OPEC Sees Tighter Market as Oil Output Drops to Lowest in a Year
By
Grant Smith
12 aprile 2018, 13:10 CEST
- Declines in Venezuela, Saudi Arabia, Libya curb group’s output
- Global oil stockpiles set to shrink more than 1m barrels a day
OPEC said its oil output fell to the lowest in a year last month amid reduced supplies from Venezuela and Saudi Arabia, suggesting global markets may tighten sharply later this year.
Most of a global crude glut has been eliminated following 15 months of output curbs by the Organization of Petroleum Exporting Countries and its partners, according to a monthly OPEC report. With production sinking in Venezuela amid an economic crisis, worldwide inventories are on course to decline significantly in the second half of 2018, the report showed.
Oil prices jumped to the highest in more than three years on Wednesday as escalating political tensions in the Middle East spurred concerns that supplies could be disrupted. U.S. President Donald Trump has warned he may take military action in Syria and reimpose sanctions against Iran, while a civil war in Yemen threatens to become a regional conflict.
Production from OPEC’s 14 members dropped by 201,400 barrels a day last month, the most since November, to 31.958 million barrels a day, according to the report. That’s the lowest since March 2017. The declines were led by Venezuela, Saudi Arabia and Libya.
After months of falling output, Venezuela is pumping about 480,000 barrels less than its agreed level under the OPEC accord. If its industry continues to deteriorate, and President Trump delivers on threats to sanction Iran, OPEC’s unintended losses could effectively
double the cut it set out to implement.
The oil-inventory surplus in developed nations has declined by almost 90 percent since the cuts by OPEC and its partners began last January, to just 43 million barrels, the report showed.
If OPEC output remains at current levels, world stockpiles would contract at a rate of about 1.3 million barrels a day in the second half of the year, the report indicated. Global oil demand remains strong, with a “positive and optimistic outlook” for driving fuels seen for the coming months, it said.
Nonetheless, Saudi Arabia and other countries have signaled the group should abide by its commitment to restrain output to the end of the year, and possibly longer, to ensure global markets are fully rebalanced. The kingdom reduced production by 46,900 barrels a day to 9.93 million a day in March.
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Oil Trades Near Three-Year High as Middle East Risks Flare
By
Sharon Cho
and
Grant Smith
12 aprile 2018, 02:42 CEST Updated on 12 aprile 2018, 10:52 CEST
- Saudi Arabia intercepts ballistic missile over Riyadh
- WTI holds steady, trades at $66.75 after Wednesday’s surge
IEA Executive Director Fatih Birol, discusses the potential impact of geopolitical tensions on oil.
Oil steadied after jumping to the highest in more than three years on concern that escalating tensions in the Middle East could lead to conflict and disrupted supplies.
Futures in New York remained above $66 a barrel, having jumped 2 percent on Wednesday to the highest since December 2014. Saudi Arabia, the biggest oil exporter,
intercepted a ballistic missile fired by pro-Iranian Yemeni rebels over its capital just hours after President Donald Trump warned America is preparing to strike Syria. Meanwhile, investors largely shrugged off a U.S. government report showing a surprise gain in nationwide crude inventories.
“The geopolitical noise is as loud as it gets,” said Norbert Ruecker, head of commodity research at Julius Baer Group Ltd. in Zurich.
A measure of oil-price
volatility also jumped Wednesday on speculation rising conflict in the Middle East may hinder crude output and shrink global supplies, sending prices above January’s highs. At the same time, concerns persist that surging U.S. production will damp efforts by the Organization of Petroleum Exporting Countries and its allies to tighten the market and prop up prices.
West Texas Intermediate for May delivery was at $66.75 a barrel on the New York Mercantile Exchange, down 7 cents, at 9:41 a.m. London time. The contract climbed $1.31 to $66.82 on Wednesday, the highest since December 2014. Total volume traded Thursday was about 38 percent above the 100-day average.
Brent for June settlement slipped 19 cents to $71.87 a barrel on the London-based ICE Futures Europe exchange, after adding $1.02 on Wednesday. The global benchmark crude traded at a $5.23 premium to June WTI.
Yuan-denominated futures for September delivery rose 1.5 percent to 424.4 yuan a barrel on the Shanghai International Energy Exchange.
Geopolitical Tensions
Tensions in the Middle East flared as Saudi Arabia said it intercepted a ballistic missile over Riyadh and shot down two drones in another part of the country in the latest attacks by Yemeni rebels. Just hours earlier, Trump had confirmed the U.S. would strike Syrian President Bashar al-Assad, whose forces are backed by Russia and Iran, over a suspected chemical-weapons attack.
“The oil markets are very much linked to geopolitical tensions, especially if they’re in the Middle East, the heart of global oil exports,” Fatih Birol, executive director of the International Energy Agency, said on Bloomberg Television. “If tensions continue, they will continue to have an impact on the oil market and prices. Definitely, this will be a reason to push the prices up.”
With investors more concerned about events in the Middle East, the shock gain in U.S. stockpiles did little to temper prices. Inventories increased 3.3 million barrels last week, according to the Energy Information Administration’s data on Wednesday. That compares with a 1.25 million-barrel decline estimated in a Bloomberg survey before the data.
Other oil-market news:
- The call skew, which measures how much more investors are willing to pay for calls than for puts, in WTI jumped Wednesday to the highest level since June 30, 2014.
- OPEC’s 2016 deal to clear a global glut by halting a significant chunk of production took almost a year of bargaining and brinkmanship. By year-end, the group may have lost the same amount of crude unintentionally.
- U.S. Treasury Secretary Steven Mnuchin signaled on Wednesday the nation may impose “strong” sanctions on Iran as Trump seeks to renegotiate a multinational accord that curbs the Islamic Republic’s nuclear program.
- Saudi Arabian Oil Co. is looking for more refining partnerships in India, the fastest-growing oil market, as part of a plan to double capacity to produce gasoline and other fuels.
— With assistance by Tsuyoshi Inajima, and Serene Cheong
