OPEC Increases Crude Production by 600,000 Barrels per Day
This week was filled with stories regarding the Organization of Petroleum Exporting Countries (OPEC) meeting that took place on June 22nd. The goal of the meeting was to decide if, and how much additional crude oil the cartel and supporting countries will produce. Saudi Arabia, OPEC’s leader and top oil producer, and Russia were pushing to increase production by 1-1.5 mmbd. However, it was announced on Friday morning that they agreed on an increase of 600,000 barrels per day starting July 1. The agreement does not specify new targets for participating countries. Saudi Arabia and Russia, two of the largest oil producers in the world, already increased production in May and plan to continue to increase production throughout the second half of the year.
Global oil supply has been decreasing since OPEC decided to cut production at the end of 2016. In more recent months, there have been other factors draining the global supply of oil. Growing global demand is the main driver, and the attacks on Libya’s port also cut oil output by 400,000 barrels per day. U.S. applying sanctions on Iran and Venezuela also contribute to the lowering global supply. As a result, Iran and Venezuela are against easing up on the production cuts.
China to Impose Tariffs on U.S. Oil and Refined Products
China threated to impose a 25% tariff on $50 billion worth of U.S. oil and refined products earlier last week. China is the largest Asian buyer of U.S. crude with imports exceeding 300,000 barrels per day. This will hit a business that is currently worth about $1 billion per month. This could cause a significant decrease in oil exports to China and could benefit other producers like OPEC and Russia making oil cheaper to buy.
Along with oil tariffs, oil pipeline companies seek exemptions from steel import tariffs. Pipelines moving crude oil out of the Permian basin are nearing full, creating a bottleneck and decreasing prices. Output from the Permian Basin is expected to rise by 850,000 barrels per day this year. New pipeline projects are not expected to be completed until at least next year. With additional tariffs, it could delay and push these projects out further.
In Other News
OPEC members are discussing a compromise agreement that would see an oil production increase of between 300,000 and 600,000 barrels a day over the next few months.
With the Organization of the Petroleum Exporting Countries meeting at the end of the week, the squabble is between the organization’s leader, Saudi Arabia, and three of the cartel’s five fellow-founding members, Iran, Iraq and Venezuela. OPEC nonmember Russia is siding with Saudi Arabia to boost output by a reported 300,000 to 600,000 barrels a day.
China’s threat to impose duties on U.S. oil imports will hit a business that has soared in the last two years, and which is now worth almost $1 billion per month.
Major U.S. energy companies including Plains All American Pipeline, Hess Corp and Kinder Morgan Inc are among many seeking exemptions from steel-import tariffs as the United States ratchets up trade tensions with exporters including China, Canada and Mexico.
UPS Inc. announced an additional $130 million investment in compressed natural gas vehicles, including 400 semi-tractors and 330 terminal trucks and five more fueling stations — underscoring the company’s role as a major catalyst for wide-scale adoption of natural gas vehicles.
Libya has lost some 400,000 barrels per day (bpd) of oil production in recent days because of militant attacks at the Ras Lanuf and Es Sider ports, the head of the National Oil Corporation (NOC) said on Tuesday.
EU negotiators are likely to finalize a 2030 energy efficiency target in informal talks planned for late Tuesday, after talks last week faltered over whether the target should be 32% or 33%, according to an EU source close to the talks.
In the United States, federal regulations regarding the size and capacity of heavy-duty trucks haven’t changed since 1982. But in recent times a proposed change in the length limit for trucks has surfaced more than once. The chances of implementation, while still small, are improving.
Iran put itself on a collision course with Saudi Arabia at this week’s OPEC meeting, rejecting a potential compromise that would allow a small oil-production increase to appease energy consumers.
A BP PLC project deep in Oman’s desert shows how big oil companies are taking hydraulic-fracturing techniques perfected in Texas to the global stage, where they had long struggled.
Saudi Arabia and Russia have promised they will lead OPEC and other big oil producers in a deal this week to boost output and lower prices but there is some doubt over whether they can deliver enough oil to offset growing global demand and a number of unexpected supply disruptions.
OPEC, which has lost Chinese market share to U.S. oil producers, should in theory view a tariff spat between Beijing and Washington as a boon.
As OPEC and Russia weigh increasing their oil output to temper rising prices, other crude producers won’t be joining in. Producers like Canada, Brazil and nations along the North Sea just don’t have the extra capacity or ability to pump significantly more crude.
Gov. John Hickenlooper, D-Colo., has signed an executive order that commits Colorado to adopting low-emission vehicle (LEV) standards.
OPEC edged closer on Thursday towards raising oil output, with Iran softening its opposition to an increase and Saudi Arabia warning of supply shortages and price rallies if production remained stable.
Oil prices rallied Friday as the global oil cartel agreed to increase production by less than some had expected, soothing fears of an imminent wave of supply.
Production at Syncrude Canada’s oil sands facility near Fort McMurray, Alberta is offline at least through July, after a power outage this week, a spokesman said on Friday. The site can produce up to 360,000 barrels per day.