If you take a look back not too long ago, when the crude freeze was the talk of the town, Saudi Arabia was iffy about freezing production. The kingdom issued several strong statements, saying “we will not agree to the deal, unless Iran does.” That day, on April 17th, 2016, the freeze deal was a no go. The deal was supposed to freeze crude production levels to stabilize oil supply and put the brakes on overproduction, the top cause in oil prices dropping.
Figures released yesterday showed that July was the highest crude production month ever for the Saudis, reaching 10.67 million barrels per day. Since the OPEC freeze meeting back in April, Saudi Arabia has exponentially bumped up its production. This is mainly due to the Saudis not cutting back on exports and their need to bring in more barrels to satisfy summer demand. Overall, this is a sign of our current market being oversupplied, and continued proof that the major oil producing countries do not want to let up.
Let’s check out the market conditions today: Diesel is up almost $0.05, gasoline up $0.0300 and crude up $1.23 as of 11:00 a.m. EST. The U.S. Dollar is up $0.092 this morning, but one thing that is deterring that figure is news out of the Middle East that militants in Nigeria are back at it again with more explosions on another crude oil pipeline. Don’t forget that it is day three of protesters blocking a Chevron oil depot, and they are demanding jobs and housing because of their claim that the oil depot is destroying their settlement.
- OPEC July oil output increases by 150,000 barrels per day to 33.39 million barrels per day.
- According to the IEA, since July global crude production has been falling behind demand by nearly 1m bbls a day. Despite the fact that OPEC is pumping out record levels of crude, non-OPEC members have scaled back production. This, along with high global crude demand, is causing the glut to wane. As refinery utilization continues at record levels, we will likely see supply and demand rebalance by 2017.