The cracks in the cartel are showing.
Amid Saudi threats (over exemptions), Iran tells OPEC it has raised output by the most since international sanctions were lifted. With inventories remaining 300mm barrels above average and OPEC production at a new record high, hopes for any production freeze deal are fading fast and WTI has test pre-Trump $43 handle lows.
The countries driving the bulk of the increase--Nigeria, Libya and Iraq--are those seeking exemptions from the cut.
Without a cut, the world's oil stockpiles are likely to keep building, putting further pressure on oil prices, which are still trading below $50 a barrel, down from the more than $100 levels seen in mid-2014.
"Looking ahead, it is important to consider the immediate impact that the assumed global supply/demand balance has on inventories, given the expected demand for OPEC crude in 2017 of 32.7 million barrels a day," OPEC said in its report.
"Adjustments in both OPEC and non-OPEC supply will accelerate the drawdown of the existing substantial overhang in global oil stocks and help bring forward the rebalancing of the market," the report said.
"Ironically" as OPEC promises to cut output, production just hit a new all time high: OPEC's crude oil output increased by 240,000 barrels a day in October to 33.64 million barrels a day, the group said in its monthly oil market report Friday, with Nigeria, Libya and Iraq driving the supply boost.
OPEC's October production is now well in excess of the high-end of the output range the group agreed to at a meeting in Algiers in September, highlighting the challenge members will face implementing that deal at its next meeting in Nov. 30 in Vienna. According to the report, the group was pumping almost 1 million barrels a day more than what is expects demand for its crude to be next year.
Meanwhile, freed from curbs on its oil trade in January, Iran said it increased output by 210,000 barrels a day to 3.92 million a day in October from the previous month. That’s 230,000 barrels a day more than estimated by OPEC itself, whose members are due to finalize how much each will cut when they gather on Nov. 30. Production from Saudi Arabia, which typically declines at this time of year, remained near record levels.
So they report inventories remain at over 300 million barrels above their 5-year average for this time of year.
And the result is oil testing pre-Trump lows