Global

Traders test OPEC ‘whatever it takes’ resolve to defend oil price

23 Jun 2017   OPEC, Prices

When OPEC leader Saudi Arabia pledged in May to do “whatever it takes” to defend world oil prices, it didn’t expect the market to be testing its resolve just one month later. As the Organization of the Petroleum Exporting Countries extended oil production cuts, oil prices fell 18 percent in just 20 days. OPEC members appear determined not to rush into deeper output curbs despite market pressure. Oil traders have chosen to ignore bullish news for prices – including a long-awaited decline in U.S. oil stocks on Wednesday – and focused instead on negative factors such as a stubborn global glut. As a result, the oil market posted its worst performance in […]

Oil market flashes warning about stock levels in 2018: Kemp

23 Jun 2017   Oil Supply, OPEC

Oil traders have become increasingly doubtful that OPEC will manage to cut crude stocks down to the five-year average in 2018 and keep them there. Calendar spreads for Brent futures throughout the rest of 2017 and 2018 have weakened significantly since OPEC agreed to roll over its production allocations at the end of May. Calendar spreads (price differences between futures contracts for delivery in different months) are closely linked to the expected level of oil inventories. Physical traders and refiners use spreads to hedge oil stored at tank farms and refineries as well as onboard ships in transit or acting as floating storage. But spreads can also be used by traders and specialist hedge funds to speculate on the level of global oil stocks in future. High and/or rising inventories are […]

OPEC Has Few Escape Routes From Another Bear Market in Oil

23 Jun 2017   OPEC

Deeper cuts weren’t seriously discussed this week: delegates Resurgent Libyan, Nigerian production presents new challenge Oil’s back in a bear market and investors remain unmoved by last month’s agreement to prolong supply cuts, leaving OPEC and its allies with few remaining tools to boost prices. As Saudi Arabia, Russia and their allies reduce output, supply that’s beyond their control keeps rising. Libya and Nigeria — OPEC members exempt from the curbs — and U.S. shale producers are resurgent, undermining efforts to tame a global glut. Prices are back below where they were when the Organization of Petroleum Exporting Countries first struck its historic deal last year. Cutting even deeper — an idea rejected just a month ago — still looks unlikely. For now at least, the Saudi pledge to do “ whatever it takes ” to stabilize prices looks like not much at all. Further curbs could be necessary, […]

Kuwaiti official says OPEC-led production cuts not working

23 Jun 2017   Kuwait, OPEC

A multilateral effort to ease global oil supply-side strains on the market hasn’t worked as designed, a Kuwaiti official said Thursday. Photo by Oskari Porkka/Shutterstock June 22 (UPI) — The multilateral effort to bring the global energy market back to a balance between supply and demand has fallen short, an exporter told a Kuwaiti news agency. Members of the Organization of Petroleum Exporting Countries and a handful of other producers, notably Russia, started implementing a deal in January to ease the supply-side strains that weighed on oil prices last year through coordinated declines in production. In May, parties to the agreement decided to extend the terms by three months longer than originally planned, to March 2018. Market analysts were anticipating deeper cuts and crude oil prices have been on a steady decline since the start of June. Mohammed al-Shatti, a deputy chairman of the Kuwait Petroleum Corp., told the […]

Iran says OPEC considering deeper output cuts, delegates skeptical

22 Jun 2017   Iran, OPEC

Iran’s Oil Minister Bijan Zanganeh talks to journalists before the beginning of a meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, May 25, 2017. OPEC members are considering further oil output cuts but should wait until the effect of the current reduced level of production is made clear, Iran said on Wednesday, hinting at possible further OPEC action after oil sank to a seven-month low. OPEC and allied outside producers agreed on May 25 to extend an existing supply cut into 2018, but oil has declined sharply since on rising production from the United States and Nigeria and Libya, two OPEC members exempt from cutting output. “We are in discussions with OPEC members to prepare ourselves for a new decision,” Iranian oil minister Bijan Zanganeh said after a cabinet meeting, according to the website for the Islamic Republic of Iran Broadcasting (IRIB). “But making […]

Iran: Production cuts difficult for OPEC members

22 Jun 2017   Iran, OPEC

Cutting back on production levels is a difficult task for members of the Organization of Petroleum Exporting Countries, Iran’s oil minister said Wednesday. Iran ranks third among OPEC member states in terms of proven crude oil reserves. Production has been more or less steady since the fourth quarter of 2016 at 3.7 million barrels per day, though that’s up about 8 percent from 2016. While other OPEC members are cutting output in a coordinated effort to balance the market, Iran can increase production as it works to recapture a market share lost to global sanctions. Speaking from Tehran, Oil Minister Bijan Zanganeh said his country was in talks with other OPEC members on current market conditions. With a steady gain in […]

OPEC, non-OPEC compliance with oil cuts hits highest in May – source

21 Jun 2017   OPEC

OPEC and non-OPEC oil producers’ compliance with a deal to cut global output has reached its highest in May since they agreed on the curbs last year, reaching 106 percent last month, a source familiar with the matter said on Tuesday. OPEC compliance with the output curbs in May was 108 percent, while non-OPEC compliance was 100 percent, the source said. Another source confirmed compliance by all producers in May was 106 percent. “This is the highest compliance since the beginning of the deal,” one of the sources said. The Organization of the Petroleum Exporting Countries and allies agreed to cut supply by about 1.8 million barrels per day (bpd) starting in January to get rid of a supply glut. A technical committee of OPEC and non-OPEC producers met in Vienna on Tuesday to monitor compliance with the pact. The producers agreed at a May 25 meeting to extend […]

OPEC Deal In Jeopardy As Libyan Oil Output Nears 1 Million Bpd

19 Jun 2017   Libya, OPEC

Libya—whose production has been hampered by civil unrest, political divides, and oil export terminals blockades over the past few years—is now targeting to further increase its oil output. Its most immediate goal is to reach 1 million bpd of production by the end of July, which would further complicate OPEC’s desperate efforts to reduce global inventories and prop up oil prices. And its ambitions seem plausible. Just last month, when OPEC was discussing rolling over the output reduction deal, production-cut-exempt Libya hit its highest daily production level since 2014. Earlier this week, OPEC reported that total cartel production in May was actually higher than in April, with Libya the biggest single contributor to that increase. Analysts warn, however, that Libya’s output increase is not a for-sure thing. Production could sharply drop again, given the political rivalry between factions and the fragile security situation in country. Both scenarios—that Libya could […]

Oil Guru Who Foresaw Crash Says OPEC Should Have Cut Deeper

16 Jun 2017   OPEC

The oil guru who predicted the market rout in 2014 said OPEC and its allies should have gone much further when they extended their supply deal last month. (Bloomberg) — The oil guru who predicted the market rout in 2014 said OPEC and its allies should have gone much further when they extended their supply deal last month. “They should have cut another million barrels a day for ninety days in order to drain the system,” said Gary Ross, global head of oil at PIRA Energy, a forecasting and analytics unit of S&P Global Platts. For Ross, the producers missed an opportunity to deepen cuts between June and August when refinery demand is higher and so accelerate the decline in inventories. Such a move would have pushed the market into backwardation, when near-term prices are higher than those for later months, he said. That structure favors OPEC because it […]

Oil supply seen outpacing consumption in 2018, demand to top 100 million barrels per day

15 Jun 2017   IEA

Growth in oil supply next year is expected to outpace an anticipated pick-up in demand that will push global consumption above 100 million barrels per day (bpd) for the first time, the International Energy Agency said on Wednesday. The Paris-based IEA said production outside the Organization of the Petroleum Exporting Countries would grow twice as quickly in 2018 as it will do this year, when OPEC and 11 partner nations have restrained output. “For total non-OPEC production, we expect production to grow by 700,000 bpd this year, but our first outlook for 2018 makes sobering reading for those producers looking to restrain supply,” the IEA said. “In 2018, we expect non-OPEC production to grow by 1.5 million bpd which is slightly more than the expected increase in global demand.” Brent […]

Market balance delayed, International Energy Agency says

15 Jun 2017   IEA

Market balance might be facing headwinds given strong production trends and high levels of oil in storage, the International Energy Agency said. File photo tlegend/Shutterstock. June 14 (UPI) — Pressure from U.S. oil production and some OPEC members mean market balancing is stalled, the International Energy Agency reported Thursday. Parties to an agreement led by the Organization of Petroleum Exporting Countries to balance the market through managed production declines decided to extend the arrangement by three months into early 2018. That led to a downturn in crude oil prices as many market watchers were anticipating deeper cuts. In its monthly market report for June, OPEC economists said Wednesday that the market was balancing in response to the production arrangement, but at a slower pace than expected. The International Energy Agency mirrored OPEC’s sentiments in its own monthly report , saying stronger U.S. crude oil production, which could increase faster […]

Global Oil Consumption Rate Grows

15 Jun 2017   IEA

Global oil consumption grew above the 10-year average rate for a second consecutive year in 2016. Global oil consumption grew above the 10-year average rate for a second consecutive year in 2016, rising by 1.6 percent, or 1.6 million barrels per day, BP’s latest Statistical Review of World Energy revealed. Strong increases in demand were seen from India (up 300,000 bpd) and Europe (up 300,000 bpd) and while demand from China continued to grow (up 400,000 bpd) it was lower than in recent years. Growth in production was limited to only 0.5 percent, which led to the oil market broadly returning back into balance by mid-year. However, prices continued to be depressed by the large overhang of built-up inventories. Natural gas production was also adversely affected by low prices, growing by only 0.3 percent. US gas output fell in 2016, the first reduction since the advent of the shale […]

Oil Prices Fall As IEA Points At Poor Fundamentals

15 Jun 2017   IEA

Oil slumped again on Wednesday on a downbeat assessment from the IEA regarding the health of the oil market. After posting some relatively optimistic projections for the “rebalancing” process in recent months, the IEA has had to concede that the massive inventory overhang might last longer than it originally predicted. The report came in the same week that OPEC published its monthly Oil Market Report, in which it too admitted that the oil market was adjusting at a “slower pace” than expected. The IEA pointed to several different metrics that don’t bode well for higher prices. First, total OECD inventory levels “increased by more than the seasonal norm” in April. Crucially, inventories in the OECD have actually grown year-to-date, despite five months’ worth of OPEC cuts. As a result of rising U.S. shale production, weak gasoline demand, high levels of U.S. imports, and a drop off in exports, U.S. […]

Analysts Warn: Much Deeper OPEC Cuts Are Needed

15 Jun 2017   OPEC

The International Energy Agency had a nasty surprise for OPEC and its partners in the oil output cut agreement today. According to the authority, non-OPEC production in 2018 will increase by 1.5 million barrels daily – a rate that will surpass the growth of global demand. The figure is particularly impressive—or frightening, depending on perspective—compared with the IEA’s estimate of total non-OPEC oil production growth for this year: 700,000 bpd. Of this, the U.S. will contribute a daily rise of 430,000 bpd “ and the year will end with production there 920 kb/d higher than at the end of 2016.” And that’s not all. The daily growth rate for U.S. oil production in 2018 is seen to average 780,000 bpd, but the IEA cautions that it may grow even faster than that. Right now, things are not looking much better: OECD crude oil stockpiles continued to rise through April […]

OPEC May Production Data

15 Jun 2017   OPEC

All data below is based on the latest OPEC Monthly Oil Market Report . All data is through May 2017 and is in thousand barrels per day. OPEC crude only production was up 336,000 barrels per day in May. The two countries that are not subject to OPEC quotas, Nigeria and Libya, were up a combined 352,000 barrels per day. That means the rest of OPEC was down 16,000 bpd. And all this was after OPEC April production was revised upward by 72,000 barrels per day. March OPEC production was revised upward by 23,000 bpd while April production was revised upward by 72,000 bpd. Not much is happening in Algeria. They peaked almost 10 years ago and have been in slow decline ever since. Angola peaked in 2010 but have been holding pretty steady since. Ecuador peaked in 2015. They will be in a slow decline from now on. […]

OPEC Members Pursue Own Agenda As Glut Persists

15 Jun 2017   OPEC

Amid reports of inventory increases, further surges in future non-OPEC supply and prices lying stagnant in the $40s, it’s becoming clear that the OPEC deal to extend production cuts in place since November has not had the desired effect. Now, OPEC states are taking divergent, self-interested approaches to the problem, raising new questions: will the group take new action to arrest the fall in prices, and if so what form will it take, and when? First, a little good news came to the market this week as the EIA reported a 1.7-million-barrel draw in inventories. At 511.5 million barrels, U.S. inventories remain in the upper half of the average range for this time of year. But the report nevertheless was a welcome change from last week’s 3.3 million barrel rise in inventories, as well as the API’s estimates that inventories would rise 2.75 million barrels this week ahead of […]

Excess oil inventories to last until 2018 – IEA

14 Jun 2017   IEA, Oil Supply

Oil demand should outpace supply in the second half of this year but excess inventories will persist well into 2018, dealing a blow to global crude producers enacting output cuts to bring down stubbornly high stockpiles. The forecast from the International Energy Agency comes as higher than expected demand growth next year is met by even stronger output from the US and other producers outside of the Opec cartel. In its monthly oil market report, which include forecasts for next year, the Paris-based energy agency said: “[The] outlook for 2018 makes sobering reading for those producers looking to restrain supply.”

OPEC’s song and dance fails to score a hit with the oil market

13 Jun 2017   OPEC

Help In a meeting that unfolded -– at least to S&P Global Platts OPEC specialist Herman Wang ‘s eyes — just like the Eurovision pop song contest, OPEC and its non-OPEC partners decided on May 25 to extend their 1.8 million b/d in production cuts through the first quarter of 2018. Herman explains the Eurovision connection and also catches up with Yasser Elguindi, an analyst with Medley Global Advisors, to break down the meeting’s results and their impact on the global oil balances. The podcast also delves into […]

Can OPEC Keep Its Nerve?

12 Jun 2017   OPEC

The recent OPEC agreement to extend production cuts for a further nine months has had a mixed response from industry commentators. For some, it’s an example of OPEC’s new steadfastness and unity of purpose, whereas for others it’s a deal likely to have little impact on bloated oil inventories and the current oil price. For such critics, other, more influential factors are in play undermining OPEC’s influence – American shale production, for example. Yet, like many things in life, it’s never as clear-cut. In this blog, I will look at the upside and downside risks of the new extension and whether it is likely to have the desired effect on both inventories and prices. What’s Working In OPEC’s Favor Firstly, there are a number of factors in OPEC’s favor – in particular the remarkable discipline of OPEC members over the last few months. While many OPEC deals in the […]

Russia’s Novak says no need to review oil output cut deal

12 Jun 2017   OPEC, Russia

Russian Energy Minister Alexander Novak attends a session of the St. Petersburg International Economic Forum (SPIEF), Russia, June 2, 2017. Russian Energy Minister Alexander Novak said on Sunday there was no need to review a global agreement on reducing oil output as it was too early to make any decisions. (Reporting by Olzhas Auyezov; writing by Jack Stubbs; editing by Jason Neely)

After oil drop, some OPEC delegates question if supply cut deal enough

10 Jun 2017   OPEC

The OPEC logo is seen outside their headquarters in Vienna, Austria May 24, 2017. Two weeks after an OPEC-led deal to extend oil output cuts until March, some OPEC delegates are questioning whether the agreement will be enough to reduce a glut in supplies and lift prices. Prices have fallen more than 10 percent to below $50 a barrel since the Organization of the Petroleum Exporting Countries and allies agreed on May 25 to prolong a deal to cut about 1.8 million barrels per day (bpd) until the end of March. The deal was initially due to run during the first half of 2017. Even a political dispute between Gulf states, the source for most of OPEC’s crude, has failed to drive prices higher. Instead, eyes are trained on Nigeria and Libya, two OPEC states that were excluded from the regime of cuts to help them recover from years […]

Oil comeback for cut-exempt producers threatens to swamp OPEC

10 Jun 2017   OPEC

FILE PHOTO: Pipelines are seen at the industrial zone at the oil port of Brega, Libya, January 12, 2017. OPEC’s battle against an oil glut is under threat as unsold crude from members Nigeria and Libya, which are exempt from a global production-cutting deal, is swamping the Atlantic Basin. Nigeria has more than 60 million barrels of unsold crude, traders of its oil said, surpassing the level reached when global oversupply peaked two years ago. More export plans are a week away, likely bringing more than 50 million extra barrels. Libya, meanwhile, is pouring nearly triple the amount of crude into global markets compared with last year. Few expected the two nations’ output to rebound so quickly, and it could scupper OPEC’s plans to lift oil prices out of a nearly three-year-long slump. The 14-nation Organization of the Petroleum Exporting Countries two weeks ago extended a deal struck in […]

Saudi’s Falih says no immediate need to adjust oil pact

10 Jun 2017   OPEC, Saudi Arabia

There is no evidence the global oil producers’ pact needs to be adjusted now, Saudi Arabian Energy Minister Khalid al-Falih said on Saturday, describing the recent weakness in crude prices as the market overreacting to statistical glitches. “I am convinced that the overall trend for the market is that of rebalancing,” he told reporters on a visit to Kazakhstan. (Reporting by Olzhas Auyezov; editing by David Clarke)

For Goldman Sachs, OPEC’s Exit Strategy Is a High-Wire Act

7 Jun 2017   OPEC

The biggest question in oil markets is what OPEC should do once its deal to cut output ends next spring. Goldman Sachs Group Inc. has an answer, but it requires a bit of balancing. Oil prices have slipped 8 percent since OPEC and its allies agreed on May 25 to keep production reduced until next April amid uncertainty about what they will do after that. For Goldman Sachs, the organization’s challenge is to reduce supplies enough in the short term without boosting prices so much that rival producers get back to work. To juggle those objectives, OPEC should make deeper production cuts now and simultaneously warn it will revive output sharply once the surplus clears, according to Jeff Currie, the bank’s head of commodities research in New York. […]

Op-Ed: Global Oil Market Trends, US Production Stump OPEC Strategy

7 Jun 2017   OPEC

Crude oil demand will have to put supply in its place before prices will manage a sustainable rally. Despite six months of lauded compliance with its own production quotas, OPEC’s effort to accelerate a global oil market rebalancing moves at a dawdling pace. Global oil prices hover nearer the November 2016 price when the cuts were announced than a $60-plus per barrel target. Meanwhile, crude and product stocks among OECD (Organization for Economic Cooperation and Development) countries ended April roughly 56 million barrels higher than the December total. Annual non-OPEC output is expected to gain 1 million barrels per day (MMbpd) in 2017 and 1.5 MMbpd in 2018, according to Societe Generale (SG) estimates. The United States is the key driver behind growing non-OPEC supply. In Texas, where the Permian Basin production rate is relentless, the Texas Petro Index (TPI) improved to 164.3 – its first year-over-year increase in […]

World’s energy system not on track to meet climate goals: IEA

6 Jun 2017   IEA, Renewables

Barely one tenth of renewable energy technology is ready to meet long-term climate change targets as governments have failed to adequately support large-scale deployment, a report by the International Energy Agency showed on Tuesday. Under a global climate pact, called the Paris Agreement, nearly 200 countries agreed last year to phase out greenhouse gas emissions this century and to limit a global average rise in temperature to “well below” 2 degrees Celsius (3.6 degrees Fahrenheit). Energy technology innovation can help achieve a cleaner energy system but strong policy signals are needed, the report said. Only three out of 26 assessed technologies – electric vehicles, energy storage and mature variable renewables (solar PV and onshore wind) – are on track to meet climate targets, according to the IEA. “Transformation toward a clean energy system is not in line with stated international policy goals. Many technology areas suffer from a lack […]

OPEC’s Next Move: Expanding The Cartel

6 Jun 2017   OPEC

OPEC is working on establishing a legal relationship with its partners in the crude oil production cut agreement. This would mean a larger oil cartel controlling possibly more than half of global oil supplies: OPEC currently controls 40 percent. OPEC’s Secretary General Mohammed Barkindo said the legalization of the relationship is a top priority at the moment, as the group aims at “stability of oil prices on a sustainable basis.” He added that “OPEC as an organization controls nothing more than 40 per cent of the oil market. The issue of stability on a sustainable basis is probably beyond the capacity of an organisation that controls only 40 per cent and that is what led to the Algiers agreement last year and later to the historic first joint meeting of OPEC and non-OPEC members.” There are three joint bodies working on the structure of this new relationship, Barkindo said, […]

OPEC to assess need for deep oil output cuts in July: Saudi’s Falih

6 Jun 2017   OPEC

OPEC and non-OPEC producers have only just agreed to extend their crude oil production cut deal through to March next year, but one of the key architects of the agreement, Saudi Arabia’s Khalid al-Falih said Saturday he will consider the need for deeper output cuts in July. Falih was optimistic that the deal struck between OPEC and non-OPEC producers May 25 would begin to start bearing fruit by the end of June. “I think we have to wait. We have to see the market and I think by the end of June, in July we will see that the action we have taken has a big impact,” Falih said in an interview with Russia’s TASS news agency during his four-day tour of Russia. “If for some reason we need to do more, we will consider to do more including extension … bigger cuts,” Falih said, adding “Nothing is off […]

Saudis: OPEC May Discuss Deeper Cuts In November

3 Jun 2017   OPEC, Saudi Arabia

OPEC and the non-OPEC producers that are part of the production cut deal may consider deepening the output cuts at the cartel’s next meeting in Vienna in November, Saudi Arabia’s Energy Minister Khalid al-Falih said in an interview with Russia’s TASS news agency on the sidelines of the St. Petersburg International Economic Forum on Friday. “If for whatever reason we need to do more we will consider doing more. I’ve said that before that we will do whatever is necessary, including extensions, including deeper cuts,” TASS quoted al-Falih as saying. The Saudi minister reiterated OPEC’s goal to draw inventories down to the industry’s five-year average. “Let’s monitor how close we are, what the trajectory is, and based on that we will decide,” al-Falih told TASS. Asked about the possibility to deepen the cuts in November, Saudi Arabia’s top oilman said: “Nothing is off the table.” But on the other […]

Exclusive: OPEC looked at extra 1-1.5 percent oil supply cut, could revive proposal

1 Jun 2017   OPEC

A TV camera is seen outside the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, May 25, 2017. REUTERS/Leonhard Foeger OPEC discussed cutting its oil output by a further 1-1.5 percent when it met last week, three sources familiar with the matter said, and could revisit the proposal should inventories remain high and continue to weigh on prices. The Organization of the Petroleum Exporting Countries and non-member producers ultimately decided at their May 25 meeting to extend their existing supply-cutting agreement for nine months, although oil ministers including Saudi Arabia’s Khalid al-Falih confirmed deeper curbs had been debated. One of the sources said the idea floated was to widen OPEC’s supply cut by about 300,000 barrels per day (bpd). That would equate to a further curb of about 1 percent of April output of nearly 32 million bpd and bring OPEC’s total pledged cut […]

OPEC and Russia Outline Vision for Permanent Oil Alliance

1 Jun 2017   OPEC, Russia

OPEC and Russia added more detail to their vision for a permanent alliance between oil producers currently working to clear a global surplus. When the 24-nation coalition agreed last week to persevere with output cuts until March, officials from the Organization of Petroleum Exporting Countries and Russia spoke of continuing to co-operate beyond that point. OPEC Secretary-General Mohammad Barkindo and Russian Energy Minister Alexander Novak said in Moscow on Wednesday they’re considering how to formalize the partnership. “‘The cooperation and collaboration between us — OPEC and non-OPEC — will outlive the implementation process,” Barkindo told reporters. “We are putting in place, if you like, the building blocks for a Catholic marriage. We do not expect a divorce in this marriage.” OPEC and Russia overcame years of mutual distrust in December when they assembled the alliance to cut oil supply and try to end a three-year price slump that has […]

How Much Will Inventories Shrink As OPEC Extends Cuts?

30 May 2017   OPEC

Well, if it’s the end of May, it must be time for another OPEC meeting. And sure enough it was. Yet again, the representatives of the OPEC nations got together in beautiful Vienna (I hear it’s tremendous in the spring) to decide the future of the oil industry and set the course for everyone’s favourite and most hated commodity for the next few hours, days, weeks and months. Joining the OPEC flashmob this time were members of the non-OPEC nations who were participating in the first round of production rollbacks agreed to last November. At issue: so, we agreed to these cuts, and the price went up but those tight oil guys are making swiss cheese out of the West Texas desert and lately the market seems to be slipping. What next? What did they decide? Before we get to that answer, let’s do a quick review of where […]

OPEC ponders how to co-exist with U.S. shale oil

30 May 2017   OPEC, Shale Oil

First, they ignored each other. Then, they went into a bruising fight. Finally, they are talking, albeit with opposing agendas. The history of the relationship between OPEC and the U.S. shale oil industry has evolved a great deal since the cartel discovered it had a surprise rival emerging in a core market for its oil around five years ago. U.S. shale bankers came to Vienna this week and OPEC is readying a trip for its top officials to Texas in a bid to understand whether the two industries can co-exist or are poised to embark on another major fight in the near future. REUTERS RECOMMENDS: “We have to coexist,” said Khalid al-Falih, Saudi Arabia’s energy minister, who pushed through OPEC production cuts in December, reversing Riyadh’s previous strategy to […]

The OPEC Elixir Wasn’t Potent Enough

29 May 2017   OPEC

Those new to financial markets, and energy trading in particular, were probably somewhat puzzled by the price action in oil futures this week following the announcement by OPEC and some influential non-OPEC nations that they are extending the production cuts agreed last year for another nine months, until the end of Q1 2018. The logical reaction to that news would have been a spike in oil, but instead we saw a dramatic decline of around five percent once the announcement was made. That is easily explained in terms of trading dynamics, but one question remains. Is it a sign that we are heading lower or does it represent a good short-term buying opportunity? (Click to enlarge) “But the rumor, sell the fact” patterns like this are extremely common, and are the logical result of declaring the intent to enact a policy before actually doing so. Various OPEC members have […]

Vienna Was A Bust: What’s Next For OPEC?

29 May 2017   OPEC

At its conference in Vienna, OPEC announced a nine-month extension of its November 2016 deal to cut production. Markets were singularly unimpressed with the decision, which had been baked into prices for at least week, following considerable speculation and positive rhetoric from Saudi Arabia, Russia and other major OPEC and non-OPEC producers. Rather than boost prices, the OPEC announcement precipitated a fall in the WTI back below $50. The general consensus is that the organization delivered what it had promised, agreeing to keep production cuts in place until March 2018 rather than mandating additional cuts or pushing the end of cuts to May 2018. Price fluctuations in the wake of the meeting don’t mean much in absolute terms, as the real impact of OPEC and non-OPEC cuts, totaling 1.8 million bpd, will be felt later in the year. Both Saudi oil minister Khalid al-Falih and Russian minister Alexander Novak […]

Op-Ed: Crude Export Habits Could Factor Into OPEC’s Oil Balancing Act

29 May 2017   OPEC

With the US entrance into the crude oil exporting market and little change in global loading, production may not be the only weight on commodity prices and crude oversupply. Although crude exports figure heavily in its namesake, the Organization of Petroleum Exporting Countries may be oblivious to their relevance now that the United States is back in the market. After a 40-year absence, the United States began shipping its crude around the world in January 2016, but the importance of the occasion is something OPEC hasn’t quite grappled with, experts say. Rather, OPEC’s focus remains on revenue, if not market share, to keep the world’s crude supply and demand in balance. And once the nine-month extension of production cuts expires next March – and if global oil benchmarks still haven’t busted through to remain above $50 for a significant period of time – the club may see that it […]

OPEC Wins Hedge Funds Back With Jump in Oil Bets Before Deal

29 May 2017   OPEC

Net-long position on WTI rose by most this year: CFTC U.S. supply drop will be key to sustaining the enthusiasm Hedge funds are giving OPEC some credit again. Following four weeks of growing pessimism, bets on rising West Texas Intermediate prices jumped the most this year just as Saudi Arabia and Russia were mustering support for the deal they struck in Vienna last week, U.S. Commodity Futures Trading Commission data show. What happens to U.S. stockpiles will be key to sustaining the enthusiasm, and the Saudis know that. In addition to prolonging a historical deal with allies, the kingdom plans to reduce exports to the world’s biggest consumer. “With OPEC now consciously trying to reduce flows into North America, it’s suggesting a faster than expected inventory unwind,” Bart Melek, a commodity strategist at Toronto Dominion Bank, said by phone. “There may be a bigger upside as we go into […]

In Fight Against U.S. Shale Oil, OPEC Risks Lower for Longer

13 May 2017   OPEC

Saudi Arabia signals curbs will be rolled into next year Oil market attention shifts to potential oversupply in 2018 When Khalid Al-Falih arrived at Davos in late January, the Saudi oil minister was exultant. The output cuts he’d painstakingly arranged with fellow OPEC states and Russia were working so well, he said, they could probably be phased out by June. Almost five months later, U.S. production is rising faster than anyone predicted and his plan has been shredded. In a series of phone calls and WhatsApp messages late last week, Al-Falih told his fellow ministers more was needed, according to people briefed on the talks, asking not to be named because the conversations are private. In their battle to revive the global oil market, OPEC and its allies are digging in for a long war of attrition against shale. “OPEC is now recognizing they need longer — and potentially […]

OPEC Should Give Up on Production Cuts

13 May 2017   OPEC

The Organization of the Petroleum Exporting Countries deserves a pretty good grade, arguably a B-plus, for its effort to prop up the world oil market. That may not be reflected in prices, which are barely 4% higher than last September, just before the coalition laid the groundwork for its deal to reduce production. Instead, they get points for denting the inventory glut weighing on the market and for keeping cheating to a…

Some OPEC Members Seek to Broaden Effort to Cut Oil Output

13 May 2017   OPEC

Six months after restricting their oil output in an effort to raise global crude prices, some members of OPEC are pushing for a broader effort to reduce petroleum production, say people familiar with the matter. Cartel members in recent weeks have suggested either making deeper production cuts or bringing new participants into the effort to cut oil exports, these people said. Members of the Organization of the Petroleum…

Oil Price Volatility Spikes Amid OPEC’s Charm Offensive

12 May 2017   OPEC

“Well he would say that, wouldn’t he.” Mandy Rice Davies at the time of the Profumo scandal, 1963. OPEC has mounted yet another charm offensive as a result of last week’s roughly 5% crash in the global price of crude. As was widely reported by the wire services, the headline from Saudi Oil Minister Khalid al-Falih to the effect that the Saudis would do whatever it takes to end the global supply glut of crude hit the world press on 8 May and gave markets a short-term boost. Al-Falih was quoted as saying that global oil markets had improved from 2016 lows when crude prices fell below the $30 per barrel level for a reason. “I believe the worst is now behind us with multiple leading indicators showing that supply-demand balances are in deficit and the market is moving towards rebalancing. We should expect healthier markets going forward.” He […]

In Fight Against U.S. Shale Oil, OPEC Risks Lower for Longer

12 May 2017   OPEC, Shale Oil

Saudi Arabia signals curbs will be rolled into next year Oil market attention shifts to potential oversupply in 2018 When Khalid Al-Falih arrived at Davos in late January, the Saudi oil minister was exultant. The output cuts he’d painstakingly arranged with fellow OPEC states and Russia were working so well, he said, they could probably be phased out by June. Almost five months later, U.S. production is rising faster than anyone predicted and his plan has been shredded. In a series of phone calls and WhatsApp messages late last week, Al-Falih told his fellow ministers more was needed, according to people briefed on the talks, asking not to be named because the conversations are private. In their battle to revive the global oil market, OPEC and its allies are digging in for a long war of attrition against shale. “OPEC is now recognizing they need longer — and potentially […]

Oil Edges Higher As OPEC Reaches Consensus On Cut Extension

12 May 2017   OPEC, Prices

OPEC members and their partners in the oil production cut agreements from last November and December have reached a consensus to extend the deal until the end of 2017, the oil ministers of Iraq and Algeria said at a joint news conference. Jabber al-Luaibi and Noureddine Boutarfa said the official announcement of the extension will take place at OPEC’s May 25 meeting at its headquarters in Vienna, with the Algerian minister adding that “Algeria and Iraq maintain a united stand for the next cuts.” No mention was made about deepening the cut, as some analysts have suggested might be necessary. The initial agreement envisaged OPEC taking off 1.2 million bpd from global supply with Russia and 10 other non-members cutting another 600,000 bpd. Two OPEC members are exempt from the cut—Nigeria and Libya— and a third member, Iran, was allowed to boost output to a specified level. Earlier this […]

Should OPEC Abandon Its Current Oil Price Strategy?

12 May 2017   OPEC, Prices

If OPEC was a person, you’d recommend either therapy or that it cut its losses and start licking its wounds. As Bill Baruch, chief market strategist at iiTRADER told marketwatch.com , “OPEC threw the kitchen sink at the market, trying different statements that ranged from extending cuts past the end of 2017 and deepening cuts – nothing worked.” Prices have continued to slide, dropping to the lowest yet in 2017. Brent crude dropped beneath $50 pb during the week, to $48.79. WTI sank further, to $45.90. It’s largely due to the increase of over 10 percent in U.S. output since 2016Q3; stocks are at 527.8m barrels which is at the higher end of expectations for this time of year. However, shale isn’t the sole source of pain – Libya has also achieved its highest level of production since 2014 at almost 800,000 pbd, thanks to two fields – the […]

OPEC Raises Forecast for Rival Oil Output

12 May 2017   Oil Supply, OPEC

OPEC on Thursday boosted its forecast for 2017 oil-production growth from countries outside the cartel by more than 60%. It is the latest evidence that surging U.S. production is dragging down efforts by the Organization of the Petroleum Exporting Countries to raise oil prices by limiting output. In its monthly report, OPEC raised its estimate of 2017 production growth from non-OPEC producers to 950,000 barrels a day over last year’s…

Oil Producers in Consensus to Extend Cuts, OPEC Members Say

12 May 2017   OPEC

Oil cuts to be extended by six months: Iraq, Algeria ministers OPEC to make formal decision at May 25 meeting in Vienna OPEC and other oil producers taking part in output cuts have reached a consensus to extend the limits until the end of the year, oil ministers for two of the group’s members said. All members of the Organization of Petroleum Exporting Countries support an extension of the cuts for a second six-month period, as do non-member nations that joined last year’s accord to curtail a global oversupply of crude, Iraq’s Jabbar Al-Luaibi and Algeria’s Noureddine Boutarfa said Thursday in a joint news conference in Baghdad. “The decision to decrease output will be for six months, and Algeria and Iraq maintain a united stand for the next cuts,” said Boutarfa, who hosted the OPEC meeting in September 2016 where the cuts were first agreed in principle. Iraq is […]

OPEC Raises 2017 Estimate for Supply Growth From Rivals by 64%

12 May 2017   Oil Supply, OPEC

Non-OPEC to grow 950,000 barrels a day in 2017, led by U.S. Outlook for non-OPEC now 4 times higher than at outset of cuts OPEC boosted estimates for growth in rival supplies by 64 percent as the U.S. oil industry’s recovery accelerates, threatening the group’s attempts to clear a surplus. Production from outside the Organization of Petroleum Exporting Countries will increase by 950,000 barrels a day this year, OPEC said in a report, revising its forecast up by about 370,000. The projection is four times higher than in November, when the group announced a production cut to try and re-balance oversupplied world markets. Non-OPEC nations pump about 60 percent of the world’s oil. Oil prices sank to a five-month low below $44 a barrel in New York last week on concern that the cuts by OPEC and 11 partners, including Russia, aren’t clearing the glut and that more supply […]

OPEC sees much higher oil supply from rivals in 2017

12 May 2017   OPEC

OPEC on Thursday sharply raised its forecast for oil supply from non-member countries in 2017 as higher prices encourage U.S. shale drillers to pump more, hampering OPEC efforts to clear a glut and support prices by cutting its output. In a monthly report, the Organization of the Petroleum Exporting Countries revised up its estimate of oil supply growth from producers outside the group this year to 950,000 barrels per day (bpd), up from a previous forecast of 580,000 bpd. OPEC 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, to clear excess supply. Russia and 10 other non-OPEC producers agreed to cut half as much. The report will add to a debate about the effectiveness of the […]

Libya, Nigeria, And Iraq – A Triple Threat To The OPEC Deal

11 May 2017   OPEC

Saudi Arabia’s energy minister Khalid al-Falih tried to put the markets at ease by all but confirming that OPEC would extend its production cuts through the end of the year. He tried to talk up oil prices even further by hinting that the group might even agree to a 9-month extension . With the OPEC cuts seemingly assured for little while longer, surely the global surplus is poised to shrink in the relatively near future, pushing up prices? Perhaps. But higher production from within OPEC could once again lead to disappointment. Libya’s National Oil Corporation just announced that it ramped up production to a two-year high of 796,000 barrels per day (bpd). That should definitely be a cause for concern for the oil bulls out there. For much of the first quarter fighting in Libya knocked production offline, briefly taking output below 500,000 bpd. The outages were one of […]

World’s Largest Oil Trader Warns OPEC: Beware For Weak Demand

11 May 2017   OPEC

When it comes to the oil market, the narrative over the past year, ever since OPEC’s first aborted its meeting last April, has been just one: limit crude supply in hopes of rebalancing the oil market, reducing excess inventories, in the process sending the price of oil higher. However, echoing what we have warned for many months, overnight the world’s biggest independent oil trader said OPEC’s efforts could be in vain because the oil producing cartel is seeking to control the wrong thing: it’s not a matter of supply, but global demand which is simply not there. (Click to enlarge) According to Vitol Group, the world’s biggest independent oil trader, demand isn’t expanding as much as expected, and U.S. shale output is growing faster than forecast, Bloomberg reports. As a logical outcome, that’s increasing the burden on the world’s biggest producers, who need to stick to their pledges to […]