Monday, October 3, 2016

Why The OPEC Deal To Cut Oil Production Will Fail

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Matt Smith, Fuel Fix: Ministers writing checks that OPEC can’t cash

Surely the latest actions by OPEC in Algiers threatens the very core of the cartel, given its members have agreed to something that is going to be extremely difficult to follow through on. To coin a phrase (well, kind of) from Top Gun, the cartel’s oil ministers are writing checks that OPEC can’t cash.

OPEC is currently producing 33.237 mn bpd – nearly 750,000 bpd above their new production target of 32.5mn bpd. Granted, Saudi Arabia is set reduce production at this juncture, back-pedaling away from its summer peak of 10.6mn bpd, as the need for direct-burn power generation ebbs, but the best case scenario for this drop would be ~500,000 bpd, taking the kingdom back to a Q4 2015 level of 10.1mn bpd.

This would leave an additional ~250,000 bpd to be cut by the cartel by November. This would mean a cut of less than 20,000 bpd by each cartel member, right? Wrong.

Read more ....

WNU Editor: Saudi Arabia is the only one who has agreed to cuts .... no one else has signed on to production cuts, and some countries are exempt. U.S. oil producers are also not included, and with new improvements in fracking technology now being employed in U.S. oil and gas fields .... expect the current oil glut to continue.

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