1. OPEC meeting comes and goes with little commotion.
OPEC had its long-awaited conference in Vienna last week and as expected announced a nine-month extension of its November 2016 deal to cut supply. Unfortunately for them, it didn’t have the effect they were hoping for. The markets were indifferent. (Mainly due to the fact that the decision has already been factored into the prices for the last few weeks because Saudi Arabia, Russia and other major OPEC members have been eluding to the cuts for quite some time.) In fact, the WTI fell below $50 after the news officially broke. Both Saudi oil minister Khalid al-Falih and Russian minister Alexander Novak shrugged off the price decreases as short-term fluctuations.
2. Iran still not participating in production cuts.
When specifically asked about joining the OPEC production cuts at the Vienna OPEC meetings, Iranian Oil Minister Bijan Zanganeh said, “Iran will not reduce its output.”
While all the other OPEC members agreed to extend the current cuts for nine months, Iran continues to argue that they should remain exempt as they work to return to pre-sanction levels of production. Currently they are producing 3.8 million bbp, and hope to increase its output to 5 million bpd by 2021.
3. The future looks uncertain for Venezuela’s oil production.
For nearly 50 days now, protestors have occupied the streets of Venezuela to fight against the dictatorial Venezuelan regime. Since the unrest began, 42 people have been killed, 2,371 arrested and thousands injured as the country slowly but surely marches toward an economic collapse. Their sputtering oil industry continues to deteriorate, and an outright collapse of their oil industry is looking more and more like a possibility every day.
As of April, Venezuelan oil production was at 1.956 million bpd, down 10% from last year, and down more than 17% from 2015. Additionally, many analysts expect Venezuela to lose another 200,000 to 300,000 bpd this year.
What makes this critical, is the fact that as of now, there doesn’t seem to be a solution in sight. The Venezuelan regime is at its lowest ever approval rating, but the government has maintained its strong military presence, making a peaceful solution difficult and unlikely.