29-01-02 A report from oil consultants Petrologistics estimates that OPEC compliance with its latest output cut has been exceptionally high. They said that the 10 OPEC members under quota cut output by 1.4 mm bpd in January from December.
This is probably the best compliance that OPEC has seen with any output restriction in recent history. Even Nigeria moved to ensure that it at least complied with this cut. Iraq saw production rise by 200,000 bpd on the month, but its production remains constrained by low exports caused by retroactive Iraqi pricing.
Add to that the cuts made by non-OPEC and it is clearly the most bullish piece of news that the market has seen in a long time. Or is it? OPEC output cuts mean nothing unless they are actually having an impact on global supplies. If the output cuts are having little effect on crude inventories during peak winter demand, then what is going to happen in the spring? The truth is that we really do not have a complete idea over what is happening to global inventories.

US stocks are published weekly, but do not give a complete picture. For that we will have to wait for the Euroilstock data or the monthly report from the International Energy Agency. A sharp draw in US stockpiles (either on the crude or product side) would also do the trick.
Expectations for tonight's report by the American Petroleum Institute are for crude and gasoline builds of 1.3 mm and 1.13 mm barrels respectively and a draw of 1.3 mm barrels in distillate stocks. Capacity utilisation is seen down by 0.7 %.

The key factor will probably be the level of US crude imports. They jumped sharply to 9.6 mm bpd from around 8 mm bpd previously. It is possible therefore that imports fell sharply. But lower imports will also be at least partly offset by lower crude runs. Product output will also fall as a result of lower refinery throughput, but low product demand is also likely to mitigate the effect of large run cuts.
This is particularly true for heating oil. New Yorkers enjoyed 60 degree Fahrenheit temperatures, with the forecast that these conditions will continue for the next five days. Mild weather is also being seen in Europe. But beware.
After a series of benign stock reports it is possible that the combination of the OPEC cuts, together with the low refinery runs produces a set of figures that surprises the market.

The Iraqi sanctions issue also seems to be coming under more scrutiny. Britain formally asked Syria why it is buying at least 100,000 bpd of Iraqi oil in violation of United Nations sanctions.
Syria, now a member of the Security Council is expected to have to answer the question. Previously Russia has blocked the investigation of the issue on the grounds that there is insufficient evidence. Diplomats say that Britain appears to be trying to embarrass Syria into compliance.