Oil in Global Economy Series: Key oil market updates

Monday, November 12, 2018 1:45 PM UTC

While the oil market continues to focus on supply/demand fundamentals, these are some key updates that you need to keep a tab on,

U.S. oil rig count: The United States is continuing to see a surge in production. According to the latest report, the production is at a record high of 11.6 million barrels per day. Despite fewer rigs operating compared to 2014/15, the production efficiency has pushed the overall production higher. As of the latest report, the numbers of operating rose to 886, the highest since March 2015. The numbers of operating rigs have increased more than 185 percent since bottoming in May 2016.
Venezuela crisis: Crisis continues in Venezuela. According to the latest report, inflation has reached an all-time peak of one million percent. Reports suggest that payment starved workers are quitting Venezuela’s oil production, which is dwindling production further. However, the country’s leadership has been trying to overcome the trouble using cryptocurrencies as a means to fund the country. The reelection of Maduro resulted in stronger sanctions from the United States. In addition to that, Venezuela’s state-owned oil producing company PDVSA announced that it would not be able to meet supply contracts as production dwindle. Oil refineries continue to shut down due to lack of crude oil supply. In the next few months, Venezuela’s production is expected to decline to 1 million barrel threshold. In the latest move, Venezuela has introduced a new sovereign bolivar, which will be supplied by the central bank beginning August 20th. The government has lined the new currency with its already introduced cryptocurrency petro. President Maduro has also transferred the country’s oil reserves to the central bank. Venezuela has the biggest oil reserve in the world, surpassing Saudi Arabia. The residents are still struggling with the introduction of the new ‘Boliver’ as the currency, which has been linked to the country’s cryptocurrency ‘Petro’. According to latest surveys by Reuters, the oil production has declined to a new low of 1.18 million barrels per day in October.
Libya: As expected, according to a Bloomberg survey Libya’s production has reached 0.97 million barrels per day in August. The recent violence has somewhat subsided but reports suggest that both sides have started implementing the security arrangements. Libya is likely to hold the general election on 10th December 2018. Germany has agreed to provide €2 million in assistance. As expected the production reached 1.05 million barrels per day in September. Libya’s production is recovering fast. According to Reuters’ Libya’s production reached 1.25 million barrels per day in October.
Iran: Uncertainty surrounds Iran’s oil exports as the U.S. sanctions kick in from 4th November. The United States has promised harshest of punishments to those who violate the sanctions including payment system SWIFT. However, the U.S. has allowed a 180-day waiver for 8 counties, including China, India, and Korea. OPEC surveys suggest that Iran’s oil production is coming down.
OPEC & Russia & Saudi Arabia: As oil price decline, OPEC producers are suggesting a production cut of million barrels per day. Russia has reportedly rejected the idea
Saudi Arabia and Trump: President Trump reportedly pressing Saudi Arabia to increase production to keep oil price low as it helps not only his economic agenda but makes it difficult for Iran as oil exports bring a lesser amount of revenues.
Nigeria: Nigeria’s oil industry is struggling with regular oil theft. In October, production declined by 70,000 barrels per day just due to theft and attack on oil infrastructure.