The output from OPEC declined to an eight-month low in September according to a Bloomberg survey.
Production declined by 145,000 barrels to an average of 29.055 million barrels per day. That is the lowest level since January. However, members with quotas declined only 95,000 to 26.76 mbpd. That was still 1.92 mbpd over their quotas.
Iraq production declined 50,000 barrels to 2.295 mbpd because a pipeline disruption slowed shipments through Turkey. Saudi Arabia production declined by 40,000 bpd but still produced 8.25 mbpd and 144,000 bpd over their quota.
Don't start thinking this is some kind of new trend for OPEC. This is temporary and interesting that compliance with quotas would increase slightly just before their Oct 14th production meeting. I already reported that OPEC oil ministers are starting to whine about enforcing compliance at the October meeting. They are complaining in public but most are still producing more than they should. Do as I say, not as I do.
OPEC member Ecuador riled the oil markets on Thursday after a new round of political unrest rocked the country. The military took over the main airport and police protested in the streets after their pay was cut. President Correa claimed his rivals were trying to stage a coup and took refuge in a hospital guarded by troops. Correa said he was not being allowed to leave and all the exits were guarded by hostile forces.
Ecuador exports about 350,000 bpd and 250,000 of those barrels come to the U.S. with 70,000 going to China. The attempted coup riled the oil market and crude prices rose +$2.11 on the news.
This was also the last day of the quarter and with crude over $76 commodity funds had to bite the bullet and load up on futures to appear smart in their quarterly statements.
The reality is still a complete lack demand growth. Crude oil inventories are nearly 18% over the 2004-2008 average for this time of year and distillates are nearly 30% over the average.
Natural gas drillers in Pennsylvania are preparing for the worst as the Pennsylvania House of Representatives passed a natural gas extraction tax for the first time. Pennsylvania is the only state that does not tax natural gas production. Governor Rendell (D) believes the gas industry should help replenish the state's depleted coffers. The Senate has yet to take up the measure.
Pennsylvania has quadrupled its gas production from 300 million cubic feet a day to more than 1.2 bcf per day in August. The proposed gas tax will cost producers 39-cents per thousand cubic feet. That number will escalate if the price of gas moves over $5.50 MBTU. The price was $3.962 on Thursday. The tax is expected to raise $326 million in 2011.
Ken Salazar got the recommendations from Michael Bromwich today for the new regulations for deepwater drilling. The clock is now ticking on the removal of the moratorium or at least an announcement on when that will happen. Salazar's office would say nothing but the ban should be lifted before its November 30th expiration date. Do you think being the center of attention makes him feel more important? That is a politician's idea of a perfect world.
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