A meeting of Organization of Petroleum
Exporting Countries (OPEC) is scheduled for 5th December 2019; the day Aramco
is also due to announce the final offer price. The producers are expected to extend
their supply pact at the meeting. It is anticipated that delegates may discuss
deeper supply cuts amid forecasts of supply glut in 2020.
Analysts are pinning hopes on the
meeting because oil prices slipped to US$63 a barrel after spiking to US$72 in the
aftermath of 14th September 2019 attacks on Saudi oil facilities. The current
price is below the levels many OPEC countries need to balance their budgets and
below the levels officials say they favor.
OPEC, Russia and other allies, known as
OPEC+, had agreed to reduce supply by 1.2 million bpd. OPEC’s share of the cut
is about 800,000 bpd, to be shared by 11 members, except Iran, Libya and
Venezuela.
United States the game spoiler
Voracious appetite for oil of United States has always been a strategic Achilles’ heel, with that vulnerability put on display to the world to during the 1973 Oil Crisis. A chronic hypersensitivity to oil supply crunches and price volatility helps US shape its foreign policy – it has been the driving force behind US partnership with the historic oil market maker Saudi Arabia. That is the reason the US Navy’s 5th Fleet patrols the critical choke points of the Gulf (the Strait of Hormuz), the Suez Canal and the Strait of Bab al Mandeb – the southern entrance to the Red Sea.
US has reached a record breaking 12.8 million barrels per day (bpd) of oil production in November in 2019 – a new high watermark for the industry. Earlier in September, US had achieved something yet more impressive when it exported more petroleum products than it imported. For the world’s leading oil buyer this is a big deal. America consumes over 20% of the global production of 99 million bpd of daily crude production, with China holding the number 2 spot at 13% and India in a distant 3rd at 5%.
Today the US leads the world in the production of petroleum products, including crude oil, petroleum liquids and biofuels with 17.9 million barrels per day, or 18% of the petroleum market. At present the US is ahead of Saudi Arabia, with 12.4 million bpd or 12% of the world's total output, and Russia producing 11.4 million bpd or 11% of the global market.
According to a Reuters report, oil
output by OPEC fell in November mainly because Saudi Arabia kept a lid on
supply to support the market before the initial public offering (IPO) of state owned
Saudi Aramco. It was also supported by reduced production by Angola due to
maintenance.
At an average, the 14-member OPEC pumped
29.57 million barrels per day (bpd) during November, down 110,000 bpd from
October’s revised figure. Production from the two other exempt producers, Libya
and Iran, was reported unchanged.
During November 2019, Saudi Arabia pumped
9.85 million bpd, down 50,000 bpd from October. Riyadh’s output had jumped by
850,000 bpd in October after the September attacks, but remained below its
stipulated quota by OPEC. In November, the country pumped around 400,000 bpd
less than the agreement allows.
OPEC’s largest production drop of
140,000 bpd was because Angola exported less crude in November due to
maintenance. The African producer was already pumping far below its OPEC quota
due to a natural decline in production and a lack of new fields coming online,
rather than due to voluntary restraint.
The 11-OPEC members bound by the
agreement, which for now runs until March 2020, have easily exceeded the
pledged cuts. Compliance has been encouraging, although Iraq and Nigeria remain
laggards among larger producers.
OPEC’s second-largest producer Iraq has
pumped slightly less, but continues to overshoot its target.
Nigeria, which has consistently pumped
more than its OPEC target, continued to do so in November, although output edged
lower this month.
Among countries pumping more, the
largest increase was in Kuwait, which increased output by 70,000 bpd to 2.72
million bpd, reaching its exact quota level.
Ecuador also pumped more after a decline
in October, when protests against government austerity measures led to several
fields being shut down.
Venezuela, which is contending with US
sanctions imposed on state oil firm PDVSA and a long-term decline in output,
managed a small boost to supply with exports increasing in November.
