Saudi Crown Prince Claims Lost Iranian Barrels Will Be Offset

Back in 1973, Saudi Arabia took a very aggressive move against the U.S. by starting the Arab oil embargo:

Saudi Crown Prince

But the Trump Administration has taken a strong position against Iran, Saudi Arabia’s nemesis. KSA also depends on the U.S. for its protection as well as its economic development. The current relationship between Washington and Riyadh could not be better:

"I love working with him (Trump)." - Crown Prince Mohammed bin Salman, October 5, 2018

Saudi Crown Prince
Photo Courtesy Of AFP)

Prior to announcing the U.S. pull-out of the Iranian nuclear deal in May, the White House had secured assurances from producers, namely Saudi Arabia, that any disruptions in Iran’s exports would be offset by higher production by countries with spare capacity, according to Treasury Secretary Mnuchin. The Saudi energy minister confirmed it. Continue reading "Saudi Crown Prince Claims Lost Iranian Barrels Will Be Offset"

Oil Market Scenarios And Risks: 4Q18

Major uncertainties loom toward the end of the year when sanctions are currently scheduled to go into effect by the U.S. regarding Iran. The range of potential outcomes is large, as it is possible that a deal may be reached with Iran which avoids sanctions (Iranian President Hassan Rouhani in a speech Sunday did not rule out peace between the U.S. and Iran), or Iran increases its exports to China and India, offsetting decreases to European countries. But the base case should assume some loss, on the order of 600,000 b/d.

President Trump has a few policy options to manage the size of the loss:

  • Pressuring the Saudis and other Gulf producers to maximize their output
  • Granting waivers so that more exports can flow
  • Ordering drawdowns of the Strategic Petroleum Reserve, potentially coordinated with the International Energy Agency

But Iran’s production is not the only risk. Venezuela’s production is in a meltdown and production may drop to just one million barrels per day by the end of the year. Whether it could stabilize at that level is an open question and is sure to provide a risk premium to oil futures prices.

I created three scenarios to develop a range of likely global inventory levels and future oil prices. The base case “demand for OPEC crude” is from OPEC’s own July Monthly Oil Market Report. In all three scenarios, I assume production in Venezuela drops to one million barrels per day (mmbd) by 1Q19 and stabilizes there. I also assume that Saudi production rises to 11 mmbd and remains at that level and production increases in the UAE and Kuwait. Continue reading "Oil Market Scenarios And Risks: 4Q18"

Oil Price Implications Of OPEC's New Oil Deal

OPEC concluded its meeting on June 22nd with a vaguely-worded communique about its oil deal:

“Accordingly, the Conference hereby decided that countries will strive to adhere to the overall conformity level of OPEC-12, down to 100%, as of 1 July 2018 for the remaining duration of the above-mentioned resolution and for the JMMC to monitor and report back to the President of the Conference.”

At the press conference afterward, OPEC president HE Suhail Mohamed Al Mazrouei, UAE Minister of Energy and Industry, struggled to explain exactly what it meant. When asked how many barrels would be added, he remarked that “you can do the math” between current output and the 100 percent conformity level, although he later said it was about one million barrels per day.

However, at the press conference of the 4th OPEC and non-OPEC Ministerial Meeting on June 23rd, oil ministers Khalid al-Falih of Saudi Arabia and Alexander Novak of Russia, responded to questions, explaining the new deal and how it would be implemented.

But Iran’s oil minister later said that OPEC’s oil output agreement did not specify a production increase, which probably explains why the agreement was left vague. It also explains Mr. Al-Falih’s unusual remark at the press conference: Continue reading "Oil Price Implications Of OPEC's New Oil Deal"

Updated World Oil Forecast For April

Robert Boslego - INO.com Contributor - Energies - World Oil Forecast


According to the Energy Information Administration (EIA), world oil production will exceed demand for much of the balance of 2018, and therefore global OECD oil inventories are projected to rise. Specifically, the EIA estimates that OECD inventories bottomed at the end of March at 2.784 million barrels (mmb) and will rise by 80 mmb through year-end, up 26 mmb from December 2017. And its projections through 2019 show another net stock gain of 34 mmb to end the year at 2.898 mmb.

World Oil Forecast

The DOE forecasts for 2018 and 2019 are based on dramatically different seasonal stock changes that occurred in 2017. OECD stocks fell by over 147 mmb from August through December, according to the latest estimates. But in 2018, it is predicting a net stock build over those same months.

World Oil Forecast

In 2019, it is forecasting a build similar to 2018, but without a first-quarter draw. Continue reading "Updated World Oil Forecast For April"

Updated 2018 Crude Oil Outlook

Robert Boslego - INO.com Contributor - Energies - Crude Oil Outlook


Analysis prepared on March 19, 2018

The relative rate of growth in supply v. demand will ultimately determine stock levels and prices. And the three key predicting agencies, the International Energy Agency (IEA), Energy Information Administration (EIA), and OPEC have different views on what is likely to unfold.

OPEC does not often predict is own production, but in December it forecast it would average 33.2 million barrels per day (mmbd) during 2018. That would far exceed its projected “call on OPEC oil,” which is world demand minus non-OPEC production. For 2018 as a whole, it predicts that figure will be 33.1 mmbd.

That demand for OPEC oil is based on a gain in demand of 1.52 mmbd and a rise in no-OPEC production of 1.15 mmbd. In my view demand is likely to be a bit stronger due to world economic growth. However, the non-OPEC supply number is much too low, given the recent rise in U.S. production of 886,000 b/d from August through November. (December production was down a bit for seasonal reasons.) Furthermore, U.S. production has yet to respond to $60/b. The rise in output last autumn was a response to $50/b.

The EIA has the most aggressive non-OPEC production estimate of a gain of 2.5 mmbd, with 2.0 occurring in the U.S. alone, and the balance in Canada and Brazil. The EIA forecast is based on a gain in crude production of 1.5 mmbd and a rise in other liquids of 500,000 b/d. WTI did not exceed $60 in any month since 2015 until January 2018. And the year-over-year gain in March 2018 is estimated to be 1.29 mmbd. And so the industry’s response to $60/b could very well enable the 1.5 mmbd gain. Continue reading "Updated 2018 Crude Oil Outlook"