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 […]

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 […]

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 […]

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 […]

An Extension Is Not Enough – Why OPEC Needs To Cut More

10 May 2017   OPEC

Crude oil prices are slumping, and everyone is clamoring to know: how far can oil fall? Is this a buying opportunity, or is the selloff likely to worsen? Bloomberg recently reported a large options trade worth about $7 million. Around 14000 August $39 puts were traded, which was more than 20 times the existing Open Interest at that level. (Click to enlarge) The buyers of the put will only start to breakeven and earn a profit if crude oil prices fall below $39 per barrel within the expiry date of the options, which would require a further fall of 15 percent. But is this likely? Can crude oil fall that much? For four months, crude oil traders waited patiently to see the results of the OPEC production cuts. The compliance from OPEC and its allies has been much better than market expectations. However, the U.S. shale oil producers had […]

Production Cuts vs Innovation – Why OPEC Has Lost The Oil Price War

10 May 2017   OPEC

OPEC and its cartel of friends must be sweating condensates in advance of their May 25th meeting. The oil price war, triggered almost three years ago, is far from over. Calling a truce with production cuts has been an ineffective strategy. In fact, it’s been a feeble strategy and nobody in the business should rely on its extension to be effective. Price wars are often triggered by the arrival of a new entrant into an entrenched market clique. American light tight oil began flowing into petroleum supply chains in 2010. By 2014, output from plays like the Bakken, Eagle Ford and Permian had penetrated 4 percent of the world’s oil market, antagonizing starched interests in the industry. There is a standard script for price wars that is played out in many businesses, not just oil. Airlines, pizza parlours and makers of high-tech equipment know the story line well. Act […]

Saudi energy minister says oil output cuts likely to be extended

9 May 2017   OPEC

Saudi Arabia’s energy minister Khalid Al-Falih said on Monday that oil markets were rebalancing after years of oversupply, but that he still expected an OPEC-led deal to cut output during the first half of the year to be extended to all of 2017. The Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, as well as other producers including Russia, pledged to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year to prop up the market. But ongoing high supplies have resulted in crude oil prices falling back below $50 per barrel. This has put pressure on OPEC to extend the cut to cover all of 2017. “Based on consultations that I’ve had with […]

Opec and Russia poised to roll over oil output cuts

9 May 2017   OPEC, Russia

Opec and Russia are on course to extend their oil output cuts in an attempt to draw down supplies and bolster the price, with Saudi Arabia saying the cartel is prepared to do “whatever it takes” to end the supply glut. Khalid al-Falih, Saudi Arabia’s energy minister, said on Monday he expected the Opec-led production deal to be rolled over until at least the end of this year. His comments follow a bruising sell-off last week that led to prices falling to their lowest levels in six months. “Based on consultations that I’ve had with participating members, I am confident the agreement will be extended into the second half of the year and possibly beyond,” said Mr Falih during an industry event in Kuala Lumpur. “The producer coalition is determined to do whatever it takes to achieve our target of bringing stock levels back to the five-year average.” Russia, which has led a group of non-Opec member producers in assisting with the cuts, also appears to be backing an extension, which is expected to be agreed at the next Opec ministerial meeting on May 25.

Saudi Arabia and Russia Signal Oil-Cuts Extension Into 2018

8 May 2017   OPEC

Prolonging cuts will speed up rebalancing of market: Novak Saudi Minister Al-Falih confident of agreement to extend Saudi Arabia and Russia signaled they could extend production cuts into 2018, doubling down on an effort to eliminate a supply surplus just as its impact on prices wanes. In separate statements just hours apart on Monday, the world’s largest crude producers said publicly for the first time they would consider prolonging their output reductions for longer than the six-month extension widely expected to be agreed at the OPEC meeting on May 25. “We are discussing a number of scenarios and believe extension for a longer period will help speed up market rebalancing” the Russian Energy Minister Alexander Novak said in a statement. Speaking in Kuala Lumpur earlier Monday, his Saudi counterpart Khalid Al-Falih said he was “rather confident the agreement will be extended into the second half of the year and […]

Saudi Arabia Says Oil Curbs Could Extend Beyond End of 2017

8 May 2017   OPEC, Saudi Arabia

Producer group determined to reach goal of reducing stockpiles U.S. shale output has slowed impact of OPEC’s production curbs Saudi Arabia’s oil minister said he’s confident that an agreement by producers to curb crude output and shrink a market glut will be extended into the second half of the year and possibly beyond. While U.S. shale output growth and the shutdown of refineries for maintenance have slowed the impact of cuts by OPEC and its partners, producers are determined to reach their goal of reducing bloated stockpiles, Khalid Al-Falih said at the Asia Oil and Gas Conference in Kuala Lumpur on Monday. He said he’s confident the global oil market will soon rebalance and return to a “healthy state.” Surging U.S. production has raised concern the Organization of Petroleum Exporting Countries and partners are failing to reduce an oversupply and prop up prices. Oil has surrendered all its gains […]