Market Overview

OPEC's Bullying Of The Crude Oil Market

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OPEC's Bullying Of The Crude Oil Market

OPEC recently cut the outlook on non-OPEC crude oil supply in 2016. It raised the forecast of supply loss for non-OPEC suppliers from 730,000 BPD to a 740,000 BPD drop, citing weak production outlooks for China, Colombia, the UK and the United States.

OPEC seems to be playing a range-bound game with the crude oil market. Earlier in 2016, crude oil prices on the Crude Oil WTI (NYMEX) were at a multi-year low closing at below $27 on January 20. Almost as if in response, a rumor started circulating in February of 2016 of an OPEC production freeze to prop up falling prices worldwide. Oil rebounded.

Related Link: Credit Suisse Expects "Fierce Cross-Winds" To Drive Oil Volatility

But surprisingly, talks failed when Saudi Arabia demanded that rival Iran also freeze its own output. Iran has only recently been released from EU and U.S. nuclear sanctions said it "will reach pre sanction levels by June" as reported by Reuters. With no intentions of slowing production let alone freeze it Iran rejected Saudi's demand and talks between OPEC and non-OPEC broke down.

It seems OPEC has been using its monopolistic-like hold on the oil market to influence price and how much non-OPEC producers can actually compete with OPEC.

OPEC's April output is a multi-year high in line with production up 188,000 barrels to 32.44 million BPD. It raised outlook for 2016 demand for its crude to 31.49 million BPD.

 

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