It has been a down week for oil prices with NY futures closing Wednesday at $49.18 and London at $49.98. The decline on Wednesday came after a surprising decrease in the US stockpile contrary to what analysts had been estimating and the API had been reporting. The decline in crude stocks, however, came only in the isolated US West Coast, which dropped by 2.6 million barrels. In the rest of the country, crude stocks increased by 2 million barrels, so the decline was largely ignored by traders who do not take West Coast crude stocks seriously. US crude stocks are still at 462 million barrels, the highest seasonal level in more than 20 years.
The status of the much-hyped OPEC production cut/freeze is coming into question by many analysts. The preponderance of the thinking now is that it will never really happen. As Iran, Libya, Nigeria, and Venezuela are expected to be exempted from any cuts; Iraq is saying it will not participate; and Indonesia is planning to increase production, this leaves only Russia and the Gulf Arabs to do the cutting. Moscow already is backing out, and most believe the Saudis and the other Gulf Arabs will not go it alone.
There seems to have been a new attack by the Niger Delta Avengers on a pipeline operated by Chevron. As usual, the damage caused by the attack is being suppressed by the government. The attack came just as Nigeria managed to bring its crude production back to 1.9 million b/d – close to the 2.2 million it had been pumping before the current round of attacks began last spring. Insurgents said the attack was in retaliation for repairs that were made at the Forcados terminal, bringing as much as 300,000 b/d back into production.
Iraq is to offer drilling rights for a dozen small to medium fields directly to international oil companies. The companies are to offer their own proposals and contracts with the most favorable to Iraq winning out. This is in contrast to the current system under which the Iraqi government attempts to keep the bulk of the profit for itself.
To the surprise of many, Venezuela managed to swap $2.8 billion of its bonds that were due next year for bonds expiring in 2020. After several rejections of its offer, PDVSA finally succeeded by cutting the size of the offer so that it would surpass the 50 percent level of those outstanding. The company offered to pay back $3.4 billion in return for the $2.8 billion swapped and backed the deal with 50 percent of the stock in Citgo which still has value. Most believe that delaying payments on $2.8 billion is nothing compared to the $65 billion outstanding and that Venezuela will default anyway as oil output continues to drop and there is no sign of change in the government or policy.
Libya says its oil production is now up to 580-600,000 b/d. While this may be good for Libya, it is not helping the global oil glut and low prices.
