Economy

Russian Federation thinking of exiting OPEC production cut deal

Russian Federation thinking of exiting OPEC production cut deal

This month's OPEC report says it expects total U.S. crude supply to increase by 110,000 barrels a day in the year ahead. Gasoline volumes rose by 3.6 million barrels, but stockpiles of distillate fuel oils - used to make diesel and heating oils - fell by 3.9 million barrels, according to new Energy Department data on Thursday.

"As a result, global benchmark Brent fell to a 10-day low of $68.50 overnight before finding support, while United States crude briefly dipped below $63 before recovering to $63.10", the analysts said.

Meanwhile, the report also presented the country's heavy oil price to be $60.87 in December, an increase of $1.6 or 2.7 percent from $59.27 in November.

There is a tremendous euphoria over crude oil touching $70 a barrel.

Besides slowing demand, a spectacular rise in US output is expected to keep oil prices under pressure, the IEA said.

Such a prospect helped push prices - which last week climbed to a three year high above $64 a barrel - as low as $63.47 Thursday.

OPEC stated that higher oil prices has resulted to further supply to market, mainly in North America and particularly tight oil, including unconventional natural gas liquids (NGLs).

The United States is set to overtake Saudi Arabia as the world's number two oil producer after Russian Federation this year, as shale companies, attracted by rising prices, ramp up drilling, the International Energy Agency said on January 19.

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However, worries of dip in revenue by Nigeria could be mitigated by an oil rally that has seen oil prices rise from around $45 a barrel in June to over $70 a barrel this month in part because of the group's agreement to reduce the world's oil production by about 1.8 million barrels a day, or almost 2% of global output. "Generally, our colleagues have said and confirmed one more time that they are committed to such more stable situation and balance and have no plans to increase [oil] production", Novak said.

The IEA also sees a big rise in oil production this year, including "explosive growth" in the US With the pickup in non-Opec supply exceeding the increase in demand, it sees the world's need for Opec production falling by around 600,000 barrels a day compared with last year, to a level below last month's output.

But both Mr Al Falih and Mr Al Mazroui said they did not think the rise in prices would hurt global demand for oil, according to Reuters.

In particular, producers in the U.S. have been amping up their output and will likely continue to do so, essentially wrecking the work OPEC has done to this point.

The IEA warned that mostly due to USA shale, total supply growth could exceed demand growth.

Profit margins of companies which have crude and crude derivatives as their significant raw material components, the prices of which are linked to the market price, could see some contraction.

That sets 2018 up to be very good for oil prices. However, this is not just about the OPEC cuts.

Market tightening in the final months of 2017 was evident and continued into 2018.


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