Have OPEC/Non-OPEC Now Covered Almost 2 Mmb/d Of Iran Cuts And Venezuela Declines?

Oct 4, 2018


Its been a good month for oil prices that has been driven by the indications that US sanctions will hit Iran’s exports more than expected. It is why we posted our Sept 28 blog “Both China And India May Be Giving In And Reducing Iran Oil Imports, A Big Plus To Oil Prices”. WTI ~$75 and Brent ~$85 are strong oil prices. We continue to be bullish on oil prices and expect continued strength, but this week’s multiple positive oil supply items point to a holding of oil prices near current levels. There were several positive global oil supply indications (from Saudi Arabia, Russia, Angola, Libya, Nigeria, and US) that point to OPEC/non-OPEC now covering ~1.926 mmb/d of potential Iran cuts and Venezuela declines. This is a big increase from a week ago. Adding ~1.926 mmb/d is a big supply add, but may fall short of Iran and Venezuela reductions being more like ~2.14 mmb/d. However, absent a supply interruption, the larger than expected supply adds are likely enough to keep a lid on oil prices given that global oil demand will start to seasonally decline as we get to year end. The IEA forecasts Q1/19 oil demand to be 1 mmb/d lower than Q4/18. The other reminder is that oil markets are increasingly set up for an oil price spike in Q2/19 or Q3/19 as the normal seasonal increases in global oil demand kicks in in Q2/19 and Q3/19. The IEA forecasts Q3/19 oil demand to be up 2.1 mmb/d vs its Q4/19 forecast.