On the night of November 30, 2016, OPEC reached a production cut agreement again after eight years. OPEC no longer returned in vain, regaining its majesty and shocking the market, and oil prices soared 10% upward when they heard the news. Although the market is still doubtful about whether oil-producing countries can implement the production cut agreement, at least recently, OPEC's reputation and appeal have returned to the king.
This production cut agreement mainly includes the following points: All OPEC members agree to reduce daily oil production by about 1.2 million barrels per day, with a new daily production target of about 32.5 million barrels, and the term will be valid for 6 months from January 2017; non-OPEC countries agree to reduce daily production by 600,000 barrels, and Russia accounts for about half of the first production cut in fifteen years (but details still need to be confirmed, so don’t expect too high); OPEC will establish a special committee to supervise production reduction; temporarily suspend Indonesian OPEC membership.
The above table is data officially released by OPEC, and there may be two low-level errors in Iran’s part, because Iran’s output in October was 3.69 million barrels per day, so in terms of the corresponding range, Iran’s output was actually allowed to increase by 107,000 barrels per day. At this OPEC meeting, Iran became the only country allowed to increase production. It is the biggest winner in terms of numbers and has indeed achieved certain benefits, but the increase in production has not yet reached the target of 4 million barrels per day. In fact, Iran itself is bound to be not very satisfied. Nigeria and Libya have exemptions, so you don’t need to reduce production, and you can be considered a winner in terms of numbers. However, due to political turmoil, Nigeria's production in October 2016 has declined by nearly 200,000 barrels per day compared with January, so it has not actually taken any advantage; Libya has also avoided production cuts due to political instability, but Libya's output in October is the highest this year, so it is actually a good result. Indonesia, which has just returned, has been suspended from its status as an OPEC member because Indonesia said it is a net importer of oil and it is difficult to participate in production cuts. Li Yan, an analyst at Longzhong Petrochemical Network, said that if each oil-producing country bears the corresponding production cut responsibility based on the proportion of the total output of OPEC, then in fact, each oil-producing country bears an additional part of the agreement. The average proportion of oil-producing countries is 1.94%, and the countries with more proportion of burden are still above this number are Saudi , Iraq , UAE and Kuwait . The UAE and Kuwait are close to the average, while Kuwait has a high per capita asset reserve, while the UAE has strong fiscal and external buffering tools, so it actually has little impact. Saudi Arabia has undertaken the largest production cut ratio, but in fact it is only equivalent to reducing production to the level from the fourth quarter of last year to the beginning of this year (highs in the past five years), and in fact it has not suffered a particularly disadvantage. The biggest loser at this meeting was Iraq, because the 210,000 barrels per day production cut exceeded its due proportion, which ended its preferential treatment exempted from OPEC cuts for more than a decade. Now Iraq has to deal with the rebel forces and fiscal pressure is tight (but it is not too much to grit its teeth in order to push up oil prices, so Iraq finally agreed to a production cut agreement).
Even if OPEC member countries can strictly abide by the production cuts, the 1.2 million barrels per day production cuts are not enough to reverse the current pattern of oversupply. If non-OPEC oil-producing countries can also strictly reduce production by 600,000 barrels per day, the speed of supply and demand returning to balance may be greatly accelerated, and it is even expected to be achieved in the middle of 2017. The question is, can all oil-producing countries strictly reduce production? Will no one secretly increase the production? You should know that OPEC has reached 17 production cut agreements in history, but in fact, only 60% of the quota has been implemented. Moreover, according to foreign media analysis, Nigeria and Libya, which have obtained the exemption, may increase production by up to 300,000 to 600,000 barrels per day, and Iran also has the possibility of excessive production increase.
benefited from the OPEC production cut agreement, international oil prices have risen sharply for two consecutive days, with Brent breaking through $53 per barrel. The rising oil prices will also restore U.S. crude oil production. Once U.S. crude oil production recovers from the current 8.6 million barrels per day to the 2015 high of 9.6 million barrels per day, the growth rate will be about 800,000 to 1 million barrels per day (previously, the annual output capacity of U.S. crude oil could reach 1.25 million barrels per day). But at least in the near future, the market can still enjoy the carnival feast of the OPEC production cut agreement.
For the current international crude oil market, US$55/barrel is still a sensitive and high resistance mark, and it is difficult for the oil price to quickly reach US$60/barrel. The supply and demand side determines the medium- and long-term trend of oil prices, while the real supply is still greater than demand. Moreover, from December 13 to 14, the Federal Reserve's first interest rate hike this year is coming. There is also a probability that the black swan will fly out in the Italian referendum on December 4.
In any case, OPEC has changed its attitude. The rise in the future center of international crude oil prices is a high probability event. The oil price below US$40 per barrel is to say goodbye.
Longzhong Petrochemical Network (longzhong1988) has been established for 26 years. It has more than 90% of the country's petrochemical product supply chain customer resources. It pioneered the e-commerce model of precise marketing in the B2B3.0 industry, and simultaneously operated Longzhong Petrochemical Network, Petrochemical Connect, and security trading platforms. In 2014, it officially started the e-commerce 4.0 era of petrochemical industry.
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