How do you get rid of an oil glut? How about a 104% solution? OPEC reportedly not only adhered to their agreed upon production cuts, but in March their compliance rate came in at an astounding 104%.  Russia also vowed to be 100% complaint by the end of the month shocking most of the OPEC watching world. This comes as Syria and North Korea are raising the geopolitical risk factors for oil. If that is not enough risk for you, than how about the news that the wild man with the dirty windbreaker jacket, wants to make a comeback. Iran’s former President Mahmoud Ahmadinejad unexpectedly filed to run in the country’s May presidential election because I think he is a bit jealous that Kim Jong-un has taken the title as the world’s biggest nut-job.

Let’s talk OPEC first. OPEC agreed to lower their production to 29.804 million barrels a day. Yet it seems that according to a Reuters report they are producing 29.757 barrels a day. The report came on the same day that Saudi Arabia said they are in favor of extending production cuts and Russia vowed to be 100% compliant with their share of the non-OPEC cuts. Russia has agreed to cut by 250,000 barrels. The Russian Energy Minister Alexander Novak insisted that that Russia will deliver 100% of its agreed upon cuts by the end of the month if not sooner. Other non-OPEC players are also showing better compliance.

This is a strong sign that OPEC and non-OPEC are doubling down on cuts at a time when geo-political risk is rising and global inventories are starting to fall. It seems that the players in OPEC/non-OPEC accord are not so worried about the rise of the shale players even as the Energy Information Administration (EIA)predicts that the U.S. is going to be producing a lot of oil. The EIA says that, “U.S. crude oil production is expected to be higher during the next two years than previously forecast, with annual output in 2018 now forecast to reach 9.9 million barrels per day, exceeding the previous record level of 9.6 million barrels per day reached in 1970.”