Oil prices continue to climb this week as OPEC seeks further consensus on an extension of the production cut deal. Both the Brent and WTI benchmarks reached two-year highs in futures trading even before markets officially opened on Monday.
Some of the new developments include the following:
1. The Nigerian oil minister said on Monday that Nigeria is willing to cap oil production between 1.8 million bpd and 1.9 million bpd. According to S&P Global Platts, Nigeria’s September production was 1.84 million bpd and their October production was 1.78 million bpd.
2. Iraq has also come out in support of an extension of the production cut deal, but its oil exports are currently in flux. It was reported that oil exports from Kurdish regions that traveled via pipeline to the Turkish port of Ceyhan were cut off briefly on Monday. Iraq is also increasing oil exports from its southern oil fields. According to TankerTrackers.com, oil exports out of Basra, increased 15% since October 22nd.
3. The Russian Energy Ministry also announced that Turkmenistan will be joining the OPEC meeting in November as an observer. Turkmenistan also joined the last OPEC meeting as an observer but did not commit to joining the deal. Turkmenistan produces about 261,000 bpd of oil, but it is a much more significant player in the natural gas markets of Central Asia and currently supplies natural gas to China and Iran. It is likely that Turkmenistan is more interested in attracting investment for its energy industry, because it could produce at much higher rates with better infrastructure.
4. Khalid al Falih, Saudi Arabia’s oil minister, also announced that Uzbekistan will join the OPEC meeting in November. Uzbekistan is a small producer, averaging about 78,000 bpd, but OPEC officials say Uzbekistan’s commitment to attend the meeting as an observer is an indication of further willingness by other producing countries to support the OPEC-Non-OPEC production cut deal.
5. OPEC and its non-OPEC partners will clearly be looking to capitalize on the recent gains in Brent and WTI as evidence that their production cut plan is working. On the other hand, some of the recent gains can be traced to a drop in exports (not production) from Saudi Arabia, especially exports to the United States. However, satellite imagery and analysis from TankerTrackers.com indicates that Saudi exports are picking up. Depending on where the Saudi oil is going, the data may or may not make an increase in exports evident prior to the OPEC meeting at the end of this month.
Note: It is questionable whether the weekend of news out of Saudi Arabia will have a prolonged impact on oil prices. Oil prices did not seriously spike until midday Monday New York time, so it is unknown how much can be attributed to these political events. Other rumors are that oil prices are rising as institutional investors are entering the oil market.
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