US Again Cited as Gadfly to OPEC's Cutback Efforts, But Hamm More Concerned About Accuracy of Production Forecasts

Friday November 17, 2017

With crude prices on Thursday falling for a third straight session - said to be caused again by the International Energy Agency earlier this week cutting its forecast for demand growth for 2017 and 2018 - attention is once more focusing on U.S. shale production, which has hit a record of 9.65 million barrels per day and threatens to undermine any benefits arising from a potential extension of the Organization of the Petroleum Exporting Countries (OPEC) output cutbacks.

The International Energy Agency on Thursday said the U.S. is is expected to account for more than 80 percent of the growth in world crude supply in the next decade; also, the Energy Information Administration showed domestic crude inventories rising for a second week in a row, building by 1.9 million barrels in the week to November 10 to 459 million barrels.

Michael Tran, commodity strategist for RBC, said that by contrast, most of the rest of the world's inventories are in line with historic averages, and that "It is no coincidence that the recent price rally has occurred concurrently with several weeks of record setting surges in exports."

As far as billionaire oilman Harold Hamm is concerned, he is more interested in an improvement in the accuracy of the EIA's production predictions, which he blames for "depressing" U.S. oil prices.

He said, "EIA is on that world stage with us, as the swing producer in the world, and so it's going to require better, more sophisticated methods of forecasting - more so than ever before."

While the U.S. beats its chest on the world stage, OPEC boosters are making the rounds and trying to assure everyone that the market will continue to strengthen under their benevolent gaze.

Khalid Al-Falih, energy minister for Saudi Arabiatold Bloomberg television, "My preference is to give clarity to the market and announce on November 30 what we're going to do, but I remain respectful of the view of my colleagues....everybody is committed to doing the right thing, which is balancing the market and doing it in a way that doesn't leave any of the countries outside the pact."

While the long list of OPEC cheaters plus members and allies outright refusing to participate in the cuts make the latter part of Al-Falih's statement almost laughable, yet more hyperbole favouring OPEC was delivered on Thursday, this time by an outside source: Rainer Seele, CEO of OMV, told CNBC, "I'm positive on the oil market: we see very strong demand...which is supporting the oil price outlook we do have, and OPEC is doing a fantastic job - I haven't seen such discipline.

"So they are just changing the image....I think OPEC will take care of balancing the market."

Earlier this week, Fatih Birol, executive director for the IEA, stated, "The United States will be the undisputed leader of global oil and gas markets for decades to come; there's big growth coming from shale oil, and as such there'll be a big difference between the U.S. and other producers."