As expected, the OPEC headlines continue to come in hot and heavy, with Reuters reporting first that Saudi Arabia has agreed to an output cut of roughly 500kbps to 10.06mmbpd.
- SAUDI TO CUT OIL OUTPUT TO 10.06 MLN BPD – OPEC SOURCE
This brings Saudi production to levels last seen in January. Additionally, Iran is said to have agreed to a production cap of just under 3.8MM bpd, which also appears to be below what was speculated just moments ago, or 3.9mmbpd.
- OPEC SOURCE SAYS IRAN PRODUCTION TO BE SET AT 3.797 MLN BPD UNDER NEW OPEC CEILING
But the most shocking announcement is that Indonesia appears to have been suspended from OPEC, and that its oil output, which according to the latest OPEC monthly report was 722kpd, will be distributed among other OPEC nations, in what may amount to a production “shuffle” not a cut:
- OPEC SOURCE SAYS INDONESIA SUSPENDED FROM OPEC
- OPEC SOURCE SAYS OPEC AGREED TO DISTRIBUTE INDONESIA OIL OUTPUT SHARE AMONG SOME OPEC COUNTRIES: RTRS
The question then arises if Indonesia was suspended from OPEC because they wouldn’t agree to cuts? Since all votes must be unanimous under OPEC rules, this might be a way to force a deal. If they won’t cut (or, in the case of Iran, be allowed to increase to 3.975), then they’re out. Also, with its share being redistributed, does that now mean that the production freeze cap is effectively 700kpd higher than prior to the expulsion.
Finally, according to a JBC report, OPEC output rose once gain in November, hitting 34.06mmbpd, up from the official 33.643mmbpd as of October.
- OPEC NOV. CRUDE OUTPUT RISES ON MONTH TO 34.06M B/D: JBC
- SAUDI ARABIA NOV. CRUDE OUTPUT FALLS M/M TO 10.55M B/D: JBC
Summarizing the above, Bloomberg’s Julian Lee writes that OPEC output rose by another 220,000 barrels a day between October and November, according to estimates published by Vienna-based JBC Energy. Total OPEC up from 33.84 million to 34.06 million. That means the actual output cut will have to be bigger than announced to get the total down to 32.5 million.
And another, more cynica summary:
So iran increasing, Indonesia leaving, Libya Nigeria and Angola get exemptions and Iraq upset. This #opec cut consensus going well!
— Paul Hickin (@GramscianPaul) November 30, 2016
There is much to process, and the market’s kneejerk reaction has been to fade the latest set of headlines, perhaps in anticipation of the upcoming shale production surge.