Opec lowers production based on reduced demand

Fuel Fix:
OPEC crude oil production declined to a 15-month low as Saudi Arabia reduced output because of waning demand from consumers, a Bloomberg survey showed.

Output in the 12-member Organization of Petroleum Exporting Countries slipped 525,000 barrels, or 1.7 percent, to an average 30.479 million barrels a day this month from a revised 31.004 million in December, the survey of oil companies, producers and analysts showed. The December total was revised 430,000 barrels a day lower mostly because of the change to the Saudi number.

“OPEC members are cutting because of concern about demand and a surplus in stockpiles and are responding to a lack of market interest,” said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts. “They are getting to that magic number of 30 million and won’t have to cut much more.”

Saudi Arabia, OPEC’s biggest oil producer, pumped 9.1 million barrels a day this month, the lowest level since May 2011. Output was down 100,000 barrels a day from December and 800,000 barrels from May, when production reached the highest level since at least January 1989. December production was revised 370,000 barrels lower.
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This may mean there is an economic downturn of significant proportions going on, but it probably also is the Eagle Ford effect finally penetrating world markets.  If that is the case it is only going to get worse as West Texas formations start coming on line with the Crain and Wolfcamp formations near the Permian basin in West Texas.   I think many have underestimate the effect of the shale oil boom hitting this quickly.

I think we can also expect to see a good bit of infrastructure construction going into place to get this oil to market.  Because of the lack of available pipelines we are already seeing increased rail transport of oil.  This has been going on for some time in North Dakota's Bakken formation.

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