Yahoo Finance A Peek into OPEC’s Report: Crude Oil Market
Crude Oil Prices Fluctuate on Supply and Demand Dynamics
OPEC
OPEC’s (Organization of the Petroleum Exporting Countries) monthly report will be released on Tuesday, May 12, 2015. Las week, an OPEC strategy presentation was held in Vienna. It’s expected that crude oil prices will average around $76 per barrel in 2025—considering that the market is optimistic—according to OPEC’s presentation.
OPEC anticipates that the US will continue to pump more despite lower oil prices. OPEC added that there’s a possibility that crude oil prices could be below $40 per barrel in 2025. The price estimation can increase or decrease between 2015 and 2025. OPEC operates as cartels and reduces production in order to increase the crude oil prices. This time OPEC thinks the strategy won’t work and its more a fight for market share. This will drive for more production to offset lower oil prices.
OPEC quota system
OPEC countries like Saudi Arabia have produced 10 MMbpd (million barrels per day) in April 2015. Iraq has also been producing to peak levels. The lower oil prices are hurting OPEC’s weaker nations. So, it’s expected that a quota system will be introduced. The poorest nations will be allowed to increase production in order to offset the lower oil prices and meet their budget deficits. This means that more oil will be produced. The actual report will be released today. It provides the latest developments.
The EIA (U.S. Energy Information Administration) reported that weekly US crude oil inventories declined by 3.9 MMbbls (million barrels) to 487 MMbbls from 490.9 MMbbls for the week ending May 1. The oil inventories dropped for the first time since January 7, 2015. The market estimated a decrease of 0.125 MMbbls for last week.
The decrease in crude oil prices affects oil companies like Hess (HES), Noble Energy (NBL), and Newfield Exploration (NFX). They account for 3.31% of the Energy Select Sector SPDR ETF (XLE). These stocks have a crude oil production mix that’s more than 40% of their total production. XLE and the SPDR Oil & Gas ETF (XOP) also fell more than 1% in yesterday’s trade.
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