Home » Posts tagged 'opec'

Tag Archives: opec

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai III: Cataclysm
Click on image to purchase

We Have A Deal: OPEC Agrees In Principle To A “Real” Production Increase Of 600,000 Barrels/Day

What was expected to be a drawn-out affair, with Iran potentially resisting and even leading to the collapse of the cartel, moments ago OPEC reached a deal in principle to raise oil production by 1 million b/d on paper, and in reality by 600 kb/d as many of the OPEC nations are already tapped out and unable to produce more.


OPEC reaches deal in principle to raise 1 mil b/d “on paper”: BBG. Brent up $1.30 on Thu’s close, around $74.41/barrel.

“Real” increase of 600,000 b/d: BBG


The deal is roughly what the committee had agreed to yesterday and is the plan pushed by Saudi Arabia all week.

As Bloomberg notes, this is the deal traders have been waiting for:

The fear was that, if the meeting broke up in disarray, Saudi Arabia would simply open the taps and other producers would follow suit, unleashing far more supply than the market needed. What this deal does is to bring some order to the process of easing supply restraint.

Indeed, absent some last minute shock, Iran appears to have gone along with the majority and will comply with what is effectively A Saudi-Russian decision, prompted by Trump complaints for the cartel to produce more oil .

As Bloomberg further adds, any distribution of output increases among OPEC and non-OPEC members “is going to create winners and losers.”

While the headline number is what will matter for oil prices, the relative gains and losses against their fellow members will also be important to the participants. That could mean ministers still have a way to go before they are finally done. But the fact that they have got as far as they have means that cohesion has, once again, proved paramount.

…click on the above link to read the rest of the article…

 

Oil Demand Growth Could Start To Soften Soon

Oil Demand Growth Could Start To Soften Soon

Oil

OPEC may tout the production cuts pact as the key driver of oil market rebalancing, but if it weren’t for the strong global oil demand growth of the past three years, we wouldn’t have seen international agencies calling the end of the oil glut.

Demand was strong because the lower-for-longer oil prices between 2015 and 2017 stimulated consumption growth in both mature OECD economies like the United States and most of Western Europe, and in emerging non-OECD markets—China and India in particular.

All oil importing nations benefited from the lower oil prices, but while demand growth in India and China is largely driven by economic expansion and industrial activity, in OECD economies demand is more closely linked with large and sustained changes in oil prices. The 70-percent rally in oil prices since the middle of last year is expected to moderate growth in the more price-sensitive OECD economies, Reuters market analyst John Kemp argues.

Oil demand will continue to increase, largely driven by non-OECD markets like China and India, but the higher oil prices could slacken the pace of the OECD demand growth that could curb global oil demand growth.

Last year, oil demand grew by 1.7 million bpd—similar to the 2016 growth and well above the 10-year average of some 1.1 million bpd, BP said in its BP Statistical Review of World Energy 2018 published this week.

“Not surprisingly, oil demand in 2017 continued to be driven by oil importers benefitting from the windfall of low prices, with both Europe (0.3 Mb/d) and the US (0.2 Mb/d) posting notable increases, compared with average declines over the previous 10 years,” BP noted.

Growth in non-OECD China—500,000 bpd—was closer to its 10-year average, according to the review.

…click on the above link to read the rest of the article…

OPEC May Oil Production

OPEC May Oil Production

All OPEC data below is from the OPEC Monthly Oil Market Report. All OPEC data is in thousand barrels per day and is through May 2018.

OPEC 14 Crude oil production was up 35,000 barrels per day but that was after March production had been revised down by 32,000 bpd and April production was revised down by 89,000 bpd.

Nigeria’s April production was revised down by 27,000 bpd and Saudi Arabia’s April production was revised down by 58,000 bpd.

…click on the above link to read the rest of the article…

Trump Slams OPEC Again, Demands Lower Prices: “Oil Prices Are Too High, OPEC Is At It Again”

Nearly two months after Trump drew a line in the sand on oil prices, when on April 20 he lashed out at OPEC, tweeting that “Oil prices are artificially Very High! No good and will not be accepted!”which promptly set a ceiling on crude and prompted Saudi Arabia to scramble to boost production…


Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!


… moments ago Trump doubled down on his oil- price targeting, and in a lengthy tweetstorm that touched on everything from Marc Sanford’s loss, to the strength of the economy, to the just concluded North Korean summit, his relationship with Kim Jong Un and the cancellation of war games with South Korea, even the announcement of the world cup host nation  (US, Mexico and Canada), Trump once again lashed out at OPEC, tweeting that “Oil prices are too high, OPEC is at it again. Not good!


Oil prices are too high, OPEC is at it again. Not good!


Translation: Trump realizes that the middle-class is spending increasingly more on gasoline, taking away from disposable income, and hopes that Saudi Arabia will pump more to offset the loss of Venezuela and Iran oil (which would not be impaired if Trump hadn’t killed the Iran deal), in line with what we described in “Rising Gas Prices Threaten To Wipe Out Trump’s Tax Cut Benefits“.

This time, the market reaction to Trump’s angry tweet was far muted, with oil barely moving – so far – after it slumped following yesterday’s API report, even if it recovered most of the losses.

…click on the above link to read the rest of the article…

Is Russia Bailing On The OPEC Deal?

Is Russia Bailing On The OPEC Deal?

Offshore rig

For the first week of June, Russia, the world’s largest oil producer, exceeded the amount it agreed to produce as part of the January 2017, OPEC/non-OPEC supply cut deal.

For the first week of June, Russia produced some 11.1 million barrels per day (bpd), far exceeding production limits outlined in the deal, Interfax news agency said on Saturday, citing a source familiar with the matter.

As part of the oil production cut, Russia agreed to trim its production by 300,000 bpd from 11.247 million bpd. The output cut deal called for its members to remove some 1.8 million bpd of oil from global markets.

That deal was orchestrated to stop the bloodletting in global oil markets at the time due to a ramp up in U.S. shale production and Saudi Arabia’s late 2014 strategy of trying to drive U.S. shale producers out of business by opening the production flood gates and sending prices to multi-year lows.

However, the Saudi’s plan backfired. Global oil prices tumbled from more than $100 per barrel in mid-2014 to under $30 per barrel by the start of January 2016, throwing global markets into a historic supply overhang, and causing financial chaos for the Saudis who had to start issuing international bonds to offset record budget deficits – a development that is still ongoing as the Kingdom shores up its finances from that low oil price period.

Now that OECD oil inventory levels have reached the OPEC/non-OPEC members’ goal of five-year averages, there is talk and speculation among not only media but oil producing countries asking if it’s time to ramp up production. Also, geopolitical factors are coming into play as renewed U.S. sanctions against Iran will remove as many as 500,000 bpd from global markets, perhaps more according to other forecasts. In addition, OPEC member Venezuela’s oil production is coming apart at the seams, also removing more barrels from the market.

…click on the above link to read the rest of the article…

Saudi Oil Production Jumps In June Despite Drop In Oil Demand: OPEC

It will probably not come as a surprise that at a time when both Trump, and Saudi Arabia, are pressing OPEC to reverse the 1.5 year long OPEC agreement and pump more oil so US gasoline prices dont soar in the summer months, that according to the just released monthly report from the cartel, total OPEC production rose by 35.4kb/d to 31.869mmb/d mostly thanks to Saudi output rising by 85.5kb/d (according to secondary) sources to 9.987mmb/d and up a whopping 161.4kb/d as per direct communication, and back over 10 million barrels.

Joining Saudi Arabia in producing more oil in June were Algeria & Iraq, while production again declined in Venezuela, with Libya and Nigeria also seeing a decline in output.

Commenting on the state of the market, OPEC noted that 2018 global oil demand growth forecast unchanged; and is forecast to increase by around 1.65mln bpd to average 98.85mln bpd, with total oil consumption projected to surpass 100mln bpd during Q4 2018.

However, OPEC did warn that its outlook for H2 2018 warrants close monitoring of the factors impacting both world oil demand and non-OPEC supply that will shape the outlook of the oil market going forward; the tacit warning here is that oil prices may be so high to pressure oil demand.

“Looking at various sources, considerable uncertainty as to world oil demand and non-OPEC supply prevails,” said report read. “This outlook for the second half of 2018 warrants close monitoring.”

Indeed, according to the report, Saudi April oil demand saw its biggest drop on record, falling across all product categories, with most of the weakness in the heavy part of the barrel, OPEC reported. Demand was down more than 5% y/y in 1st 4 months of 2018, with April falling y/y by 420k b/d, or 17%.

…click on the above link to read the rest of the article…

Geopolitical Tensions Reach Boiling Point Ahead Of OPEC Meeting

Geopolitical Tensions Reach Boiling Point Ahead Of OPEC Meeting

Globe

The upcoming OPEC meeting on June 22 is shaping up to be a contentious one, after news broke that the U.S. government asked Saudi Arabia to increase oil production before Washington pulled out of the Iran nuclear deal.

Earlier last week, news surfaced that the U.S. government asked Saudi Arabia to boost output to relieve pressure on prices. But Reuters followed up with a report on June 7, adding more context to that story. According to Reuters, a high level Trump administration official called Saudi Arabia a day before Trump was set to announce the U.S. withdrawal from the Iran nuclear deal, asking for more oil supply to cover for disruptions from Iran.

The last time the U.S. government pressured OPEC into adding supply, it was also over Iran. The Obama administration wanted the cartel to offset disrupted Iranian production, after an international coalition put stringent sanctions on Iran in 2012. Roughly 1 million barrels per day were knocked offline.

While the Trump administration’s request might irk OPEC members, with Iran obviously the most aggrieved, the apparent willingness of Saudi Arabia to comply with Washington’s request has ignited furor from within the group.

“It’s crazy and astonishing to see instruction coming from Washington to Saudi to act and replace a shortfall of Iran’s export due to their Illegal sanction on Iran and Venezuela,” Iran’s OPEC governor, Hossein Kazempour Ardebili, said in comments to Reuters. He said that OPEC would not simply comply with Washington’s requests. “No one in OPEC will act against two of its founder members,” he said, referring to Iran and Venezuela. “The U.S. tried it last time against Iran, but oil prices got to $140 a barrel.”

“OPEC will not accept such a humiliation. How arrogant and ignorant one could be (to) underestimate the history of 60 years’ cooperation among competitors,” he said.

…click on the above link to read the rest of the article…

It’s The Demand, Stupid! Is China About To Burst The Black Gold Bubble?

For months we have heard about how the oil market’s over-supply ‘glut’ has been removed thanks to OPEC/NOPEC’s production cut deal and the narrative of ‘global synchronous recovery’ has buoyed the demand side of the equation – sending crude prices to four year highs (helped considerably by an increasing geopolitical risk premium, that is now evident more in Brent than WTI).

However, the last couple of weeks have turned ugly for the ‘no brainer’ record spec longs in crude oil as prices have tumbled (and President Trump has complained)..

The 50% surge in crude prices – and concurrent rise in gas prices at the pump – has begun to worry some that demand destruction looms. However, as The Wall Street Journal’s Nathaniel Taplin reports, what investors may not appreciate is that demand growth is also poised to slow in the world’s largest net oil importer last year, China.

Chinese petroleum demand still appears fine. Growth bounced back to a healthy 9% on the year in April, twice the rate in March. April’s petroleum burn was flattered, however, by exceptionally weak demand in the same month the year before – and probably by the official end of the government’s winter pollution controls, which had given temporary shot in the arm to Chinese industry this spring.

Unfortunately the overall trend for the industrial and transport sectors – which together account for about 70% of Chinese oil demand – looks shaky.

Growth rates in freight traffic and electricity production both peaked in the third quarter of 2017, excluding January and February figures distorted by the Lunar New Year holiday.

Freight tonnage growth is now running at barely half the 11%-12% rate it reached in mid-2017.

Weakening global trade, driven partly by the slowdown in Europe, will put further downward pressure on those numbers.

…click on the above link to read the rest of the article…

Higher Oil Prices Might Not Destroy Demand Growth

Higher Oil Prices Might Not Destroy Demand Growth

Gas station

The recent jump in oil prices to $80 per barrel raised a lot of questions about whether or not the heady demand growth projections for this year would hold up. In fact, signs of strain quickly popped up in disparate parts of the world. But as governments move to protect their citizens from high fuel prices (and to protect their political positions), demand might not be as price sensitive as analysts tend to think.

The history of oil price cycles show demand is highly sensitive to sharp increases in prices – demand took a hit in 1973, the early 1980s, the extraordinary 2005-2008 price increase, and the 2011-2014 period, when prices routinely topped $100 per barrel.

That record provides some guidance about what we should expect. Brent hit $80 per barrel for the first time in more than three years in May, a price level that would start to test the durability of demand growth. The run up in prices coincided with some early signs that consumers were losing their patience.

For example, U.S. President Donald Trump complained to OPEC in April about “artificially” high prices, and reportedly sent a request to the Saudis for higher output recently. Crippling protestsin Brazil brought the economy to a standstill and led to the ouster of the CEO of Petrobras. The International Energy Agency revised down its forecast for demand growth this year by 100,000 bpd, citing high prices.

Just as prices started to become painful, the OPEC+ coalition felt compelled to change course, and are on the verge of increasing output. Even with the recent price correction, demand threats still loom. The U.S. Federal Reserve continues to hike interest rates, which is strengthening the U.S. dollar and making dollar-denominated debt more painful to service. That is putting a strain on emerging market demand. The currencies of Argentina and Turkey have been slammed in the past few months.

…click on the above link to read the rest of the article…

Next Stage of Pressure on Iran – Lower Oil Prices

Next Stage of Pressure on Iran – Lower Oil Prices

President Trump is stepping up his attack on Iran.  He’s now planning the long-game for maximum pressure.  The news that Trump quietly asked Saudi Arabia to ramp up output by 1 million barrels a day is the key.

From the analysis at Oilprice.com:

Saudi Arabia and some of its close Arab allies in the Gulf, as well as the leader of the non-OPEC nations taking part in the production cut deal—Russia—are the only producers that have the spare capacity to increase production. So, in case of increased production from OPEC and allies, the potentially lower oil prices would hurt the other OPEC members that don’t have the spare capacity to boost output.

The point here is to begin dropping oil prices now that the U.S. has blown out Turkey’s finances and helped Saudi Arabia improve its fiscal position for the rest of the year with high oil prices.

Turkey is a net energy importer and $75+ per barrel oil is a huge drain on its finances at a time when its currency and bond markets are under serious pressure from a strengthening U.S. dollar.  Don’t think for a second the Turkish lira wasn’t helped in its fall.  This is a classic hybrid war attack on a country not playing by U.S. rules.

But, now that Trump’s U.S. economy is threatened by high energy costs, he’s looking to improve that situation while also putting a strain on Iran’s finances through the double whammy of losing not only up to 1 million barrels of production per day but also getting $20-25 less per barrel.

And right on target, oil shorts are piling on because that’s what happens when the markets are told which way policy is heading.

…click on the above link to read the rest of the article…

OPEC’s Dilemma: Demand Destruction Or Production Boost

OPEC’s Dilemma: Demand Destruction Or Production Boost

Crude oil pipeline

The early signs of discontent and demand destruction could be forcing OPEC’s hand, but increasing production carries its own risks.

OPEC and Russia are considering raising oil production in a few weeks’ time, and while much of the focus has (rightly) been on the supply outages in Venezuela and the potential for disruptions in Iran, the prospect of demand destruction also looms large for the cartel and its partners.

Oil forecasters had been predicting a blistering oil demand growth for 2018. But lately, those bullish forecasts are not looking quite as good, precisely because oil prices had climbed to their highest level in more than three years. For instance, in May the International Energy Agency revised down its forecast for demand growth for 2018 from 1.5 million barrels per day (mb/d) to 1.4 mb/d.

But a growing list of other signs should cause OPEC some concern, and might ultimately push the disparate members of the group into agreeing on higher output.

A nationwide truckers’ strike in Brazil paralyzed the country. Truckers were outraged by the soaring cost of fuel. The expense is made worse by the fact that Brazil’s currency, the real, has declined significantly this year, doubling the pain for motorists in the country. The strike led to enormous damage to the agricultural sector, and led to shortages of a wide array of basic goods. The country’s GDP is expected to take a significant hit.

That strike was followed up by an oil workers’ strike, which forced the temporary shutdown of a series of refineries. The workers, as well as the truckers and a wide swathe of the country, are outraged about the cost of fuel, and they demanded an end to the more market-based pricing for gasoline and diesel that was introduced several years ago.

…click on the above link to read the rest of the article…

Trump Asked Saudi Arabia To Boost Oil Production By 1 Million Barrels Per Day

It all started on April 20, when having tweeted at and about virtually everything else, President Trump realized that surging oil and gasoline prices are wreaking havoc on his economic agenda and eating away at the benefits from his tax cuts, and so he made it clear when he lashed out on twitter against OPEC which he said was “at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”


Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!


The result was instant, sending the price of oil sharply lower….

… and effectively capping the price oil, which is now at the level when Trump made his warning.

Since then Trump’s stance has only hardened, and because the US president has become an especially good friend with the ruling Saudi regime, there has been a dramatic reversal within OPEC, whose next meeting is now expected to see the cartel and Russia modestly boost oil production to comply with Trump’s demand.

But by how much?

This morning Bloomberg reported the answer, when it said that the Trump administration has quietly asked Saudi Arabia and other OPEC producers to increase oil production by about 1 million barrels a day, or – not surprisingly – just enough to offset expected Iran oil export declines as a result of Trump’s renewed embargo on Tehran.

…click on the above link to read the rest of the article…

OPEC And Russia Prepare For Long-Term Control Over Oil Market

OPEC And Russia Prepare For Long-Term Control Over Oil Market

oil rig

In a tight oil market reacting with price gains to concerns about supply shortages, the leaders of the OPEC and non-OPEC nations part of the production cut deal—Saudi Arabia and Russia—hinted last week that easing the cuts was an option that they had discussed and that would be up for talks at the OPEC and allies’ meeting in less than a month.

Oil prices plunged from three-and-a-half-year highs on reports that the Saudis and Russia may add as much as 1 million bpd of supply to offset crumbling Venezuelan production and possible loss of Iranian oil exports with the return of the U.S. sanctions.

Many analysts don’t think the group would add the reported 1 million bpd of supply, but the oil market lapped up the news and concerns about a return to oversupply have dominated the OPEC chatter news flow for nearly a week. As the June 22 meeting is drawing closer, oil prices will likely react to any new hint, comment, or report about OPEC’s efforts to “address consumer anxiety over security of oil supplies.”

The latest of those reports says that OPEC and non-OPEC are set to stick to the production cuts through the end of 2018, but will be ready to “adjust” supply to address possible shortages.

The group of producers part of the pact “is not ready yet to fully lift controls,” a Gulf source familiar with the Saudi thinking has told Reuters, adding that “it is going to be a long-term cooperation for the sake of a stable oil market.”

“However, if any shortage takes place, the producers will coordinate closely and promptly take necessary actions. The OPEC and non-OPEC agreement will remain in place. But the level of the cut may be adjusted if a physical shortage arises,” the source told Reuters.

…click on the above link to read the rest of the article…

Don’t Take Higher Oil Prices For Granted

Don’t Take Higher Oil Prices For Granted

Oil

Oil prices collapsed at the start of this week, with WTI and Brent dropping 5.5 percent and 7.5 percent respectively from their three and a half year peaks.

This recent price slump serves as a timely reminder for market observers and players alike that, while a heightened geopolitical risk premium and declining inventories have boosted prices, there is plenty of downside in today’s markets.

The prices started to fall when Saudi Arabia and Russia, two key brokers in the Vienna agreement, announced that they are ready to ramp up production to counter the threat of falling supply from Iran and Venezuela. The fear of a huge surge in U.S. shale production also played a part in sending oil prices lower, with rising U.S. exports to Asia beginning to impact the market share of both Russia and Saudi Arabia in the region.

Many already understand that this price rally is not sustainable. Vladimir Putin recently saidthat an oil price of $60 “suits Russia”. Last year, Russia’s finance minister shared his plans to draft the 2017-2019 budget based on oil prices as low as $40. These statements, taken alongside the recent reports that Russia and Saudi Arabia are looking to bring some production back online, have been seen by some as a sign that the recent oil price rally is coming to an end. It has long been known that these kind of production deals are not long term and sustainable solutions to an oil market crisis.

This is not to say that oil prices can’t rise again, or even touch $100 in the near future. Both the Iran nuclear deal and collapsing production in Venezuela could provide plenty of upside to oil prices.

…click on the above link to read the rest of the article…

 

Art Berman: Think Oil Is Getting Expensive? You Ain’t Seen Nothing Yet.

A global supply crunch approaches…

After issuing clear warnings on this program that sub-$50 oil prices were going to be short-lived, oil expert and geological consultant Art Berman returns to the podcast this week to explain why today’s $70 oil prices will go higher — likely much higher — and start materially contricting world economic growth.

Art explains how the current glut of oil created by the US shale boom — along with high crude output by both OPEC and non-OPEC  producers — is a temporary anomaly. Fundamentally, we are not finding nearly as much oil as we need to continue the trajectory of the global demand curve. And at the same time, we’re extracting our reserves at a faster rate than ever. That’s a mathematical recipe for a coming supply crunch — it’s not a matter of if, but when:

The price of oil has gone up 30%+ percent just here in the last year alone. There are some very good reasons for that.

In the United States, we’ve been drawing down our reserves, our inventory and the amount of oil we have in storage, consistently since February of 2017. We’re going into the 15th month of drawing from storage each week because we’re not producing enough to meet the need.

To those paying attention: the United States is right now producing more oil than it ever has in its history. We are a million barrels a day higher than the peak in 1970 — the one that King Hubbert got in trouble for warning about. We’re higher by 50,000 or so barrels per month of production. Yet, here we are, still sucking oil out of storage. What does that tell you? There is only one way to interpret that: We are using more than we are producing.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai III: Cataclysm
Click on image to purchase