Why Opec Increased Crude Oil Production - Barkindo
Jun 27 2018
That'll support American oil prices while a deal in Vienna between OPEC and its allies to boost output - led by Saudi Arabia - may weigh on Europe's Brent crude, analysts including Damien Courvalin wrote in a June 24 report. ICE August Brent lagged slightly, settling $2.50 higher at $75.55/b.
The premium of Brent crude over US futures narrowed to around $5.21 a barrel on Monday, down from almost $10 a week ago, thanks to the steep drop in the premium of USA coastal grades over the West Texas Intermediate benchmark price. "We remain focused as an apolitical organisation and will remain focused on our core responsibility of trying to manage the market, especially the instrument of supply management to maintain stability at all times", Barkindo explained. The spread between the European and American markers narrowed 18 per cent Monday and has nearly halved in under a week. "Cushing stockpiles are quickly withdrawing as the USA summer driving season boosts refiners' demand for crude, supporting WTI prices".
The front-month Brent/WTI spread, which hit near three-year high in late May at more than $11/b, has since declined sharply to trade within a $5-$7/b range, settling at $6.65/b on Monday.
The OPEC deal, which was reached after a last-minute compromise with Iran, is a victory for Saudi Arabia and Russian Federation which both backed an increase.
"OPEC was able to overcome objections by Iran and others to production increases by framing their decision as a return to the originally agreed 1.8 million b/d cuts", S&P Global Platts Analytics said. "If we are going to see more Iranian barrels coming off the market, that is likely to be bullish for USA exports".
Iran said it doesn't believe buyers of its oil will get waivers from the United States government that would allow them to continue purchasing cargoes after President Donald Trump's renewal of sanctions. The group's compliance rate was at 162 percent in May, according to Bloomberg calculations based on OPEC's secondary source data. Iran saw less than 700,000 additional barrels a day and Iraq predicted it could be as much as 800,000.
The oil complex surged Friday, taking many in the oil world by surprise after OPEC and its 10 non-OPEC partners put aside political differences and agreed to adhere to 100% of their production cuts, effectively boosting global supply.
"The family is growing and for us, the more the better".