OPEC detects high compliance with oil cut deal

“But given recent producer statements suggesting that a rollover of this policy is contingent on cooperation, OPEC will face a conundrum as to what to do next when it meets again in May”, Tchilinguirian added. Estimates show that supply from the 11 Opec members with production targets fell to 29.88 million bpd last month.

An IEA report released on Thursday predicted that global demand growth for oil will drop from 1.6 million barrels per day (bpd) in 2016 to 1.4 million bpd this year, due to a weaker economic outlook.

“If current production levels were maintained to June when the output deal expires, there is an implied market deficit of 500,000 bpd for the the first half of 2017, assuming, of course, nothing changes elsewhere in supply and demand”, the agency stated. Iraq’s compliance still hasn’t come fully but more output cuts are likely in the coming weeks.

“You need to take a more holistic approach since there are many other storage areas than just the USA”, he said, adding that he maintains his view that prices will enter into the US$60 levels by year-end.

The draw in USA stocks was mainly due to the drop in imports, particularly those from OPEC members who are cutting production to comply with an agreement. And analysts said it was premature to say the weekly data was bullish given US stocks remain 7% above year-ago levels.

“Whether the fight for market share will return will strongly depend on the future development of non-OPEC production/non-shale production in regions where investments were cut back significantly”, Van Cleef added.

As the graphic below illustrates, Saudi Arabia has been making up for non-compliance elsewhere, cutting by 800,000 bpd – according to OPEC secondary sources.

Lower prices tend to have a positive effect on demand for products.

“The acquisition of Plumrose is a continuation of JBS’ strategy of expanding its portfolio of branded, high value prepared foods, and strengthens its customer base and geographical distribution in the United States”, JBS says.

The only thing that these confusing series of events confirm is that the data on world oil output and trade are extremely unreliable.

But Sprott Asset Management portfolio manager Eric Nuttall expects prices will continue to rise gradually as storage levels are eventually drawn down.

Oil prices shot higher Wednesday after US government data showed the first decline for domestic-crude stockpiles in 10 weeks. U.S. shale oil output hit a low of around 8.46 million bpd in July 2016.

On the one hand, the kingdom’s energy ministry communicated to Opec that its official output in February was a little over 10 million barrels per day, up 263,000 bpd from the previous month.

On the inventory side, United States oil stocks have increased for nine straight weeks, touching a record 528 million barrels, a record high.

Crude inventories fell by 237,000 barrels in the last week, compared with analysts’ expectations for an increase of 3.7 million barrels. In Europe, stocks at the Amsterdam-Rotterdam-Antwerp (ARA) are down 9.4 per cent y/y to 46.54 million barrels. “The OPEC cuts were good enough to prevent a repeat of the glut of a year ago, but it’s a different story if you want to have oil at $60 or $70”.

Oil prices extended gains on Thursday as an unexpected drop in USA crude stockpiles boosted market sentiment.

However, the rate could increase only if will ignore the dynamic resistance from the median line (ml) of the descending pitchfork, the bearish movement will resume only if the rate will take out the support from the 150% Fibonacci line (ascending dotted line).