Brent crude oil prices dropped more than $1/bbl on the London market June 21 on the eve of a meeting in Vienna by the Organization of Petroleum Exporting Countries, which agreed on no more than 100% compliance with its existing production-cut targets of 1.2 million b/d.
Cartel members had reduced production by more than its overall production-cut targets, spokesmen said, adding they had no immediate allocation or reallocation numbers for specific OPEC members.
The 1.2 million b/d is for all of OPEC through Dec. 31. The next OPEC meeting is scheduled for Dec. 3. Members will closely communicate with one another to achieve 100% compliance, spokesmen said, adding a committee will continue to monitor production levels. Analysts calculated OPEC can increase production by 600,000-900,000 b/d to stay at the 100% level.
An alliance of OPEC and some non-OPEC producers, including Russia, agreed in 2016 to total production cuts of 1.8 million b/d, effective Jan. 1, 2017.
Upon conclusion of the June 22 meeting, cartel spokesmen said no specific production increase number was targeted, but rather OPEC members agreed to a collective conformity of 100% to the existing 1.2 million b/d production-cut target.
Some countries will not contribute to increased production because they have no spare capacity. Both Saudi Arabia and non-OPEC Russia had pushed for increased production levels.
Since the production-cut targets were implemented, oil demand has picked up despite supply disruptions in Venezuela and Libya, resulting in higher oil prices.
Andrew Slaughter, Deloitte Center for Energy Solutions executive director, said in a note issued before the meeting concluded that world oil inventories have come down to a 5-year average range and crude oil prices have recovered.
“A wildcard remains the US producers, but now, for reasons that could surprise to the downside,” Slaughter said. “The US upstream sector’s heightened focus on capital discipline and emerging midstream bottlenecks potentially slowing the pace of US production growth are all new factors that could impact supply and weigh on OPEC’s decision.”
Energy prices
The August light, sweet crude contract on the New York Mercantile Exchange fell 17¢ to settle at $65.54/bbl on June 21. The August price fell 38¢ to $64.86/bbl.
The NYMEX natural gas price for July increased 1¢ to a rounded $2.97/MMbtu. The Henry Hub cash gas price rose 5¢ to $3/MMbtu on June 21.
Ultralow-sulfur diesel for July dropped nearly 4¢ to a rounded $2.07/gal. The NYMEX reformulated gasoline blendstock for July decreased more than 1¢ to a rounded $2.01/gal.
Brent crude oil for August fell $1.69 to $73.05/bbl on London’s International Commodity Exchange. The September contract decreased $1.53 to $72.80/bbl. The gas oil contract for July was $634.50/tonne, down $12.75.
OPEC’s basket of crudes averaged $70.94/bbl on June 21, down $1.54.
Contact Paula Dittrick at [email protected].
