CICC reported on April 27 that can now be said that the production cuts of OPEC and its allies failed? There is an increasingly inconsistent with the fact that crude oil market is still sufficient and crude oil inventories are influential.
OPEC countries and other producers, including Russia, have been boasting about their strict compliance with the agreement to reduce production by 1.8 million barrels per day from January to June.
now looks like OPEC and its allies will extend the agreement for another six months. The current consensus is to extend, and the decision is likely to be announced at a meeting on May 25.
If the success criteria of the production cut agreement are purely measured by the price, then you can say that the agreement has at least US$50 per barrel to support the price.
Before the production cut agreement was reached at the end of November last year, Brent crude oil prices hovered between US$40-50 in the second half of last year. The birth of the production cut agreement successfully increased oil prices.
When the agreement came into effect on January 1 of the new year, Brent crude oil consolidated for two months in a narrow range, and then fell sharply in early March, but the $50 mark was held.
But Brent crude oil once again probed the bottom of the range after the agreement, and fell to $51.42 this Monday, as doubts about the final effect of OPEC production cuts began to rise.
determines the long-term price outlook and what is more important is perhaps the amount of available crude oil and the level of inventory. If OPEC and its allies want to achieve sustainable higher prices, global supply and inventory will need to be reduced.
record crude oil transport volume
This is the main reason for the failure of the OPEC protocol. According to Thomson Reuters (Thomson Reuters), the global crude oil transported by tankers hit a new high in April.
On Tuesday, data showed that an average of 50.3 million barrels of crude oil were transported per day in April, breaking the record of 46.1 million barrels per day set in January.
This number does not contain the oil transported by pipeline. However, the reduction in pipeline supply is unlikely to exceed the increase in sea freight.
data also shows that , which is the biggest responsibility for production cuts, has actually increased its tanker transport volume in recent months, with volume firmly exceeding the level at the end of last year.
Saudi Arabia is expected to transport 8.29 million barrels per day of crude oil in April, exceeding 7.94 million barrels per day in March, 7.73 million barrels per day in February, and 7.83 million barrels per day in January.
The world's largest crude oil importer country China's customs released data on Tuesday showed that China imported crude oil from Saudi Arabia, Russia, Angola, Iranian and Iraq in March more than last month.
China's data does not conform to the story of "successful production cuts" at all, but is completely the opposite. The current situation shows a huge difference between reducing production and actually reducing supply.
is likely that OPEC and its allies have indeed strictly followed the production cut agreement, but it does not necessarily translate into a reduction in crude oil transportation. Another problem is that producers outside the agreement such as the United States and Brazil , Brazil have been increasing production and transportation.
Oversupply is reflected in global inventory. International Energy Agency (IEA) recently said that inventory in industrialized countries is still 10% higher than their five-year average.
Granted, inventory stored in less visible places -- such as those in developing countries and those stored at sea -- seems to be declining, but the question is whether this is fast enough to provide a basis for higher prices in the coming months.
For OPEC, no matter how much you talk about reducing production or inventory, what ultimately works for the price is the crude oil that buyers can access. For now, it may be too early to say that OPEC and its allies have failed, but the data shows that at least they are heading in that direction.
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