Fears of potential shortages from the implosion of Venezuela’s production, and the imposition of sanctions on Iran, have catapulted the Brent oil price marker to $80. However, there are great uncertainties about how much oil supplies will be disrupted over the balance of 2018, and what the supply response will be from OPEC and other producers, such as Russia and the United States.
Venezuela’s production fell by 45,000 b/d in April from March, averaging 1.47 million barrels per day. The April decline was equal to the average monthly drop thus far in 2018. Whether the rate of decline will increase, or stay the same, is unknown, but what is known is that oil workers have been leaving the country, unpaid.
The May 20th presidential election has been called a sham. And President Trump is considering sanctioning Venezuela's oil or prohibiting the crude to be sold in the U.S. If he does, Venezuela’s economy is expected to collapse because it is totally dependent on oil revenues. Continue reading "Oil Market Risks For 2018: Upside Then Downside"
The Energy Information Administration (EIA), International Energy Agency (IEA) and Organization of Petroleum Exporting Countries (OPEC) each released their monthly global oil assessments and projections. They agree that the global oil glut will not be whittled down to anywhere near OPEC’s target of the 5-year OECD average by year-end. Their numbers also imply that global inventories in 1Q18 will build.
The EIA numbers indicate that stocks will be 130 million above the average, just slightly below September’s estimate at end-March.
OPEC does not project its own production, and it, therefore, does not produce future global inventory levels. But assuming September OPEC production for 4Q17 and 1Q18, stocks will drop by 51 million barrels in 4Q17 and rise by 74 million in 1Q18, a net gain in inventories from September. Continue reading "Oil Price 'Risk Premium' to Play Out Over 4Q17"
Arrogant OPEC members thought they could beat American shale oil producers into submission in a market share battle. But instead, they caught a tiger by the tail, and now the tiger is turning on them.
OPEC producers were bragging back in late 2014 that they had much lower costs of production than American shale oil producers and could easily win back market share by undercutting their prices. But they failed to take into account that they needed higher prices than shale oil producers because oil revenues largely support their national budgets.
Low oil prices caused huge national budget deficits in OPEC countries. They did hurt the smaller, leveraged shale producers; however, they were able to take advantage of the bankruptcy laws in the U.S., not a real option for the producing countries. Their best response is to devalue their currencies, but there are a host of economic issues associated with exercising that option.
Fresh data were reported by OPEC and the U.S. Energy Department recently. The data imply that global oil stocks will rise, instead of decline in 2017, even with the OPEC-non-OPEC production cutbacks. Continue reading "Oil Market Outlook Deteriorating for OPEC"
But No Agreement To Cut Production Likely
OPEC President, H.E. Dr. Mohammed Bin Saleh Al-Sada, Qatar's Minister of Energy and Industry, issued a press release August 8th announcing that an informal meeting of OPEC member countries would take place on the sidelines of the 15th International Energy Forum in Algeria from 26 to 28 September 2016. There was an initial price rise, but that faded on Tuesday and Wednesday. Continue reading "OPEC Oil Export Revenues Lowest Since 2003"
August crude futures prices edged $0.20 higher in the week ending July 12th (to correspond to the data below), closing at $46.80. However, prices are down about 7% since early June when a confluence of events caused supply disruptions in multiple locations.
Though U.S. crude oil inventories have dropped more than 20 million barrels since the end of April, petroleum product stocks reached a new peak in the week ending July 8th. Continue reading "Speculators' Risk Assessments Key to Crude Price Changes"