Venezuela’s oil exports, for example, remain largely barred from global markets due to US sanctions. Sanctions that will likely remain in place so long as embattled president Nicolas Maduro clings to power.
Then there’s the growing civil unrest in Libya. Much of the nation’s oil production remains shuttered by a local branch of the armed forces, mired in civil war. You can add Iraq to the list too, where protests also impacted on oil output over the weekend.
Even the US killing of top Iranian general Qasem Soleimani — and Iran’s retaliatory missile strikes against Iraqi bases housing US forces — wasn’t enough to push crude to new highs.
Which all spells bad news for OPEC’s efforts to crimp the gushing global supply lines.
Not that OPEC’s leaders are ready admit as much yet.
In December OPEC+ (which includes Russia) agreed to slash another half million barrels per day (bpd) from their combined output. If that target’s met, the Saudis upped the ante by saying they’d slash another 400,000 bpd. That agreement runs through the end of March, and it could be extended to the end of the year.
OPEC’s talking heads believe their efforts should support crude prices at or above today’s prices. But the world’s top energy agencies — and your editor — disagree.
‘OPEC’s own research team sees that pact continuing to drain global stockpiles throughout 2020. By contrast, the IEA [the International Energy Agency in Paris] and EIA [the US Energy Information Administration] see inventory levels rising — even if the deal gets implemented in full. And even if were to be extended for the entirety of 2020.’
Much of the global supply glut continues to be driven by record levels of US production.
And with most US shale producers profitable at prices above US$50 per barrel, crude looks to be overpriced, even after this year’s 7% retreat.
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