has declined to 1.34 million barrels per day in June. In the latest move, Venezuela is trying to push a new currency in the face of rising inflation but struggling to do so.
Libya: According to OPEC, Libya’s production declined to 0.6 million barrels per day in June, down from almost a million barrels a few months back as the struggle continues over counties oilfields. The drop is continuing as the struggle to control oilfields turn violent. Storage tanks are getting attacked regularly and the oil is now directly going to shipment avoiding storage.
Iran: In response to Iranian President Rouhani’s threat that the U.S. would face the mother of all wars in Iran, President Trump tweeted, “To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!”. The situation remains immensely tense.
OPEC & Russia & Saudi Arabia: The OPEC group agreed to production increase by easing the ceiling. However, confusions remain over the increment size. The OPEC statement suggested full compliance to 100 percent from current 147 percent. According to OPEC’s MOMR, OPEC produced around 32.32 million barrels of crude oil per day in June, up more than 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. Expect Saudi production to rise further as production dwindles in Angola, Libya, Nigeria, and Venezuela. According to OPEC, Saudi pumped 10.42 million barrels per day in June.
Iraq: Unrest is spreading across Iraq and in some places it getting violent with protesters reportedly being killed. The protest has now reached the capital city of Baghdad.