OPEC production cut
30-Nov-2023. Oil. OPEC additional production cuts. Even though OPEC+ today agreed on additional production cuts for Q1 2024, the price of oil reacted with a quite strong decline (over 5% intra-day). OPEC+ countries agreed on additional cuts of 0.696 mb/d (Algeria, Iraq, Kazakhstan, Kuwait, Oman, UAE), plus 0.2 mb/d Russia (cut of export of fuel oil), plus extensions of 1 mb/d cut by Saudi Arabia and of 300k b/d export cut by Russia. The total number of new cuts is 0.896 mb/day. But the market is not happy mainly because of the risk that these additional cuts are more paper cuts than real ones. Production cuts are “voluntary ones”, not part of an OPEC+ agreement.
US oil balance sheet 1-Dec-2023
6-Dec-2023. US Oil latest weekly data (week ending 1-Dec-2023). What is worth paying attention to: 1. Decrease in oil production by 100kb/d 2. Total inventory decreased only slightly, in total by 1.383mb (198kb/day) 3. For the second week in a row, SPR increased (but only 47kb/day, i.e. 330kb in absolute terms) 4. The largest negative weekly “Oil Adjustment” in the history of data, as much as -1.417 mb/day (there was "too much oil" on the market so one needs a negative adjustment to balance all weekly data) 5. A large increase in Net Imports (i.e. exports de facto decreased) by a total of 2.9 mb/day (vs. the previous week) to the level of -1,544 mb/day. I have marked the above points in the attached table, which contains all the most important weekly data.
oil balance sheet 24-Nov-2023
29-Nov-2023. US Oil Market Balance Sheet (week ending 24-Nov-2023). Generally, there are 3 main sources of demand and supply: 1) Production, or supply, last week in the US total production was 22.31 million b/d, 2) Consumption, i.e. demand, last week in the US total consumption (products supplied) was 18.92 million b/d, 3) Net Imports, can act as supply (import > export), or demand (export > import), last week in the USA the total Net Imports amounted to -4.45 million b/d (negative Net Imports means positive Net Export, therefore it was additional demand last week), The three points above should add up to zero, but if they don't (they practically never do), the difference goes to two things: 1) Change of Inventories, or/and 2) Level of Adjustments. Production (22.31 mb/d) minus Net Imports (-4.45) minus consumption (18.92) = 1.059 mb/d (this is how much oil is missing on the market). Since the change in Inventories was +0.46 mb/d (biuld in inventories), there was a total oil shortage of 1.52 mb/d - and this is exactly what the Adjustment amounted to (see Figure 1). Figure 2 shows the details.
SPR fun fact
6-Dec-2023. Oil. Fun fact. The US government bought oil for the second week in a row and increased SPR strategic stockpiles. Figure 1. The purchase price was $75.87. However, the average selling price of SPR was $88.09. The difference is $12.22. If the government bought back 300 million barrels (Figure 2) at a profit of $12.22 per barrel, the total profit would be $3.666 billion. In October, the American government spent USD 469.997 billion (so-called Total Federal Outlays, Figure 3, link below the text), which means that the expenses amounted to USD 631.72 million per 1 hour. Therefore, the profit from the SPR buyback would last for 5 hours and 48 minutes.
