Is OPEC's Mission "Accomplished"?

Authored by Nick Cunningham via OilPrice.com,

OPEC’s goal of draining the global inventory surplus has finally been achieved.

The International Energy Agency said in its latest Oil Market Report that the supply overhang has pretty much vanished, thanks to OPEC’s efforts at limiting production. “It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” the Paris-based energy agency wrote.

Market fundamentals are on a similar track compared to last month’s report. The IEA kept its oil demand forecast at 1.5 million barrels per day (mb/d), although it noted that the back-and-forth on trade tariffs between the U.S. and China puts the demand outlook at risk. For example, a 1 percent decline in global GDP growth would result in a reduction in demand growth by 690,000 bpd. “Oil demand would suffer the direct impact of lower bunker consumption and lower inland transportation of traded goods, reducing fuel oil and diesel use,” the IEA said. Still, the negative effects of a trade war remain to be seen.

The supply picture also looks about the same, with growth expected to hit a soaring 1.8 mb/d this year, underpinned by a staggering 1.3 mb/d growth rate from the U.S. However, the IEA said that its supply forecast is also vulnerable to some new potential risks. The pipeline bottleneck emerging in the Permian basin could slow the rate of growth of U.S. shale supply. “[T]here is concern about bottlenecks in takeaway capacity that have seen recent discounts for WTI Midland versus Houston widen to a record at nearly $9/bbl. This issue applies in Canada as well as in the US,” the IEA said.

The flip side of that is the unexpected production declines from OPEC. The IEA said that taken together, some 800,000 bpd of supply has been sidelined, dramatically bolstering the impact of the OPEC/non-OPEC cuts. “To all intents and purposes, more than a second Saudi Arabia has been added to the output agreement,” the agency wrote.

Sharp declines from Venezuela, in particular, are accentuating the agreement, helping to put OPEC’s compliance rate at 163 percent in March.

The agreement is succeeding in balancing the oil market. “With just under half of global oil supply subject to restraint and oil demand growing steadily, the impact on stocks has been substantial,” the IEA said.

Global inventories have plunged, with the surplus in the OECD falling to just 30 million barrels above the five-year average. At the same time, refined product stocks are actually below the five-year average. The IEA says that if output remains constant and the demand forecast lives up to expectations, the market could see inventories decline at a 0.6-mb/d pace for the rest of the year.

The data on inventories is not perfect. OECD numbers are published on a two-month lag, providing the market only with a retrospective look at the state of play. Also, the inventory data in the non-OECD -which, at this point accounts for the bulk of demand growth – is notoriously opaque, which makes sweeping conclusions about the oil market tricky.

With those caveats in mind, the IEA said the long-sought market “rebalancing” effort may have arrived. “With markets expected to tighten, it is possible that when we publish OECD stocks data in the next month or two they will have reached or even fallen below the five-year average target.”

Against that backdrop, the reassertion of geopolitical uncertainty is now heavily influential. “As we write, uncertainty about the next steps in Syria and Yemen have helped propel the price of Brent crude oil back above $70/bbl.”

Even as OPEC has apparently achieved its goal of draining surplus stocks, the group seems set on keeping the cuts in place through the rest of this year. That likely means it will formulate new criteria to justify ongoing cuts. “OPEC is within rapid reach of its first announced goals and will have to come up with a new metric for the June meeting if it wants the agreement to last into the second half of the year,” Olivier Jakob of Petromatrix told Reuters.

Comments

CPL Mon, 04/16/2018 - 10:43 Permalink

Yes, mission accomplished.  As predicted they will be riding camels again and dying like flies once again, which is perfectly natural. 

CPL BennyBoy Mon, 04/16/2018 - 10:59 Permalink

Problem is USD buys nothing now.  The mild and tiny business success of dullards that are lousy at math has removed all chance of any possible success.  Then again they are all just communist wastrels that have been trained to come when the suet is poured into the troughs.

Imagine that.  Central Bank communists not only spend other people's money but their own future defenses.

In reply to by BennyBoy

abgary1 Déjà view Mon, 04/16/2018 - 15:04 Permalink

It is coming.

 

Co2 is not a GHG and is not making our climate warmer.

The earth is presently in an interglacial temperature peak which will not last and the sun's solar flare activity is waning. Combine the two factors and we end up with a cooling trend and possibly an ice age.

Fossil fuel consumption is only going to rise and possibly dramatically.

Please read The Deliberate Corruption of Climate Science and or Human Caused Global Warming by Dr. Tim Ball to understand climate science.

Also read The Chilling Stars: A Cosmic Theory of Climate Science by Svensmark and Calder is understand the cosmic ray theory of cloud formation which is a huge driver of our climate.

 

In reply to by Déjà view

machiavellian-trader Mon, 04/16/2018 - 10:44 Permalink

Not till they IPO Aramco, rob western idiots that will pour people pension funds into a company that has low reserves and has had to invade Yemen try and take control of North Yemeni oil.

Once thats done.

Mission Accomplished

Ink Pusher Mon, 04/16/2018 - 10:52 Permalink

What about the 80 Billion Bbl discovery in Bahrain ??

Their fields also contain an estimated 14 trillion cubic feet of gas !

*Bahrain is not OPEC and It hosts the U.S. Navy’s 5th Fleet.

D503 machiavellian-trader Mon, 04/16/2018 - 12:08 Permalink

The oil discovery that wasn't?

That claim has not been proven to be recoverable, is shale oil (the worst of the worst), is on an island incapable of providing the water to extract it, and even if every barrel is fully recovered, at zero energy cost, is roughly two years of global consumption. 

The gas ("20 trillion cu ft") is 1/6th of a year's consumption. 

So what you have is an unsubstantiated claim that isn't shit even if it is true. 

In reply to by machiavellian-trader

Sapere aude Ink Pusher Mon, 04/16/2018 - 18:31 Permalink

An utter fabrication.

For a start it is NOT an 80 billion bbl discovery, it is a PROSPECTIVE discovery.

That is often the ruse to seek finance from 'investors' who don't have a clue about oil and gas production.

Secondly, its the worst of all worlds, a prospective OFFSHORE SHALE OILFIELD.

Well they can't make money on on shore shale, so it would require $100 oil to even be considered possibly viable!

Third, the guesstimates are STOIIP and that is so widely wrong, as it may contain NO OIL at all, which is often the case with these published prospectives estimates.

It can be water, and its only a resource when its an actual resources, not prospective, and you should perhaps check up on how many of these end up as successful ventures. NOT MANY?

Finally with an STOIIP estimate, its total resource estimate, not recovery, so with shale, you might stretch to a 20% recovery figure, which is being very very generous.

So straight away the figure even if it were true, is divided by 5, making 16 billion bbls.

There are only 6 fields that produce 1,000,000bbls a day, and the above is not likely to come anywhere near that.

Ghawar for example is now down to a 48% water cut..

 

You believe all you read, and then no doubt you'll cough up the money these people want to piss up the wall chasing rainbows, because as sure as hell they will not make a cent.

 

If U.S. shale companies can't make profits, and they can't not even at $80, then what on earth is the chance of offshore shale got of making money....unless oil is $120 bbls

The article reeked of desperation, and I put a post on here at the time that showed the article had been EDITED from its original version, to take the words prospective out....someone probably had a short on oil so thought they would help by having a fake news story. Just like the fake oil glut.

IF there was an oil glut you would not see so much angst over control of oilfields in Syria, Iraq etc. etc.

 

 

In reply to by Ink Pusher

jin187 Juggernaut x2 Mon, 04/16/2018 - 12:25 Permalink

What that means is that oil can't sustain a price over $60, so we'll never see an effective boycott or production cut from OPEC again.  Certainly not the $120 we saw 10 years or so ago.  Now we have them over the barrel.  They can sell us cheap oil, or sell us no oil.  Their choice.

In reply to by Juggernaut x2

Sapere aude jin187 Mon, 04/16/2018 - 18:20 Permalink

Some of you really do not do your homework.

jin have you been on the gin

 

One massive hole in your comment is that the U.S. really doesn't have anyone over a barrel, certainly not with shale, as its costing much more to produce than they are getting for it! FACT.

The U.S. has put itself over a barrel by encouraging shale production to keep down world oil costs, but that's coming unstuck at the seems as more and more learned people realise Ponzi shale has only been kept going by cooking the books.

You've no doubt been sucked in by CEO's spouting off about being able to produce shale oil at $30 and still make a profit.....sadly their accounts show that is a heap of bullshit.

They've had to sell assets, raise more and more finance with the prospect of interest rate rises and tap stockholders, but where that finance is drying up....and without that shale is dead.

The reason its drying up is because who wants to lend $150 per bbl to have it then sold for $50!

In reply to by jin187

Ink Pusher Juggernaut x2 Tue, 04/17/2018 - 15:48 Permalink

Oil should be at $35 across the board today and that's still being fuckin' generous. 

The incredibly many "SURPRISE BUILDS & DRAW-DOWNS" reported signifies the extreme levels of manipulation required to keep the prices at their current wholly fantastical and inflated levels *strictly because they are tied directly to all petro-currencies.

*The "new wars" should help bump dollar and oil price too eh !

 

 

In reply to by Juggernaut x2

mailll Mon, 04/16/2018 - 11:18 Permalink

Alternative energy sources are an absolute must.  I love it whenever I see new solar panels and wind mills pop up.  Oil is an antiquated source of energy and needs to be replaced with clean energy sources.  Most of the world is jumping onto this renewable energy bandwagon and I think that is great.  We will always need oil as an energy source though, it cannot be eliminated.  We just need to move forward with the renewables, which we are doing. 

jin187 mailll Mon, 04/16/2018 - 12:49 Permalink

No amount of carbon taxes will magically make solar panels not suck.  Only when the technology becomes far more efficient, and cost effective than oil, will people switch to it en masse.  Adoption time for new technology completely displacing old is usually somewhere in the 50-year range.  My guess is that 90% of the people on the internet talking about "we" need to do this, probably don't have a solar-powered anything.  Probably don't even own a fucking Prius.  Renewables will take over when they're capable of doing so, and not a moment before.  I just wish the average libtard would get that through their neanderthal skulls.

In reply to by mailll

mailll jin187 Mon, 04/16/2018 - 15:51 Permalink

I don't buy into this global warming conspiracy or the carbon tax BS.  I just always liked energy efficiency such as the LED light bulbs.  They use 1/6th the energy than a conventional incandescent light bulb and we are getting what we paid for, light, not heat.  And I liked the fact that my 2000 chevy cavalier got 28 mpg.  Solar isn't very efficient right now, probably close to 20% efficient, but consider this, although renewables aren't cheaper, how much would gas cost right now if the world didn't turn to alternative energy sources including nuclear?  I may be an idiot for believing in alternatives and renewables, but at least we aren't 100% dependant on oil where we would be paying $7-$10 for a gallon of gas. We have to diversify with our energy sources.  We can't have all of our eggs in one basket.

In reply to by jin187

Sapere aude mailll Mon, 04/16/2018 - 18:13 Permalink

You haven't quite worked things out have you....the renewable schemes so heavily subsidised will run out of the resource materials to construct them or the cost of them will soar, let alone the battery storage systems necessary for round the clock energy. Just as well Tesla is so slow at making its cars, as no doubt within a few years, how are we going to produce batteries to replace those failing, when we can't even produce enough now for new vehicles.

Lithium carbonate....well that's gone from?

Cobalt

Rare Earth minerals

Graphite

Nickel

Copper

Manganese

Aluminium

Silicon

Steel

PPGM

Don't forget silver too

 

With the lithium ion battery being used everywhere, its no wonder there is such a price hike in lithium, but graphite and rare earth minerals all.

 

In reply to by mailll

philosobilly Mon, 04/16/2018 - 12:05 Permalink

we need to build refineries and go north korea with our energy allocation, autarky. let the rest of the world fight over energy, we can eaisly be self sustaining- correction north america can be self sustaining, no problem.

IronForge Mon, 04/16/2018 - 12:25 Permalink

Nope. Mission Not Accomplished.

 

SYR endured a Regime Change Racket; and just might get that Pipeline from IRN built.

 

CHN have their PetroYuan to Au Scheme; and IND-IRN just started Trading Petroleum for Au.

 

CHN and IND should continue to increase their Energy Consumption, so with IRN and RUS being able and eager suppliers, OPEC probably won't be able to leverage the Petroleum Market as they used to.

Last of the Mi… Mon, 04/16/2018 - 12:57 Permalink

OPEC is dead. The only thing left is the billionaire sand fly attractants (not the camels) standing in a circle jerk trying to retain past glory days. The global monopoly is finally dead and it's good thing as the members scramble for assets that 10 trillion in QE has already scavenged coast to coast. Worldwide the middle class is dead and the results are still being felt. 

Sapere aude OccamsCrazor Mon, 04/16/2018 - 18:05 Permalink

Might be more money for U.S. shale companies, but its not making them a profit not at all. When oil was over $80 they didn't make profits and they certainly are not making anything know except debt and more debt.

Its more money for the U.S. oil industry, but its like pumping in $150 to get $80 back, so the net result is less money, more debt, more suckered stockholders, and more double speak talking about being able to make a profit at $30, when their balance sheets show they are up to their neck in debt, with prospect of rising interest rates, and having sold off assets, as well as suckers more money out of stockholders.

Quite why people still talk and post about the U.S. oil industry especially shale as if its profitable, I just don't know, because its simply fake news....dont take my word for it, look up the oil companies own accounts.

In reply to by OccamsCrazor

adr Mon, 04/16/2018 - 13:45 Permalink

Gasoline selling for $2.80 a gallon for regular at $64 a barrel. That's more than mission accomplished.

I paid more per gallon for heating oil than I did in 2014 when oil was over $100.

I paid $1.65 a gallon for gas when oil was $75 and now it is more than a dollar more.

Thanks a lot Hebrews.

Sapere aude Mon, 04/16/2018 - 17:59 Permalink

Yes, but then think. There is no sign of a fall in oil demand worldwide, only growth, but just for second let us take your figure of 1% drop strangely based solely on GDP.

Your estimate is 690,000bbls less crude daily required!

Except of course you have deliberately forgotten to add in the most important part about oil and gas production....DEPLETION AND DECLINE RATES.

For shale it is a horrific 65-70% drop in the first year.

So lets take the rest, say about 90,000,0000bbls daily....now that is conventional, but where many of the wells are in terminal decline such as the ME Saudi wells, Ghawar in particular the super giant that used to provide on its own over 6% of world oil supply daily.

The decline rate on that 90,000,000bbls being generous is 6% although it compounds each year.

90,000,000bbls  x 365 = 32,850,000,000 yearly

 

6% of 32,850,000,000=197,100,000bbls lost production through depletion.

 

197,100,000/365 = 5,400,000bbls A DAY LOST PRODUCTION.

 

That does not even include the fantastic loss of production from shale currently around 65-70% in the first year!