Americas News
OPEC Boosts Oil Output Amid US Hitting Infrastructure Hurdles
Despite market tightening worries on the part of crude traders, there's no lack of evidence that producers in many countries of the world are in full swing and supply is in abundance.
That notion was hammered home again on Monday, when two sources familiar with the matter said an monitoring committee of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers found that oil producers participating in a supply-reduction agreement cut output in July by 9 percent more than called for in the agreement.
Compared with a compliance level of 120 percent for June and 147 percent for May, this means participants have been steadily increasing production.
While presumably this helps calm fears that output declines from Venezuela, Nigeria, and Libya will lead to a market tightening, elsewhere in the world infrastructure is such that it may be limiting the full potential of oil companies.
Such is the case in Texas, where output "is on fire", according to Yahoo Finance, but where in the Permian Basin the lack of pipelines is forcing producers to relocate rigs and even put the brakes on production until more infrastructure is in place.
Jennifer Rowland, a senior energy equity analyst at Edward Jones, said, "We already hear anecdotally in conference calls of [producers] moving rigs out of the Permian to a place that doesn't have these issues."
Yahoo Finance reported that producers in the Permian "have been pumping so much oil that they have to sell it at a discount to Cushing, Oklahoma, to get it through its small congested system of pipelines."
Earlier this year, Canada earned headlines for a lack of sufficient piping that was slowing crude flows out of the Alberta oil sands.
But some experts are placing their faith in bottlenecks being resolved in the near future, which will also help reduce adverse effects of declining production in some countries.
On Monday, Patrick Pouyanne, chief executive of Total, told an oil conference in Stavanger, Norway that he is s taking a "prudent" approach to oil prices after 2019, when bottlenecks in U.S. oil infrastructure could be resolved.
Pouyanne was referring to over a dozen U.S. energy pipelines on the drawing board, some of which are still seeking financing and would accommodate greater U.S. oil and gas exports as well as relieve the bottleneck in West Texas shale fields.
While all of this would amount to bad news for people worried about waning demand due to geopolitical strife, if nothing else more news of output increases from OPEC should put to rest - or at least soften - talk that the cartel is unable to make up for output shortages elsewhere in the world.
