While the oil market fluctuates on OPEC posturing, supplies in Cushing, Oklahoma are falling. Not only did the private crude forecaster Genscape report a million barrel drop last week, a pipeline spill in a pipeline going in and out of the all-important delivery point will further reduce supply.
After dropping hard on comments Iraq’s oil minister Jabar Ali al-Luaibi made that somehow he thinks Iraq should be exempt from production cuts, reports of the supply drop in Cushing as well as the reports about a pipeline spill, put the bulls back in control. Enbridge’s Seaway Legacy Pipeline, as well as the Seaway Twin line, were shut reducing supply by 850,00 barrels a day. It was reported overnight that the Twin line pipeline is back in operation but the legacy line is not. So there will be future drops in supply in Cushing next week as well.
The OPEC secretary general Mohammed Barkindo will meet with Iraq’s prime minister Ali al-Luaibi and try to get him back on board with a production freeze. He will more than likely get back on board after allowing Iraq to increase their output quota to about 4.75 million barrels of a day. Currently, they are producing at 4.43 million barrels of oil a day. This should get Iraq back on line with a cut and I am thinking there will be some type of announcement of that today.
Distillates also came back strongly on a refinery glitch in Texas. The coker that went off line came back up so the concern about a furthering tightening in supply should be limited.
Bloomberg News is reporting that the oil price rally is coming too late to save some of the most troubled oil services companies. Basic Energy Services Inc., which has been working with creditors to align its debt burden with depressed energy prices, said it will file for bankruptcy by Oct. 25. The move would come just a day after Key Energy Services Inc. filed for bankruptcy protection. Bloomberg reports that at least 100 North American oilfield services companies have gone bankrupt in 2015 and 2016 as energy prices slid. Debt burdens taken on when oil topped $100 a barrel earlier in the decade are proving unmanageable now that prices are at about half that level, even after this year’s 35 percent rally.
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