Key Pipeline Closure Amplifies OPEC’s Efforts

15 Dec 2017   OPEC, Prices

But this time, it’s not the usual suspects of Libya, Nigeria, or Iraq. It’s a shutdown of a major oil pipeline in the North Sea, which is expected to last for weeks. The Forties Pipeline System—responsible for carrying 40 percent of the UK’s North Sea crude oil production—was shut down earlier this week after a small hairline crack at Red Moss near Netherley, south of Aberdeen, was discovered. At the time of writing, the latest media update from Forties operator Ineos early Thursday stated that “At this stage it is still too early to say how long the repair will take to complete, but it is expected to be a matter of weeks rather than days. We can confirm that formal Force Majeure has been declared on relevant contracts.” Not only is the Forties pipeline a key transit route for North Sea oil, the Forties crude blend is the […]

The Most Important Part Of The OPEC Deal

15 Dec 2017   OPEC

The OPEC meeting in Vienna last month was, despite all the hype, always going to be a dull affair. The extension of the oil supply cuts had been all but decided before the members met, and only the length of the extension was subject to speculation. But in six months’ time, these members will meet again, and this time around there will undoubtedly be drama. Saudi Arabia’s Energy Minister Khalid al-Falih said in Vienna that discussing an exit strategy from the cut agreement was premature, adding that the exit would be gradual. Now, it’s beginning to look like his remark may have been a bit premature: other OPEC officials are already talking about it. In recent days, two OPEC oil ministers —UAE’s Suhail al Mazrouei and Kuwait’s Issam al-Marzouq—have commented on an exit strategy. Both have been guarded in their remarks, with Al Mazrouei saying simply that it was […]

OPEC Wakes Up to the Threat of U.S. Shale 2.0

14 Dec 2017   OPEC, Shale Oil

Stronger U.S. output is blunting OPEC’s effort to clear glut Once expected in third quarter ’18, rebalancing now seen later OPEC predicted that global oil markets won’t rebalance until late next year after boosting forecasts for supplies from the U.S. and other rivals. The Organization of Petroleum Exporting Countries’ monthly report raised its outlook for non-OPEC supply in 2018 by 300,000 barrels a day, as its projections for American output caught up with those of the U.S. government. As a result, an initiative by OPEC and Russia to clear a global oil glut by cutting production — previously seen succeeding in the third quarter of 2018 — will take effect more slowly. Oil prices climbed to a two-year high above $65 a barrel in London this week, supported by a temporary pipeline halt in the U.K. and the Nov. 30 decision by OPEC and Russia to press on with […]

OPEC Oil Output Falls to Six-Month Low but U.S. Fills Gap

14 Dec 2017   OPEC

A worker makes adjustments in the Bashneft PAO oilfield in Russia. OPEC production fell to its lowest in six months but rival U.S. production was surging faster than expected, meaning oil markets may not rebalance before the end of 2018, the oil cartel said Wednesday in its closely watched monthly oil report. The Organization of the Petroleum Exporting Countries said its crude production fell by about 133,500 barrels a day in November to 32.45 million barrels a day. The group and its Russia-led allies agreed last month to extend the combined production cuts of 1.8 million barrels a day until the end of 2018. However, the output decrease last month was tied to other factors with domestic demand for Saudi oil declining in the winter and Angola and Venezuela facing production issues. However, OPEC said other producers were fast filling the gap, notably U.S. shale-oil companies that have been […]

U.S. Shale Sends OPEC Deal Back To Square One

14 Dec 2017   OPEC, Shale Oil

True to its perpetually optimistic form, OPEC, which last month for the first time conceded to the threat posed by rising U.S. shale production…  sharply raised its demand forecast for cartel oil in 2018, ahead of the OPEC meeting at the end of November. And, according to OPEC’s latest market report for the month of December, demand is set to continue rising, with global oil demand projected to grow at around 1.53 mb/d in 2017, in line with last month’s forecast. China is projected to lead oil demand growth in the non-OECD, followed by Other Asia – which includes India – and OECD Americas. Which means that an unexpected Chinese landing, whether hard or soft, will have an adverse impact on oil in addition to all other commodities. (Click to enlarge) Separately, in 2018, world oil demand is expected to grow by 1.51 mb/d according […]

U.S. Shale Output Rises As OPEC Production Falls To 6-Month Low

14 Dec 2017   OPEC, Shale Oil

OPEC’s crude oil production dropped to a six-month low in November, while U.S. and other non-OPEC supply has grown stronger than initially expected this year, which prompted the cartel to revise up on Wednesday its estimates for non-OPEC supply growth in 2018. OPEC’s crude oil production fell by 133,500 bpd from October to stand at 32.448 million bpd in November, OPEC’s Monthly Oil Market Report showed on Wednesday. This was the lowest production the cartel has reported in six months . The largest increase among the members came from Nigeria, whose production in November jumped by 95,800 bpd from October to 1.790 million bpd, according to OPEC’s secondary sources. Angola, Saudi Arabia, Venezuela, and the UAE saw the largest declines in production. The final OPEC monthly report for this year focused on the 2017 highlights and expectations for 2018. In both overviews, the predominant theme was the U.S. shale […]

OPEC November Oil Production

14 Dec 2017   OPEC

The OPEC data below was taken from the December OPEC Monthly Oil Maret Report . All data is through November 2017 unless otherwise noted. OPEC crude oil production declined by 133,500 barrels per day in November. Algeria was up slightly in November after that huge decline in October. Angola was the biggest loser in November, down 108,700 barrels per day. Ecuador, though holding its own for the last year, appears to be in slow decline. I have managed to cobble together an estimate of Equatorial Guinea’s historical C+C production. I had the EIA’s production numbers through June 2013. I subtracted 10% for “other liquids”, then merged that with the OPEC MOMR data that started in 2016. However, Equatorial Guinea’s production is not enough to make much difference. Gabon is also in slow decline. And their production is not enough to make much difference in total OPEC production. Iran ignores […]

OPEC sees balanced oil market by late 2018 as cuts erode glut

14 Dec 2017   OPEC

OPEC expects the world oil market to be balanced by late 2018 as its deal with other producers to cut output reduces excess oil in storage, even as the U.S. and other producers outside the group pump more crude. The Organization of the Petroleum Exporting Countries, in a monthly report, cut its estimate of global demand for its crude in 2018 by 270,000 barrels per day (bpd) to 33.15 million bpd, in part because of higher U.S. supply. But the 14-country producer group said its oil output in November, as assessed by secondary sources, was below the 2018 demand forecast at 32.45 million bpd, a drop of about 133,000 bpd from October. The report follows the Nov. 30 decision by OPEC, […]

Kuwait’s oil minister says premature to talk about exit strategy from supply cuts

14 Dec 2017   Kuwait, OPEC

Kuwait’s oil minister said on Thursday it was too early to talk about a strategy to exit the current OPEC and non-OPEC supply cutting pact. “It’s premature to talk about exit strategy. Any exit strategy in the future will surely be implemented in a smooth manner that will not disrupt the stability of the market and it will be on a gradual basis,” Bakheet al-Rashidi, Kuwait’s newly appointed oil minister, said in a statement. “The developments of market fundamentals will continue to be closely monitored by the Joint Ministerial Monitoring Committee (JMMC), in which the State of Kuwait is a leading member, to ensure that the target of re-balancing the market and restoring its stability is achieved,” he added. The Organization of the Petroleum Exporting Countries and non-OPEC producers led by Russia agreed last month to extend oil output cuts until the end of 2018 to […]

Summary of Weekly Petroleum Data for the Week Ending December 8, 2017

14 Dec 2017   OPEC

U.S. crude oil refinery inputs averaged about 17.0 million barrels per day during the week ending December 8, 2017, 243,000 barrels per day less than the previous week’s average. Refineries operated at 93.4% of their operable capacity last week. Gasoline production increased last week, averaging over 10.1 million barrels per day. Distillate fuel production decreased last week, averaging over 5.2 million barrels per day. U.S. crude oil imports averaged about 7.4 million barrels per day last week, up by 161,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.4 million barrels per day, 3.3% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 483,000 barrels per day. Distillate fuel imports averaged 149,000 barrels per day last week. U.S. commercial crude oil inventories (excluding those in the […]

Cyberattacks: The Biggest Threat To OPEC

13 Dec 2017   OPEC

Oil and cybersecurity in one sentence certainly makes for a thrilling read, and there will be an increasing amount of information on the topic as the Internet of Things expands and the global oil industry adopts automation and digital technology. OPEC is no exception in this digitalization drive, but unlike its non-OPEC counterparts, the cartel has emerged as much more vulnerable to cybersecurity threats. An analysis of data collected from 134 countries by the International Telecommunication Union has revealed that some of the world’s biggest oil producers, including Iraq, Saudi Arabia, Venezuela, Iran, and the UAE, are lacking in the cybersecurity department. This means that, compared to European producers and the United States, OPEC members are pretty much unprepared for a major cyberthreat. What is the likelihood of such a threat actually materializing? Well, the general opinion in cybersecurity circles is that everything that can be hacked will be […]

UAE says OPEC, allies to announce exit strategy from oil cuts in June

United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui said on Monday that OPEC and non-OPEC oil producers plan to announce in June an exit strategy from global supply cuts, but that does not mean the pact will end by then. Mazroui said it was premature to talk about the form or shape of such an exit strategy before June, when OPEC, Russia and other producers participating in the supply-reduction agreement – aimed at boosting oil prices – are due to meet next. “We will announce … a strategy in the June meeting. That does not mean we will exit in June. That means we will come up with a strategy,” he told reporters […]

Kuwaiti Oil Minister: OPEC Cuts May End Earlier Than Planned

12 Dec 2017   Kuwait, OPEC

To keep the air of mystery, or whatever remains of it after the November 30 Vienna Club meeting, Kuwait’s Oil Minister Issam al Marzouq yesterday said the cuts may end before the end of 2018. “We still have a full year left in the agreement, but there is a possibility that we exit the cuts agreement before 2019 if the market is re-balanced by June,” Al Marzouq said , adding that Russia was pressuring its partners in the agreement to end it as soon as it is possible. The minister was speaking to Bloomberg on the sidelines of an event of the Organization of Arab Petroleum Exporting Countries. Separately, at the same event, Al Marzouq said he expected the market to rebalance no sooner than the last quarter of 2018, in keeping with the extension that OPEC and its partners agreed to in Vienna last month. He added that […]

Withdrawal From OPEC Deal Could Take 6 Months To Negotiate

8 Dec 2017   OPEC

Withdrawing from the OPEC-NOPEC agreement to cut 1.8 million barrels per day of output could take up to six months to fully negotiate, according to top Russian energy official Alexander Novak. “This is a process to be discussed. It can take three months or half-year. A specific moment of time to be considered, depending on the future demand,” the minister said. Novak said discussing a premature withdrawal did not reflect any desire within the Russian leadership to abandon the deal, which, over its lifetime in 2017, has allowed the Brent barrel price to recover to $60+. Last week, OPEC and its non-OPEC partners agreed to extend the deal through the end of 2018, but the team included a review clause that would take place in June. It is unclear whether countries will have the ability to leave the pact at that point. Libya and Nigeria will face a combined […]

The Drastic Drop Off In U.S. Oil Imports

7 Dec 2017   Oil Supply, OPEC, USA

While the dust may now have settled on last week’s OPEC meeting, the cartel’s impact on U.S. oil inventories is set to linger on. Stocks are at their lowest level since January 2016, and are down over 80 million barrels from their peak in March – in spite of a 30 million barrel injection from the SPR. As we head into the holiday season, the U.S. should expect little in the way of holiday cheer from OPEC flows. U.S. imports of OPEC crude have averaged 3.26 million barrels per day through the first eleven months of this year, a smidge higher than last year’s average. Although imports started out the year at 3.7mn bpd in January, the highest monthly level since 2013, we have seen them dropping below the 3mn bpd mark in recent months – led by a significant drop in deliveries from Saudi Arabia. (Click to enlarge) […]

OPEC’s Latest Agreement May Not Stabilize Oil Prices

6 Dec 2017   OPEC, Prices

The 14-strong Organisation of Petroleum Exporting Countries (OPEC), along with 10 oil states outside of the cartel, has reached an agreement to limit oil output until the end of 2018. This decision comes after what has already been more than a year of production cuts, the Telegraph reports . This new deal, wider and more inclusive than the one running since the beginning of this year, will also extend to Nigeria and Libya. Previously, these two countries were exempt from the production quotas, despite being OPEC members, because of their struggles with internal political unrest. OPEC crucially reached an agreement despite the last-minute posturing from Russian oil minister Alexander Novak, who warned that oil prices above $60 a barrel could reignite a production boom in the U.S. shale industry. The agreement reached by the OPEC and non-OPEC members faces several serious challenges in achieving its objective of stabilising oil […]

Oil Markets Calm After OPEC Storm

6 Dec 2017   OPEC, Prices

Natural gas production in the Appalachia region (which includes the Marcellus and Utica shales) has increased by more than 14 billion cubic feet per day (Bcf/d) since 2012. That growth has been the main driver behind the growth in total U.S. gas output. – From January through October 2017, total natural gas output from the Appalachia region averaged 23.8 Bcf/d. – Gas output per rig from new wells also shot up in the region over the past few years. Since 2012, average monthly output per rig for new wells increased by 10.8 Mcf/d since 2012, much higher than any other region in the country. Market Movers • ExxonMobil (NYSE: XOM) is considering investments in offshore oil and gas in Egypt, according to Reuters. • CNPC said it discovered a new oil field in the Juggar Basin […]

Oil Climbs as OPEC Tightening Dovetails With U.S. Supply Drop

6 Dec 2017   OPEC, Prices

Bank of America Merrill Lynch sees Brent at $70 next year U.S. crude stocks probably fell 2.5 million barrels last week Crude rose as lower OPEC production and signs of shrinking U.S. oil inventories bolstered expectations for an end to the global surplus. Futures gained 0.3 percent Tuesday in New York. Output by the Organization of Petroleum Exporting Countries last month slid to the lowest in half a year, evidence the cartel is succeeding in reducing a glut. Oil stockpiles in the U.S. probably declined for a third week, according to a survey of analysts before the release of government data on Wednesday. OPEC members “continue to abide by their cuts,” Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone. “Signs that U.S. inventory levels continue to come down and demand stays strong will probably get the market to restart its rally.” Oil […]

OPEC oil output falls in November to lowest since May

5 Dec 2017   OPEC

 OPEC oil output fell in November by 300,000 barrels per day (bpd) to its lowest since May, a Reuters survey found, pressured by a drop in Angolan and Iraqi exports, strong compliance with a supply cut deal and involuntary declines.  OPEC’s adherence to pledged supply curbs rose to 112 percent from October’s 92 percent, the survey found. Top exporter Saudi Arabia pumped below its OPEC target, as did all other members except Ecuador, Gabon and the United Arab Emirates. The Organization of the Petroleum Exporting Countries is reducing output by about 1.2 million bpd as part of a deal with Russia and other non-member producers, which have also committed to production cuts. Oil LCOc1 is trading near a two-year high supported by falling inventories, strong demand and high compliance […]

The One Indicator OPEC Must Watch

5 Dec 2017   OPEC

“We will not let go of our current approach until we reach a balanced market,” Saudi oil minister Khalid al-Falih said Monday at a news conference in Riyadh. OPEC ended months of speculation last week when it decided to extend its production cuts through the end of 2018, easing concerns that the limits would be lifted before the oil market was ready. But while it put some uncertainty to rest, the next question is what OPEC does when the oil market becomes “balanced”? What is the exit strategy ? There isn’t one at the moment, and we can assume OPEC doesn’t know what comes next. But we do know that the group has one key metric in mind: inventories. The target is to bring global oil inventories back down to the five-year average. Oil inventories exploded between 2014 and 2017, hitting record levels that left the world awash in […]

OPEC’s November Output Drops 300,000 Bpd

5 Dec 2017   OPEC

OPEC’s oil output fell by 300,000 barrels per day in November, giving the bloc its lowest production rate since May, according to a new Reuters survey. Cuts in Angola and Iraq caused most of the drop, which was bolstered by strong compliance to the output reduction deal ahead of an agreement to extend it through the end of 2018. Compliance has now hit 112 percent, compared to 92 percent in October. All but three OPEC nations pumped oil at a rate lower than their assigned quotas. Ecuador, Gabon and the United Arab Emirates were the three holdouts, but all three are tiny producers compared to Saudi Arabia, Iraq and Iran. “Based on the recent past we can start the New Year with relative optimism as far as conformity is concerned,” Tamas Varga of oil broker PVM told Reuters. “The outcome of last Thursday’s meeting looks constructive.” In Vienna, OPEC […]

Big Shale Turns OPEC Ally From Foe With Focus on Oil Returns

5 Dec 2017   OPEC, Shale Oil

Don’t expect Big Shale to rush and fill the hole left by OPEC in the oil market. (Bloomberg) — Don’t expect Big Shale to rush and fill the hole left by OPEC in the oil market. Executives from three of the biggest independent U.S. drillers say they won’t increase activity just because prices rise after the Organization of Petroleum Exporting Countries and its allies agreed to extend output curbs. The emphasis, instead, will be on maintaining spending discipline and generating profits to return to investors, according to Pioneer Natural Resources Co., Parsley Energy Inc. and Newfield Exploration Co. While crude is trading near the highest level in more than two years as OPEC and its partners limit supplies in a bid to drain a global glut, investors have been concerned stronger prices would encourage U.S. drilling and undermine those efforts. The biggest oil crash in a generation began in […]

Saudi Oil Minister Hints At Post OPEC Deal Strategy

5 Dec 2017   OPEC

OPEC and Russia-led non-OPEC oil producers left any ‘exit strategy’ talk out of their agreement to extend the production cut pact through the end of 2018 last week, and now Saudi Arabia’s Energy Minister Khalid al-Falih fed the market some hints about what OPEC would do after the cuts. Unless sudden oil market developments occur, OPEC is expected to continue sticking to the production cuts until the end of next year, and “we will not alter our course in the second half of the year,” al-Falih said at a news conference in Riyadh on Monday. “However, we think that the outlook for when we will hit the balanced market will be clearer in June, and we will start thinking of what do we do in 2019,” the most powerful oil minister at OPEC said, as carried by Reuters. “The intent is not overnight to open the taps and flood […]

Does OPEC Need An Exit Strategy?

4 Dec 2017   OPEC

One of the crucial details that OPEC omitted when it rolled over its production cuts for another year was how the group plans on winding down the agreement. When pressed by reporters, Saudi oil minister Khalid al-Falih said that it was “premature” to talk about an exit strategy. Taking “extraordinary measures” to rescue the oil market without any idea on how to exit the intervention is not unlike what central banks have done over the past decade to juice the global economy. Intervening is easy, backing out is the tricky part. Al-Falih emphasized that any exit would be “gradual,” and he went to great lengths to point out the strong relationship between Saudi Arabia and Russia, and not addressing how to end the deal is critical to that. “For now, the OPEC-Russia bromance continues.” Jamie Webster, an OPEC watcher at the Boston Consulting Group, told Bloomberg . However, if […]

OPEC expects to stick to cuts in second half of 2018: Saudi minister

4 Dec 2017   OPEC

Saudi Arabia’s Energy Minister Khalid al-Falih said on Monday oil producers might start discussing in June when to raise output once the market outlook was clearer, even though OPEC was expected to continue output curbs in the second half of 2018. The Organization of the Petroleum Exporting Countries and non-OPEC producers led by Russia have agreed to extend oil output cuts until the end of 2018 to clear a global glut but have signaled a possible early exit if market overheated. Sponsored Falih said in Riyadh that the expectation was that “we will not alter our course in the second half of the year,” adding that this assumed there were no unexpected developments. “However, we think that the outlook for when […]

OPEC extension a win-win, even for U.S. shale oil producers

2 Dec 2017   OPEC, Shale Oil

A move by parties to an OPEC-led agreement to extend a production cut deal to the end of 2018 is a win-win, including for U.S. shale oil players, analysts said. Ministers from the Organization of Petroleum Exporting Countries and a handful of non-member states, notably Russia, agreed Thursday to extend an agreement that sidelines the equivalent of about 2 percent of total global demand for crude oil through the end of next year. The agreement, implemented in January and meant expire in March, is designed to drain the surplus on the five-year average for global crude oil inventories and Saudi Oil Minister Khalid al-Falih said parties are about halfway to their goal […]

OPEC and Russia Extend Output Cuts, Strengthening Oil Alliance

1 Dec 2017   OPEC

All participants agreed market is moving in right direction Libya, Nigeria accept production limits for the first time OPEC and its allies outside the group agreed to maintain oil production cuts until the end of 2018, extending their campaign to wrest back control of the global market from America’s shale industry. After a day of talks in Vienna, the decision showed the strength of the unprecedented alliance between the world’s top two oil producers, Saudi Arabia and Russia, and confounded Wall Street analysts who’d predicted Moscow would be reluctant to keep going. The deal was even beefed up through the inclusion of Nigeria and Libya, two members of the Organization of Petroleum Exporting Countries originally exempted from the curbs. “We are united, shoulder to shoulder,” Saudi Arabian Energy Minister Khalid Al-Falih said sitting next to his Russian counterpart Alexander Novak at a press conference after the meeting. “We are […]

OPEC, Russia agree oil cut extension to end of 2018

1 Dec 2017   OPEC, Russia

OPEC and non-OPEC producers led by Russia agreed on Thursday to extend oil output cuts until the end of 2018 as they try to finish clearing a global glut of crude while signaling a possible early exit from the deal if the market overheats. Russia, which this year reduced production significantly with OPEC for the first time, has been pushing for a clear message on how to exit the cuts so the market doesn’t flip into a deficit too soon, prices don’t rally too fast and rival U.S. shale firms don’t boost output further. Sponsored Russia needs much lower oil prices to balance its budget than OPEC’s leader Saudi Arabia, which is preparing a stock market listing for national energy champion Aramco next year and would hence benefit from pricier crude. The producers’ current deal, under which they are cutting supply by about 1.8 million barrels […]

Visualizing OPEC’s Success

1 Dec 2017   OPEC

But it hasn’t all been plain sailing. In fact, it’s been decidedly choppy. From an export perspective, certain cartel members have made a concerted effort to keep crude off the market, while others have blatantly not. Saudi continues to lead the way in terms of compliance – and they have the most to #win. Versus last October’s reference level, OPEC exports have dialed back by an average of 300,000 barrels per day over the first three quarters of this year. Saudi Arabia is accountable for a large chunk of this, exporting around 260,000 bpd less over the period. While others have also reined in exports, increasing flows from the likes of Libya and Nigeria have offset these efforts. Although Saudi exports have ticked higher in the last couple of months, exports have dropped from other members instead. This has been out of necessity, as opposed to complicity. As the […]

Oil prices rise after OPEC extends output curbs

1 Dec 2017   OPEC

Oil prices edged higher on Friday, a day after OPEC and other major producers agreed to extend output curbs until the end of 2018 in a bid to tackle global oversupply and bolster prices. The Organization of the Petroleum Exporting Countries and some non-OPEC producers led by Russia agreed on Thursday to keep current limits on output in place until the end of next year, although they signaled a possible early exit from the deal should the market overheat and prices rise too far. Sponsored Brent was trading at $63.07 by 0931 GMT, up 44 cents on the day. U.S. light crude was 34 cents up at $57.74. OPEC’s decision to extend output curbs had largely been priced in by the market, analysts said. Traders had pushed up […]

As OPEC extends output cuts, Asia turns to North America for more oil

1 Dec 2017   OPEC

Asian refiners are losing no time reacting to a decision by OPEC and Russia to extend their agreed production cuts to all of 2018, ordering more oil from the Caribbean and Gulf of Mexico in a move that will result in lost OPEC and Russian market share.  Output cuts aimed at tightening the market to prop up prices have been in place since January and were to expire in March 2018, but the Organization of the Petroleum Exporting Countries (OPEC), together with non-OPEC producers including Russia, extended those cuts on Thursday, to cover all of 2018. Despite this, oil supplies remain ample. Even before the official announcement on Thursday to extend the […]

OPEC Is Expected to Extend Output Cuts, but Questions Remain Over Length

30 Nov 2017   OPEC

OPEC ministers attend an informal meeting on the eve of the Vienna meeting. VIENNA—OPEC members said Thursday they were poised to agree to extend their efforts to cut crude-oil production through the end of June and possibly through all of 2018, a crucial juncture for an oil industry in the midst of a fragile recovery. The Organization of the Petroleum Exporting Countries gathered Thursday morning at its Vienna headquarters to decide how long to keep up a deal struck last year that withholds almost 2% of global petroleum production. The current agreement expires at the end of March. Oil-market observers say anything less than an extension throughout 2018 could cause oil prices to fall Thursday because Saudi Arabia has built up expectations for it. Analysts have said continued cuts are necessary to help OPEC achieve its goal of bringing inventories back to the five-year average. Stockpiles have fallen closer […]

Vienna Is The Ultimate OPEC Smokescreen

30 Nov 2017   OPEC

The OPEC circus continues to make headlines. All the five-star hotels are booked, as market analysts fervently examine their glass balls to predict the outcome of Thursday’s big meeting. Again, OPEC strategists have successfully raised media attention to a level where the oil market’s future is undecided. However, the new structure of the oil market was already decided weeks ago between Moscow and Riyadh. Though Saudi Crown Prince Mohammed bin Salman (MBS) has limited his agenda to the media frenzy of the Colditz Castle of Riyadh (a.k.a. the Ritz Carlton) and the ongoing Iranian-Qatari war drums, Saudi Arabia, OPEC’s unquestionable leader-to-be for the coming decades, has already put its new market strategy in place. The kingdom will continue its export cuts, while shaping the market increasingly by conquering market share in the petroleum products market. On the short term, analysts are looking at statements coming from the cramped media […]

OPEC, non-OPEC cut talks hit snag on extension duration

29 Nov 2017   OPEC

Will it be six months or nine months? Some ministers unconvinced of need to keep cuts for full 2018 Lack of agreement on how long stock surplus will last: Falih Analysts divided on what to expect from Thursday’s meeting OPEC and its 10 non-OPEC allies appear to be debating between the two options for extending its 1.8 million b/d supply cut deal past its March expiry, as they prepare to meet Thursday in the Austrian capital. Which option wins out will largely determine the direction of prices and the pace of recovery of US shale. Citigroup’s head of commodities research Ed Morse warned Tuesday that global oil prices could plunge by up to $8/b if the OPEC/non-OPEC coalition disappoints traders by not extending the deal for nine months through the end of 2018. “The issue is not so much whether the market is going to sell off, the question […]

OPEC Has Backed Itself Into A Corner

29 Nov 2017   OPEC

After months of talk and speculation regarding OPEC’s production cuts, the moment of truth is almost upon us—the cartel and its allies are meeting in Vienna this week to decide the future of their pact. An announcement of some sort is expected on November 30, but analysts and the oil market aren’t as convinced as they were two months ago that the statement will be about a nine-month extension through the end of 2018. Yet, extending until the end of next year is still considered to be the base scenario, and the oil market has largely priced in such decision. So if OPEC falls short of this base expectation, oil prices could take a hit. On the other hand, rolling over the cuts until end-2018 could over-tighten the market and boost prices more, giving U.S. shale all the more reason to raise production. OPEC has little room to maneuver […]

Why Is The OPEC Deal Suddenly Uncertain?

29 Nov 2017   OPEC

The investment bank warned that the oil market could be disappointed in a few days because there is a higher degree of uncertainty heading into the talks than there was at previous meetings. The working assumption is that OPEC and the group of non-OPEC countries will agree to extend the production cuts for an additional nine months, keeping them in place until the end of 2018. Indeed, at the time of this writing, it appeared that the OPEC joint technical committee was on the verge of recommending as much ahead of the full meeting. But the successful outcome of such a recommendation hinges on Russia, the one party that has been the most hesitant about an extension, at least for such a lengthy duration. Some Russian officials have suggested a shorter extension, while others suggest waiting until the March 2018 expiration date draws near before making a decision. That […]

Forget OPEC, Putin Is Calling The Shots In Global Oil | OilPrice.com

29 Nov 2017   OPEC

Do you remember who first said anything about extending the oil production cut deal until the end of next year? It wasn’t Saudi Arabia or any other Gulf producer. It wasn’t even Venezuela. It was Russia, and more specifically President Putin, who suggested such an extension during Saudi King Salman’s visit to Russia in October. At the time, most other participants in the deal were slapping each other on the backs for the high compliance rates and the increasingly evident results from the cuts, arguing that an extension may be unnecessary. No longer: now everyone seems to be convinced that an extension is in fact necessary, at least everyone in OPEC. But the country that will actually make or break the deal will be Russia.

One OPEC source that requested anonymity, told Bloomberg that Putin is “calling all the shots.” RBC Capital’s head of commodities Helima Croft called the Russian President “the world’s energy czar.” Indeed, Russia seems to have replaced Saudi Arabia as the market swinger, along with U.S. shale. How did this happen and how did OPEC miss it? It happened gradually, just like the shale boom that OPEC also underestimated and ignored until it was too late. Russia has a lot of natural resources. It is trying to make the best possible use of these resources. It has been expanding its crude oil production for years, reaching a 30-year high last year, at over 11 million bpd, right before the original OPEC deal.

This is how Putin played Riyadh. It was clear that Russia’s participation in the cut deal would be crucial for prices to respond in the way OPEC wanted. To secure this response, OPEC’s leader cozied up to Moscow, with the first ever visit by a reigning Saudi monarch and a string of preliminary investment agreements, not to mention the purchase of the Russian S-400 missile system. All this despite the fact that Russia is a strong ally of Riyadh’s arch-enemy, Iran, and has shown no signs of willingness to reconsider its regional alliances.

View full article at oilprice.com


Oil falls on doubts over OPEC, pipeline restart

28 Nov 2017   OPEC, Prices

 Oil prices fell on Tuesday on uncertainty over the outcome of a key OPEC meeting this week due to decide on production policy for the next year.  Brent crude oil LCOc1 was down 50 cents a barrel at $63.34 a barrel by 1000 GMT. U.S. light crude CLc1 was 50 cents lower at $57.61, after falling 1.4 percent in the last session. Sponsored Members of the Organization of the Petroleum Exporting Countries and other key producers, including Russia, meet on Nov. 30 to discuss whether to continue to limit production in an effort to drain global inventories to help push up prices. They cut production by 1.8 million barrels per day (bpd) in January and agreed to hold down output until March. The market had expected OPEC […]

OPEC’s Clash With U.S. Oil Is Nearing Its Day of Reckoning

28 Nov 2017   OPEC

Strategy of cartel has helped to deplete half surplus stocks Bolstering prices is emboldening American shale-oil drillers The clash between OPEC and America’s oil industry is reaching a day of reckoning. The U.S. shale revolution is on course to be the greatest oil and gas boom in history , turning a nation once at the mercy of foreign imports into a global player. That seismic shift shattered the dominance of Saudi Arabia and the OPEC cartel, forcing them into an alliance with long-time rival Russia to keep a grip on world markets. So far, it’s worked — global oil stockpiles are draining and prices are near two-year highs. But as the Organization of Petroleum Exporting Countries and Russia prepare to meet in Vienna this week to extend production cuts, ministers have little idea how U.S. shale production will respond in 2018. “The production cuts are effective — it was […]

Tough OPEC meeting looms amid specter of oil deficit

28 Nov 2017   OPEC

OPEC is heading for tougher-than-expected policy talks this week amid concern that its efforts to rebalance the oil market might overshoot by creating a global deficit and spurring a further price rally. “It will not be an easy meeting and we always look at various scenarios,” United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui said on Tuesday in Dubai before leaving for the gathering of the Organization of the Petroleum Exporting Countries in Vienna. OPEC, Russia and nine other producers are cutting oil output by about 1.8 million barrels per day until March 2018, and on Thursday will discuss extending the deal. The market had largely expected OPEC to prolong cuts until the end of 2018 but doubts have emerged in the last few days. Sponsored […]

OPEC’s Impossible Task

28 Nov 2017   OPEC

OPEC is on the verge of extending its production cuts for an additional nine months, pushing the deal through the end of 2018. But the determination to keep the cuts in place comes at the same time that U.S. shale seems to be accelerating in response to higher oil prices. It’s an impossible tension that OPEC has to deal with. Hesitate on cuts and risk another slide in oil prices, or keep the cuts in place and offer more room to U.S. shale? OPEC has tried to send a signal to the oil market that the group is operating with a consensus, and it telegraphed its intentions ahead of time to inspire confidence in the group’s cohesion. By demonstrating such resolve, the logic seems to be, the oil market would continue to tighten and prices would remain stable. But the downside of such a strategy is that it isn’t […]

Citi: Prepare For An OPEC Disappointment

27 Nov 2017   OPEC

A week out from the OPEC meeting, everyone is assuming a rollover of the production cuts for an additional nine months will be a simple formality, putting the limits in place until the end of 2018. But what if such a scenario fails to materialize? What if the cuts are for a shorter duration, or perhaps worse, there is no consensus at all? Russia is likely to be the key to this puzzle, and there are reports that Russian officials are not convinced that any action is needed at this time. They argue that it is too early to announce anything, and that the OPEC/non-OPEC alliance should just wait until the expiration of the current agreement (March 2018) draws closer. That would not be a satisfactory outcome for the vast majority of oil speculators (or for other oil producers around the world), who have baked an extension into their […]

Oil Investors’ Surprise New Worry: An Over-Achieving OPEC

27 Nov 2017   OPEC

Journalists listened to OPEC ministers attending a meeting in Vienna on Wednesday, where members reviewed progress on their 2016 agreement to curb oil output. After years of doing too little, OPEC could suddenly be doing too much. The Organization of the Petroleum Exporting Countries’ 14 members and other major producers like Russia are widely expected to strike an agreement this week to continue withholding about 2% of global oil supply from the market. The national energy ministers of about two dozen countries are set to meet Thursday at the oil cartel’s headquarters in Vienna. But OPEC is beset by doubts that renewing its production agreement for another several months will help its members, say OPEC representatives and independent market watchers. Some members, along with outside analysts, say that OPEC could overstimulate the market and send prices too high next year. That, in turn, risks depressing demand for crude. “There’s […]

OPEC, Russia Said To Announce Oil Pact Extension On Nov 30

25 Nov 2017   OPEC

Saudi Arabia and Russia have agreed that OPEC and non-OPEC allies should announce an extension of the cuts at the highly-anticipated meeting in Vienna on November 30, Bloomberg reported on Friday, quoting people involved in the talks. Recent OPEC/non-OPEC oil pact chatter had it that Saudi Arabia was pushing for an announcement of the cuts extension next week in Vienna, while Russia was more hesitant about telling the market on November 30 how the participants in the deal would act. Russia appeared to be stalling and playing for an announcement to be issued closer to the current expiration deadline of the deal, March 2018. According to Bloomberg’s sources, now Russia and Saudi Arabia have agreed on the need to announce some sort of a deal next week, but Russia has insisted on additional phrasing in the extension deal that would link the size of the cuts to the state […]

OPEC Set To Move Fast On Cut Extension Decision

25 Nov 2017   OPEC

A draft agenda for next week’s meeting of OPEC’s energy ministers suggests the decision to extend the oil production cuts until the end of 2018 is all but made, at least as far as OPEC members are concerned. Reuters reports that the agenda calls for just a three-hour meeting, which by OPEC standards is very short. If the meeting is to be so short, then all participants must already be on board with the extension, Reuters said. Indeed, both the secretary-general of OPEC, Mohammed Barkindo, and Saudi Arabia’s Energy Minister Khalid al-Falih, have said in recent weeks that they are seeking to reach consensus among all OPEC members on the extension prior to the November 30 meeting. However, this is only the first meeting due November 30. After that one, the OPEC ministers will meet with their non-OPEC partners. The biggest among these partners, Russia, has hinted that it […]

Russia-OPEC Agree on Framework to Extend Oil Cuts

25 Nov 2017   OPEC

Kremlin said to be willing to announce end-2018 deal on Nov 30 Various options still on the table, says Energy Minister Novak OPEC and Russia have crafted the outline of a deal to extend their oil production cuts to the end of next year, although both sides are still hammering out crucial details, according to people involved in the conversations. The Organisation of Petroleum Exporting Countries and several non-OPEC nations led by Russia will meet next week in Vienna to discuss prolonging their output curbs. Moscow had been hesitating over the need for an extension now because the current deal doesn’t expire until the end of March. After days of talks, Moscow and Riyadh now agree they should announce an additional period of cuts at the Nov. 30 meeting, the people said, asking not to be named because the conversations are private. Russia wants the extension deal to include […]

Putin Crowns Himself OPEC King

25 Nov 2017   OPEC, Russia

For more than half a century, Saudi Arabia’s oil minister could move markets with a few choice words about what OPEC may decide at its next meeting, generating millions if not billions of dollars of profit for insiders. Not anymore. While OPEC’s gatherings still influence prices, it’s not Saudi Arabia’s voice that matters most, but the voice of a non-member: Russia, specifically Vladimir Putin. Since engineering Russia’s pact with the Organization for Petroleum Exporting Countries to curb supplies a year ago, Putin has emerged as the group’s most influential player. As one senior OPEC official put it on condition of anonymity, the Russian leader is now “calling all the shots.” The Kremlin’s growing sway within the cartel reflects a foreign policy that’s designed to counter U.S. influence across the globe through a wide mix of economic, diplomatic, military and intelligence measures. That strategy, which is undergirded by Russia’s vast […]

Russia ready to support oil output deal as OPEC meeting looms

25 Nov 2017   OPEC, Russia

 Russia said on Friday it is ready to support extending a deal among oil producers on cutting output, less than a week before OPEC meets in Vienna to discuss policy, although it has yet to say how long it should be for.  Russian Energy Minister Alexander Novak said that Russia would discuss the details of an extension of the global deal on Nov. 30, but made no mention of how long this should last beyond its March expiry. “We see that 50 percent of oil stockpiles have been removed, the oil price has reached its balance,” Novak told RBC TV. The Organization of the Petroleum Exporting Countries, Russia and several other major producers have cut their combined output by about 1.8 million barrels per day […]

OPEC Will Extend The Cut

24 Nov 2017   OPEC

There will be an OPEC deal extension—no matter the public tussling between opposing forces in the industry cartel—if the world’s largest oil producers are really determined to end the supply glut. A failure to agree on the market remediation would cause oil prices to plummet immediately, forfeiting any gains that have been made in the last year. Saudi Arabia needs $60 per barrel for its Aramco initial public offering to be a success in the second half of next year. It plans to sell just five percent of its prized company in the largest IPO in financial history, but a low price could force the country to sell a larger share, siphoning off government revenues at a time of strained budgets. Aramco’s IPO is important not just for Saudi Arabia’s non-oil future. As one of the world’s most efficient and low-cost oil producers, its longevity can be seen as […]

OPEC agenda points to short meeting to set oil policy

24 Nov 2017   OPEC

A draft agenda for OPEC’s meeting on Nov. 30 in Vienna pencils in three hours for the group’s oil ministers to decide whether to extend their oil supply curbs, indicating that decision-making is expected to run smoothly.  The members of Organization of the Petroleum Exporting Countries, Russia and nine other producers are curbing oil output by about 1.8 million barrels per day until March 2018. They are expected to extend the deal at the Vienna meeting. Sponsored Three hours would be a short meeting by the standards of OPEC, whose gatherings have in the past sometimes stretched into the early hours of the morning as ministers argued about policy. OPEC Secretary General Mohammad Barkindo said on Nov. 7 the group was seeking […]