OPEC+ Delays Planned Crude Production Ramp Up
September 6, 2024
Surprise, surprise. OPEC+ decided to delay adding more barrels to the market for two months. They have said they will continue to evaluate the markets and continue to monitor the situation. This of course is happening as WTI crude oil prices trade under $70 per barrel. OPEC+ is just kicking the can down the road and this will be an ongoing issue for them into the future. Javier Blas from Bloomberg said they will have to do far more than delaying the almost 2 million barrels a day of extra production that it penciled in by the end of next year. It will need to cut output outright. Without curbing production, further price drops loom.
The EIA reported that US crude oil inventories fell to their lowest level since September 2023 as imports fell, while gasoline stockpiles increased with the end of the summer driving season. Crude inventories fell by 6.8 million barrels to 418.3 million barrels in the week ending August 30th. Net US crude imports were down last week by 853,000 bpd to 2.0 million bpd, while exports increased by 85,000 bpd to 3.8 million bpd. Crude stocks in Cushing, OK fell by 1.1 million barrels.
HSBC said in a recent report that any decision by OPEC+ might be taken negatively by the market. Holding off its production output increase may be interpreted as a belated admission by OPEC that oil demand is weak. It said increasing production would tip the oil market into a meaningful surplus from the first quart of 2025 onwards. HSBC said its Brent price forecast remains at $80 per barrel for the second half of 2024 and $76.50 per barrel for 2025. However, it stated that downside risks are increasing.
Crude stocks were down 6.87 million barrels, gasoline stocks were up 850,000 barrels, and distillates were down 370,000 barrels.
Propane inventories were up 2.621 million barrels, this was more than expected. Total stocks are now at 95.690 million barrels, a very comfortable level, and the outlook it that the market should see a couple weeks with more builds to inventory. The consensus seems to be that will not make it to 100 million barrels, but we might be close.
The US jobs number out this morning said new jobs were up 142,000 less than the 161,000 expected. This reflects a slowing labor market, but it does also help clear the way for the Fed to lower interest rates.