When the oil cartel OPEC and 11 other non-member petrostates agreed last November to cut their collective output by 1.2 million bpd, traders anticipated a price rebound. Since then, the price for a barrel of oil has jumped less than $10, and much of the blame for this muted response falls on the shoulders of U.S. shale producers, which have taken advantage of petrostate supply cuts to increase their own production. But as the FT reports, new data suggests that those petrostate production cuts could now be making a difference in helping to balance supply and demand in today’s market:
Data provided to the Financial Times show that crude oil being shipped over the oceans or stored on supertankers has dropped by as much as 16 per cent since the beginning of the year, in a signal that supplies could be dropping faster than many in the market believe. […]
At the FT conference, many senior oil trading executives argued that US crude inventories, which have risen since the start of the year as domestic production rebounds towards 9m barrels a day, were masking tightening supplies elsewhere.
We’ve seen a lot of talk lately about growth in American crude oil inventories, and those supplies have helped to offset the market effects of OPEC & co’s production cuts. As a result, prices haven’t strayed much further than the $50-$55 per barrel range.
But as fungible as the global oil market is, there’s still a sizable amount of uncertainty in it. Even in 2017, traders still have some tea leaf reading to do, and one of the metrics at their disposal is the amount of oil being shipped on tankers. This new report suggests that the petrostate cuts could be eating away at the supply glut to a greater extent than previously believed.
In the midst of these production cuts, Libya is seeing its own output surge after the country’s biggest oil field resumed production. Libyan crude supplies increased 160,000 bpd as a result, which won’t do anything to ease petrostate concerns over the oversupplied market.