How Much Spare Capacity does OPEC+ have?

[dan_s]

In a recent Rystad Energy article that we posted here last week (which all of you should read carefully), there is a chart that shows that since the pandemic OPEC+'s production actually peaked in mid-2022 at 38.9 million barrels per day. In mid-2022 the official OPEC+ production quota's totalled 41.5 million barrels per day, but 2/3rds of the cartel's countries weren't able to meet their quotas.

You can also see the Rystad Energy chart at the 16 minute mark of my June 30th podcast.

In the recent Raymond James presentation that I discussed here yesterday, they point out that due to lack of investment the original OPEC cartel's maximum production capacity has declined.

In June, not including the recent 1 million barrel per day cut by Saudi Arabia, the OPEC+ quotas were 38.5 million bpd and actual production was 36.9 million bpd.

Raymond James showed slides recently that indicate that the only cartel members that have ANY ADDITIONAL PRODUCTION CAPACITY are Saudi Arabia, UAE, Iraq and maybe Iran. RJ thinks that Iran is already back to maximum capacity since Team Biden has stopped making any attempt to enforce the existing sanctions. Russian oil production is declining, but exports have not declined much because Putin is draining inventories to generate oil revenues.

Rystad and Raymond James both think that by the end of 2023 the OPEC+ maximum production capacity will be ~37 million bpd, which is just 1.1 million bpd above the current OPEC+ production (35.9 million bpd), INCLUDING SAUDI ARABIA'S VOLINTARY CUTS THAT BEGAN JULY 1ST.

In my opinion, the current Wall Street paradigm is that OPEC+ and the U.S. can ramp up production quickly if necessary. If that is a FALSE PARADIGM, then this world is heading for a train wreck.

U.S. oil production has recently declined back to 12.2 million barrels per day, which is back to where it was in August, 2022.

The active drilling rig count in the U.S. has been falling each week for over two months. More importantly, the number of active frac crews that complete wells has also been declining. U.S. oil production CANNOT INCREASE AT THE CURRENT LEVEL OF DRILLING & COMPLETION ACTIVITY.

Biden continued to drain the SPR during June. Total U.S. petroleum inventories have declined by 25% since Joe Biden became the President.

Rystad and Raymond James say demand for oil-based products exceeds supply by over 2 million bpd NOW. If Saudi Arabia sticks to their promise to keep a million bpd of supply off the market through August, we should see big draws from U.S. and OECD petroleum inventories.
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Read the Rystad article: https://www.rystadenergy.com/insights/oil-fundamentals-are-about-to-turn-decisively-bullish

Send email to Sabrina ( energyprospectus@gmail.com ) to get the Raymond James' presentation slides.