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An OPEC/non-OPEC agreement edging closer?

Published Tuesday, January 26th, 2016

After snowmageddon the oil market returned to reality yesterday. Heating oil led crude prices up on Friday with a gain of 9.8cts/gal and led them down yesterday with a loss of 6cts/gal. WTI lost $1.85/bbl to close at $30.34 and Brent lost $1.68/bbl, closing at $30.50. The March/April WTI spread widened to -$1.46/bbl (-0.14) and March/April Brent to -81cts/bbl (-0.15).

An additional nudge came from the Iraqis who reported that production from their central and southern fields rose to a record high in December of 4.13 mbpd, up from 3.66 mbpd in November. Adding in 600,000 bpd from the northern fields under the control of the KRG and total Iraqi production comes out at 4.7 mbpd – 400,000 bpd more than the level reported by OPEC secondary sources. It is a reminder, if any were needed, that oil production is currently a free for all without limits.

Not surprisingly oil prices have fallen another $1/bbl overnight, but there are developments that could make bears very nervous. The howls of protest from both OPEC members and non-OPEC are rising. Both the OPEC Secretary-General and Kuwait’s OPEC governor, speaking in different locations, made it clear yesterday that they are ready to sit down with non-OPEC producers to find a solution. The VP of Russian producer Lukoil has reportedly called on the Kremlin to work on a production deal with OPEC. According to TASS, he claims that “Iraq has warned all its subcontractors, including us, about the need to cut production”. This is big news if true.

to read the rest of the report, please click here

Posted by David Hufton