Opec’s Market Management Dilemma: From Bad To Worse?

16 Aug 2019 Issue: 62 / 33 By: Jamie Ingram

Brent crude is down from $71/B for April to below $60/B since early August despite US shale output underwhelming since early 2019. With the Permian set to get a boost from new pipeline capacity and global economic headwinds, $60/B might be as good as it gets. Saudi Arabia and its Opec+ counterparts may not like it but they have no good options.

US crude production has flatlined since the start of 2019. May’s 12.11mn b/d output figure, the most recent ‘final’ number, is up just 70,000 b/d on December: storms in the Gulf of Mexico mean provisional June and July numbers are actually down on late-2018. The 11.72mn b/d July figure is a whopping 760,000 b/d lower than the 12.48mn b/d the US government’s Energy Information Administration was forecasting for July four months ago.

But despite this, and a collapse in output from Opec members Iran and Venezuela which saw Opec’s overall output fall to a five-year low for July (MEES, 9 August), oil prices have trended lower, not higher. Benchmark Brent has averaged below $60/B since early August (MEES, 16 August). (CONTINUED - 1402 WORDS)