EMEA News
More Output Increases Cause Crude Losses Friday and Predictions OPEC and Russia will be "Punished Mightily" Next Week
A report from Petro-Logistics predicting that production from the Organization of the Petroleum Exporting Countries (OPEC) will swell by 145,000 barrels per day (bpd) this month caused crude on Friday to plummet over 2 percent - and pundits to note that the cartel and its chief ally, Russia, could be "punished mightily" for failing to positively impact stockpiles under its cutback initiative.
West Texas Intermediate gains were wiped out upon the report's release, with a $1.15 drop for a $45.77 per barrel settlement; Brent plummeted $1.30 to $48 per barrel.
Not even news that rigs operating in the U.S. dropped by one this week along with little-to-no increases in recent weeks - something analysts previously thought would galvanize the market - was enough to offset the losses; and this follows the evaporation of a brief rally earlier this week when Saudi Arabia said it would cut exports by a further 1 million bpd - a promise that wasn't backed by any data or firm commitment.
Daniel Gerber, chief executive for Petro-Logistics, wrote, "OPEC-14 supply is expected to exceed 33 million bpd in July, which represents an increase of 145,000 bpd over June, driven by higher supply inSaudi Arabia, UAE, and Nigeria.
"July volumes represent an increase of more than 600,000 bpd over the first-half 2017 average."
It's worth noting that OPEC's output in Jun rose by 393,000 bpd to 32.611 million bpd, due to rises from Nigeria and Libya, with extra supply also from Saudi Arabia and Iraq.
Now all eyes are focused on next week, when several OPEC nations and some non-members will meet in St. Petersburg to discuss the progress of their cutbacks; it has been said that Libya and Nigeria could be then asked to cap their output.
If the two countries continue unchecked, James Williams, an economist at WTRG Economics, says we will see "lower prices, because U.S. production is still anticipated to increase."
John Kilduff, founding partner of Again Capital, added, "We're keying on everything ahead of the OPEC meeting; they can't add even a barrel right now."
There is a growing sentiment that the July 24th event will be a "make or break meeting," according to Kilduff: "If nothing comes out of this meeting and they disappoint us all, the cartel and Russia will be punished mightily - so this is a big day."
He went on to say that if they are unable to deliver on Monday, "that could send tremors" resulting in Russia leaving the deal entirely.
Kilduff concluded that the only good news is that there's a "decent rise" in oil usage around the world.
But it's debatable to what extent the rise could offset rampant pumping, especially considering earlier this week it was revealed that China will average a 95,000 bpd demand growth this year, far below gains of as much as 290,000 bpd two years prior.
