Oil in Global Economy Series: Key oil market updates

Monday, November 5, 2018 10:57 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 11.2 million barrels per day. Despite fewer rigs operating compared to 2014/15, the production efficiency has pushed the overall production higher. As of the latest report, the numbers of operating rose to 874, the highest since March 2015. The numbers of operating rigs have increased more than 175 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 one million 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. 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. The residents are still struggling with the introduction of the new ‘Boliver’ as the currency, which has been linked to the country’s cryptocurrency ‘Petro’. According to latest surveys by Reuters, the oil production has declined to a new low of 1.18 million barrels per day in October.
Libya: Libya is likely to hold the general election on 10th December 2018. Germany has agreed to provide €2 million in assistance. As expected the production reached 1.05 million barrels per day in September. Libya’s production is recovering fast. According to Reuters’ Libya’s production reached 1.25 million barrels per day in October.
Iran: Uncertainty surrounds Iran’s oil exports as the U.S. sanctions kick in from 4th November. The United States has promised harshest of punishments to those who violate the sanctions including payment system SWIFT. However, the U.S. is likely to allow quota-based imports for some countries like India, Japan, and Korea.
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 147 percent. In September, OPEC production rose to 32.76 million barrels per day. According to Reuters’ survey, the OPEC production is set to rise by 390,000 barrels per day in October.
Saudi Arabia and Trump: During a meeting between oil giants like Russia and Saudi Arabia, Saudi oil minister seems to have defied U.S. pressure to pump more oil as he announced that Saudi Arabia has no plans to increase production further. However, production surveys suggest that Saudi production is rising. The recent Khashoggi killing has put the kingdom under pressure.
Norway: Norway’s oil production is reportedly declining at a fast pace. In September, Norway produced around 1.302 million barrels of crude oil per day, almost 10 percent lower compared to last year.