Market Worried OPEC Producers Can’t Keep Up

OPEC impressed oil traders this year by making almost all the supply cuts it promised. Keeping output down will only get harder.

The Organization of Petroleum Exporting Countries and its partners are expected to extend output curbs into early 2018 when they meet next week, in an ongoing bid to clear a global surplus. Yet the tailwinds that made cutting supply easier in the first half of the year — from a seasonal lull in demand to temporary oil-field maintenance — will be gone just as new obstacles are emerging.



To keep a lid on output this summer, Saudi Arabia will need to sacrifice an even bigger share of exports as consumption at home rises. Iraq yearns to expand capacity, and has already used the option of maintenance to keep oil fields idle. Meanwhile Nigeria and Libya, two OPEC nations exempt from the deal, are restoring lost output.

“They’re going to struggle,” said Michael Barry, director of research at consultants FGE in London. “This deal has been remarkable in its implementation. As time goes on, discipline is likely to erode. Almost every country wants their production to go up.”

Brent crude, the global benchmark, was trading 0.7 percent higher at $52.01 a barrel as of 12:46 p.m. in London.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza