1) On August 20, the OPEC and non-OPEC Joint Ministerial Monitoring Committee (JMMC) will hold its second teleconference meeting. The last meeting was held on July 18, at which OPEC producers reported that, due to increased oil output, their overall compliance level had fallen to 121%. Whereas the JMMC used to evaluate compliance on a country-by-country basis, this will no longer be the case. It is widely expected, though not discussed outright, that some countries will produce more than envisaged by their individual production quotas, in order to increase the amount of oil on the market. Iran has called out Saudi Arabia and Russia for over-production already, but these admonishments have been mostly ignored. Compliance levels are expected to show further drops, but perhaps less than expected as Saudi Arabia reported that it produced less crude oil in July than it did in June.
2) On September 15, gasoline outlets in the United States will start selling winter blend gasoline. In preparation for this, refineries generally start producing winter blend in August. Refineries typically go offline for maintenance as they complete the switchover, which somewhat lowers oil demand. However, impact on demand should not be shocking, because the switchovers are generally staggered. Winter blend gasoline is cheaper to produce because it contains more butane and fewer blended elements designed to reduce air pollution. Typically, consumers see a drop in gasoline prices after the switchover.
3) On or after November 5, the United States will impose sanctions on anyone or any institution that has “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the National Iranian Oil Company (NIOC).” The first round of sanctions are going into effect this week and include sanctions on anyone or any institution that helps Iran purchase US dollars or gold. There are also sanctions on those who sell, “supply, or transfer to Iran significant goods or services used in connection with the automotive sector of Iran.”
Oil refineries that are still purchasing Iranian oil will be watching to see how the US implements this week’s round of sanctions. They may alter future purchases of Iranian crude oil if they see that the US is serious about these sanctions. Right now, analysts estimate that between 600,000 and 1 million bpd of Iranian oil may come off the market as a result of sanctions. However, that number should be expected to rise if the US implements financial and automotive sanctions strictly.
4) OPEC plans to hold its next regular meeting on December 3, in Vienna. It will be followed by a non-OPEC Ministerial Meeting, at which analysts are hoping the group will reveal details of the new “super-OPEC” institution. The question of whether Russia will maintain its cooperation with OPEC is of great importance. Saudi Arabia has gone to great lengths to keep Russia involved in both supply cuts and increases over the past year and a half, but there remains a possibility that Russia will decide to leave the group and pursue its own agenda. Russia’s participation and cooperation depends entirely on whether that cooperation is seen as furthering the country’s own interest. Will the country still see cooperation with OPEC in its interest if oil prices increase significantly by December? If not, it might very well decide not to join a “super-OPEC” institution. Or it may press for the institution to take the shape of a symbolic group for furthering discussion rather than for setting out measures.