Round 2: Trump Vs. OPEC

With oil prices having staged a recovery during the first quarter of 2019, primarily due to the withholding of oil supplies from Saudi Arabia, President Trump has once again entered the oil market as a threat. Not since OPEC’s founding in 1960 has an American president been as vocal or involved as Trump.

Trump’s intervention in “Round 1,” summarized below, shocked the market, causing a massive price collapse. However, with close scrutiny of the president’s views, both before taking office and over the past year, the market should not have been so surprised.

Saudi Arabia is in a delicate position. On the one hand, it needs oil prices in the $80s to support it's country’s budget, even if lifting costs are $10 or less. It also knows that a “high price” is not the best price longer-term, due to cutbacks in demand and the increasing availability of substitutes, such as U.S. shale.

But possibly most importantly, it depends on the U.S. for its security. And looking forward, it wants U.S. investment to help diversify its economy as the oil age wanes.

Simply put, it cannot afford to ignore this U.S. president, whose first international trip was to KSA. There is an important political and economic link to the U.S. that it did not have even one president ago (Obama). And its arch-nemesis, Iran, at the same time is being severely harassed by President Trump. Continue reading "Round 2: Trump Vs. OPEC"

Moment of Truth Approaching on Iran Sanctions

OPEC’s market monitoring committee met on September 23rd to assess conditions just about six weeks before new U.S. Iran sanctions go into effect, targeting Iran’s oil sector. Buyers and sellers are in the process of finalizing their loading programs for November, and so this assessment is of particular importance as to the question of whether oil supplies will be adequate once those sanctions go into effect.

The market focused on the lack of public discussion of President Trump’s demand on Twitter last Thursday for OPEC to increase supplies to get prices down:

"We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!"

However, Saudi Energy Minister Khalid al-Falih was quoted as saying, "Our plan is to respond to demand. If demand [for Saudi crude] is 10.9 million b/d you can certainly take it to the bank that we will meet it. But the demand is 10.5 million b/d or 10.6 million b/d. I think October will be more than this."

Iran Sanctions
Source: AFP

In a more recent news story, it was reported that Saudi Arabia and its allies discussed adding 500,000 b/d to supply. Saudi Aramco plans to add 550,000 b/d of new capacity in the Khurais and Manifa oilfields in the fourth quarter of 2018. Continue reading "Moment of Truth Approaching on Iran Sanctions"

World Oil Supply-Demand Balance in 2017 Depends on Limited OPEC Production Increase

Robert Boslego - INO.com Contributor - Energies


The Energy Information Administration (EIA) recently released its September Short-Term Energy Outlook (STEO) and its projects that world supply and demand will finally balance by late 2017. However, that depends on OPEC production rising a very small amount.

Base Case Scenario

Specifically, the EIA reported that OPEC crude production averaged 32.7 million barrels per day (mmbd) in August, and it projects OPEC production to average 32.95 mmbd in 2017. Under that scenario, world supply meets demand of 97.8 million barrels per day, and total inventories end 2017 at 3.062 billion barrels, about 350 million barrels higher than normal.

OECD Commercial Oil Inventory

The 2017 demand figure represents a gain of 1.5% from estimated demand in 2016 of 95.88 mmbd, which is a gain of 1.6% over 2015. This assumes a healthy macroeconomic environment. For example, the EIA is projecting that US GDP gains 2.6% in 2017, much better than the 1.5% GDP gain EIA assumes in 2016. Continue reading "World Oil Supply-Demand Balance in 2017 Depends on Limited OPEC Production Increase"

Oil Climbs over $50: Can Investors Bank on a Recovery?

The price of a barrel of oil has almost doubled from its low of $28 at the start of the year, prompting speculation that a recovery is underway, which may result in the revival of companies in the exploration, production and services sectors that have foundered since prices collapsed in 2015.

Oil Supply Graph

According to news reports published today (Thursday, May 26), the pop above $50/bbl can be attributed to a drop in supply. The U.S. Energy Information Administration's "Summary of Weekly Petroleum Data for the Week Ending May 20, 2016" notes that "U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.2 million barrels from the previous week."

Since breaking the mark the price has sunk below the $50 level, but hovers in the vicinity, as it has for the past few weeks. Continue reading "Oil Climbs over $50: Can Investors Bank on a Recovery?"

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/zeVPBxSjFLI/16990

What To Expect In The Oil Market

By: Sara Nunnally of Street Authority

The latest rumor around the global water cooler that Russia and OPEC-leader Saudi Arabia have agreed to freeze oil production at January or February levels has been dispelled... for now.

The OPEC leaders meeting in Doha failed to reach an agreement to cap production, with Iran bowing out of the meeting altogether, and refusing to pull back on its oil production. As a result, oil prices took a big tumble. Brent crude fell a harsh 7% on the news. West Texas Intermediate (WTI) fell almost as much at 6.6%.

But does a "no deal" result from the OPEC Doha meeting mean production caps are off the table? Or that OPEC wouldn't seek an alliance outside its cartel?

Hardly.

In response to the meeting, Qatar's energy minister Mohammed bin Saleh al-Sada said, "We of course respect [Iran's] position... The freeze could be more effective definitely if major producers, be it from OPEC members like Iran and others, as well as non-OPEC members, are included in the freeze."

Al-Sada said that OPEC members need more time. Which says to me that this won't be the last we hear of production caps.

Indeed, this wasn't the first time we'd heard about potential cooperation between OPEC and Russia, either.

The rumor of a possible oil production freeze lifted oil markets as much as 4.7% and kept prices for WTI above $41 mid-week last week. That means oil prices have been on a wild ride. Take a look at WTI futures: Continue reading "What To Expect In The Oil Market"

Article source: http://www.streetauthority.com/node/30672983