It says something about the state of communication and diplomacy in this day and age that a tweet from the US president sent shockwaves through an OPEC/non-OPEC Joint Ministerial Monitoring Committee (JMMC) meeting in Jeddah, Saudi Arabia, on April 20, 2018. "Looks like OPEC is at it again," President Donald Trump tweeted. "Oil prices are artificially very high! No good and will not be accepted." It came just as the JMMC announced that they might extend their crude oil production cuts to prop up the market.
On this episode of the S&P Global Platts OPEC Outlook podcast, senior oil writer, Herman Wang, recaps the meeting and the reaction to the president's social media comment, which livened up what had been a fairly uneventful affair.
Platts OPEC survey -- OPEC Mar crude oil production tumbles to 32.14 mil b/d, down 250,000 b/d from Feb
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It says something about the state of communication and diplomacy in this day and age that a tweet from the US president sent shockwaves through an OPEC/non-OPEC monitoring committee meeting in Saudi Arabia.
"Looks like OPEC is at it again," President Donald Trump tweeted on Friday. "Oil prices are artificially very high! No good and will not be accepted”
The tweet came just as the monitoring committee announced that they might extend their production cuts to prop up the market, because, well, the global economy needs them to.
So on this episode of the S&P Global Platts OPEC Outlook podcast, we’ll recap the meeting and the reaction to the president’s tweet, which livened up what had been a fairly uneventful affair.
I’m your host, Herman Wang, thanks for listening.
Well let’s start at the beginning, in fair Jeddah, where we lay our scene:
Ministers from the six-country monitoring committee overseeing the 1.8 million b/d production cut agreement between OPEC and 10 allies, including Russia, gathered on Friday at the swanky Ritz Carlton hotel in the historic Saudi port town of Jeddah, on the Red Sea.
The ministers were in Jeddah to ostensibly review compliance with the agreement and discuss the state of the oil market.
Supply and demand balances have tightened significantly since the 24-country OPEC/non-OPEC coalition began its production cuts in January 2017. Almost 16 months later, OECD commercial oil inventories – that’s the barrels held in storage by companies in developed nations – were nearing their five-year average. That’s the target that OPEC had said it was aiming for with the cuts, when they talk about rebalancing the market, and so the International Energy Agency declared that it was basically Mission Accomplished for the OPEC/non-OPEC coalition.
Well, not so fast. Members of the group have enjoyed the rise in oil prices, up to four-year highs in recent days, that they want to continue the party.
And at this meeting, they concluded that they’re going to keep on with the cuts. Maybe even extend them beyond their scheduled expiry at the end of 2018.
Why? It’s for the good of the market, to stimulate a healthier economy in which both producers and consumers can thrive.
See, back in 2015 and 2016, when oil prices were in the dumps, down to $27/b in January 2016, due to the oversupply in the market caused by the surge in US shale production and, it must be said, a fierce pump-at-will marketshare battle by OPEC members and Russia – remember Russia was producing at a record high of more than 11 million b/d to become the world’s largest oil producer, surpassing Saudi Arabia, which was pumping close to 10.7 million b/d, and you also had Iran coming off of sanctions, among other things – well that price slump caused a lot of oil companies to cut back on their spend