Opec Officials Fear Supply Outstripping Demand Amid Falling Prices

Opec officials are growing concerned that the global demand for oil may not be meeting supply levels, as Brent prices have fallen to their lowest level since mid-April, slipping below the $23/bl mark. The situation is grim for Opec producers, with some members, such as Iran and Libya, fearing that an early production cut may be necessary to stabilize the market. The market's current price for Brent is not considered cheap, and global oil stocks may be rising again, but they are still far from being high.

Key Takeaways:

• Opec officials are worried that supply may be outstripping demand, with Brent prices falling to their lowest level since mid-April.
• The contango on Brent prices has become profound, with prompt prices falling to $1/bl below January prices.
• Opec's hawks, including Iran and Libya, are advocating for an early production cut, fearing that the slide in prices will not stop.
• Global oil stocks are not yet high enough to stabilize the market, and prices for crude oil and heating fuels have been volatile due to low stock cover.
• Iraq's battle of wills with the UN has added an extra level of nervousness, but Baghdad's ability to whip up confusion would have been less effective if the markets had spare inventory available.
• US marker WTI's behavior suggests that tight supply is not an issue of the past, despite Opec's reading of events since its last production increase.
• The US Strategic Petroleum Reserve has delivered 30mn bl of crude to buyers in November and December to combat high prices.
• The situation in the US highlights that it is really Opec's mostly high-sulphur oil that is oversupplied, not all oil everywhere.
• A jump in European refinery runs has flooded Europe with unwanted fuel oil, causing high-sulphur fuel oil prices in the Mediterranean to dive nearly $28/t in just a week.

Statistics:

• Brent prices fell to their lowest level since mid-April, slipping below the $23/bl mark.
• The contango on Brent prices has widened to $1/bl.
• Opec's hawks, including Iran and Libya, want an early production cut to stabilize the market.
• Global oil stocks are still far from high enough to stabilize the market.
• US marker WTI's premium over Brent briefly soared in pre-holiday trade.
• The US Strategic Petroleum Reserve delivered 30mn bl of crude to buyers in November and December.
• High-sulphur fuel oil prices in the Mediterranean dived nearly $28/t in just a week.
• The Mediterranean dived nearly $28/t in just a week.
• High shipping costs kept unwanted fuel oil from flowing to other demand centers.

Sources:

• "Opec officials muttered about talk of production cuts as outright prices sank and prompt Brent prices weakened against forward levels." (The source is not explicitly stated, but appears to be a news article or market report from a reputable source.)