US not concerned by any new OPEC output cut, says Brouillette

Optimism in oil market is growing that we could see Beijing resume some normalcy in travel and trade outside of the Hubei province, says analyst. (Shutterstock)
Short Url
Updated 12 February 2020

US not concerned by any new OPEC output cut, says Brouillette

  • Oil prices rise to $54 a barrel on Tuesday, recovering from a 13-month low

VIENNA: The US is not concerned by moves being considered by OPEC and its allied producers to curb oil production further, US Energy Secretary Dan Brouillette said on Tuesday.

A technical panel that advises the Organization of the Petroleum Exporting Countries and its allies, led by Russia, have proposed an additional output cut of 600,000 barrels per day (bpd), three sources told Reuters last week.

OPEC is meeting next month in Vienna.

The group of producers, known as OPEC+, has already been implementing cuts of 1.2 million bpd since January 2019 to reduce the global supply glut and prop up crude prices.

“We’re not concerned about the decision that OPEC may make and whatever decision they make will be good for them and we appreciate what they’re doing,” Brouillette told reporters on the sidelines of a conference at the UN nuclear watchdog’s headquarters in Vienna.

“They’re going to meet and they’re going to make a determination and a decision that’s best suited for them but I think their ability to impact oil prices in the manner in which they did, you know, three, four, five decades ago is just fundamentally different,” Brouillette said.

Meanwhile, oil rose to $54 a barrel on Tuesday, recovering from a 13-month low as the number of new coronavirus cases slowed in China, easing some concerns about lengthy destruction of oil demand.

Brent crude rose $1.07 to $54.34 a barrel, having dropped on Monday to its lowest since January last year at $53.11. US West Texas Intermediate crude was up 89 cents at $50.46.

“The bottom seems to be in place for oil prices,” said Edward Moya, analyst at brokerage OANDA.

“Optimism is growing that we could see Beijing resume some normalcy in travel and trade outside of the Hubei province.”

Investors remain wary that China’s oil demand could take a further hit if the coronavirus cannot be contained and if OPEC and its allies, known as OPEC+, fail to agree on further steps to support prices.

“Though oil is recovering again today, the lack of any coordinated action by OPEC+ means that oversupply concerns are likely to retain the upper hand,” said Commerzbank analyst Eugen Weinberg.

Oil rose alongside a rally in world equities, which resumed their climb toward record highs on Tuesday on hopes the virus is peaking.


Demand issues ‘to overshadow OPEC+ supply next year’

Updated 29 October 2020

Demand issues ‘to overshadow OPEC+ supply next year’

  • Libya's rising production adding to pressure on oil markets

DUBAI: The Organization of the Petroleum Exporting Countries (OPEC) and its allies will have to contend with a “lot of demand issues” before raising supply in January 2021, given throughput cuts by oil refiners, the head of Saudi Aramco’s trading arm said.
OPEC and its allies plan to raise production by 2 million barrels per day (bpd) from January after record output cuts this year as the coronavirus pandemic hammered demand, taking overall reductions to about 5.7 million bpd. 

“We see stress in refining margins and see a lot of refineries either cutting their refining capacity to 50-60% or a lot of refineries closing,” Ibrahim Al-Buainain said an interview with Gulf Intelligence released on Wednesday.

“I don’t think the (refining) business is sustainable at these rates (refining margins).”

However, Chinese oil demand is likely to remain solid through the fourth quarter and into 2021 as its economy grows while the rest of the world is in negative territory, he added.

Among the uncertainties facing the oil market are rising Libyan output on the supply side and a second wave of global COVID-19 infections, especially in Europe, on the demand side, Al-Buainain said.

Complicating efforts by other OPEC members and allies to curb output, Libyan production is expected to rebound to 1 million bpd in the coming weeks.

Oil prices, meanwhile, fell over 4 percent on Wednesday as surging coronavirus infections in the US and Europe are leading to renewed lockdowns, fanning fears that the unsteady economic recovery will deteriorate.

“Crude oil is under pressure from the increase in COVID-19 cases, especially in Europe,” said Robert Yawger, director of energy futures at Mizuho in New York.

Brent futures fell $1.91, or 4.6 percent, to $39.29 a barrel, while US West Texas Intermediate crude fell $2.05, or 5.2 percent, to $37.52.

Earlier in the day Brent traded to its lowest since Oct. 2 and WTI its lowest since Oct. 5.

Futures pared losses somewhat after the US Energy Information Administration (EIA) said a bigger-than-expected 4.3 million barrels of crude oil was put into storage last week, but slightly less than industry data late Tuesday which showed a 4.6 million-barrel build.

However, crude production surged to its highest since July at 11.1 million barrels per day in a record weekly build of 1.2 million bpd, the data showed.

Gasoline demand has also been weak overall, down 10 percent from the four-week average a year ago. US consumption is recovering slowly, especially as millions of people restrict leisure travel with cases surging nationwide.