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Saudis Reportedly Target US Inventories By Slashing Oil Exports

WTI prices briefly popped above $52 before fading quickly after Bloomberg reported that after flooding the US market in recent months, Saudi Arabia plans to slash exports starting in January in an effort to dampen visible build-ups in crude inventories.

Bloomberg reports that, according to people briefed on the plans of state oil company Saudi Aramco, American-based oil refiners have been told to expect much lower shipments from the kingdom in January than in recent months following the OPEC agreement to reduce production.

Oil traders were not that impressed…

And while the plan to slash Saudi exports to America may ultimately convince a skeptical oil market about the kingdom’s resolution to bring supply and demand incline, it may anger President Trump, who has used social media to ask the Saudis and OPEC to keep the taps open.


Hopefully OPEC will be keeping oil flows as is, not restricted. The World does nott want to see, or need, higher oil prices!


OPEC November Production Data

OPEC November Production Data

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

OPEC  15 was down 11,000 barrels per day in November but that was after October production was revised upward by 67,000 bpd.

OPEC production was 32,965,000 barrels per day in November. The revised October numbers, 32,976,000 was an all time high.

Above are the major revisions. All other revisions were in the low single digits.

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

Multipolar World Order in the Making: Qatar Dumps OPEC

Multipolar World Order in the Making: Qatar Dumps OPEC

Multipolar World Order in the Making: Qatar Dumps OPEC

The decision by Qatar to abandon OPEC threatens to redefine the global energy market, especially in light of Saudi Arabia’s growing difficulties and the growing influence of the Russian Federation in the OPEC+ mechanism.

In a surprising statement, Qatari energy minister Saad al-Kaabi warned OPEC on Monday December 3 that his country had sent all the necessary documentation to start the country’s withdrawal from the oil organization in January 2019. Al-Kaabi stressed that the decision had nothing to do with recent conflicts with Riyadh but was rather a strategic choice by Doha to focus on the production of LNG, which Qatar, together with the Russian Federation, is one of the largest global exporters of. Despite an annual oil extraction rate of only 1.8% of the total of OPEC countries (about 600,000 barrels a day), Qatar is one of the founding members of the organization and has always had a strong political influence on the governance of the organization. In a global context where international relations are entering a multipolar phase, things like cooperation and development become fundamental; so it should not surprise that Doha has decide to abandon OPEC. OPEC is one of the few unipolar organizations that no longer has a meaningful purpose in 2018, given the new realities governing international relations and the importance of the Russian Federation in the oil market.

Besides that, Saudi Arabia requires the organization to maintain a high level of oil production due to pressure coming from Washington to achieve a very low cost per barrel of oil. The US energy strategy targets Iranian and Russian revenue from oil exports, but it also aims to give the US a speedy economic boost. Trump often talks about the price of oil falling as his personal victory.

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

OPEC Cuts Deep to Save Cartel

OPEC Cuts Deep to Save Cartel

With oil prices in free fall and the dawning realization that Great Reflation trade of 2017 is over, OPEC needed to do something drastic to remind everyone how important they are.

Moreover, with Qatar quitting the cartel last week it was then doubly necessary for OPEC to make the markets stand up and remember them.

So, after a few days of wrangling, a 1.2 million barrel per day cut was announced by OPEC, far larger than the market was expecting.

The Trump administration is fuming today over this result.

Predictably, oil prices jumped on the news.  All is right with their world, yes?

Well, yes and no.  The Saudis need $80 per barrel oil.  Russia doesn’t get its hair mussed below around $50 and even then it simply scales back government spending in line with oil prices — auto-budgeting based on oil tariffs.

The free-floating ruble insulates Russia domestically from a sharp drop in oil prices far better than Saudi Arabia since the Riyal is pegged to the U.S. dollar.

But for Saudi Arabia, the stakes are far higher.  And its chief rival, Iran, understands this very well.  The reason the OPEC meeting was so touch and go was Iran exerting its leverage over the Saudis in response to U.S. sanctions.

Because while Russia agreed to a 200,000 barrel cut, which is nothing to them in the grand scheme of things, Iran was exempted from making any cuts.

Iran, Libya and Venezuela will be effectively exempt from the cuts, though the text of the deal will say they received “special considerations,” Iraqi oil minister Thamir Ghadhban said.

Saudi Loss Leader

Saudi leadership is weakening.  Qatar left to pursue its own ambitions without OPEC getting in the way.  That’s a nice way of saying they want to do business with Iran developing the shared North Pars gas field.

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

OPEC Surprises Markets With Last Minute Deal

OPEC Surprises Markets With Last Minute Deal

Oil

In the last possible minute, OPEC+ managed to agree upon a massive cut of 1.2 million bpd, pushing oil prices up by over 3 percent.

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Friday, December 7th, 2018

OPEC+ succeeds, agrees to cut 1.2 mb/d. The obvious major news of the day comes from Vienna. OPEC+ agreed, despite a lot of jockeying, to cut 1.2 mb/d of supply beginning in January. OPEC will contribute 800,000 bpd and non-OPEC will cut by 400,000 bpd. The group met on Thursday but cancelled a press conference, raising doubts about the ability to reach an agreement. Iran held up the talks early Friday because it refused to accept limits on its production, although, to be sure, any limit would be symbolic anyway since its output is declining due to sanctions. Iran was exempted from the deal. Oil sank on Thursday and in early trading on Friday, but prices spiked by more than 4 percent when an agreement was announced.

Trump admin to roll back sage grouse protections. On Thursday, the Trump administration announced plans to roll back protections on the sage grouse, effectively opening up 9 million acres of federal lands to mining and drilling. The move would open up more land than any other policy change to date, according to the New York Times. The proposal is expected to be finalized next year.

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

Oil Volatile As Iran Denies Reports It Agreed To Deal

Oil Volatile As Iran Denies Reports It Agreed To Deal

Update (8:00 am ET): Oil prices spiked Friday morning before quickly fading after Reuters reported that Iran has agreed to the OPEC deal for 800,000 b/d of cuts – only for an Iranian delegate to swiftly deny that report, sending crude prices back from whence they came.

The Iranian delegate said there’s still ‘lots of haggling’ about a possible deal.

* * *

Update (7:10 am ET): As furious negotiations continue on day two of the OPEC+ talks in Vienna, one OPEC delegate has informed BBG that the group has yet to finalize the final number for the cuts.

* * *

Update (6:30 am ET): Boom…

OPEC TALKS IN VIENNA ARE DEADLOCKED: DELEGATE
Reports of the deadline followed headlines claiming that Iran had demanded that an exemption must be included in any agreement about production cuts. A counteroffer for Iran to agree to a “symbolic” cut has reportedly been categorically rejected by the Gulf Producer. WTI has moved back to unch on the day.

* * *

Update (6:20 am ET): Expressing dissatisfaction with the terms of whatever deal has been discussed, Iran is reportedly holding out for language about an exemption for the struggling producer to be included in the agreement following three hours of talks on Friday.

It would be ironic if Iran – which has been blamed, along with Saudi Arabia and Russia, for triggering the collapse in oil prices due to the sanctions ‘exemptions’ on its oil exports extended by the US – ends up killing the deal, because the only less-desirable outcome for oil markets than a ‘baseline’ cut scenario would be ‘no deal’.

Oil prices are all over the place as the perceived prospects for a deal change with each new headline.

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

Qatar peak oil

Qatar peak oil

Qatar announces it will leave OPEC

Qatar_Minister_Energy_Dec2018

Qatar to withdraw from OPEC in January 2019
Speaking at a news conference in the capital Doha, al-Kaabi said: “The withdrawal decision reflects Qatar’s desire to focus its efforts on plans to develop and increase its natural gas production from 77 million tonnes per year to 110 million tonnes in the coming years.”

“They say it has nothing to do with the blockade on Qatar and that they have been thinking about it for several months now,” Bellis said, referring to a diplomatic blockade on Qatar by Saudi Arabia, the United Arab Emirates ( UAE ), Egypt and Bahrain.

Since 2013, the amount of oil Qatar produced has steadily declined from about 728,000 barrels per day in 2013 to about 607,000 barrels per day in 2017, or just under two percent of OPEC’s total output.
https://www.aljazeera.com/news/2018/12/qatar-withdraw-opec-january-2019-181203061900372.html

Qatar_CandC_liquids_Jan1994-Aug2018Fig 2: All liquids production with EIA data
https://www.eia.gov/beta/international/data/browser/

Qatar_crude_production_2002-Sep2018_Jodi

Fig 3: Crude production and exports (Jodi data)

Oil_Gas4_big

Fig 4: Qatari oil and gas fields (main oil fields: Dukhan, Al Shaheen, Idd el Shargi)

Qatar_crude_condensate_NGL_production_1949-1965-1980-2017

Fig 5: Crude, condensate and NGL production

OPEC’s Statistical Bulletin
https://www.opec.org/opec_web/en/publications/202.htm

Qatar-oil-production-consumption_2017

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

 

World Bank Warns Of Extreme Volatility In Oil Markets

World Bank Warns Of Extreme Volatility In Oil Markets

World Bank

After several months of oil price rises and then a sharp reversal over the last few weeks, world oil markets are in for more heightened volatility next year because of scarce spare production capacity among OPEC members. This warning comes from the World Bank, which in the latest edition of its Russia Economic Report said that OPEC was the single most important factor for oil price outlooks in the short term.

“As non-OPEC oil supply growth is expected to be greater than that of global demand, the outlook for oil prices depends heavily on supply from OPEC members,” the report’s authors noted. The level of spare capacity among OPEC members is estimated to be low at present, suggesting there are limited buffers in the event of a sudden shortfall in supply of oil, raising the likelihood of oil price spikes in 2019.”

The World Bank is not alone in seeing OPEC’s spare capacity as an important factor for oil prices going forward. Spare capacity provides a cushion against price shocks as evidenced most recently by the June decision of the cartel and Russia to start pumping more again after 18 months of cutting to arrest a too fast increase in oil prices. They had the capacity to do it and prices stopped rising, helped by downward revisions of economic forecasts.

Now, the oil market is plagued with concerns about oversupply, but this could change quite quickly if there is any sign that OPEC is nearing the end of its spare production capacity. As to the likelihood of such a sign emerging anytime soon, this remains to be seen.

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

Oil Crashes After Saudis Propose Smaller Than Expected Production Cut

As if plunging equity futures were not enough for traders to worry about this morning, in the past two hours oil, which had rebounded heading into this week’s 2-day OPEC meeting, tumbled sharply, dropping as much as 5%, with WTI sliding as low as $50.23 – less than a dollar from this year’s low of $49.41 – from above $53/barrel earlier in the session as Saudi Arabia said producers were working towards a deal to cut output that could fall short of market expectations. Brent crude fell 4.2% to $58.99 a barrel.

Saudi energy minister Khalid al-Falih told reporters ahead of today’s critical closed-door meeting of oil ministers in Vienna that OPEC and allies outside of the cartel including Russia were still working towards reaching an agreement by Friday.

Falih said Saudi Arabia’s preference was for a “sufficient cut but not overly large”, adding that a 1 million barrels a day “would be adequate”, but noting that “there is no deal yet.” He may have been remembering Trump’s tweet from yesterday, and realizing that if the US president gets angry with his boss, and de facto real OPEC leader, Crown Prince MbS, things could get much worse.

The kingdom also called for contributions from all countries, saying that the deal should be “fair and equitable” and should include Russia, as well as countries that were exempt from previous deals, such as Libya and Nigeria.

Quoted by the FT, when asked if a pact might not be reached, he said all options were on the table, but added that Russia, the largest oil producer in OPEC+ but slightly behind the US, and seen as crucial to reaching a deal, had “made a promise” to cut.

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

Iran: Oil To Fall To $40 If OPEC Fails To Reach Deal

Iran: Oil To Fall To $40 If OPEC Fails To Reach Deal

oil tanker hurricane

A fractured OPEC is meeting later this week to discuss a deal to cut oil production—yet again—to rebalance the market and lift oil prices that have recently slipped to below most of the cartel members’ budget-balance points.

OPEC needs a unanimous vote to pass decisions such as curtailing production. Yet, Iran—one of OPEC’s biggest producers but also one of the most sidelined members in recent months—warns that the group is unlikely to reach an agreement on a sizeable cut of around 1.4 million bpd as some are suggesting. Such a failure to act decisively would send oil prices plunging to $40 a barrel, Iran’s OPEC Governor Hossein Kazempour Ardebili told Bloomberg in an interview.

The cartel and its Russia-led non-OPEC allies may not extend their cooperation pact either, according to Iran’s representative at OPEC—a position typically held by the second most powerful oilman in a cartel member after the oil minister.

Iran has repeatedly expressed frustration with the Saudi/Russia-led increase in oil production since June to offset what was expected to be a steep decline in Iranian oil supply with the U.S. sanctions on Tehran’s petroleum and shipping industries.

Iran’s oil exports indeed dropped by some 1 million bpd, but they are likely still holding onto above 1 million bpd, while U.S. waivers to eight Iranian customers allow buyers to continue purchasing oil at reduced volumes until the end of April next year.

Oil prices have plunged by around 30 percent from early October as the market started to fear an oversupply is building up again, due to record high production in Saudi Arabia and Russia, and an all-time high oil output in the United States, coupled with fears of slowing economic and oil demand growth.

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

Alberta Intervenes To Halt Canada’s Oil Crisis

Alberta Intervenes To Halt Canada’s Oil Crisis

oil sands

Oil prices rose on Monday, buoyed by coordinated production cuts – cuts that did not come from Vienna (although that too could occur later this week).

Instead, the mandatory reductions were handed down by the provincial government of Alberta. “Perhaps OPEC should therefore consider inviting Canada to its meeting on Friday,” Commerzbank said in a note.

Alberta Premier Rachel Notley announced the production cuts “in response to the historically high oil price differential that is costing the national economy more than $80 million per day,” her office said in a statement. Western Canada Select (WCS) has plunged below $15 per barrel, representing a discount to WTI that has hovered at around $40 per barrel.

“The price gap is caused by the federal government’s decades-long inability to build pipelines. Ottawa’s failure in this area has left Alberta’s energy producers with few options to move their products, resulting in serious risks for the energy industry and Alberta jobs,” the Alberta Premier’s office said.

Alberta’s oil industry is producing roughly 190,000 bpd in excess of available takeaway capacity. The surplus is filling storage up quickly. Oil producers will be required to make cuts on the order of 8.7 percent, or 325,000 bpd, beginning in January. Once the storage glut is reduced, the cuts will narrow to just 95,000 bpd, which will stay in place through the duration of 2019.

The first 10,000 bpd for each producer will be excluded from the mandatory cuts, intended to avoid negatively impacting small producers. The baseline used to calculate the cuts will be the highest level of production for each producer over the past six months.

Notley expects the production cuts to boost prices for WCS by roughly $4 per barrel, adding $1.1 billion to government revenue between 2019 and 2020.

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

Alberta Orders “Unprecedented” Oil Output Cut To Combat Crashing Prices

While just a few hundred miles south, WTI is flirting with the one year low price of $50/barrel, Canada’s oil-producing hub, Alberta, would be ecstatic to have its oil trade at anything even remotely close to this level.

As we reported recently, Canadian oil producers are in an increasingly tough predicament. With high and increasing oil demand around the globe over the last year, Canadian oil production has increased accordingly. All of this is simple and predictable economics, but in the process Canadian oil hit a massive roadblock. Producers have the supply, and they have more than enough demand, but they don’t have the means to make the connection. Canadian export pipelines simply don’t have the capacity to keep up with either the supply or the demand.

Canadian oil producers have now maxed out their storage capacity, and the Canadian glut continues to grow while they wait for a solution to the pipeline problem to materialize. As pipeline space is at a premium and storage has hit maximum capacity, oil prices have fallen dramatically, and the differentials that had previously been hitting heavy oil hard in Canada (now at below $14 a barrel for the first time since 2016) have now spread to light oil and upgraded synthetic oil sands crude as well, leaving overall Canadian oil prices at record lows.

So in a long-awaited and according to local energy traders, overdue response, Canada’s largest oil producing province ordered what Bloomberg called “an unprecedented output cut”, an effort to ease a worsening crisis in the nation’s energy industry and adding to global actions to combat a recent price crash ahead of this week’s OPEC+ summit where oil exporters will similarly seek to slash output (something which all OPEC+ nations agree upon, but nobody wants to be the first to cut its own production).

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

In Historic Decision, Qatar Unexpectedly Says Will Leave OPEC Jan. 1

Just days before the cartel (along with its outside accomplices) is due to meet in Vienna for what could be another historic meeting, OPEC is dissolving right before our very eyes, as the perceived “US influence” over Saudi Arabia has strained ties within the bloc. As we pointed outon Friday, the increasingly “problematic” perception that Saudi Arabia is accelerating production to appease President Trump – and subsequently that the entire bloc’s policy is now subject to undue US influence – has reportedly brought several OPEC members to the verge of mutiny.

And on Monday, just hours after the conclusion of the G-20 summit in Buenos Aires, Qatar announced that, after more than 55 years of membership, it would be leaving the bloc effective Jan. 1. While countries have left OPEC before, Qatar’s departure is more significant than its declining oil production might suggest: Since forming in 1960, no other Persian Gulf Countries have left (though Ecuador and Gabon once left, only to return, and Indonesia has suspended its membership).

OPEC

Saad Sherida al-Kaabi

According to Al Jazeera, the Qatari television network, Qatari Energy Minister Saad Sherida al-Kaabi broke the news overnight. It was later confirmed by Qatar’s state energy company, which clarified that Qatar would be leaving OPEC effective Jan. 1.


Qatar announces it was withdrawing from the Organization of Petroleum Exporting Countries “OPEC” effective 1 January 2019.


Qatar, of course, has every reason to be angry with the Saudis. A blockade against Qatari exports remains intact following the GCC crisis of summer 2017. And just like then, when we pointed out that the “real reason for the Qatar crisis was natural gas”, so the Qataris have teased that they are leaving OPEC to “focus on LNG”.

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

Putin Confirms No New Oil Production Cuts; Hopes For US, UK Detente

Russian President Vladimir Putin praised Trump, pummeled Poroshenko, and poured cold water on oil market bulls’ hopes in a statement following the G-20 meetings.

Putin began by confirming what White House Press Secretary Sanders noted earlier – he and Trump had spoken broefly on the sidelines of the G-20 and discussed the Ukraine incident. Putin added that “Trump is not afraid of [him]” and expressed “pity that he could not have a full format meeting with President Trump” pointing out that “Russian needs to maintain dialog with US,” and “hopes to meet [Trump] when US is ready.”

Putin also mentioned Russia’s relationship with the United Kingdom, noting that “UK is an important partner for Russia” adding that he “hopes to overcome differences, to normalize relations with UK in the near future.”

But perhaps the most important aspect of Putin’s comments – related to markets – was his statement on crude production cuts.

Russian news service RIA noted earlier that Putin and Saudi Arabian Crown Prince Mohammed bin Salman (MbS) discussed oil, haven’t taken concrete decisions yet, including production cuts, Kremlin’s foreign police aide Yuri Ushakov said.

And Putin just confirmed that there are no additional cuts over and above the OPEC+ Vienna Accord levels currently in place:

  • *PUTIN SAYS THEY AGREED TO EXTEND OPEC+ AGREEMENT
  • *PUTIN SAYS RUSSIA, SAUDI AGREES TO CONTINUE AGREEMENT
  • *PUTIN: EXACT VOLUME TO BE AGREED W SAUDI ARABIA BASED ON MARKET

Confirming Lavrov’s comments earlier in the week that there was no need for additional deals or cuts. The two producers will monitor market to adjust policy accordingly.

Finally Putin raised the topic of the Kerch Strait crisis, explaining that “Poroshenko was dividing Ukraine through the use of mertial law,” adding that it “was much too early to talk about the release/swap of Ukraine sailors.

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

Oil Prices Set To Book Worst Month In A Decade

Oil Prices Set To Book Worst Month In A Decade

Refinery

Oil prices dropped early on Friday, on course to finish their worst month since 2008, as fears of oversupply and slowing demand growth dragged oil down into a bear market in November with prices off by some 30 percent from four-year highs in early October.

At 07:10 a.m. EDT on Friday, WTI Crude was down 1.81 percent at $50.52, and Brent Crudetraded down 1.47 percent at $59.03.

On Thursday, oil prices jumped on reports that Russia had conceded that it needs to reduce oil production and join a new Saudi-led OPEC cut to balance the market.

The rise didn’t last long—prices headed down again on Friday, pressured by rising U.S. oil production and comments by Russia’s Energy Minister Alexander Novak, who said in an interview with the TASS news agency that “To me, the current price range is comfortable for producers and consumers.”

Earlier this week, Russian President Vladimir Putin also signaled that Moscow is okay with oil prices at their current levels.

Russia is comfortable with oil at around $60, Putin said, a week ahead of the OPEC+ meeting in Vienna and just two days before the G-20 summit in Buenos Aires.

In his interview with TASS published on Friday, Novak, as usual, was elusive about Russia’s position about a new production cut, and said that Moscow will have its stance ready by the December 6-7 meeting.

Before the OPEC/non-OPEC meeting, the oil market will be looking for clues about global economy and trade at this weekend’s G-20 summit. U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet on the sidelines of the event to discuss the trade war. Putin, for his part, is expected to meet with Saudi Crown Prince Mohammed bin Salman and the two may discuss the OPEC-Russia oil cooperation, days ahead of the OPEC+ meeting.

The next few days could provide some major catalyst for oil prices.

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