OPEC continues to make more Profits
Kane Davis Cooper ̶ Despite the glut in oil supplies continuing to grow and declining oil prices, OPEC still managed to make more money than last year. This is even with the deal made between members to cut production which appears to be failing to support global prices.
Revenues of over $1.6 billion a day were generated, which is up over 10% compared to the last two quarters of 2016. If the latest figures from the cartel are compared with the first two quarters of last year when prices sunk to more than a 10 year low, income is up by a massive 43% even with production at almost the same level.
If OPEC is successful in reducing the over-supply, revenues for the second half of the year could climb further.
The agreement last year to curb supply came after 2 years of unlimited production which undermined world prices.
OPEC, together with cooperating non-members including Russia has agreed to reduce production levels by just under 2 million barrels per day in the first two quarters of this year. The agreement was then extended it until next year after inventories fell less than anticipated.
Prices have not strengthened noticeably since the agreement and questioned arose as to whether deeper cuts are needed at some future time.
Increasing production in the United States has countered some of the OPEC cuts made.
While OPEC states will applaud the extra money, it has not enough to fill budget shortfalls that have arisen. To square its own account, it is calculated Saudi Arabia requires prices over $70 a barrel.
Using Dubai as a point of reference, prices have risen around one quarter from last year’s average as production fell just two percent.
All this points to further cuts being implemented at some point but reaching that agreement with the cartel members may not be so easy.