Gold Investment Crude Oil Network (http://energy.cngold.org/) May 23, Monday (May 22) ICE Brent July crude oil futures electronic disk prices closed down 0.07 US dollars on Monday, a decrease of 0.13%, Reported at 53.73 US dollars / barrel. Both the US and Brazil crude oil futures once hit the highest level since April 19. US WTI July crude oil futures electronic trading prices closed up 0.14 US dollars, or 0.28%, to 51.04 US dollars / barrel, oil prices rose to more than a month high, because the market for oil exporters will agree to extend the production agreement this week, the confidence is increasing, And speculation that oil-producing countries may further increase production efforts. In addition, the WTI June crude oil futures contract has completed the final transaction at 02:30 on Tuesday.
US oil has risen on the eighth day of the past nine trading days and has risen by about 16% since hitting a five-month low earlier this month.
OPEC's expected reduction in production is expected to heat up
The factor driving the rise in oil prices is that the market expects the Organization of Petroleum Exporting Countries (OPEC), and non-OPEC oil producers such as Russia, to extend the agreement to reduce production by 1.8 million barrels per day by six to nine at a meeting held on May 25. month.
Bjarne Schieldrop, chief commodities analyst at SEB Markets, said that the decision to extend the production cuts seems to be basically a foregone conclusion. It seems that the consensus within OPEC is very high.
Saudi Energy Minister Falih visited Norway on Monday, and the country is now trying to lobby other OPEC members to support a nine-month extension of the production cuts to alleviate global oversupply and support oil prices.
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Falih expects that the proposal to extend the production reduction agreement for 9 months will not be opposed within OPEC; at the same time, Falih said that the production reduction agreement is similar to the previous agreement, with only minor adjustments.
OPEC Secretary-General said on Monday that the consensus of the member states of the organization and other oil-producing countries in extending the period of production cuts is increasing.
According to sources, before the OPEC meeting with OPEC oil producers on Thursday, countries also discussed the possibility of increasing production cuts.
Analysts at Commerzbank said that if the agreement is not reached, the market may be disappointed.
In a report, Commerzbank said that if the oil-producing countries only agree to extend the production reduction agreement, the best result is that the market reacts neutrally and may even ignite disappointment.
OPEC's production reduction results have so far not touched the market, and OPEC's second largest oil producer is also the biggest producer of cheaters. As capacity increases, OPEC's second-largest oil producer, Iraq, will have less incentive to cut production in the future. If the past cuts were just beginning, OPEC's extension of its production cuts will likely increase oil prices.
In the first quarter, the daily production of Iraqi crude oil was more than 80,000 barrels higher than the allowance for production cuts allowed by OPEC. If the current agreement is extended to 2018, the country will have less incentive to comply with the production reduction agreement in the future. The reason is that the key oil fields in the south are expanding capacity, and the war between Iraq and IS has continued for three years, and the country is sinking into a debt quagmire.
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Harry Tchilinguirian, Head of Commodity Market Strategy at London-based Faba Bank, said, "If that part of the capacity has been idle, there will be opportunity costs, and Iraq will be less willing to comply with the production cut agreement." But he is optimistic that with the like Members such as Saudi Arabia compensate for Iraq’s excess production, and global crude oil inventories will decline by the end of the year.
But if Iraq’s implementation of crude oil production cuts to such a degree that other countries in the OPEC’s 13 member states are also opportunistic, the global oversupply of crude oil will deteriorate and risks will arise.
Brent crude oil fell below $50 this month. Due to the active production of US shale oil mining companies, OPEC's efforts to curb global crude oil supply have been hampered. However, after Saudi Arabia and Russia reached a consensus to extend the crude oil production reduction agreement for nine months to March 2018, the oil price is still far below the new high level after the production agreement is reached.
Morgan Stanley crude oil analyst Martijn Rats said, "Many market participants have no longer paid much attention to the impact of production cuts." He said that if Brent trades between $50 and $60, it means OPEC Member states are basically obligated to cut production, and prices below or above this range indicate that they have not complied with the production reduction agreement.
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In the production reduction agreement reached last November, OPEC envisaged a reduction of 120 barrels per day. Iraq’s production quota was 210,000 barrels per day, and production was reduced to 4.351 million barrels per day. According to OPEC data, Iraq’s output reduction rate was 61% in the first quarter of this year, although Iraq’s production reduction rate increased to 90% in April this year. Moreover, Iraq is not the only oil-producing country with unfavorable production cuts. The UAE's production reduction rate in the first quarter was only 57%, but in April it exceeded the production cut. Many non-OPEC oil producing countries, including Russia, have also failed to meet their production reduction targets.
Robin Mills, chief executive of Qamar Energy, a Dubai-based energy consultancy, said, "I suspect that Iraq's production cuts in the second half will exceed the levels already achieved." He believes that with the completion of multiple oilfield maintenance efforts, the new oilfield Production begins, and domestic demand rises seasonally, Iraq may produce more crude oil, and there are many signs that this has begun to appear.
Other OPEC member states are tolerating Iraq’s violations because Saudi Arabia has made up for it. According to OPEC data, Saudi Arabia has increased production quotas by 35% or 170,000 barrels per day. As a result, OPEC's production reduction rate reached 96% in the first quarter. The International Energy Agency (IEA) reported that the number was very unexpected because the previous production reduction rate was never higher than 80%.
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OPEC's current risks are much higher than in the past, and its influence on the global crude oil market has also weakened, as oil-producing countries such as Saudi Arabia have seen insufficient funds and more and more financing. This is one of the reasons why OPEC members prefer to turn a blind eye to Iraq’s violations without breaking the production reduction agreement.
This is no exception in Iraq. As early as 2003, after the US invasion of Iraq, Iraq was exempted from output restrictions in order to rebuild post-war and sanctioned productivity. Iraq, which had refused to join the production cut, was reluctant to sign a production reduction agreement. As its crude oil minister, Jabbar Al-Luaibi, said, the Iraqi combat forces were "fighting for the world."
In addition, Iraq has no control over its entire oil industry and even lacks understanding. In last year's production cuts, crude oil production controlled by the semi-autonomous Kurdish region of northern Iraq accounted for 1/8 of the country's total production. The Kurds have not reported production figures since last October.
But Iraqi crude oil minister Al-Luaibi still insists that Iraq has complied with its commitment to reduce production. He said that the crude oil market should use government figures to estimate its performance. Because OPEC's data cited six second-hand sources, including Platts and Argus Media, the data underestimated the level of crude oil production used to determine Iraq's production cuts as a basis for production cuts.
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The output reduction quota allocated to Iraq in November last year was 4.561 million barrels per day, which was about 200,000 barrels lower than Iraq’s own estimated production level. Since then, Iraq has become even more impressive, and Iraqi crude oil minister Al-Luaibi has often claimed that Iraq is assessing its production cuts based on exports rather than production.
Although the Iraqi crude oil minister has already agreed to extend the production cuts agreement, he also claimed that once crude oil stocks are balanced, Iraq needs to prepare for the growth of crude oil demand. On Monday (May 22), Al-Luaibi announced in a speech that even if the oil price fell to $10 a barrel, Iraq would maintain its investment in crude oil.
With the outside world questioning whether OPEC production reduction can balance the supply and demand balance of the global crude oil market, the risk of escaping production cuts is increasing. Naeem Aslam, chief market analyst at London-based Think Markets, said in a May 15 report that if OPEC really wants to solve the oversupply, it would have to double its production to achieve "maximum production cuts."
Independent crude oil analyst Anas Alhajji said, "This is the problem of OPEC: the absence of the punishment mechanism. The so-called production cut is simply to sell dog meat."
The United States increased production into a worry
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Some analysts pointed out that in order to balance the supply and demand in the market, it is necessary to increase production cuts, but pointed out that so far, the action to reduce production has stimulated US energy companies to increase shale oil production.
Goldman Sachs pointed out in the report that if OPEC and Russian production rose to the maximum level and the growth rate of US shale oil production was not controlled, then the oil market is expected to reproduce the risk of oversupply at the end of 2018.
The number of US oil drillings has increased for the 18th consecutive week, the second longest growth span in history; oil prices continue to spur oil companies to increase oil production to the highest level since mid-2015.
Since the middle of last year, US oil production has increased by 10%, or close to 900,000 barrels per day to 9.3 million barrels per day.
Other unfavorable factors for oil prices
Libyan officials said that the country's crude oil production has recovered to 788,000 barrels per day, as the problem of electricity affecting the production of two oil fields in the east has been resolved.
In addition, OPEC's increased production cuts and consequent rise in oil prices may prompt some consumer countries to look for alternative and alternative sources of energy.
The Indian Oil and Gas Minister said on Monday that the country is considering buying crude oil from US and Canadian suppliers and considering developing renewable energy.
Pay attention to mobile phone gold investment crude oil (http://m.cngold.org/energy/), the latest news on oil price adjustment is always available.
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