OPEC made the right calls on Friday in Vienna even amidst their usual drama. The Wall Street Journal
and various sources are reporting a deal between the cartel and its “OPEC+” partners to cut down on
crude output by 1.2 million barrels per day. The details are still not clear at this time but some reports
have shown that OPEC will compensate for 0.8 mmbpd of the cuts with the + members most notable
This level of reduction according to some people will bring back balance to the world oil markets. Crude
oil traders also seem to be in agreement with this line of thinking with West Texas Intermediate crude
oil futures going up over $2/bbl in early trading and the more popular European crude oil benchmark,
Brent trading up about 5% today at $63/bbl.
This turn out of events will be a huge relief for the management of US oil exploration and production
companies (E&Ps). It is great to see that the counterproductive decision of OPEC to increase production during the now infamous Thanksgiving of 2014 didn’t recur. This softer OPEC and the diplomatic spirit of Bush 41 is so obvious to see in OPEC’s wise decision to reduce production going forward.
The E&P managements are usually wrongly accused of being responsible for the seeming imbalance in the world oil markets but when you look closely at the Weekly Petroleum Status Report by the US
Energy Information Administration, you realize that this is totally wrong.
In the US, average crude oil production numbers were at 11.700 mmbpd recording an increase of 1.993
mmbpd from the previous year. However, we saw a decrease in US net crude import of about 1.828
mmbpd. Therefore, the delta in production was almost offset by the decrease in imports and the
remaining 165,000 barrels per day can be seen as a rounding error.