Some OPEC Members Not Complying with Production Cuts
August 21, 2020
Some members of OPEC have been asked to increase production cuts in August and September to make up for past over production. Reuters reports that the OPEC+ document says that some members would need to cut an extra 2.31 million barrels per day for a month to make up for their oversupply between May and July. The over producers have been asked to scale back and will be watched to see how they progress on compliance, but it is very unlikely they hit this 2.31 million bpd target unless it gets done over many months not just a couple. This volume over their quotas could continue to put some selling pressure on prices as the economic recovery concerns have grown in the last few weeks.
The EIA reported that between December 2019 and May 2020, crude oil output in North Dakota fell from an average of 1.2 million barrels per day to 0.9 million bpd, a decline or more than 615,000 bpd (41.6%). This production decline is greater than it would have been if producers solely halted new drilling and allowed production from current wells to naturally decline.
India’s crude oil imports fell to their lowest levels in July amid additional lockdowns.
Crude exports from the largest crude exporter in the world, Saudi Arabia, have extended a decline in June to the lowest export level on record. Exports fell 17.3% from the month before.
Beijing has removed mask requirements as the city has reported no new cases in 13 days. After multiple lockdowns it appears the outbreak has been controlled as no new locally transmitted cases have occurred in the country for five days. Let’s hope this is a good sign for all of us moving forward.
The US initial jobless claims released yesterday showed an increase in clams of 135,000 back up over 1 million clams. The continuing jobless claims number does continue to fall.
Minutes of the Federal Reserve meeting on July 28-29 released late Wednesday said the staff of economist told policy makers that they were lowering the GDP estimates for the 2nd half of 2020. The jobless claims news and this Fed news put some selling pressure on energy price yesterday as the economic recovery and with it, energy demand was called into question.