Oil in Global Economy Series: Key oil market updates

Monday, July 30, 2018 9:58 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 11 million barrels per day for the past two 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 861, 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 and IMF has warned that it could reach 100,000 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 has introduced a new sovereign bolivar, which will be supplied by the central bank beginning August 20th. The government has lined the new currency with its already introduced cryptocurrency petro. President Maduro has also transferred the country’s oil reserves to the central bank. Venezuela has the biggest oil reserve in the world, surpassing Saudi Arabia.
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 the counties' oilfields. However, in the latest move, the opposition parties with the intervention of the French government have agreed to hold an election.
Iran: the relation between Iran and the United States continue to deteriorate with regular exchanges of threats and insults. As a result of the ongoing hostility, and the looming U.S. sanctions, the Iranian rial has depreciated to record low against the U.S. dollar to 100,000 per dollar
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 and protests against the government continue in Iraq. The protest claimed its first major victim as the Iranian electricity minister is fired over the recent blackouts.