Iran reaps rewards following OPEC production cut
- Author: Ronnie Bowen Jan 11, 2017,
Jan 11, 2017, 0:37
Oil markets edged higher on January 10 on expectations that at least some planned production cuts would be implemented, though optimism earlier surrounding the deal lost its ground due to several developments that may undermine efforts of major producers to oust global oversupply.
WTI and Brent sank more than 2.5 percent in intraday trading on Monday, after a report at the end of last week showed another solid build in the US rig count, the tenth consecutive week that the oil industry added rigs back into the field.
Given the latest production figures coming from OPEC, they cartel is going to cut their total oil production by as much as 1.2 million barrels per day to avoid exceeding the 32,5-million-bpd threshold.
The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).
United States drillers boosted the rig count by four to 529 last week, according to data on Friday from Baker Hughes.
Freight Services International in Dubai fuel broker Matt Stanley said that the average rig count in Canada for last month stood at 209, up 36 from 173 in November past year.
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There are concerns that the USA could quickly ramp up oil production, which is relatively easy to accomplish from its shale oil reserves, which could impact the global oil supply/demand balance, and in a worst case cause OPEC members to ramp up production to defend market share. During this period, West Texas Intermediate crude oil rose 0.5%, as we discussed in Part 1 of this series.
Tehran was fortunate when it was exempted from the OPEC deal agreed to in November to reduce production by 1.2 MMBPD for six months, an accord aimed at addressing the global oil glut and raising low oil prices.
"US SPR sales add to bearish pressures on US crude", Citi said following the release of the bids. "Some fresh unexpected news may be required to revive the bull market".
Late previous year, OPEC pledged to cut supplies along with key non-OPEC producers like Russian Federation and Kazakhstan, who said they've met or exceeded their initial goals for cutting production.
Crude oil prices were volatile in Asian trade Tuesday as concerns over a stubborn global supply overhang kept prices in a tight range.
On Monday, prices fell almost 4% after data from industry firm ClipperData showed Iran's floating storage had nearly halved since September, a sign that the country is aggressively taking advantage of the higher prices to sell more.