Vienna Shocker: Indonesia Suspended From OPEC

Tyler Durden's picture

As expected, the OPEC headlines continue to come in hot and heavy, with Reuters reporting first that Saudi Arabia has agreed to an output cut of roughly 500kbps to 10.06mmbpd.

  • SAUDI TO CUT OIL OUTPUT TO 10.06 MLN BPD - OPEC SOURCE

This brings Saudi production to levels last seen in January. Additionally, Iran is said to have agreed to a production cap of just under 3.8MM bpd, which also appears to be below what was speculated just moments ago, or 3.9mmbpd.

  • OPEC SOURCE SAYS IRAN PRODUCTION TO BE SET AT 3.797 MLN BPD UNDER NEW OPEC CEILING

But the most shocking announcement is that Indonesia appears to have been suspended from OPEC, and that its oil output, which according to the latest OPEC monthly report was 722kpd, will be distributed among other OPEC nations, in what may amount to a production "shuffle" not a cut:

  • OPEC SOURCE SAYS INDONESIA SUSPENDED FROM OPEC
  • OPEC SOURCE SAYS OPEC AGREED TO DISTRIBUTE INDONESIA OIL OUTPUT SHARE AMONG SOME OPEC COUNTRIES: RTRS

The question then arises if Indonesia was suspended from OPEC because they wouldn't agree to cuts?  Since all votes must be unanimous under OPEC rules, this might be a way to force a deal. If they won't cut (or, in the case of Iran, be allowed to increase to 3.975), then they're out. Also, with its share being redistributed, does that now mean that the production freeze cap is effectively 700kpd higher than prior to the expulsion.

Finally, according to a JBC report, OPEC output rose once gain in November, hitting 34.06mmbpd, up from the official 33.643mmbpd as of October.

  • OPEC NOV. CRUDE OUTPUT RISES ON MONTH TO 34.06M B/D: JBC
  • SAUDI ARABIA NOV. CRUDE OUTPUT FALLS M/M TO 10.55M B/D: JBC

Summarizing the above, Bloomberg's Julian Lee writes that OPEC output rose by another 220,000 barrels a day between October and November, according to estimates published by Vienna-based JBC Energy. Total OPEC up from 33.84 million to 34.06 million. That means the actual output cut will have to be bigger than announced to get the total down to 32.5 million.

And another, more cynica summary:

There is much to process, and the market's kneejerk reaction has been to fade the latest set of headlines, perhaps in anticipation of the upcoming shale production surge.

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NDXTrader's picture

So no one is cutting

Sofa King's picture

Algo's aren't programmed for news of Suspension. So cuts but no cuts.

AlaricBalth's picture

Indonesia joined OPEC initially in 1962 and suspended its membership as of 1 January 2009, but this was reactivated as of 1 January 2016. It has now suspended its membership again.

Dec 2015 from OPEC: For after an absence of some seven years, Indonesia made its return to the OPEC fold. There were no fanfares, no effusive speeches — just the obligatory welcome. It was, as expected, suitably understated. For the Organization, the message was clear; it was as if its only Southeast Asian Member had never been away! Indonesia’s return to OPEC follows the election of the country’s new President, Joko Widodo, in 2014. Together with Minister of Energy and Mineral Resources, Sudirman Said, they decided the time was ripe to once more take their seat at the OPEC Conference table and help the Organization as it strives to steer an orderly path for the oil market in the testing years ahead.

http://www.opec.org/opec_web/en/press_room/3403.htm

tmosley's picture

Exactly. Production will actually rise after this. Indonesia no longer needs to hold back at all, and other OPEC countries will prodice as much as Indonesia was allowed to produce.

OPEC not long for this world, I think.

NDXTrader's picture

If Saudi "cuts" 500, yet Indonesia's share of 722 is distributed then essentially they cut around 450,000 barrels a day. Or enough to power LA. Sleight of hand

bada boom's picture

So this is what happens when you don't play ball, you get kicked off the team.

Pump like a motherfucker Indonesia.

philipat's picture

They can't. Production is falling as the older fields decline and investment policy has not been conducive to new foreign investment in deep offshore exploration.

divingengineer's picture

Same story as Mexico, Brazil, Ecuador, Venezuela, etc, etc, etc. 

Throw in a few "nationalizations" i.e. thefts, and nobody wants to play with you any more. 

Just ask Pemex how that one plays out, 1 to 20.53 usd to peso, I have never seen it that high since I've been going to Mexico. 

Snípéir_Ag_Obair's picture

medium term bet on disruption and spike.

http://www.moonofalabama.org/2016/11/syria-roundup-jihadi-fronts-fall-ap...

shit's gonna get real, nephews.

NoWayJose's picture

So we are cutting production by 1.4 million barrels per day -

800K from Indonesia and 600K from non OPEC.

LawsofPhysics's picture

LOL!!  Does this mean that that country gets to keep ALL their oil and resources?!?!?

Pay attention folks, if you are kicked out of a club, does that mean that the other club members still get to come on to your property and steal your resources/assets?

 

Seasmoke's picture

I don't know. You might have to ask Francis Sawyer ....

Free Francis Sawyer !!!!!

Seasmoke's picture

The pea is not under any of the shells !!!!!

fannyplucker's picture

Indonesia is suspended because they didn't play along with Saudi terror.

viator's picture

So OPEC actually raised world production. Saudis dropped 500 but OPEC gets to share Indonesia's 722. Indonesia keeps producing 722. So total production goes up +222kpd.

directaction's picture

Indonesia is producing all it can at 722,000 bbls/d. And it delines each year. 
But they now consume 1.700,000 mb/d.
They import nearly a million bbls of oil equivalent each day, nearly as much as France.
It makes no sense for them to be in OPEC. It's only for their vote.

 

luri's picture
luri (not verified) Nov 30, 2016 10:47 AM

THE OPTICS OF OPEC AND ITS "FAKE NEWS". JUST ADD TO LIST OF OTHER FAKE NEWS PROVIDERS.

 

 

luri's picture
luri (not verified) Nov 30, 2016 10:50 AM

SO HERE IS THE THING - THE MARKET IS 'RALLYING' ON THE 'TRUMP' REFLATION TRADE.

BUT TRUMP PROMISED ON THE CAMPAIGN TRAIL TO MAKE AMERICA GREAT AGAIN - WHICH MEANT UNLEASHING AMERICAN COAL AND NATURAL GAS ENERGY TO BRING DOWN THE COST OF ELECTRICITY IN ORDER TO CUT COST FOR 'PRODUCTION' OR MAKING THINGS.

WELL THAT IS DEFLATION TO ENERGY!

AND THAT IS DEFLATION TO PRICES PAID FOR PRODUCTION!

SOMEONE NEED TO ADVISE OPEC!

SOMEONE NEEDS TO ADVISE STOCK HOLDING HFT MACHINES!

earleflorida's picture

machines need to be greased too..

lubricate those hft machines, now... before they seize-up

Mr. Bones's picture

"Decrease production" and kick Indonesia out, sharing their production among fewer members.

Does this cartel understand how cartels are supposed to work?

divingengineer's picture

None of them can afford to cut production, they are between a rock and a hard place. 

We're not the only country with hordes of gimme dats to support. 

directaction's picture

Indonesia has been a net oil importer since 2004.
In 2004 their domestic oil consumption exceeded their declining oil production.
Indonesia is the only OPEC member that is an oil importer.
They shouldn't be in an organization of petroleum exporters. 

Great Deceivah's picture

Indonesia still produces oil, even if it is not enough to cover their consumption

directaction's picture

So does France and Germany. And Italy. And the USA.
But they all consume far more than they produce.
Indonesia consumes far more than it produces, too.
It'd be like the USA or Italy being an OPEC member nation.  

tuetenueggel's picture

Oh yeah! Germany also produces oil. but a few K-barrels only. Its no member of Opec

in spite of producing oil. So what´s the reason for Indonesia as Opec Member ?

E.F. Mutton's picture

"Vienna Shocker?"  More like "Cleveland Steamer" on the net effect.

 

hairball48's picture

The OPEC countries can't cut in reality. They need the cash to keep their constituents from breaking out the pitchforks and rope. It'll be fun watching how this plays out.

What will they do when the world goes into the coming depression and demand falls like a rock?

hairball

Still stackin'

tuetenueggel's picture

OPEC tries one thing: make people worldwide believe, they could do any regulation. They can´t do anything. People don´t believe a single word, due to earlier lies. Prices won´t surge, so will output. Worldwide they need the cash desperately like the Saudis, whose financial terms are catastrophic. Russia is the only one to be rather little impressed by low prices. Us Shallow oil production needs prices above 58 $/barrel.

Have a nice winter.

 

Cluster_Frak's picture

let's cheat to cheat

Dragon HAwk's picture

What do you want the number to be?

tarabel's picture

 

 

I see Obama's man at the Bureau of Economic Analysis has found a new job already.

angry_dad's picture
angry_dad (not verified) Nov 30, 2016 11:48 AM

lets buy more crude from our friends in Indonesia

adios opec!

TheCentralScrutinizer's picture

Not really much of a cut if they suspend Indonesia, which is now free to produce as much as they want without OPEC restrictions.. 

And their "share" of production gets distributed to other OPEC members, which decreases the amounts of cuts they have to make..

Beware the propaganda.. 

Scrutinizer

gcjohns1971's picture

Cartel membership - in any cartel - is always dependent on enforcement.

Cartels are enforced two ways:

1) by governments using brute military and judicial force to exclude nonmembers.

2) by the cartel refusing to share the benefits of the cartel - always and everywhere artificially high prices.

Indionesia has been signalling for some years that OPEC first have number 1,  and that they were indecisive on the benefits of number 2.

When market share is more important than prices, disproving the enforcement mechanisms can be fatal to a cartel:   The 'other guys' would rather take your customers than your high prices...it tends to become epidemic, and then the cartel quietly, without announcement simply ceases.