IEA Data Shows Mixed Signals from OPEC......

Yesterday, the International Energy Agency (IEA) released its Oil Market Report for December. In the report, the IEA noted that it believes that OPEC produced roughly 34.2 million bbl/d in November, or an additional 500,000 bbl/d from OPEC's recent estimate for the month. These numbers call into question the authenticity of OPEC's reporting and render a 1.2 million bbl/d cut from the cartel significantly less impactful. Undoubtedly, the biggest question mark surrounding OPEC's recent historic production cut is the cartels ability to not cheat on the numbers (which historically has been a problem). If the market senses that OPEC members are not adhering to their newly defined production quotas, prices will turn negative quickly. The next three to six months will provide the market answers as to whether the cartel is strong enough to hold to its newly stated production quotas. The IEA also noted in its December report that it has revised its estimate for Chinese and Russian consumption prompting the agency to raise its forecast for global oil market demand growth this year by 120,000 bbl/d to growth of 1.4 million bbl/d. A strengthening demand picture globally combined with OPEC's recent production cut (should the cartel adhere to the new quotas) will undoubtedly send oil prices significantly higher in the coming months (potentially into the $60-$65  bbl/d range).