Crude Oil: Compliance to Production Cuts Reach New Highs

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At the beginning of the fifth ministerial meeting of the Supervising Committee of Production Cut agreed by the Organization of Petroleum Exporting Countries (OPEC), its secretary general, Mohammad Barkindo, valued as unedited the high degree of performance of the adjustment.

Nigeria was first granted production cuts at the November, 2016 Ministerial Conference and this was later extended in May at another Ministerial Conference, until the country stabilizes its crude oil production.

It is expected until March 2018 that OPEC and their allies have agreed to reduce output by about 1.8 million barrels per day, with the intent to empty inventories.

Data from the U.S. Energy Information Administration shows oil inventory levels in the States trending upward from the time oil prices began to collapse in July 2014 and peaked at 535 million barrels in March 2017 but has declined to 472.8 million by the week of Sep.15.

Years of instability in the oil-rich Niger Delta region of the country resulted into a drop Nigeria's oil production, causing its foreign reserves to deplete and dragging the country into recession last year.

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Kuwaiti Oil Minister Essam al-Marzouq, who chaired Friday's meeting, said that since the supply cuts "the oil market had markedly improved. and is evidently well on its way towards rebalancing".

Minister of Petroleum Bijan Zangeneh on Thursday said Iran had a major quarrel with non-OPEC producers over its push to win back the market share but it did not back off in the face of "many bad things which were said".

Brent crude rose 0.3% to $56.69 per barrel. Nigeria, which is now exempt from making cuts, reiterated that it would accept a cap once output stabilizes around 1.8 million barrels a day. Opec's rules mean these figures would only be discussed internally and the so-called secondary sources production estimates-compiled from third parties and published each month-would remain the only official way for measuring compliance, the delegates said.

The two African nations are now exempt from cutting output because of internal strife, and recent production gains from both countries have diluted the efforts of other members to boost prices.

According to traders, the USA crude received some reinforcement from a compelling lure in gasoline stocks from 2.1 million barrels to 216.19 million barrels. When the country achieves consistent production of 1.8 million barrels a day "we will basically place a cap on ourselves", he said. This has prompted more talk about including Libya and Nigeria in the pact.

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