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Thursday, May 04, 2017

Good or bad, Oil takes a dive

Well, if you saw oil drop like a stone like I did today, you must have been asking what was on the go?

Oil dropped on news that there's a "potential" settlement between rival factions in Libya. If an unsettled peace does come in, it will probably mean a quick increase in Libyan production and exports.

Why is that important?...

When OPEC and non-OPEC producers signed on to their agreement at the end of November, 2016, Libya, another OPEC member, was not included in the overall production cut. At the time, civil unrest had been raking the country, so, members decided that they would not be included in the cuts Implimented by OPEC. That cut came in around 1.2 million barrels, while non-OPEC producers like Russia, added another 600,000 barrels.

    With Libyan production down to 200,000 barrels at the time, I guess the rest of OPEC didn't think there would be a turn-around in Libyan production like what is expected to happen now.
Libyan production was initially set around 1.5 million barrels a day before the unrest struck, and could all be back online as early as July.

    We may have to wait until May 25th to see the final result of all this, as OPEC is expected to meet then, and they may just decide to deepen the cuts, or forget that option altogether, in which case, we may see oil prices crash again.

    While all a good thing on a consumer perspective, oil's volatility in a situation such as this, does nothing for the provincial coffers.

Regards,

George
Twitter #GeorgeMurphyOil

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