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Russia will play OPEC ball, report finds

23 Mar 2017   OPEC, Russia

Russia is likely to play along with what’s expected to be another six months of OPEC production cuts despite lackluster compliance, a new report finds. Members of the five-member committee monitoring a managed production decline agreement from the Organization of Petroleum Exporting Countries meet during the weekend in Kuwait to consider the durability of the deal. The monitoring team counts Russia as a member. Russia is among the parties contributing to the agreement and is expected to contribute most to production declines from producers outside OPEC. Russia’s contribution is vital to the arrangement, though the Kremlin offered mixed support for the agreement last year after publicly stating in […]

Goldman Sachs: OPEC’s Influence On Oil Prices Is Dwindling | OilPrice.com

23 Mar 2017   OPEC

In a research note, Goldman Sachs has effectively demoted OPEC from a price setter to a mere inventory manager, with the cartel’s long-term control over international oil prices diminishing thanks to shale, which sports much faster returns: 6-9 months from final investment decision to peak production versus several years for conventional oil. The lengthy process of conventional oil is precisely what gave OPEC the ability to pull the strings of international prices.  Goldman commended OPEC on its decision to cut production, adding, however, that it had an opposite to the desired effect by “underwriting” shale oil production, and spurring the growth in it that we are now witnessing.  The investment bank also has some bad news for the oil industry, noting that the period between this year and 2019 will see a hefty increase in global oil production thanks to large-scale investments made in 2011-2013. In fact, Goldman expects the possible addition of 1 million barrels of crude to global daily output in the period.  There is some uncertainty as to whether all these mega projects will deliver in line with expectations, given the oil industry’s history of failing to do this, but delivery has improved in the last three years, so the 1 million barrels are a real possibility.

View full article at oilprice.com

How OPEC Shot Itself In The Foot

23 Mar 2017   OPEC

At the start of March, we showed a fascinating chart from Rystad Energy, demonstrating how dramatic the impact of technological efficiency on collapsing U.S. shale production costs has been: in just the past 3 years, the wellhead breakeven price for key shale plays has collapsed from an average of $80 to the mid-$30s… (Click to enlarge) … resulting in drastically lower all-in breakevens for most U.S. shale regions. (Click to enlarge) Today, in a note released by Goldman titled “OPEC: To cut or not to cut, that is the question”, the firm presents a chart which shows exactly how OPEC lost the war against U.S. shale. The cost curve has massively flattened and extended as a result of “shale productivity,” driving oil breakeven in the U.S. from $80 to $50-$55, in the process sweeping Saudi Arabia away from the post of global oil price setter to a mere inventory […]

OPEC Out Of Moves As Goldman Sachs Expects Another Oil Glut In 2018

23 Mar 2017   OPEC

Oil prices are heading down again on swelling U.S. crude oil inventories, with Brent dropping below $50 per barrel for the first time this year. The OPEC deal that has taken more than 1 million barrels per day of oil off the market has not succeeded in reversing this bearish trend for inventories. And with the deal at its midway point, focus is shifting towards an extension of the cuts through the end of the year. But OPEC’s usual strategy of jawboning the market back up ahead of these negotiations seems to be wearing thin amid record high crude oil inventories. “OPEC has used up most of its arsenal of verbal weapons to support the market. One hundred percent compliance by all is the only tool they have left and on that account they are struggling, ” said Ole Hansen, head of commodity strategy at Saxo Bank. “OPEC’s market […]

Saudi Arabia may insist on Iran oil output cuts to continue OPEC deal: sources

23 Mar 2017   Iran, OPEC, Saudi Arabia

Geopolitical rivals Saudi Arabia and Iran may be headed for another OPEC showdown, as the producer group enters negotiations over extending oil production cuts in force since January.  Saudi Arabia may demand that Iran, which is allowed a slight rise in output under the deal, commit to an output reduction as a condition of continuing the cuts, people familiar with the kingdom’s thinking told S&P Global Platts.  The provision is among several that Saudi Arabia, tired of seeing its market share eroded as it bears most of the burden of OPEC’s agreed cuts, is likely to come to the table with, sources say. These include stipulations on members who have exceeded their quotas and exempt members nearing full production capacity, notably Nigeria.

How OPEC Lost The War Against Shale, In One Chart

22 Mar 2017   OPEC

At the start of March we showed a fascinating chart from Rystad Energy, demonstrating how dramatic the impact of technological efficiency on collapsing US shale production costs has been: in just the past 3 years, the wellhead breakeven price for key shale plays has collapsed from an average of $80 to the mid-$30s… … resulting in drastically lower all-in breakevens for most US shale regions. Today, in a note released by Goldman titled “OPEC: To cut or not to cut, that is the question”, the firm presents a chart which shows just as graphically how exactly OPEC lost the war against US shale: in one word: the cost curve has massively flattened and extended as a result of “shale productivity” driving oil breakeven in the US from $80 to $50-$55, in the process sweeping Saudi Arabia away from the post of global oil price setter to merely inventory manager. […]

An OPEC Deal Extension Isn’t As Simple As It Sounds

22 Mar 2017   OPEC

It’s been six months now that oil prices have been reacting to OPEC, first to the possibility of an agreement, and then to the production cut deal itself, forged by OPEC to rebalance the market. The deal–initially aired as ‘an agreement to agree on a deal’ in September and signed at the end of November—will likely impact the market for at least the next six months. The agreement clearly states that it is production that OPEC producers are vowing to cut, but Iraqi oil minister Jabbar al-Luaibi has recently claimed—rather emphatically—that it is exports , not production, that serve as the baseline for the cuts. And according to Iraq, the agreed-upon cuts have been all about exports all along. Of course, exports are the logical ‘by-product’ of production of oil exporting nations, but each of those producers feels the weight of production cuts differently. Each OPEC nation has a […]

OPEC leans toward oil cut extension, but non-members need to be in: sources

21 Mar 2017   OPEC

OPEC oil producers increasingly favor extending beyond June a pact on reducing crude supply to balance the market, sources within the group said, although Russia and other non-members need to remain part of the initiative. The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1 for six months, the first reduction in eight years. Russia and other non-OPEC producers agreed to cut half as much. The deal has lifted oil prices LCOc1, but inventories in industrial nations are rising and higher returns have encouraged U.S. companies to pump more. A growing number of OPEC officials believe it may take longer than six months to […]

OPEC February Production

21 Mar 2017   OPEC

The new January OPEC Monthly Oil Market Report is out with crude only production numbers for February 2017. All charts are in thousand barrels per day. All data below is in thousand barrels per day and is through February 2017. OPEC crude oil production dropped to 31,958,000 bpd in January. That was a drop of 140,000 bpd. In January OPEC production dropped 930,000 bpd for a two month total of 1,070,000 bpd. Officially OPEC agreed to cut production by 1.2 million barrels per day beginning in January. So they are getting close. OPEC’s November production of 33,374,000 represented an all time high for the Cartel. I have added OPEC direct communication to what OPEC’s secondary sources says, Notice the difference in what Saudi says they produced and what their secondary sources say Saudi produced. One source sited this as the reason oil prices dropped today. Algerian production held steady […]

Expert Analysis: The OPEC Cuts May Be Working

18 Mar 2017   OPEC

WTI traded to a 3.5 month low on Tuesday at $47.09 after OPEC members shook production cut deal confidence for a second straight week. Saudi Arabia contributed to bearish concerns by reporting February production of 10.01m bpd for a 263k bpd m/m increase (secondary source estimate for Feb was less than 9.8m bpd) while Iraq released a goal of producing 5m bpd by the end of 2017. – We continue to have a short term positive view of sub $50 WTI choosing to focus on IEA estimates that OPEC is 90 percent compliant with their 1.2m bpd production cut goal (other analysts see +100 percent compliance) rather than the mixed rhetoric from members. To help their effort Bloomberg reported that non-members cut exports by 240k bpd in February. In terms of rhetoric, Saudi Arabia also worked to walk back some of the concerns they created (and perhaps intimidate […]

Non-OPEC producers deliver 64 percent of pledged oil output cuts in Feb -source

18 Mar 2017   OPEC

Eleven non-OPEC oil producers that joined a global deal to reduce output to boost prices delivered 64 percent of promised cuts in February, an industry source said on Friday, still lagging the higher levels of OPEC itself. The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers agreed to cut production by 1.8 million barrels per day (bpd) from Jan. 1 to boost prices and reduce a supply glut. Compliance numbers were reviewed at a meeting in Vienna on Friday comprised of officials from countries monitoring adherence to agreed output levels — OPEC members Kuwait, Venezuela, Algeria plus non-OPEC Russia and Oman. Russia plans to step up its adherence, saying on Friday that it will cut output by the full amount it had pledged — 300,000 bpd — by the end of April and will maintain that level until the deal expires at the end of June. […]

OPEC will need to extend output curbs to sustain oil price recovery: Reuters poll

17 Mar 2017   OPEC

OPEC will have to extend its oil output curbs in order to sustain a recovery in prices, as a revival in crude production outside the group may scupper its efforts to erode an overhang of unused inventory, a poll of market analysts showed on Friday. Six of the 10 analysts polled by Reuters said they believed OPEC will extend its output cuts beyond June this year, while two felt the group did not need to extend the deal and a further two were undecided. “If OPEC is genuinely pursuing an inventory target, then an extension to current supply restraint is needed,” BNP Paribas analyst Harry Tchilinguirian said. “But given recent producer statements suggesting that a rollover of this policy is contingent on […]

Global oil stocks rise, but IEA says OPEC curbs may create H1 deficit

16 Mar 2017   OPEC

Global oil inventories rose for the first time in six months in January, despite OPEC’s production cuts, but if the group maintains its output limits, the market may tilt into deficit in the first half of 2017, the International Energy Agency said on Wednesday. The IEA said crude stocks in the world’s richest nations rose in January for the first time since July by 48 million barrels to 3.03 billion barrels. “The actual build in OECD stocks in January reminds us that it may be some time before global stocks start to fall,” the agency said. Compliance by the Organization of the Petroleum Exporting Countries with its agreed output cut of 1.2 million barrels per day in the first half of this year […]

Oil Gains on U.S. Supply as IEA Says Time Needed to Drain Glut

16 Mar 2017   IEA

Oil rebounded above $48 a barrel amid a reported decline in U.S. crude stockpiles as the International Energy Agency said the market needs time to drain a global inventory glut. Futures advanced as much as 2.4 percent in New York after slumping almost 11 percent the previous seven sessions. U.S. inventories fell by 531,000 barrels last week, the industry-funded American Petroleum Institute was said to report. Government data Wednesday is forecast to show stockpiles rose for a 10th week. Oil markets are still struggling to clear a surge in supply from OPEC at the end of last year, according to the International Energy Agency. Oil last week broke below $50 a barrel for the first time since December as rising U.S. supply has swamped the impact of supply reductions from members of the Organization of Petroleum Exporting Countries and 11 other nations that started Jan. 1. While an OPEC […]

Be patient on oil market balance, IEA says

16 Mar 2017   IEA

There’s nothing shocking in the steady build of crude oil inventory levels and those waiting for the market to balance out should be patient, the IEA said. The Organization of Petroleum Exporting Countries started implementing a production deal in January that aimed to correct a market characterized by oversupply. Despite the cap on production, crude oil stockpiles in the world’s leading economies continue to build up, suggesting some pressures from the glut remain. A report from the International Energy Agency stated the buildup in the level of unabsorbed crude oil should not be surprising considering OPEC members were increasing their production “relentlessly” before the deal was reached in November. “Export volumes are still appearing in storage around the world and, as part of this, U.S. stocks are building,” the IEA’s report read. For the United States, the world’s leading economy, it’s seen a “triple surge” […]

International Energy Agency Oil Market Report

16 Mar 2017   IEA
  • Having expanded by 1.6 mb/d in 2016, global oil product demand growth is expected to ease back to 1.4 mb/d in 2017. Early indicators of 1Q17 demand support this, with slowdowns seen in January in Japan, Germany, Korea and India.
  • Global oil supplies rose 260 kb/d in February as OPEC and non-OPEC producers pumped more.At 96.52 mb/d, world oil production stood 170 kb/d below a year ago. OPEC posted a year-on-year decline for the second month running. In 2017 non-OPEC output is set to rise 0.4 mb/d to 58.1 mb/d.
  • OPEC crude output rose by 170 kb/d in February to 32 mb/d, putting compliance with the group’s supply cut at 91% for the month. Saudi Arabia raised output by 180 kb/d month-on-month, but flows remained below its agreed target.
  • OECD commercial inventories rose in January for the first time in six months by 48 mb, or 1.5 mb/d, to 3 030 mb, underpinned by near-record US crude stocks and gains in Europe. Preliminary data show a modest draw of 5 mb in February despite further builds in US crude.
  • Benchmark crude prices moved in a tight range of $55-56/bbl through February, before falling more than $3/bbl on 8-9 March. Sour crude Dubai maintained the gains achieved against Brent in recent months, while middle distillates and gasoline prices rose in most regions.
  • Refinery throughput growth recovered to 0.9 mb/d y-o-y in 4Q16, but will slow down to a 0.6 mb/d increase in 1Q17, before surging by 1.9 mb/d in 2Q17. This reflects a recovery from 2Q16’s unusually low levels, with implied refined product stock drawdowns supporting higher throughput.

IEA Claims The OPEC Deal Is Working

16 Mar 2017   IEA

OPEC’s relentless output increase before their November deal to curtail supply has led to the first global stocks increase in six months, the International Energy Agency (IEA) said on Wednesday, noting that the market needs time to see a significant drawdown, expecting an implied deficit of 500,000 bpd for the first half at current production levels and supply and demand fundamentals. According to IEA data, total OECD oil stock levels confirm the legacy of higher production at the end of last year. Global inventories had started falling in August from record high levels, and by end-December they had dropped by 120 million barrels, an average decline of almost 800,000 bpd, IEA said. “However, in January we saw an abrupt about turn with OECD stocks increasing by 48 mb (1.5 mb/d) and preliminary data for February suggests they have fallen back again only modestly,” the agency noted. Export volumes are […]

Has OPEC Underestimated U.S. Shale Once Again?

16 Mar 2017   OPEC, Shale Oil

The U.S. shale cowboys are back on their horses and leading a strong recovery in the oil patch that is not expected to falter even as WTI prices dropped last week below $50 per barrel for the first time in more than two months. With lessons learned from the oil price crash and budgets streamlined and focused on the most prolific shale plays, U.S. drillers are giving OPEC a hard time by raising output and hedging future production. Meanwhile, the cartel members are trying to cut supply and fix the price of oil at such a range that would allow them to reap higher oil revenues, but not allow the shale patch to recover too much too fast. Two and a half months into the supply-cut deal, it looks like OPEC is losing the campaign to prop up oil prices. The drop in prices that began last week saw […]

Global oil stocks rise, but IEA says OPEC curbs may create H1 deficit

15 Mar 2017   IEA, Oil Supply, OPEC

Global oil inventories rose for the first time in six months in January, despite OPEC’s production cuts, but if the group maintains its output limits, the market may tilt into deficit in the first half of 2017, the International Energy Agency said on Wednesday. The IEA said crude stocks in the world’s richest nations rose in January for the first time since July by 48 million barrels to 3.03 billion barrels. “The actual build in OECD stocks in January reminds us that it may be some time before global stocks start to fall,” the agency said. Compliance by the Organization of the Petroleum Exporting Countries with its agreed output cut of 1.2 million barrels per day in the first half of this year […]

OPEC says oil stocks keep rising despite supply cut deal

15 Mar 2017   Oil Supply, OPEC

OPEC said on Tuesday oil inventories had continued to rise despite the start of a global deal to cut supply and raised its forecast of production in 2017 from outside the group, suggesting complications in the effort to clear a supply glut. The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1, the first cut in eight years. Russia and 10 other non-OPEC producers agreed to cut half as much. But in its monthly report OPEC said oil stocks in industrialized nations rose in January to stand 278 million barrels above the five-year average, of which the surplus in crude was 209 million barrels and the rest products. “Despite the supply adjustment, stocks have continued to rise, not just in the U.S., but also in Europe,” OPEC said in the report. “Nevertheless, prices have undoubtedly been provided […]

Outside OPEC cuts, Libya and Nigeria still on slow oil recovery path

15 Mar 2017   OPEC

When OPEC reached a deal last year to cut oil output, the decision to exclude Nigeria and Libya from the restrictions was seen as a risk to the group’s efforts to curb a global crude glut. An oil price rally has already stumbled since the deal, but Nigeria and Libya are not to blame. Output from both nations has slipped since December and violence in the two African states makes their ambitions to hike production look optimistic. “The success of these cuts, debatable as they may be, will not hinge on Nigeria and Libya,” said ING analyst Hamza Khan. OPEC members and non-OPEC producers agreed to cut output by 1.8 million bpd for six months from Jan. 1. OPEC has […]

Production gains seen in some OPEC members

15 Mar 2017   OPEC

Some members of OPEC are producing more oil and Saudi Arabia has breached a psychological threshold for February, based on the organization’s first report since enacting production limits for members of the group. File photo by akiyoko/Shutterstock. March 14 (UPI) — Secondary sources reporting to OPEC said member states operating outside a production deal increased production last month by more than 80,000 barrels per day. Crude oil prices were moving lower in early Tuesday trading after the Organization of Petroleum Exporting Countries released a market report for March showing how well a move to curb about 1.2 million barrels per day from the market was holding. The deal was brokered in November and called for a collective ceiling of 32.5 million barrels per day. Secondary industry sources told OPEC economists that, collectively, the 13 members produced 31.9 million barrels per day in February. Libya and Nigeria are exempt from […]

EIA And OPEC Send Oil Prices Tumbling

15 Mar 2017   OPEC

The double whammy of yesterday’s EIA drilling productivity report – showing rampantly rising shale production next month – combined with a bearish OPEC monthly oil market report, has sent oil prices scampering lower, testing key support levels on both Brent and WTI. With more twists and turns in the coming days than the Monaco Grand Prix, hark, here are five things to consider in oil markets today: 1) The latest OPEC oil market report has ruffled feathers, put the cat among the pigeons, and got the bears a’ growlin’. We discussed yesterday how the rise in U.S. crude inventories this year (hark, 800,000 bpd) was offsetting that of last quarter’s OECD stock draw (hark, 800,000 bpd). Today’s report shows that OECD stocks rose in January to a smidge over 3 billion barrels – some 278mn bbls above their five-year average. OPEC’s goal is to get inventories closer in line […]

Can OPEC Resist The Temptation To Cheat?

15 Mar 2017   OPEC

OPEC’s monthly report for February was released Tuesday morning, and total output appears to have fallen from 32.097 million bpd in January to 31.958 million bpd. Members which agreed to the production freeze and cuts were able to reduce production from 29.9 million to 29.7 million bpd, with Iraq and the UAE continuing to pump above agreed-upon levels, exceeding quotas by 63,000 and 51,000 bpd, respectively. This is pretty good news, but in light of last week’s massive U.S. inventories and the subsequent decline in prices from $54 to $47, the report isn’t enough to indicate a reversal in OPEC’s suddenly declining fortunes . Secondary source verification indicated that Saudi production continued to fall, to 9.797 million bpd. According to direct communication, rather than continue its cuts, the country actually increased production between January and February, from 9.748 million to 10.011 million bpd. While total Saudi output has fallen […]

OPEC Cracks?

15 Mar 2017   OPEC

One of my go-to analysts on oil production is former Italian oilman Leonardo Maugeri, who now works at the Belfer Center at Harvard University. In my book, The End of Doom , I cited his 2012 analysis Oil: The Next Revolution published when oil prices hovered around $100 per barrel in which he correctly predicted that they would drop steeply in the middle of current decade. Why? “Oil is not in short supply. From a purely physical point of view, there are huge volumes of conventional and unconventional oils still to be developed, with no ‘peak-oil’ in sight,” he argued. Maugeri was right: WTI oil fell below $30 per barrel in early 2016. Last fall, the Organization of Petroleum Exporting Countries (OPEC) and Russia agreed to restrain their production (create a shortage) in order to boost prices. The Saudi Arabians had let their own production rip for the last […]

Iran Continues To Ignore The OPEC Deal

15 Mar 2017   Iran, OPEC

All data below is in thousand barrels per day and is through February 2017. (Click to enlarge) OPEC crude oil production dropped to 31,958,000 bpd in January. That was a drop of 140,000 bpd. In January OPEC production dropped 930,000 bpd for a two-month total of 1,070,000 bpd. Officially OPEC agreed to cut production by 1.2 million barrels per day beginning in January. So, they are getting close. OPEC’s November production of 33,374,000 represented an all-time high for the Cartel. Algerian production held steady in February after a drop of 33,000 bpd in January. Angola’s production was down 18,200 bpd in February. Ecuador’s production dropped 4,400 bpd in February after dropping 13,000 bpd in January. Gabon dropped 7,000 bpd in February and reached a new low of 194,000 bpd. Iran continues to ignore any requests from OPEC to cut production. Iran’s production was up over 36,000 bpd in February […]

Kuwait Becomes First OPEC Nation to Call for Longer Oil Cuts

14 Mar 2017   Kuwait, OPEC

Kuwait wants OPEC to extend output cuts beyond June, becoming the producer group’s first member to call for more time to balance the global oil market as the rally that boosted prices initially on the curbs has faded. U.S. inventories have climbed more than expected, causing prices to decline even as global producers cut their output, Kuwait’s Oil Minister Issam Almarzooq said, according to official news agency Kuna. Kuwait supports rolling over the oil cuts, though it’s too early for the Organization of Petroleum Exporting Countries to agree on an extension, he said. “Kuwait supports the extension of the agreement after June,” Almarzooq said. An extension will ‘‘accelerate the rebalancing of the global oil market and will contribute to the return of prices to levels acceptable for producing countries and for the petroleum industry in general.” OPEC and 11 other major producers agreed last year to slash production, spurring […]

OPEC’s Best Signal of Success No Longer Looks So Promising

14 Mar 2017   OPEC

When OPEC announced production cuts last year, the most reliable indicator of oil-market supply started signaling a shortage ahead. Now it’s pointing the other way. In the weeks after OPEC’s Nov. 30 agreement, shorter-term oil prices began to strengthen versus longer-term contracts amid expectations the group’s output cuts would cause a shortfall this year. That trend is reversing on growing concern the curbs aren’t enough to clear the surplus in world oil inventories. Oil prices have slumped below $50 a barrel for the first time this year as record crude stockpiles and rebounding production in the U.S. suggest that the curbs by the Organization of Petroleum Exporting Countries and Russia aren’t working fast enough. In January, front-month Brent crude futures narrowed their discount — known as contango — against contracts for the following year on expectations the supply curbs would succeed. By Feb. 21, the front-month had developed a […]

New Oil Price War Looms As The OPEC Deal Falls Short

14 Mar 2017   OPEC

Last November, OPEC orchestrated an impressive feat: corralling all (or nearly all) of its members to sign on to relatively aggressive production cut deal, and then actually convincing everyone to follow through on those reductions beginning in January. OPEC’s estimated 94 percent compliance rate defied the cartel’s own history of cheating and mistrust, and OPEC has taken around 1 million barrels of oil production per day off the market. They were initially rewarded for this. Oil prices rallied more than 20 percent in the month after the deal was announced and investors and analysts have been mostly bullish on crude prices ever since. But the cuts were not all that they seemed to be for two reasons: OPEC cut from record highs and countries exempted from the deal ramped up oil production in the fourth quarter of 2016, offsetting much of the reductions. Member countries (excluding Indonesia, which is […]

How Likely Is An OPEC Deal Extension?

14 Mar 2017   OPEC

Damned if they do and damned if they don’t. This is OPEC’s precarious position after the recent fall in oil to below $50 per barrel. Oil prices will tank if OPEC says that they are not open to extending their production cuts for another six months. On the other hand, if prices remain low, OPEC only stands to lose market share to its competitors by continuing the production cuts. So what will they do? For the whole of last year, OPEC had been supporting prices on speculation of an impending production cut. In January of this year, the production cuts became a reality, and the oil cartel achieved an exemplary compliance rate of above 90 percent for both January and February on its agreed plan. But prices have not reacted the way many had hoped. After breaking out of the long-term resistance of $52 per barrel, oil was unable […]

The OPEC Deal Is Facing Its Biggest Test

10 Mar 2017   OPEC

OPEC’s strategy to balance the oil market and bolster prices is facing its biggest test. The producer group is aiming to revamp the market by eroding a crude inventory surplus that’s depressed prices since 2014. A deal to cut output announced at the end of November, intended as a catalyst for trimming global stockpiles, had the side-effect of triggering a surge in U.S. production and a jump in the nation’s inventories to an all-time high. That’s prompted crude to give up a chunk of its post-deal gains. With the focus now shifting to what the Organization of Petroleum Exporting Countries will do next, here are six charts indicating which way the oil market could be starting to turn. 1. $50 a Barrel Broken WTI and Brent sank by the most in more than a year on Wednesday, with U.S. crude subsequently falling through $50 a barrel for the first […]

CERAWeek: OPEC done bearing ‘burden of free riders’

10 Mar 2017   OPEC

Maintaining a stable world oil market is a global responsibility and not one that should fall squarely on the shoulders of the Organization of Petroleum Exporting Countries, two of the cartel’s primary decision makers emphasized during separate discussions at CERAWeek by IHS Markit on Mar. 7. In past industry downturns, non-OPEC producers “simply reaped the benefits of OPEC supply reduction,” but now OPEC has made it clear it “will not bear the burden of free riders,” explained Khalid Al-Falih, Saudi minister of energy, industry, and mineral resources, and chairman of Saudi Aramco, to his Houston audience during a ministerial address. “We can’t do what we did in the ’80s and ’90s by swinging millions of barrels in response to market conditions,” he stated. OPEC members and 11 non-OPEC nations late last year altogether agreed to cut production by about 1.8 million b/d through this year’s first 6 months ( […]

Saudis tell U.S. oil – OPEC won’t extend cuts to offset shale: sources

10 Mar 2017   OPEC

Senior Saudi energy officials told top independent U.S. oil firms in a closed-door meeting this week that they should not assume OPEC would extend output curbs to offset rising production from U.S. shale fields, two industry sources told Reuters on Thursday. Oil producers led by Saudi Arabia and top non-OPEC exporter Russia are in an uneasy truce with U.S. shale firms after a two-year price war that sent many shale producers to the wall. The Saudis and Russia led a deal to curb output in late 2016 to end a global supply glut that pushed oil prices to a 12-year low. The resulting rise in oil prices has sparked a rush of new output by shale producers, who this week outlined ambitious production growth plans across the United […]

Oil Companies Take to Thrifty Bets

9 Mar 2017   OPEC

The world’s biggest oil companies are getting thrifty. Oil prices have made a modest comeback from the lows hit a little over a year ago, but energy companies such as Exxon Mobil Corp. and BP PLC aren’t pursuing the extravagant bets they made at $100 a barrel—like commissioning multibillion-dollar projects in Arctic waters and Kazakhstan’s…

OPEC cut 40 percent more in February than pledged in oil deal: Kuwait

9 Mar 2017   OPEC

Kuwait Oil Minister Essam Al-Marzouq said on Wednesday that OPEC’s compliance with an oil output cut reached last year stood at 140 percent in February, while non-OPEC members compliance was 50-60 percent. The Organization of the Petroleum Exporting Countries (OPEC) agreed to cut its output by about 1.2 million bpd from Jan. 1 to prop up oil prices and reduce a supply glut. Marzouq attributed the high compliance rate by OPEC members to a deep production cut by Saudi Arabia. “Saudi Arabia has voluntarily cut by more than its share to increase confidence in the output reduction issue (agreement),” he told journalists in Kuwait. He described OPEC’s compliance as “excellent” and that of the non-OPEC members as “acceptable”, adding that there was […]

OPEC Offers Olive Branch To U.S. Shale

9 Mar 2017   OPEC, Shale Oil

Anybody who is anybody in the world of oil is gathering in Houston this week for the IHS CERAWeek Conference, an annual get-together of top industry analysts, executives and government ministers. The mood in Houston is notably different from a year ago, when oil prices languished in the $30s per barrel. Everyone can thank OPEC for the renewed sense of optimism. At the conference, OPEC said that it would continue to be the “only catalyst” for balancing the market, a comment meant to emphasize OPEC’s significance after several years of infighting. But it was also a welcome assurance for shale producers hoping that OPEC will intervene for the sake of market stability. OPEC also tried to assure the markets that compliance on the production cut deal has been high and will continue to rise. Russian officials added that in the coming weeks they will fully comply with the 300,000 […]

OPEC and Resilient Shale Companies Learning to Coexist

8 Mar 2017   OPEC

U.S. shale producers won’t quit pumping oil, and OPEC is learning to deal with that. That’s the message emerging from this year’s CERAWeek energy conference, where the mood as thousands of energy executives and oil ministers from around the world meet is markedly different from a year ago, when oil prices had just fallen under $30 and the Saudi oil minister suggested that shale producers and others would have to perish for…

Shale Helped Offset Some Global Declines in Oil Production, OPEC Leader Says

8 Mar 2017   OPEC, Shale Oil

Without the U.S. shale revolution, the global economy probably would have been mired in deep crisis, said Mohammad Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries, on Tuesday. When American drillers began using advanced technologies to tap new wells from Texas to North Dakota, a lot of global oil production was in peril, with output falling in Nigeria, Iran, Libya and other hot spots. …

Oil Majors To Boost Production As IEA Warns Of Supply Deficit

Oil prices traded sideways in a quiet market as traders digest the news coming from Houston where the world’s opinion leaders in oil & gas have gathered for this year’s CERA Week. (Click to enlarge) (Click to enlarge) Chart of the Week (Click to enlarge) • Total installed wind capacity surpassed hydropower in the U.S. for the first time last year. • Hydro has been a pillar of the U.S. electricity system for decades – not as large a share of the sector as coal, natural gas or nuclear, but hydro has held a sizable share since the post-WWII build out in the 1940s and 1950s. • On February 12, in the Southwest Power Pool, which covers North Dakota down to Northern Texas, wind accounted for half of the entire system’s generation, the first time that has occurred in one of the seven regional transmission organizations (RTOs). Market Movers […]

IEA warns of potential shortage of global oil supplies in 3 years

8 Mar 2017   IEA, Oil Supply

The recent drop in oil industry investment brought on by weak prices threatens to significantly slow supply growth in the long term, and could lead to a shortage when it comes to meeting global demand, the International Energy Agency said in its five-year oil market forecast released Monday. That may happen even as crude stockpiles in the U.S. and elsewhere climb over the next few years, the IEA said in its “Oil 2017” report. “If the record two-year investment slump of 2015 and 2016 is not reversed,” supply growth may stall by 2020, it said, pointing out that global oil and gas upstream, or exploration and production, investment fell by 25% in 2015 and by another 26% in 2016. This year, it’s “evident” that under the Organization of the Petroleum Exporting Countries-led production cut agreement, output reductions are taking place just as production from the non-OPEC sector, led by […]

IEA: Huge Oil Price Spike Inevitable

8 Mar 2017   IEA, Oil Supply, Prices

Three years of drastic cuts to upstream spending because of the meltdown in oil prices could result in a shortage of oil supply in a few years, according to a new report from the International Energy Agency. When oil prices collapsed in 2014, oil producers quickly took an ax to their spending. Global oil and gas investment dropped by a quarter in 2015 and by an additional 26 percent last year, the IEA estimates. A long list of projects, particularly very large ones, were put on ice. Because many of these projects take years to develop, the sharp slowdown between 2014 and 2016 could result in very few sources of new supply hitting the market towards the end of the decade. To be sure, supply is already coming back. The U.S. has added more than 500,000 bpd since last summer, and shale drillers are ramping up activity. The IEA […]

Oil output cuts past June must include non-OPEC members: OPEC Secretary General

8 Mar 2017   OPEC

OPEC Secretary General Mohammad Barkindo listens during a news conference after a meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, November 30, 2016. REUTERS/Heinz-Peter Bader/File Photo Any decision to extend OPEC production cuts past June would have to include the continued participation by the non-OPEC members of the November accord, OPEC Secretary General Mohammad Barkindo said on Tuesday. The group held talks in recent days with shale oil producers and hedge fund executives, he said during a media conference at the CERAWeek energy conference in Houston. This is the first time OPEC held bilateral meetings with shale producers and investment funds, Barkindo said. “I think we have broken the ice between ourselves and the industry, particularly the tight oil producers and the hedge funds who have become major players in the oil market,” he said in remarks on the sidelines of the […]

Oil to Hit $40 If OPEC Fails to Expand Cuts, Pioneer Says

8 Mar 2017   OPEC, Prices

Oil prices will tumble to $40 a barrel if OPEC doesn’t extend its pact later this year to cut output, according to one of the most prominent producers in the shale patch. U.S. shale drillers are keeping an eye on the second half of the year to see if OPEC and non-OPEC members extend their agreement, which lasts through June, to reduce production by 1.8 million barrels a day, Scott Sheffield, chairman of Irving-based Pioneer Natural Resources Co. , said Tuesday in an interview at the CERAWeek industry conference held by IHS Markit in Houston. “If OPEC does not extend, we will see $40 oil,” Sheffield said. “That will have a major impact on future investments in the U.S. shale business.” The Permian Basin of West Texas and New Mexico, which emerged as the hottest region for drilling during the 2 1/2 year downturn, would see a major curtailment […]

Opec reverses its hedge fund condemnation

8 Mar 2017   OPEC

Opec once decried hedge funds as a malign influence on the oil market. Now it is seeking their opinion.  Mohammad Barkindo, secretary-general of the oil exporters’ cartel, said on Tuesday he was meeting fund managers while in Houston for an energy conference this week, giving them his time along with US shale executives and other senior figures in energy circles.  The overtures are a change for Opec, which historically lashed out at “speculators” for distorting the price of crude. But financial participants have become too large a presence to ignore.  “Times have changed; the industry has changed,” Mr Barkindo told reporters at the CERAWeek by IHS Markit conference. “We are more globalised, and the impact of the financial markets on oil continues to be magnified. And in this world we believe that we should adapt to these new changes and therefore reach out.”  Hedge funds and other money managers have built a net bullish futures position worth nearly 1bn barrels of crude oil, recently the biggest on record. The position expanded after Opec reached an agreement to cut output on November 30.

Saudi Energy Minister Says OPEC Will Remain Stabilizing Force for Oil Prices

8 Mar 2017   OPEC, Saudi Arabia

Saudi Arabia’s energy minister said Tuesday that the Organization of the Petroleum Exporting Countries will continue to be the world’s “only catalyst” for stabilizing oil prices, but he warned that the group won’t take steps to bail out the market. Investors should not fall prey to “wishful thinking that OPEC or the kingdom will underwrite the investments of others at our own expense and long-term interests,” Khalid al-Falih…

IEA Doubles Forecast for New OPEC Oil by 2022 as Iraq Ramps Up

7 Mar 2017   Oil Supply, OPEC

OPEC will increase its production capacity by about twice as much as previously thought, led by expansion in Iran and Iraq, the International Energy Agency said. The Organization of Petroleum Exporting Countries will raise output capacity by 1.95 million barrels a day from 2016 to 2022, with a third of the gains concentrated in Iraq, the IEA said. Last year the Paris-based agency predicted growth of 800,000 barrels a day from 2015 to 2021. While OPEC is leading an effort by global producers to clear a glut this year by reducing output, the organization is getting ready to meet rising demand in coming years. Iraq is rehabilitating its oil industry after years of conflict, while neighboring Iran is seeking foreign investors after the lifting of nuclear-related sanctions. “The group is building capacity even as it reduces in 2017, in anticipation of higher demand,” said the IEA, which advises most […]

IEA Sees Oil Investment Revival After a Two-Year Rout

7 Mar 2017   IEA, Oil Supply

Oil companies are reviving investment after a two-year rout as OPEC output cuts boost prices, easing but not eliminating the risk of a future supply crunch, the International Energy Agency said. There are “signs of a modest recovery” in spending in 2017 following two years of big investment cuts, the Paris-based agency said Monday in a report. The IEA doubled forecasts for production growth outside OPEC next year as U.S. shale producers emerge “leaner and fitter” from the downturn. The Organization of Petroleum Exporting Countries and Russia headed an agreement among 24 oil producers last year to clear a global glut, spurring a 20 percent rally in crude prices. Before that decision, OPEC had refused to reduce output on the grounds that any curbs would bail out rival producers. “Until the agreement was struck, prices threatened to return to the levels seen in early 2016” of less than $30 […]

IEA: Oil investment drought threatens price surge

7 Mar 2017   IEA

Drastic cuts in oil industry investment risk creating a shortfall in supply that by 2020 will expose the market to a surge in prices, the International Energy Agency has warned. Despite a chorus of analysts predicting a decline in oil consumption in the coming years, as governments push for energy efficiencies, cleaner fuel usage and electric cars, the IEA cautioned in its five-year outlook: “We see no such peak in sight.” More investment in global oil and gas exploration and production is crucial to ensure future supplies are able to meet growing demand, it added. The oil price crash that sent prices from $115 in 2014 to below $30 early last year forced international energy companies to curb investment by a quarter in 2015, and by a similar amount last year. The Paris-based agency said only modest signs of recovery in 2017 meant that it was far from clear that enough projects would enter the pipeline in the next few years to avoid a supply crunch.

IEA warns of oil ‘supply crunch’ by 2020 with no capex renaissance

7 Mar 2017   IEA

Global oil supply may struggle to match demand after 2020, when the pinch of a two-year decline in investment in new production could leave spare capacity at a 14-year low and send prices sharply higher, the International Energy Agency said on Monday. Investors generally are not betting on a sharp rise in the price of crude oil any time soon, but the contraction in global spending in 2015 and 2016 and growing global demand means the world could well face a “supply crunch” if new projects are not soon given the go-ahead, the IEA said in its five-year “Oil 2017” market analysis and forecast report. Most supply growth is expected to come from the United States, where the IEA said shale, or light tight output (LTO), will grow by 1.4 million barrels per day by […]

Too early to discuss oil deal’s extension: Russia, Iraq

7 Mar 2017   OPEC

Russia and Iraq said on Monday it was too early to discuss an extension of a historic deal to curb oil output beyond June while cash-strapped Angola supported the move to boost oil prices. Members of the Organization of the Petroleum Exporting Countries (OPEC) including Iraq and non-OPEC countries such as Russia last year agreed to cut oil production by some 1.8 million barrels per day (bpd)for six months beginning Jan. 1 to reduce global oil supplies that have weighed on prices. On Tuesday, all eyes will be on Saudi Arabia’s Energy Minister Khalid al Falih who is scheduled to speak at the CERAWeek energy conference in Houston. Falih met his Russian counterpart, Alexander Novak, on Monday and the two voiced satisfaction with the […]