US oil , via Bloomberg
Oil faces some trouble ahead as it approaches its seasonal weak time. If you look at the returns of US oil over the last 20 years you can see the distribution favours sellers between the period of November 20 to December 20. You can see the worst year was 2014 with a -27.12% drop in oil.
OPEC+ to extend cuts?
The latest news out on November 11 was that OPEC+ is talking about extending cuts for 3-6 months. At present OPEC have agreed a production quote of 21.8mln bpd and are due to relax these to 23mln bpd next year. Libya, Iran and Venezuela are excluded from the deal.
Can OPEC balance the market even with cuts?
It may be tricky.
- Libyan oil production was reported to exceed 1.2mln bpd on November 13. They are said to be ready to comply with quotas when/if they hit +1.6mln bpd.
- Iran's entry into the international oil market could be prompted by a Biden administration taking a more dovish approach to the Iran nuclear deal. Their current level of production is around 0.5 mln bpd. However, when the deal was in place it stood around 2mln bpd
- Iraq. Although OPEC production compliance was reported at 101% for October Iraq may struggle to keep production quotas as it funds 97% of its state budget through its oil.
All these are potential drags on oil going forward into this seasonally weak time of year.See this helpful graph below:
