OPEC supply cuts will not work-II: Deficit will turn to surplus soon.
OECD crude inventories have fallen and oil futures curves are in backwardation. Does that mean OPEC has achieved its mission? 8The answer seems to be an emphatic "no". 8There is little indication that the backwardation in futures curves is going to stop US production from expanding. In 2018, US production will likely hit an all-time high, surpassing the cycle peak reached before the price war in 2014 and above the 10 million barrel mark last hit in 1970. 8Simultaneously, OPEC and it non-OPEC partners last week announced they will extend the deal to cut supply from October 2016 by 1.8mn barrels to the end of 2018. 8But the expectation is that compliance in this extended deal will fall short of expectations. 8Surpluses are going to back again, and Q4 2017 is likely to be the last quarter of deficit for a while. Click on Reports for more