Tuesday, July 18, 2017

OPEC Cuts -- "Every Arab For Himself" As Agreement Starts To Break Apart -- July 18, 2017

I recently wrote that as the OPEC cuts fail to increase prices, we will likely see "every Arab for himself." Apparently I wasn't too far off. From Bloomberg:
"Ecuador breaks ranks with OPEC and increases oil output."
It is breaking down for the reasons previously suggested. Ecuador says it must boost production to raise revenue.

Bloomberg also reports that OPEC's total compliance with deal sank to a 6-month low in June. Maybe I'm missing something, but isn't the deal only eight months old? It was announced in November, 2016, and if it was realistically to go into effect in January, 2017, we're only six months into the deal. Whatever.

More from the linked article:
OPEC has for years cheated on its own agreements, particularly when oil prices fail to recover after an output cut. But Ecuador has taken the rare step of saying publicly it will increase production, making it impossible for the group to conceal the desertion.
The Latin American country won’t be able to meet its commitment to lower output by 26,000 barrels a day to 522,000 a day, as agreed with OPEC last year, Oil Minister Carlos Perez said.
“There’s a need for funds for the fiscal treasury, hence we’ve taken the decision to gradually increase output,” Perez said. “What Ecuador does or doesn’t do has no major impact on OPEC output.”
That would be true. But what Ecuador does or doesn't do has a major impact on how the rest of the world sees OPEC.

Does this 26,000 bopd increase concern Saudi Arabia? LOL. John Kemp is reporting, via Twitter, that "senior Gulf OPEC source will be making an emergency trip to Ecuador with the Joint Ministerial Monitoring Committee to address compliance."

Oh, oh. Ecuador may be kicked out of OPEC.

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