Global Oil Market - Feb 10

[dan_s]

From my friends at OilPrice.com

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The IEA says that global oil production fell by 1.5 mb/d in January, largely because OPEC cut 1 mb/d as part of its deal. The Paris-based energy agency said that the cuts were some of the largest in OPEC’s history and the 90 percent compliance rate is a sign that the group is intent on carrying out the agreement. If OPEC maintains the cuts at current levels, the IEA says that global inventories could fall by 600,000 bpd through June. The IEA said it would take a “wait and see” approach, but the agency was largely optimistic in its latest monthly oil market report.

The combined OPEC cuts of 1.2 million barrels per day (mb/d) plus the additional 0.6 mb/d from non-OPEC countries is helping to erase the supply overhang in the oil market. But the oil ministers of Iran and Qatar said this week that OPEC’s work would be undone if the deal was allowed to expire in June. They suggested that the cuts might need to be extended until the end of the year if the oil market is to balance, a sign that the adjustment process is taking longer than anticipated.

Venezuela’s state-owned oil company PDVSA has “fallen months behind on shipments and fuel under oil-for-loan deals with China and Russia,” according to a new Reuters report. Russia and China are key benefactors of Venezuela, keeping it afloat during the worst economic crisis in recent memory. But Russia and China are also on the hook for a combined $55 billion to Venezuela, and needs to keep the oil flowing in order to recoup payment. Reuters says that PDVSA is behind by about $750 million in oil, which speaks to the depths of the crisis that Venezuela finds itself in.

Bloomberg reports that Wall Street is funneling the largest amount of capital back into the oil and gas sector since at least 2000. Energy companies issued 13 new rounds of equity in January, raising $6.64 billion in capital, a large volume and a sign that investors are hungry for energy exposure. In a separate report, Moody’s Investors Service predicted that M&A deals would rise substantially in 2017.

[dan_s]

IEA Oil Market Report: https://www.iea.org/oilmarketreport/omrpublic/