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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.

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Oil Prices Hit Multi-Month Lows

Oil Prices Hit Multi-Month Lows

Oil

Oil prices fell to multi-month lows at the end of the week, as a confluence of factors all point in a bearish direction.

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Oil Markets Enter “Crucial Period”

Oil Markets Enter “Crucial Period”

Oil

Oil prices edged up this week on lost supply from Iran and Venezuela, although those supply concerns are somewhat offset by worries over demand.

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OPEC downgraded demand while the IEA said in a report that supply outages are “tightening up” the oil market. With Iran sanctions less than two months away, “we are entering a very crucial period for the oil market,” the IEA said.

Oil market remains “fragile,” Russian energy minister says. Russia’s energy minister Alexander Novak said that the global oil market remains “fragile” because of production declines and geopolitical unrest. “This is huge uncertainty on the market – how the countries, which buy almost 2 million barrels per day of Iranian oil will act. Those are Europe, Asia Pacific region … There is a lot of uncertainty. The situation should be closely watched, the right decisions should be taken,” Novak said. He said Russia could step in if the market needs more supply. “Russia has potential to raise production by 300,000 barrels (per day) mid-term.”

U.S. shale companies increased hedging for 2020. U.S. shale companies took advantage of relatively high oil prices in the second quarter to lock in hedges beyond 2019, according to the Houston Chronicle and Wood Mackenzie. Permian shale drillers increased 2020 hedging by 431 percent in the second quarter of this year, an indication that E&Ps are worried about pipeline bottlenecks stretching beyond 2019. WoodMac says the hedging activity that far out is unusual. The risk of hedging is that some companies could eliminate upside exposure if pipelines are completed on time and oil prices rise.

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Could Oil Hit $100?

Could Oil Hit $100?

$100

Oil prices have continued their climb following a week of bullish news, and with geopolitical tensions reaching a boiling point, prices are poised to head even higher.

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Friday, May 11, 2018

Iran continues to dominate the headlines, keeping WTI above $71 per barrel and Brent at $77 per barrel as of early trading on Friday. The exchange of airstrikes between Iran and Israel is also adding to the tension. Meanwhile, aside from the huge increase in U.S. oil production, the EIA reported some bullish figures this week – a decline in both crude oil and gasoline inventories by more than expected.

OPEC sees Iranian outage as not immediate. Any loss of supply from Iran due to U.S. sanctions will take time, and OPEC won’t rush to increase output in the interim, sources told Reuters. The steep losses from Venezuela combined with the potential disruption in Iran could force OPEC to adjust production levels earlier than it had expected. But because U.S. sanctions don’t really take effect until November, OPEC is not scrambling just yet. “I think we have 180 days before any supply impact,” an OPEC source said. They will meet in Vienna in a month to evaluate the current status of the oil market and the production limits.

Short-term supply glut eases Iran fears. Although supply outages from Iran could severely tighten the oil market, Bloomberg reports that there is currently a bit of a supply glut, which should prevent a sudden price spike. Oil traders have reported unsold cargoes in north-west Europe, the Mediterranean, China and West Africa. The sudden emergence of a temporary glut is reflected in the Brent timespreads, with the July-August spread falling from 63 cents per barrel last month to just 24 cents per barrel this week, a five-month low. The narrowing of the spread is a “sure sign of an oversupplied market,” Bloomberg reports.

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Oil Prices Tear Higher On Middle East Tensions

Oil Prices Tear Higher On Middle East Tensions

Marcellus gas rig

Oil prices rose on Tuesday ahead of the API data report, fueled by Middle East tensions and dwindling crude output in Venezuela.

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– U.S crude oil exports averaged 1.1 million barrels per day (mb/d) in 2017, twice as high as 2016. It was the second full-year since the prohibition on crude exports had been lifted.

– Canada remained the largest buyer at 29 percent of total U.S. exports. But a notable development was the emergence of China as a major buyer of U.S. crude, representing 20 percent of the total.

– Breaking it down by product type, crude oil only accounts for 18 percent of total petroleum product exports, with hydrocarbon gas liquids (HGL) and distillates each accounting for 22 percent.

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OPEC Looks To Dial Back Production Cuts

OPEC Looks To Dial Back Production Cuts

OPEC

Last week’s surprise drawdown in crude inventories may be the last for a while, as analysts are expecting a reversal in stocks this week.

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– China became the second largest LNG importer in 2017, surpassing South Korea.

– China’s LNG imports of 5 billion cubic feet per day (Bcf/d) was second only to Japan’s 11 Bcf/d.

– The surge in LNG imports is helping China fuel its rapid switchover from coal to gas. China has run into gas shortages amid its aggressive push to clean up air pollution by shutting down coal.

Market Movers

Sanchez Energy (NYSE: SN) saw its stock jump more than 3 percent after it announced it would pay dividends on series A and B convertible perpetual preferred shares in cash rather than stock.

• The share price of Carrizo Oil & Gas (NASDAQ: CRZO) fell by more than 6 percent after hours after reporting that its 2018 production could dip 10 percent, while also predicting that oilfield services costs would see a “double-digit increase” this year.

Schlumberger (NYSE: SLB) and Baker Hughes (NYSE: BHGE) were upgraded by Bank of America to a Buy rating, while Halliburton (NYSE: HAL) was downgraded to Neutral.

Oil prices gained a bit over the past few trading days, after a surprise drawdown in crude stocks last week. But analysts see that to be a one-off, with expectations that inventories will resume climbing this week.

IEA: U.S. to become world’s largest oil producer by next year. The IEA’s executive director said that the U.S. will surpass Russia to become the world’s largest oil producer “definitely next year,” if not in 2018. “U.S. shale growth is very strong, the pace is very strong … The United States will become the No.1 oil producer sometime very soon,” Fatih Birol told Reuters.

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Can Anything Stop The Shale Surge?

Can Anything Stop The Shale Surge?

Shale

Higher oil prices may lead to huge growth in U.S. shale production, according to revised predictions from both OPEC and the IEA.

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Oil Market On Edge Following Outages

Oil Market On Edge Following Outages

Oil

Several key outages have left the oil markets anxious despite a promising start to the week. Analysts are keeping a close eye on both Nigeria and Venezuela as political instability threatens to impact supply further.

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– Brazil’s oil production surged this year, jumping to 3.3 million barrels per day (mb/d), up from 3.2 mb/d in 2016 – a figure that includes other liquids production.

– The increase came largely from the pre-salt, which surpassed 1 mb/d in 2017, a sharp 33 percent increase from 2015 levels.

– Brazil is now the 9th largest oil producer in the world.

Market Movers

• Eni (NYSE: E) started production at its Zohr gas field in Egypt. Separately, the Italian oil company said that it restarted production at its Goliat field in Norway’s Arctic after a two-month outage.

• Ecopetrol (NYSE: EC) announced its fourth oil discovery in Colombia this year. “This new discovery shows that we are on the right track to our objective of increasing reserves. We are satisfied with the results of this alliance with Parex, which has underlined the potential of Santander province,” Ecopetrol CEO Felipe Bayon said.

• Total SA (NYSE: TOT) announced a final investment decision for large-scale development of the Libra project in offshore Brazil. The project will consist of a floating production storage and offloading unit with eventual capacity of 150,000 bpd.

Tuesday December 19, 2017

Oil prices initially rose on Monday on news that Nigerian oil workers went on strike, raising fears of a supply outage. The strike was called off, however, leading to a selloff in oil prices. But the lingering outage of the Forties pipeline continues to support Brent prices.

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OPEC Extension Sends Oil Prices Soaring

OPEC Extension Sends Oil Prices Soaring

Barrels

Oil markets’ initial reaction to yesterday’s OPEC news was rather dull, however oil prices saw a sharp spike on Friday morning as the bulls returned to the mix.

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OPEC followed through on its promise, extending the production cuts through the end of 2018, bringing relief to an oil market that had grown jittery in recent days. Oil prices traded in a relatively narrow range after the meeting and appeared muted. But once concerns over a selloff calmed, oil prices rallied once again on Friday morning.

OPEC deal extended through 2018. The deal will run from January through to December, and the exact volumes of the production cuts will be the same as this year. The OPEC/non-OPEC coalition said that they would monitor market conditions and would remain “agile,” ready to respond if the fundamentals deviate significantly from expectations. They will revisit the agreement at the next official meeting in June 2018, but they assume the cuts will last through the end of the year. Russian officials pressed for details on an exit strategy heading into the meeting, but the group offered no information – Saudi oil minister Khalid al-Falih said it would be “premature” to do so. One notable change is that Libya and Nigeria agreed to cap their production levels at their 2017 average, which doesn’t necessarily curtail supply but will prevent any “surprise,” as witnessed this year. The Russian and Saudi oil ministers played up their unity and boasted about their strong relationship. All smiles from Vienna.

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Oil Prices Spike On Middle East Tensions

Oil Prices Spike On Middle East Tensions

Oil

Oil prices rose on Friday on bullish data from China showing an uptick in oil imports by 1 million barrels per day in September, from a month earlier. On top of that, anxiety over President Trump’s decision to decertify the Iran nuclear deal, plus simmering tension in Iraq likely added a bit of upward pressure on crude prices. WTI and Brent gained more than 2 percent in early trading on Friday.

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Friday, October 13th, 2017

Trump to decertify Iran deal. President Trump has confirmed his plan to decertify the Iran nuclear deal on Friday, a move that could ratchet up tensions between the two nations. However, he will stop short of calling for new sanctions. Instead, he will ask the U.S. Congress to hold off until the administration tries a new strategy to tighten the screws on Tehran. Iran promised a “crushing” response if the U.S. declared the Revolutionary Guard a terrorist organization. As of now, the ramifications for the oil market are unclear, but probably not that significant in the near-term. The key European nations party to the agreement are still supporting the original deal.

Troops mobilize in Iraq. Kurdish authorities have sent thousands of troops to the key oil region of Kirkuk to defend the region, after the Iraqi government mobilized troops and tanks south of the city. The military movements raised concerns of a possible clash between the central government in Baghdad and Kurdish forces, a development that some fear could lead to civil war. Related: Kurdistan Accuses Baghdad Of Planning Oil Field Seizure

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Olduvai IV: Courage
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Olduvai II: Exodus
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