All eyes this week are on OPEC!
Come Thursday this week OPEC will finally be meeting in Vienna to discuss their plans for extending production cuts. There is still discussion that Russia is undecided on how they feel about further extending the cuts, but as of right now the consensus is that production cuts will be extended an additional 9 months in 2018. Stephen Brennock, analyst at PVM Oil Associates, was quoted as saying, “A long-running barrage of bullish rhetoric from the oil cartel has cemented widely-held beliefs that supply curbs will be extended through to the end of next year.”
The Keystone pipeline has no restart date to fire back up and there are 170 workers currently working around the clock to help with the clean-up efforts. This is the third time that the Keystone pipeline has sprung a leak. The other two occurrences resulted in roughly 400 barrels spilt each time and happened in 2016 and in 2011. According to analysts prior to the Keystone being initially fired up, this state of the art pipeline should not have more than 1 leak, more than 50 gallons, per every seven to eleven years. Needless to say, this is not the case considering this is the third leak since the pipeline began operating in 2010.
The world has seen the U.S. continue to rise up to similar levels of production as the top oil kingpins, Saudi Arabia and Russia, and does not seem to be slowing down. As a country we have hit 9.66 million barrels per day in production and that now takes us to levels we have not seen in close to five decades. With production increasing we also saw a jump in rig counts last week back up +9 to 747 active rigs. Keep in mind also that this increase can also be viewed as a 57.6% increase year over year.
A few things to keep an eye on that could have a significant affect in the OPEC’s plans:
- Iraq is opening up 9 new oil/natural gas producing blocks to foreign bidders to come and develop the otherwise “neglected” areas. These 9 blocks were affected in the mid 1980’s and 1990’s by conflicts between Iraq and its neighbors. Current output is 4.8 mbpd and should reach 5mbpd by end of 2017.
- In January Russia’s Sakhalin-1 project is set to increase their current production to roughly a quarter million barrels per day. The Sakhalin-1 venture currently produces 200,000 bpd. According to Reuters Ehsan Ul-Haq (director of crude oil and refined products at consultancy Resource Economist) has said “Russia may have to cut output from other fields to compensate for a rise in output from Sakhalin-1. It is in Russia’s interest to comply with deal to keep oil prices high.”