OPEC revises Russia's oil production outlook downward by 110000 bpd in 2017

Crude price gains, however, were capped by forecasts for rising USA and Russian production and scepticism that OPEC as a whole would comply with its commitment to reduce supplies. OPEC members agreed to cut 1.2 million b/d.

Brent crude fell 1.3 per cent to below $55 a barrel in London trading this morning, while its U.S. counterpart, West Texas Intermediate, dropped 1.4 per cent to below $52.

The Organization of the Petroleum Exporting Countries, excluding Indonesia, pumped 33.085 million barrels per day last month.

After a recovery late previous year, the oil market seems to have settled with a price around $55 a barrel... at least for now.

In regards to non-OPEC producers, the report states that Russian oil output declined by 30,000 bpd to 11.05 million bpd in December.

Brent crude, benchmark for half of the world's oil, averaged about $45 a barrel last year, more than 50% below levels in 2014, the year OPEC chose to tackle a global glut by keeping the taps open.

"At $50, $55, we've already seen a lot of activity", Birol said. "So what we are doing in Saudi Aramco we are building our capacity in the oil", he said.

Light, sweet crude prices gained slightly on the NY market on January 17 as trading resumed after the Martin Luther King Jr. holiday on January 16.

Investors are getting jittery about reports of rising USA shale oil production that could wipe out the price gains made since the Organization of the Petroleum Exporting Countries and other oil producers agreed to curb output in November. Earlier, the price had fallen as low as $54.10 a barrel. On Tuesday, Saudi Arabia said deeper-than-planned production cuts and robust demand were helping the market rebalance. The news eclipsed a bearish report on crude reserves.

Crude oil futures fell Wednesday morning as the dollar recovered versus other majors, denting commodities priced in the greenback.

Behind this rise were comments from the secretary-general of Opec, Mohammad Barkindo.

When OPEC announced the deal, they said that the cut could be extended for another six months.


OPEC expects Russian Federation production to drop significantly in compliance with a recent deal, helping to offset USA and Canadian increases.

Still, the largely Middle Eastern view that the real worry is shortage, not glut, was reiterated the same day Allman-Ward made his remarks, by Amin Nasser, president and CEO of Saudi Arabian Oil Company (Saudi Aramco).

According to Reuters, Luaibi said that Iraq would remove a further 40,000 barrels per day this week in order to meet its target to cut 210,000 barrels. Any rise in the inventory spread would pressure crude oil prices. Oil is traded in dollars.

This is seen as positive for demand.

USA commercial crude oil inventories rose by ~4.1 MMbbls (million barrels) in the week ending January 6, 2017-compared to the previous week.

These factors combine to make a bullish case for demand finally outstripping supply after two years.

Fears Iraq will fails to meet its production cuts target saw the oil price lose four per cent by the end of NY trading on Monday.

At the moment option 2 looks more likely...

The drop coincides with "bullish sentiment from speculators... showing early signs of abating, raising the possibility that the oil rally is running out of steam", Nick Cunningham writes on Oilprice.com. Sen, for one, believes the nation's crude output will increase by half a million barrels a day as producers dispatch drilling rigs to the Permian Basin.

While China consumes more oil than nearly any other country, it's also one of the world's biggest producers, with fields stretching from offshore its southern coast to the far north east. Speculator bet on higher oil prices increased significantly over the month as indicated by the exchange traders' commitment data.

He adds: "All it will take is a bit of bearish news to spark a downturn in prices".

  • Tracy Klein