Oil Market Update

Indeed, given the coming ballyhooed transition to the “post-carbon” world, it looks like there’s nothing for the oil industry to be excited about at this time.

by James Corbett
The International Forecaster

Oil is once again trending downward this week after failing to sustain its breakout above the psychologically important $50/barrel mark earlier this month. The push above the $50 level came after OPEC’s production cut agreement last month in Algiers (or, more accurately, traders’ expectations that OPEC might actually be able to pull a production cut off this time).

[…] The inevitable chink in OPEC’s latest armor appeared on Sunday when Iraqi Oil Minister Jabber Al-Luaibi told a news conference that Iraq should be exempted from the agreement because of its ongoing war with the Islamic State. Libya, Iran and Nigeria are already exempted from the agreement, and Russia’s Rosneft has already signaled its intention to actually increase output, so if Iraq were to pull out it’s almost certain that the agreement as a whole will collapse.

To make matters even worse, Iran, Iraq and Venezuela have all disputed OPEC’s estimates of each country’s oil production that is being used to form the production deal. OPEC uses secondary sources, including media reports, to estimate oil production, but, according to its critics, it does a terrible job at it. As the managing director of National Iranian Oil Co., Ali Kardor, pointed out earlier this week, Iran produces 3.89 million barrels a day, 300,000 more than what OPEC estimated last month. If future production cuts are based on these inaccurate estimates, countries fear they will be squeezed much harder than they should be.

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