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What To Expect From Today’s OPEC+ Meeting: Another Saudi Surprise?

What To Expect From Today’s OPEC+ Meeting: Another Saudi Surprise?

After Wednesday’s JMMC meeting ended without reaching a recommendation (as is customary and expected), the key decision-making OPEC+ meeting – where ministers will hammer out May’s output quotas – begins at 1pm London Time. As Newsquawk notes, market expectations are skewed towards an extension of current cuts, but a clear stance from Saudi – who have a tendency to surprise in recent months – remains to be seen, namely on the decision regarding the extra 1MM barrels the Kingdom has kept offline since the start of the year.

Commenting on today’s key event, Bloomberg’s Jake Lloyd-Smith reminds us that Saudi Arabia has sprung some big surprises in the oil market already this year, and may do so again today as OPEC+ grapples with a thorny decision on supply. That could make for a volatile session before the long weekend, and already has with oil whipsawing from gains to losses in jittery trading, amid market rumors that OPEC+ is i) considering a return to phased monthly oil-output hikes and ii) is also considering maintaining current cuts, according to a delegate… which pretty much covers every base so is completely useless.

As such, while the consensus view is the grouping will stick with deep output curbs to safeguard crude’s recovery, there’s an outside chance of alternative outcomes. These span the twin extremes, from releasing barrels to tightening further.

At issue is the varied recovery across key regions. For every rosy demand metric from the U.S. or China, there’s a poor one from Europe as lockdowns make a comeback. In addition, Riyadh faces a headache from rival Iran, which has been pushing clandestine barrels into China despite U.S. sanctions…

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

opec+, oil and gas industry, zerohedge, saudi arabia, russia, iran, china, united states, economic sanctions, oil, oil price, bloomberg

The Iran-China Axis Is A Fast Growing Force In Oil Markets

The Iran-China Axis Is A Fast Growing Force In Oil Markets

One of the things that doesn’t get a lot of discussion in the press is the under-the-table relationship Iran and China have had when it comes to oil. At first glance, they wouldn’t seem to have a lot in common. One is a theocracy with a radical view of non-believers and the other is probably the only example of a successful communist dictatorship since this form of government was created. But, if you look a little deeper they have a couple of things that align their mutual interests strongly. The first is they are both absolute dictatorships, meaning the institutions of government and national policies can be changed at the whim of those at the top. The second thing they have in common, and this is the main takeaway, both countries have serious geopolitical issues with the United States.

Iran suffers from years of sanctions imposed primarily by the U.S. to compel them to comply with U.N. resolutions regarding their atomic program. China views this century as the one in which they displace America as the world’s dominant Super Power. The place where these two authoritarian government’s worldviews align is in their opposition to the U.S.

It’s worth noting China’s apparent success has been funded by western economies over the last 75-years, thanks to our desire to buy everything as cheaply as possible. In that time, China has become the manufacturing center for the world and amassed immense wealth in doing so. The pandemic has caused a rethinking of the wisdom of outsourcing strategic commodities to despotic regimes, but for now, if you buy something other than food odds are it was made in China.

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

OPEC Update, March 2021

OPEC Update, March 2021

The OPEC Monthly Oil Market Report for March 2021 was published this past week. The last month reported in each of the charts that follow is February 2021 and output reported for OPEC nations is crude oil output in thousands of barrels per day (kb/d). The numbers at the left side of the graphs show February 2021 output (and in some cases the trailing 12 month average output).

Figure 1

Figure 2

OPEC crude output decreased by 647 kb/d in February 2021, total OPEC crude output for January 2021 was not revised from last month’s report. Most of the decrease in OPEC output was due to a cutback in Saudi Arabia’s output by 930 kb/d from January to February 2021.

Figure 3
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Dennis Coyne, OPEC, oil , oil production, peak oil barrel

Shale Giants Proving OPEC Right

Shale Giants Proving OPEC Right
Saudi Arabia’s bet that the golden age of U.S. shale is over appears to be a safe one – for now, at least.

(Bloomberg) — Saudi Arabia’s bet that the golden age of U.S. shale is over appears to be a safe one — for now, at least.

A round-up of data on shale drillers shows they’re sticking to their pledge to cut costs, return money to shareholders and reduce debt. If they stay the course, it would validate the OPEC+ alliance’s high-stakes wager that it can curb output and drive crude prices higher without unleashing an onslaught of supply from U.S. rivals.

That’s still a big “if,” one that’s keeping the oil market on edge as crude’s rally makes it more tempting for shale producers to go back on their word. But the U.S. shale patch is showing little sign of a true comeback so far, and even a dramatic boost in activity would leave oil output below pre-pandemic levels until late next year. Drillers that have shown signs of straying from the script and boosting production have been punished by investors.

Publicly traded explorers that are remaining disciplined on output are helping to keep crude prices aloft, said Michael Tran, managing director for global energy strategy research at RBC Capital Markets. The motives of closely held producers, on the other hand, remain “an open-ended question,” he said. The number of oil rigs has already jumped 80% after bottoming out in August, Baker Hughes data show.

The more restrained shale drillers are this year, “the more they can potentially grow production at higher prices next year and beyond,” Tran said.

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

Bloomberg, M.Tobin, D.Wethe, K.Crowley, oil price, oil, crude oil, saudi arabia, shale oil, opec+, rigzone.com

Happy Days At The Gas Pump Are Over As Prices Soar 

Happy Days At The Gas Pump Are Over As Prices Soar 

When the virus pandemic first hit early last year, Americans were locked down in their homes as gasoline demand plunged and prices crashed. Last April, the nationwide average for gasoline was around $2. According to AAA, prices are surging nationwide, up 32 cents in the previous month to $2.796 for regular.

On Monday, regular gasoline in Los Angeles County rose for the 27th consecutive day and 47th time in 48 days, increasing to $3.81, the highest since Dec. 3, 2019. Average prices for crude products in the metro area have been on a tear, resulting in a price shock for many consumers who are still battling food and housing insecurities, along with job loss as they wait for the next round of stimulus checks.

Happy times at the pump are over as crude product prices continue to rise. 

GasBuddy analyst Patrick DeHaan told Fox News that one reason for the jump in prices is due to increased demand. Still, more importantly, he said the Organization of the Petroleum Exporting Countries (OPEC) “is not opening the spigot.”

Last week, OPEC leaders maintained production cuts for all countries except Russia and Khazakstan. The news caused West Texas Intermediate and Brent to surge.

OPEC’s decision last week inspired Goldman’s Damien Courvalin to raise his Brent forecast by $5/bbl, to $75/bbl in 2Q and $80/bbl in 3Q21: “This increase in our price forecast reflects stronger time spreads, with our updated inventory path consistent with $5/bbl additional backwardation over the next six months relative to our prior forecast.”

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

 

Is The World About To See An Oil Shortage?

Oil Flirts With $70 After The OPEC+ Surprise

Oil Flirts With $70 After The OPEC+ Surprise

Brent is now flirting with the $70 mark after OPEC+ shocked markets once again by refusing to bring more oil production online.

In this week’s Global Energy Alert, our trading team delves into how an inflationary environment will impact oil stocks. Sign up today to get breaking news, expert analysis, and trading tips.

Friday, March 5th, 2021

Oil skyrocketed on Thursday after OPEC+ decided to hold off on easing production cuts for another month, surprising the oil market. WTI and Brent shot up more than 4%. During early trading on Friday, Brent surpassed $69 per barrel,

OPEC+ extends cuts, surprising market. OPEC+ extended the cuts through April, aside from a slight increase allowed for Russia and Kazakhstan, due to seasonal consumption patterns. Even Saudi Arabia decided to keep its 1 mb/d of voluntary cuts in place. The surprise news led to a price surge. “One of the reasons the market is continuing to react positively today could be that OPEC’s own balances suggest very steep draws,” Rystad Energy said in a statement.

Oil majors expect record cash flow. Big Oil is looking at 2021 with increased optimism, mostly because oil prices have rallied in recent weeks. Moreover, the ultra-conservative capital spending plans and the huge cost cuts have allowed international oil companies (IOCs) to materially lower their cash flow breakevens. These factors are set to result in a record cash flow for the biggest oil firms this year if oil prices average $55 per barrel, Wood Mackenzie said in new research.

Oil majors going green? Speaking from the annual CERAWeek by IHS Markit energy conference, Big Oil chief executives from Exxon Mobil (NYSE:XOM)Chevron Corp.(NYSE:CVX)Occidental Petroleum (NYSE:OXY) and ConocoPhillips (NYSE:COP)have all spoken about the industry’s transition to a lower-carbon world, with OXY even branding itself a ‘carbon management’ company that wants to set the industry standard for the production of net-zero carbon oil…

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The Death of Ahmed Zaki Yamani, the “Oil Sheik” who Understood Everything

The Death of Ahmed Zaki Yamani, the “Oil Sheik” who Understood Everything


Ahmed Zaki Yamani, oil minister of Saudi Arabia until 1986, died in London last week. In memory of the “oil sheik,” I reproduce here a comment that appeared on the ASPO-Italia blog in 2006. The interview of Yamani by Oriana Fallaci in 1976 is a good example of how the oil problem is misunderstood in the West and of the many lies told about it. Yamani, despite all the accusations and insults he received, was always a moderate who sought compromise. He managed to prevent his country, Saudi Arabia, from the disasters that befell all oil-producing countries in the Middle East.

Unfortunately, Yamani’s legacy has been somewhat lost over the years, but it is only now that Saudi Arabia is seeing bombs falling on its territory — a destiny that so far the country had avoided. Now, things are going to become very difficult as Saudi Arabia faces the unavoidable decline of its once abundant oil resources.

Yamani is remembered, among other things, for having said that “The Stone Age did not end because the world ran out of stone, and the Oil Age will end long before the world runs out of oil.” And, with that, he demonstrated that he had perfectly understood the concept of “EROEI” and the consequences of gradual depletion. 

http://aspoitalia.blogspot.com/2006/11/fallaci-intervista-yamani.html 

(Fallaci’s interview is available in full at this link.)

Fallaci interviews Yamani: thirty years later
Di Ugo Bardi – September 2006 (slightly edited for publication on “The Seneca Effect“)

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Heal the Planet for Profit – Redux


Giorgione The Tempest 1508
“Mankind’s only chance to not destroy its planet lies in diverging from all other species in that not all energy available to it, is used up as fast as possible. But that’s a big challenge. It would, speaking from a purely philosophical angle, truly separate us from nature for the first time ever, and we must wonder if that’s desirable.”

I wrote that 4 years and 2 months ago today, and I’m still thinking about it. It came to mind again, along with the article it comes from, see below, when I saw a few recent references to climate change, and to how any policy to halt it should be financed. It’s all painfully obvious.

Bill Gates, while on a virtual book tour, says governments should pay. In particular for the innovation needed. We’re going to solve it all with things we haven’t invented yet. That kind of thinking never fails to greatly boost my confidence in people and their ideas.

Overall, Gates’ words feel like a stale same old same old been there done that tone. But one thing is changing. Since Joe Biden became the most popular US president ever, according to his vote count, there is now a climate czar at the US Treasury, and a climate change team at the US Fed. Progress! At least for those seeking to use your money to solve their problems.

Bill Gates: Solving Covid Easy Compared With Climate

Mr Gates’s new book, How to Avoid a Climate Disaster, is a guide to tackling global warming. [..] Net zero is where we need to get to. This means cutting emissions to a level where any remaining greenhouse gas releases are balanced out by absorbing an equivalent amount from the atmosphere…

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

Oil Major Total Sees 10 Million Bpd Supply Gap In 2025

Oil Major Total Sees 10 Million Bpd Supply Gap In 2025

France’s supermajor Total is warning that the world could find itself with a shortfall of supply of 10 million barrels per day (bpd) between now and 2025, due to continued underinvestment in the industry, the OPEC+ pact, and cracks in the U.S. shale business model.

“There is a risk of supply crunch in the mid-term,” Helle Kristoffersen, President, Strategy and Innovation at Total, said on the company’s Q4 earnings call this week.

“We have seen in 2020 how OPEC managed to bring back market discipline. We’ve seen the cracks in the US shale model, and we’ve seen a continued underinvestments in the oil industry as a whole,” Kristoffersen said.

The market needs new oil projects, considering the fact that many producing oilfields will see natural declines in production, the executive said.

“And that’s true, even if you take very cautious view on short-term demand recovery and on future demand levels,” Kristoffersen added, noting that “a 10 million barrels per day gap in supply between now and 2025, that’s a massive shortfall of supply to cover in just a very few number of years.”

Last year, the coronavirus accelerated a structural decline in upstream oil investments as all E&P firms, oil supermajors, U.S. shale producers, and national oil companies alike, slashed capital expenditures in the wake of the price crash.

Investments in new oil supply have now slumped to a more-than-a-decade low.

OPEC+ currently has a lot of spare capacity that could come on stream when demand recovers. But sustained investments in oil and gas will be needed to meet global consumption of oil, which the world will continue to need, peak demand or not, analysts and forecasters warn.

“The world may be sleepwalking into a supply crunch, albeit beyond 2021. A recovery in oil demand back to over 100 million b/d by late 2022 increases risk of a material supply gap later this decade, triggering an upward spike in price,” says Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie.

 

Cash-Strapped Iraq Drastically Devalues Dinar As Fears Of Nationwide Unrest Grow

Cash-Strapped Iraq Drastically Devalues Dinar As Fears Of Nationwide Unrest Grow

According to the latest IMF forecasts, Iraq’s GDP will contract 12% this year, more than that of any other OPEC member under a production quota.

A global pandemic-induced demand slump (among other domestic issues) has pushed Iraq – under its OPEC membership – to slash oil production by over 12% year-over-year (however, Iraq, along with other nations such as Nigeria, has pumped above its quota on several occasions since then).

In the most recent sign of Baghdad’s growing desperation for cash as its economy unravels, Iraq sought an upfront payment of about $2 billion in exchange for a long-term crude-supply contract as state coffers dwindle and school teachers go unpaid.

As Bloomberg reports, the letter from SOMO, the Iraqi state-owned agency in charge of petroleum exports, was first reported by the Iraq Oil Report.

“SOMO, on behalf of the Ministry of Oil, has the interest to propose a long-term crude-supply deal in exchange for prepayment for a fraction of the total allocated quantity,” according to the letter, which was marked strictly confidential.

The anxiety is rising as officials fear a repeat of the upheaval last year that brought down the government and saw hundreds of protesters killed.

All of which has led to the decision to devalue the Dinar… drastically.

As Bloomberg’s Khalid Al-Ansary reports, the central bank reduced the official rate to 1,450 dinar per dollar, the first devaluation since 2003, it said in a statement. That’s from about 1,190 previously. Dollars will be resold to local banks at 1,460 dinar apiece.

Inflation imminent? or hyperinflation?

The embattled nation’s central bank is taking the steps to avoid depleting its foreign-currency reserves…

Prime Minister Mustafa Al-Kadhimi, who came to power in May, has warned that the government will struggle to pay civil servants without raising more debt.

One Little Problem with the “All-Electric” Auto Fleet: What Do We Do with all the “Waste” Gasoline?

One Little Problem with the “All-Electric” Auto Fleet: What Do We Do with all the “Waste” Gasoline?

Regardless of what happens with vaccines and Covid-19, debt and energy–inextricably bound as debt funds consumption– will destabilize the global economy in a self-reinforcing feedback.

Back in the early days of the oil industry (1880s and 1890s), the product that the industry could sell at a profit was kerosene for lighting and heating. Since there was no automobile industry yet, gasoline was a waste product that was dumped into streams.

Why couldn’t the refiners produce only kerosene? Why did they end up with “worthless” gasoline?

The answer is a barrel of oil produces a variety of products. While there is some “wiggle room” to produce more diesel and less gasoline, etc., it isn’t possible to turn a barrel of oil into only one product.

John D. Rockefeller became very wealthy by cornering much of the oil market in the 19th century. But he didn’t become fabulously wealthy until the 20th century, when the rise of automobiles created a market for all the “waste” gasoline.

Rockefeller became super-wealthy when all the products of each barrel of oil could be sold at a premium rather than just a portion of the products.

This reality has been forgotten: the price that can be fetched for a barrel of oil depends on the demand for all the products, not just a few of the products.

Those demanding an all-electric auto-truck fleet as a “green” alternative will re-create the dilemma of what to do with the “waste” gasoline. The world will still want fuel for all those container ships bringing all the goodies of a consumerist society, all those cruise ships visiting ports of call, jet fuel for all those exotic vacations enabled by 550 mile-per-hour aircraft, and oil-based lubricants, plastics and petro-chemicals, and so oil will still be pumped and refined, and almost half of it will be gasoline.

We can either use it or throw it away but we can’t magically turn a barrel of oil into only one product.

This is a topic worthy of your understanding, so grab a vat of your favorite beverage and turn off all distractions.

Longtime readers know I’ve focused on energy-oil markets for 15 years. Despite ups and downs in price, the oil market has been remarkably stable.

This stability is about to transition to chronic instability: wild swings in price, shortages, and social chaos in both producing and consumer nations.

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

The Invisible oiliness of everything

The Invisible oiliness of everything

Preface.  Even a simple object like a pencil requires dozens of actions to make and dozens of objects that took energy to make.  This is why it is unlikely wind, solar, or any other contraption that make electricity, have a positive return of energy, or energy returned on energy invested.  If you look at all of the energy of the steps to create a wind turbine or solar panel, they don’t produce as much energy as it took to make them, and certainly not enough extra energy to replace themselves.  Besides, electricity is only about 15% of overall energy use, with fossils providing the rest transportation, manufacturing, heating, and the half a million products made from fossils as feedstock as well as energy source.

***

Just as fish swim in water, we swim in oil.  You can’t understand the predicament we’re in until you can see the oil that saturates every single aspect of our life.

What follows is a life cycle of a simple object, the pencil. I’ve cut back and reworded Leonard Read’s 1958 essay I Pencil, My Family Tree to show the fossil fuel energy inputs (OBJECTS made using energy, like the pencil, are in BOLD CAPITALS, ACTIONS are  BOLD ITALICIZED).

pencils“My family tree begins with … a Cedar tree from Oregon. Now contemplate the antecedents — all the people, numberless skills, and fabrication:

All the SAWS. TRUCKS, ROPE and OTHER GEAR to HARVEST and CART cedar logs to the RAILROAD siding. The MINING of ore, MAKING of STEEL, and its REFINEMENT into SAWSAXES, and MOTORS.

The growing of HEMP, LUBRICATED with OILDIRT REMOVEDCOMBEDCOMPRESSEDSPUN into yard, and BRAIDED into ROPE.

BUILDING of LOGGING CAMPS (BEDS, MESS HALLS). SHOP for, DELIVER, and COOK FOOD to feed the working men. Not to mention the untold thousands of persons who had a hand in every cup of COFFEE the loggers drank!

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

Oil and the Changing World Order

U.S. oil inventories have fallen every week for two months yet WTI has averaged less than $40 per barrel since the end of August. That is because oil has been re-priced and markets are unwilling to pay more for it.

Those who expect a return to 2019 price levels acknowledge that the oil-demand recovery has stalled. They believe that this is because of Covid-19 and that things will return to normal once there is a vaccine.

Perspective

“I don’t think the severity of this downturn has been well understood yet.”

Sophia Koropeckyj, Moody’s Analytics

What is happening to oil markets and to the global economy is not because of a virus. The virus greatly accelerated what was already happening. Things won’t go back to normal when the virus ends. I wrote that a month ago and nothing has happened since then to change my mind.

The world is in a debt cycle that began fifty years ago. World orders change when debt cycles approach their end. Ray Dalio has studied how and why world orders have changed over the last 1500 years. These are the requisites that changing world orders have in common:

  • High levels of indebtedness.
  • Low interest rates that limit the ability of central banks to stimulate the economy.
  • Large wealth gaps and political divisions that lead to social an political conflicts.
  • A rising world power that challenges the over-extended leading power.

These criteria have clear relevance to the present world order as China challenges U.S. hegemony. Discord created by debt, interest rates and income inequality have been aggravated by the Covid-19 pandemic but will not be resolved when the virus is controlled.

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

Forget Peak Oil Demand, Supply Crisis Could be Hitting First

Forget Peak Oil Demand, Supply Crisis Could be Hitting First

In today’s IEA’s annual World Energy Outlook 2020 report, the OECD energy watchdog states that it doesn’t see a peak oil demand before 2040, only a possible oil demand flattening. The energy agency repeats that oil demand is effected by COVID, but all scenarios show that oil demand has not peaked yet. The energy agency contradicts here the views currently being proponed by BP and others that oil demand has peaked already. The report bluntly states that after recovering from the “exceptional ferocity” of the COVID-19 crisis, world oil demand will rise from 97.9 million bpd in 2019 to 104.1 million bpd in 2040.

Even that the agency acknowledges that demand has been hit and is lagging behind 2019 levels, overall demand will increase, only the increase will be slightly slower than expected. The Paris-based agency, financed by the OECD governments, and lately known as a main proponent of energy transition and renewables, expects that a slower increase of oil demand the coming years will be caused by clean transport policies and surging renewable energy. At the same time the IEA also reiterates that demand for petrochemicals and global growth of long-distance transport will be leading to a net increase of oil demand until 2040.

It needs to be reiterated that several major factors are very unsure that could have a major impact on global oil demand growth. The current assessments are all taking into account a wide range of proposed and/or signed energy transition and net-zero emission government policies.

These will have an impact if fully implemented by all. Looking at the current situation, especially due to COVID-related economic issues, renewable and emission reduction policies could however become sidelined, delayed or put on ice. The need for a revamp of the global economies is clear, but choices will be made by respective constituencies without full focus on climate change and renewables.

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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