OPEC next meeting is the expected trigger for the oil market
July 24 OPEC meets in St. Petersburg, and therefore there is a good chance that efforts to bring Libya and Nigeria into a common system of production quotas can be implemented, according to a report by the OPEC secretary.
Oil production in Libya has increased from 460,000 barrels per day since the beginning of the year, while production in Nigeria increased by 175,000 barrels per day. Civil wars in both countries reduced production. Nevertheless, the Libyan output is the highest in a couple of years, but still only slightly more than half its peak in 2014. Nigerian production is just below 1.8 million barrels per day.
This year, most other OPEC countries have reduced production, according to the terms of the agreement. In addition to Libya and Nigeria, production increased in two other countries: Iran and Iraq. This year the volume of production in Iraq increased by 110 thousand barrels per day. Half of the increase occurred in June. This year Iran increased production by 270 thousand barrels a day. This was largely a phenomenon of the first quarter of 2017. In the second quarter, production in Iran remained virtually unchanged and remained below 3.8 million barrels.
Thus, the threat to the current agreement is within the structure of OPEC. OPEC calls are internal, not external. Nevertheless, the increase in production in Saudi Arabia is not a kind of the withdrawal from the agreement. It is often forgotten that Saudi Arabia is one of the few countries that burns oil for electricity. The country often improves productivity in the summer months to meet the demand for electricity associated with increased use of air conditioners.
Over the past two weeks, oil reserves in the US fell by 13.8 million barrels. This is the biggest two week decline since the beginning of last September. The reduction in inventories, apparently, depends on the intensification of operations for processing and export. The US exports more than 900,000 barrels per week, which is 80% more than in the second quarter of 2016. Oil imports into the United States also fell, allowing China to accept the honor of being the world's largest oil importer.
Technically, Brent crude yesterday corrected from an important level of $ 49 per barrel. Today, in the focus is weekly data from the API for oil and petroleum products, tomorrow we will analyze official data from the US Department of Energy. Until the end of the week the market can gain to levels of 51 dollars per barrel.