Source: Wall Street News Author: He Hao
OPEC's oil production cuts were not implemented, mainly because Iraq's production exceeded its quota for the second month in a row. The latest OPEC report basically remains unchanged in its global oil supply and demand forecast for this year and next. Oil consumption is expected to increase strongly by 2.2 million b/d in 2024, reaching a record 104.5 million b/d. On the same day, the US Department of Energy raised its oil price forecast by more than 4 US dollars this year, raising the US oil production forecast.
On Tuesday, according to OPEC's latest report, the organization's oil production reduction plan came to a standstill, and production cuts were not implemented in place, mainly due to Iraq exceeding production quotas for the second month in a row. Member countries such as Saudi Arabia, the United Arab Emirates, Kuwait, and Algeria have been complying with production reduction quotas.
According to the OPEC monthly report, OPEC crude oil production in February was 26.571 million b/d, compared to 26.368 million b/d in January. Saudi Arabia produced 8.98 million b/d of crude oil in February, compared to 8.962 million b/d in January. Russia's crude oil production in January was 9.5 million b/d, in line with the country's commitment to cut production. Iran's crude oil production in February was 3.148 million b/d, compared to 3.163 million b/d in January.
Iraq's average crude oil production in February was reduced by only 14,000 barrels to 4.2 million barrels, which is roughly the same as January production, which is about 200,000 b/d higher than the agreed production limit. Iraq's oil minister Hayyan Abdul Ghani said last week that the country was meeting its target of 4 million b/d and promised to make up for any deviations through additional production cuts. However, it should be noted that Iraq often violates relevant agreements because the country needs revenue to build its economy.
Furthermore, Kazakhstan's crude oil production is also above its quota, and the country, like Iraq, has promised to make up for the relevant gap through additional production cuts.
According to the latest tanker tracking data, in the week ending March 10, Russian shipping crude oil shipments soared to the highest level this year. Russia promised to focus more on reducing crude oil production next quarter. Russian President Vladimir Putin recently said on Tuesday that although cutting oil production may cause Russia to lose market share, complying with the OPEC+ oil production agreement will help support Russia's oil sales revenue. In terms of cooperation with OPEC+, we fully support Russia's reduction in oil production.
J.P. Morgan recently said that if Russia cuts oil production, it is expected that international oil prices will experience a bull market in the summer. According to the commitments made in OPEC+'s latest oil production reduction agreement, Russia is expected to cut oil production to 9 million b/d in June.
The Saudi-led OPEC organization and its allies promised to cut production to avoid an oversupply of global crude oil, thereby supporting oil prices. Earlier this month, OPEC+ agreed to extend the oil production reduction agreement until the end of the second quarter of 2024. According to the paper agreement, the reduction in production is equivalent to approximately 2 million b/d.
The above production reduction measures have helped keep the price of Brent crude oil above 80 US dollars/barrel, even though the crude oil market is currently facing adverse impacts such as a slowdown in global demand growth and competitive production increases in oil producers other than OPEC+, such as the US.
The latest OPEC report basically remains unchanged in its global oil supply and demand forecast for this year and next. Oil consumption is expected to increase strongly by 2.2 million b/d in 2024, reaching a record 104.5 million b/d. This forecast is significantly higher than the general expectations of the market; even Saudi Aramco only predicts that demand will increase by 1.5 million b/d this year.
Although the OPEC monthly report shows that progress in production cuts has been blocked, crude oil prices have not fluctuated much in the short term. Major OPEC+ member states will hold an online meeting at the beginning of next month to review market conditions. The ministers of the member states are scheduled to meet at the Vienna headquarters in early June.
On the same day, the US Energy Information Administration (EIA) released the latest short-term energy outlook report. The main points are as follows:
The EIA raised its oil price forecast by more than 4 US dollars this year. The price of Brent crude oil is expected to be 87 US dollars/barrel in 2024, previously estimated at 82.42 US dollars/barrel, and expected to be 84.80 US dollars/barrel in 2025, and 79.48 US dollars/barrel previously.
The EIA estimates the price of gasoline at $3.48 per gallon in 2024, previously at $3.31 per gallon. The price of gasoline was estimated at $3.45 per gallon in 2025, compared to the previous forecast of $3.31 per gallon.
The EIA raised the US oil production forecast for this year and next two years. The US crude oil production is expected to be 13.19 million b/d in 2024, previously 13.1 million b/d. The expected production in 2025 was 13.65 million b/d, and the previous forecast was 13.49 million b/d.
The EIA raised its forecast for the US economic growth this year. The US GDP is expected to grow by 2.6% in 2024, by 1.8% previously, by 1.7% in 2025, and by 1.6% previously.
The International Energy Agency (IEA) will release its latest monthly oil supply and demand estimate update on Thursday. The agency provides recommendations for major crude oil consumers.
edit/lambor