Oil rises 1% on settlement amid fears of supply shortages

[Pitcher]

Friday, January 4th, 2019

Oil prices popped on Friday as signs of a trade thaw emerged and data showed strong OPEC cuts in December.

Oil prices poised for large weekly gain. Brent and WTI are set to close out the week with the largest weekly gain since December 2016. This week, crude benchmarks could gain as much as 10 percent, owing to Saudi production cuts and a broader sense that the oil selloff has gone far enough. “Underpinning this wave of buying is mounting evidence that Saudi Arabia has taken an axe to its oil production,” Stephen Brennock, an analyst at PVM Oil Associates Ltd., told Bloomberg.

Strong U.S. employment data. The U.S. Labor Department reported strong job figures for December, with employers adding an estimated 312,000 jobs for the month, higher than expected. The data suggests the U.S. economy remains in solid shape, even as signs of a global slowdown have continued to mount. The downside of the jobs report is that it undercuts the case for the Federal Reserve to abandon interest rate hikes. It could also embolden the Trump administration to take a harder line in trade talks with China.

U.S.-China trade talks. U.S. and Chinese officials are set to meet on Monday to resume trade talks, and news of the meeting bolstered sentiment in financial markets. The three-month truce in the U.S.-China trade war ends in March, but the tone from officials from both countries has thawed recently. The shakiness in the global economy, which the trade war has contributed to, is also putting pressure on both sides to back away from the brink. “China has a strong desire to have a truce on trade war,” Shi Yinhong, a professor of international relations at Renmin University in Beijing, told the FT. “[T]he probability of the two sides reaching an agreement within the 90 days is growing”.

Related: Moody’s: The Shale Band Is Back, And Here To Stay

U.S. shale activity slowed in fourth quarter. The collapse of oil prices in the fourth quarter of 2018 led to a slowdown in the shale patch. The business activity index published by the Federal Reserve Bank of Dallas show that activity decelerated and production growth slowed. The data suggests that the U.S. shale industry was very responsive and sensitive to lower oil prices. The average prediction for year-end WTI prices from oil and gas executives was $59 per barrel.

OPEC production fell in December. OPEC’s oil production fell in December to 32.68 mb/d, down about 460,000 bpd from a month earlier, according to Reuters. It was the largest monthly decline in two years. The reductions came ahead of the OPEC+ deal, which begins this month, and suggests that Saudi Arabia wanted to unilaterally tighten up the market. Saudi Arabia alone slashed output by 400,000 bpd, and Saudi officials said they would cut deeper in January.

U.S. shale production problems. The Wall Street Journal reported that U.S. shale companies have over-hyped the production potential from thousands of shale wells. “Two-thirds of projections made by the fracking companies between 2014 and 2017 in America’s four hottest drilling regions appear to have been overly optimistic, according to the analysis of some 16,000 wells operated by 29 of the biggest producers in oil basins in Texas and North Dakota,” the WSJ wrote. “Collectively, the companies that made projections are on track to pump nearly 10% less oil and gas than they forecast for those areas.” The WSJ calculated that the lower-than-expected production adds up to nearly one billion barrels of oil and gas over 30 years, worth more than $30 billion at current prices.

Libya’s Sharara field sees more trouble. Libya’s largest oil field, the Sharara field, was hit with more bad news this week. “An inspection team reported the theft of key operational equipment, including transformers and cables from several wells. The incident will reduce Sharara's output by approximately 8,500 barrels per day even after the main system restarts operations,” Libya’s National Oil Corp. said in a statement. The Sharara field, which has typically produced in excess of 300,000 bpd, was temporarily shut down last month. “We are very concerned these attacks are not simple robberies but are part of a systematic attempt to destroy the Sharara system,” NOC chairman Mustafa Sanalla said.

Related: 2019 Could Make Or Break OPEC

Offshore drilling plans delayed on government shutdown. The U.S. Interior Department delayed the release of a proposed plan for offshore oil and gas leasing sales from 2019 through 2024 due to the ongoing government shutdown, according to S&P Global Platts. The plan was supposed to be released in mid-January but is now likely delayed.

Oil tanks in Permian caught fire. A series of oil tanks caught firenear a Noble Energy (NYSE: NBL) well site in the Permian in the early hours on January 2. The well was shut down and no injuries were reported.

Michigan to review Line 5 pipeline plans. The eleventh-hour deal between Enbridge (NYSE: ENB) and Michigan’s outgoing Republican governor is now being scrutinized by the new Democratic Governor and the state’s Attorney General. The plan calls for Enbridge to build a new line next to the aging Line 5 system, which is over sixty years old. Environmental groups and native tribes have vociferously opposed the plan, which they argue could spoil the Mackinac Straights. Line 5 carries crude oil and natural gas liquids from Canada, across Michigan, to a major petrochemical hub in Sarnia, Ontario.

 

 

https://oilprice.com/Energy/Energy-General/Oil-Rallies-On-Trade-Optimism.html

[yota691]

Oil prices are stabilizing in suppor t of hopes for trade talks and OPEC cuts

 

Arab and international Economy News _ Baghdad Oil prices held steady on Tuesday, buoyed by hopes that US and Chinese officials' talks in Beijing could defuse trade disputes between the world's two largest economies, while cutting OPEC-led production cuts on the market. By 0742 GMT, the benchmark Brent crude for $ 57.42 was up 9 cents, or 0.2 percent, from the previous close. US WTI crude futures were $ 48.56 a barrel, up 4 cents, or 0.1 percent. US Commerce Secretary Wilbur Ross said on Monday that Beijing and Washington could reach a "trade deal" that we can accept as dozens of officials from China and the United States hold talks in an effort to end a trade row that has been disrupting world markets since last year. Despite optimism in the talks in Beijing, some analysts warn that relations between Washington and Beijing are still fragile and that tensions may erupt again soon. There is also concern that a global economic slowdown will negatively affect fuel consumption. Given oil supplies, crude prices in 2019 are supported by production cuts by the Organization of the Petroleum Exporting Countries (OPEC), which is dominated by Middle Eastern countries, as well as reductions in non-OPEC production. Views 21   Date Added 08/01/2019

[yota691]

OPEC oil prices rise to more than 56 dollars

 

energy Economy News - Baghdad The Organization of the Petroleum Exporting Countries (OPEC) said on Wednesday that OPEC's daily basket price rose to more than $ 56 a barrel. "The price of the OPEC basket of fourteen barrels of crude was $ 56.43 per barrel," the organization said in a statement read by the economy news. "The price rose from the previous day of $ 55.14, according to the calculations of the OPEC secretariat." The cartel of the Organization of the Petroleum Exporting Countries (OPEC) consists of: Algeria, (Kuwait), Kuwait (Kuwait), S Sider (Libya), Bonnie Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Morban (United Arab Emirates) and Miri (Venezuela). Views 16   Date Added 09/01/2019

[yota691]

American supply drops in oil prices

 

energy Economy News - Baghdad Oil prices fell more than 1 percent on Thursday, driven by growing US supply, amid cautious US-China talks, without any concrete details of a solution to trade disputes between the two countries. US West Texas futures were at $ 51.66 a barrel at 08:07 GMT, down 70 cents, 1.3 percent from the previous settlement. Brent crude fell 1.2 percent, or 72 cents, to $ 60.72 a barrel. Views 12   Date Added 10/01/2019

[yota691]

Saudi Arabia reveals the size of its oil reserves

 

 Twilight News    
 3 hours ago

Saudi Arabia's oil reserves rose by 2.2 billion barrels to 263.1 billion barrels by the end of 2017, the Ministry of Energy said on Wednesday, while gas reserves increased by 17 trillion cubic feet to 319.5 trillion cubic feet, according to an independent review.

The Kingdom had previously announced that as at 31 December 2017, oil reserves stood at 260.9 billion barrels and gas 302.3 trillion cubic feet, representing the estimated reserves of oil and gas in the Saudi Aramco concession.

Following the ratification, the reserves of the Aramco concession area increased by the end of 2017 by 2.2 billion barrels to 263.1 billion barrels of oil and 319.5 trillion standard cubic feet of gas.

In addition to Saudi Arabia's Aramco concession, Saudi Arabia also has half of the oil reserves in the region shared with Kuwait. Saudi Arabia's share of oil reserves in the divided region (both land and sea) is 5.4 billion barrels, plus gas resources of 5.6 trillion cubic feet .

The inclusion of the oil and gas review by the Digweller & McNoten Company in the Aramco concession area will raise the Kingdom's total proven oil reserves from the end of 2017 to about 268.5 billion barrels of oil and 325.1 trillion cubic feet of Gas.

"The recent audit proves our belief that Aramco is the most valuable company in the world," Saudi Energy Minister Khalid Al-Falih said.

"The independent assessment confirms that every barrel of the oil we produce is the most profitable in the world."

Al-Falih pointed out that the cost of a barrel of oil in Saudi Arabia is estimated at $ 4, which makes Aramco the most profitable, adding that the Kingdom ranked first in terms of lack of burning associated gas.

In a related context, Al-Falih said that it aims to raise the proportion of gas component in the energy mix of the Kingdom to 70% from 50% in the next 12 years.

He stressed that the oil market will stabilize soon, saying, "We are serious in stabilizing the market."

"We are not overly concerned about the increase in oil stocks now after the OPEC + agreement," he said, pointing out that the Opec + cuts aim to reassure the market that we will continue to manage the fundamentals and keep the market in balance.

He did not rule out calling for further moves by the Organization of the Petroleum Exporting Countries (OPEC) and its allies in the future, noting that the market situation now looks better than it was a few weeks ago.

On oil production, Al-Falih pointed out that the Minister of Energy: Saudi Arabia's oil production at 10.2 million barrels per day currently, expected to reach Saudi Arabia's oil exports to 7.2 million barrels per day in January and 7.1 million b / d in February.

"The stability of the oil market will take time but we do not target a specific price for oil, and we will continue to monitor the oil market and stock levels," he said.

Keywords: 

[Pitcher]

The oil market looks to be broadly balanced in 2019, an improvement on 2018 which turned out oversupplied,” Morgan Stanley analysts Martijn Rats and Amy Sergeant wrote in a note. “This supports a partial oil price recovery.”

The investment bank says that the plunge in oil prices has “overshot,” with the selloff having been magnified in December due to the global financial turmoil.

To be sure, the fundamentals did turn negative, with weaker expectations for demand, weaker time spreads in the futures market, and higher inventories. In the short run, the ramp up of OPEC+ supply before the December decision to slash output will take time to filter through the market.

Morgan Stanley argues that a similar thing happened the first time around when OPEC+ agreed to cut production at the start of 2017. Producers ramped up output in the weeks and months ahead of the deal, and that new oil set sail just ahead of the implementation of cuts.

As a result, in the first half of 2017, inventories barely budged, even as production fell. It took several months before all of those additional barrels arrived at their destination and became integrated into storage facilities, and ultimately worked off by the market. It wasn’t until the second half of 2017 that visible inventory data began to demonstrate significant declines. Morgan Stanley says a similar thing might happen this year, which could cap oil prices at $65 per barrel. Related: The 3 Continents Driving Global Energy Demand

Floating storage has already begun to creep up, and the corresponding deterioration of timespreads has also occurred. The Brent forward curve has moved more sharply into contango recently, a situation in which near-term prices trade at a discount to longer-dated futures. Both floating storage and the contango are symptoms of a marker that is well- or over-supplied. The OPEC+ cuts are phasing in, but will take time to have an impact. Morgan Stanley slashed its oil price forecast by $8 per barrel, expecting Brent to average $61 this year, down from a previous estimate of $69. But the investment bank does see a “partial rebound” of Brent oil prices into the mid-$60s. The bank says that the oil market was oversupplied by about 0.6 mb/d in 2018, but things look better this year. “With demand growth in 2019 of ~1.2 mb/d and year-on-year decline in OPEC supply of 1.1 mb/d, offset by non-OPEC growth of ~1.6 mb/d, we expect supply and demand to be broadly in equilibrium over the year, an improvement over 2018,” Morgan Stanley concluded.

 

Of course, the situation is dynamic. The decision of OPEC+ to slash output will help boost prices, but that also makes it less likely that U.S. shale growth will slow. In 2020, shale output is expected to grow by even more, after the inauguration of new pipelines unlock new supply later this year. Wood Mackenzie and Rystad Energy both see non-OPEC output growth of between 2 and 3 mb/d in 2020, which will exceed total global demand growth. That suggests that the OPEC+ cuts might need to remain in effect beyond this year, although that also means the cartel cedes even more market share. It’s a riddle that Saudi Arabia and its partners will be hard pressed to figure out.

Related: OPEC’s No.2 Boosted Production, Exports Just Before Cuts Began

One consequence of U.S. shale continuing to grow while OPEC+ countries keep barrels off of the market is the increasing shift towards lighter oils in the global crude slate. Oil from West Texas tends to be light, while barrels from Saudi Arabia are more of the medium variety. Prices for gasoline and naptha have grown increasingly weak – a result of the surging supply of light oil. Meanwhile, medium and heavy supplies are less abundant, and diesel prices reflect that.

This light/heavy disparity could grow as the year wears on, with the impending regulations on marine fuels from the International Maritime Organization (IMO) set to take effect at the start of 2020. The IMO rules will force dirty fuel oil out of the mix for ship-owners, and diesel and other distillates will be called upon to fill the void. Analysts have long predicted that the IMO rules could drive up global crude oil prices.

For now, WTI is trading just above $51 per barrel and Brent at $61. Analysts are not suggesting a return of last year’s price levels, but the consensus seems to be that the late-December plunge went too far. “We think the rally in oil prices has further to run in Q1,” Standard Chartered wrote in a note on January 10.

 

https://oilprice.com/Energy/Oil-Prices/There-Is-Still-Room-To-Run-For-Oil-Prices.html

 

 

[Pitcher]

There Is Still Room To Run For Oil Prices

By Nick Cunningham - Jan 10, 2019, 6:00 PM CST

Join Our Community

 

Iraq increased in December both its oil production and exports, just ahead of the start of the new round of OPEC cuts, but OPEC’s second-largest producer says that it will be sticking to its pledge to reduce output as agreed.

According to data from Iraq's State Oil Marketing Organization (SOMO), as carried by S&P Global Platts, the total Iraqi oil exports in December—including those from the semi-autonomous region of Kurdistan—rose by 33,000 bpd from November to December, and stood at 4.14 million bpd last month, compared to a total of 3.81 million bpd exports from Iraq and Kurdistan in November. 

Production from Iraq and Kurdistan inched up by 10,000 bpd from November to average 4.465 million bpd in December, data from SOMO showed.

According to Iraq’s oil ministry data from last week, Iraq’s federal oil exports jumped to 3.726 million bpd in December from 3.372 million bpd in November, as exports from the southern ports at Basra hit a record high and exports from the northern Kirkuk fields increased after a slow tentative resumption in November following a year-long hiatus.

 

But as January began, Iraq vowed last week to stick to the production cuts agreed to by OPEC and its allies.

OPEC’s second-biggest producer will hold its production at 4.513 million barrels per day for the next six months, according to the Iraqi Oil Ministry, as cited by S&P Global Platts. If achieved, Iraq would produce 140,000 fewer barrels per day for the next six months than it did in October 2018—the date from which the cuts were calculated.

The news comes after Kpler and Refinitive Eikon data showed earlier last week that Iraq increased its oil exports to the United States in December by 140,000 barrels per day.

Iraq’s commitment to the latest deal is critical to the cartel’s success, and not just because it is OPEC’s second largest producer. In the first round of production cuts, Iraq was the largest overproducer and least compliant member of the group. 

 

https://oilprice.com/Energy/Oil-Prices/There-Is-Still-Room-To-Run-For-Oil-Prices.html

[Laid Back]

Adam mention this in his last update.

 

Now, think about this little tidbit... you may have noticed at the very top of that page that Iraq has "confirmed their 

commitment to participating" in the oil productions cuts. But, as a savvy reader who remembers the details, you 

also know that Iraq was not specifically included in the original OPEC agreement. 

 

Iraq is essentially standing on the sidelines, voicing support, encouraging the action... but reserving the right to 

step back from it and swoop in on some profits once they are there again, while everyone else frantically 

tries to organize a vote to release themselves from their self-imposed restrictions. At that point in time, Iraq will 

have all the time they need to successfully execute a couple days or even weeks of trading, exchanging currency 

with higher values and reaping profits on said exchanges, and everyone wins.

————————————————————————————————————————————————-

We get this in the news.

 

OPEC’s second-biggest producer will hold its production at 4.513 million barrels per day, for the next 6,months.

 

Iraq’s commitment to the latest deal is critical to the cartel’s success, and not just because it is OPEC’s second largest producer. In the first round of production cuts, Iraq was the largest overproducer and least compliant member of the group.

 

Thanks for the post Pitcher.

 

Go oil production 

Go RV

Go $1:1

[yota691]

Oil prices are falling and heading for the biggest weekly gain in two years

 11 January 2019 09:47 p
Mubasher : Oil prices fell on Friday, with fears of a slowdown in global economic growth, but is heading for the biggest weekly gain in two years.

By 6:30 am GMT, the price of Brent crude for March delivery fell 0.3 percent to $ 61.50 a barrel.

While US crude futures for February delivery fell 0.2% to $ 52.51 a barrel.

US Nymex crude had the longest daily gain in 9 years at yesterday's session.

This week, crude received mixed data, some positive and one negative. Oil-price news is the meeting between the United States and China to discuss the three-day trade dispute.

The Chinese side stressed that it has made progress in trade talks with the United States on structural issues related to the forced transfer of technology and intellectual property rights.

On the other hand, there are still fears of a slowdown in global economic growth, as the World Bank lowered its forecast for global economic growth this year and 2020.

The bank forecast global economic growth this year would be 2.9 percent, 0.1 percent below initial estimates and 3 percent in 2018.

The Bank also cut its estimate of global economic growth in 2020 by 0.1% at 2.8%.

The announcement of Baker Hughes crude mining data is scheduled for later in the day.

 

[Pitcher]

America’s Remarkable Dual Achievement In Energy

By Irina Slav - Jan 10, 2019, 5:00 PM CST

Join Our Community

America’s “Generation Energy” has achieved something that seemed impossible: an increase in energy consumption coupled with a consistent decline in carbon dioxide emissions to the lowest in several decades. That’s what the chief executive of the American Petroleum Institute told a news conference at the annual State of American Energy address.

“Every generation has its own defining challenges, and its own defining accomplishments. We call this one ‘America’s Generation Energy’ because of a remarkable dual achievement: meeting record world energy demand while driving record CO2 emissions reductions. Thanks to America’s Generation Energy and its cutting-edge innovations, the U.S. energy outlook is stronger than ever,” Mike Sommers said.

Indeed, data from the World Bank shows that CO2 emissions in the United States fell to the lowest level in 50 years in 2012 on a per capita basis. At the same time, oil and gas production has been growing, especially in the last two decades thanks to the shale revolution. However, it’s worth noting that emissions have not been falling throughout these 50 years: there was a consistent decline over the three years to 2017 but now, CO2 data from emissions tracker Rhodium Group suggests, these may have actually risen in 2018, by 3.4 percent.

Sommers also praised the increase in U.S. crude oil exports, saying “Net oil imports this year are set to fall to their lowest levels since 1958. On some days, we actually export more oil than some OPEC nations produce. That’s a monumental shift in the global balance of energy power, and it’s paying off in communities across the nation – cutting family budgets and bringing manufacturing jobs back.”

Data from the Energy Information Administration shows U.S. crude oil exports hovered around the 2-million-bpd mark between May and October last year, dipping to 1.75 million bpd in August but recovering and rising to 2.326 million bpd in October. 

 

At the same time, imports, including from OPEC, stood at over 10 million bpd for all but two months in the May-October period, falling to 9.42 million bpd in October. In other words, the United States remains a net oil importer despite occasional peaks. Over the May-October 2018 period, crude oil imports from Canada alone were double the average rate of exports, at 4-4.55 million bpd.

Another outtake from the API’s annual State of American Energy address was a poll seeking to gauge the sentiments of Americans towards the domestic energy industry. The poll found that the overwhelming majority supported the growth in local crude oil and natural gas production and the increased development of energy infrastructure.

As much as 77 percent of the 1,000 participants in the survey said they supported policies in favor of the energy industry, according to API’s chief executive, with 90 percent seeing “personal value” in crude oil and natural gas. Some 83 percent saw oil and gas as “important for the future”.

The results of the poll are hardly a surprise, despite a lot of vocal opposition to pipelines and drilling on federal lands. Rising local production of oil and gas has had an overall positive effect on household spending and as the poll suggests most people are happy about it whatever the side effects of more drilling environmentalists protest against may be.

 

https://oilprice.com/Energy/Energy-General/Americas-Remarkable-Dual-Achievement-In-Energy.html

[Pitcher]

Saudis Set Sights On $80 Oil

Hoping to drive oil prices back up to $80 per barrel, Saudi Arabia is preparing deeper production cuts this month.

Saudi Arabia plans on lowering oil exports to 7.1 million barrels per day by the end of the month, according to the Wall Street Journal. The Saudi budget does not breakeven unless Brent crude prices average in the mid-$80s per barrel, vastly higher than today’s spot price. The WSJ reports that Saudi Arabia plans on cutting exports 800,000 bpd below November levels, which appears to be a larger reduction than required as part of the OPEC+ agreement.

The news helped push up crude oil prices on Monday. “The market has jumped all over that,” John Kilduff, founding partner at energy hedge fund Again Capital, told CNBC. The Saudis are “just being aggressive about trying to clean up the situation they fell into from oversupplying the market based on the fear of Iran sanctions,” he said.

WTI and Brent were each up 2 percent during midday trading, with WTI closing in on $50 per barrel and Brent jumping above $58 per barrel. Both benchmarks have rallied more than 16 percent since hitting a low point in late December. “Momentum is coming back into the market from very depressed price levels,” Petromatrix strategist Olivier Jakob said, according to Reuters. “We've had five consecutive days of price gains already, so what you have today is a continuation of that.” Related: Canada’s Natural Gas Crisis Is Being Ignored

A few other factors are contributing to the nearly two-week rally. The softer tone from the U.S. Federal Reserve last week buoyed global equities, reducing fear that steadily tightening monetary conditions would push the global economy into recession. Meanwhile, the U.S. and China resumed trade negotiations this week, widely seen as a small sign of a thaw in the trade war. With both countries already starting to suffer from the effects of the trade war, there is pressure on both governments to reach an accord. If the worst can be avoided, there is a lot more room to the upside for crude prices, particularly since oil traders have grown pessimistic about the fate of the global economy. “The oil market is still pricing-in a sharp slowdown in global growth despite our economists’ forecast for resilient growth and robust late-2018 oil demand data,” Goldman Sachs wrote in a note on January 6. “Absent such a large slowdown, we expect prices to recover further, although growth uncertainty will likely require strengthening physical oil markets to drive this rally, with encouraging evidence that the OPEC cuts are starting.”

Indeed, the oil market is already tightening up relative to the outlook in December when prices dropped to 18-month lows. Saudi Arabia already slashed output by 400,000 bpd in December compared to a month earlier, and news that they will essentially cut another 400,000 bpd in January is raising expectations of a tighter market.

 

Related: Has U.S. Fracking Activity Peaked Already?

“If compliance by OPEC and the allied non-OPEC countries is similarly high as in the agreement two years ago, the oil market is likely to be rebalanced during the first half year,” Commerzbank wrote in a note on Monday. “Less sharply rising US oil production may also play its part in this. According to Baker Hughes, drilling activity at least dropped noticeably in the last reporting week, doubtless as a result of the recent low prices.”

With the OPEC+ cuts now phasing in, the supply glut that blew up the market in November and December could start to ebb. To be sure, there is not a consensus on this point. Some analysts see the OPEC+ cuts as coming up short relative to what is needed to balance the market. Nevertheless, the outlook appears dramatically tighter than it did in December.

 

 

https://oilprice.com/Energy/Energy-General/Saudis-Set-Sights-On-80-Oil.html

 

 

[danielchu]

Well with 80$ a BBL we can go from number 3 in the world oil production to number one next year!!

The World's Top Oil Producers of 2017

• United States. The United States is the top oil-producing country in the world, with an average of 14.86 million b/d, which accounts for 15.3% of the world's production. ...

 

Opps sorry all ready number one ... guess that will make OPEC  obsolete.

Edited January 12, 2019 by danielchu

[danielchu]

Here’s Why OPEC Can’t Control Oil Prices Anymore

By Josh Barro

 

Don’t expect too much. Photo: Joe Klamar/AFP/Getty Images

Oil prices in free fall — a barrel of West Texas Intermediate crude now sells for $52, down a third since October — has been good news for American consumers, but it’s bad news for countries with oil-dependent economies. That is why leaders from Organization of Petroleum Exporting Countries (OPEC) have been meeting in Vienna and trying to agree on a production cutback to push up prices.

But they haven’t been able to reach an agreement.

These days, OPEC tries to coordinate with Russia, which isn’t an OPEC member, because the group doesn’t believe it can affect global oil prices enough through the actions of its own members. And the Persian Gulf countries that dominate OPEC want a larger cutback than Russia is willing to agree to.

As Bloomberg describes, this split is partly driven by conflicting interests: The Gulf producers are mostly concerned about how low oil prices affect their government budgets, but Russia doesn’t want prices to rise too much. Bloomberg cites a Kremlin official who worried higher gasoline prices could upset consumers and reduce political support for Vladimir Putin’s economic policy.

But a broader reason OPEC control of oil prices isn’t working anymore is that the world oil market has changed in ways that make a cartel strategy less effective.

The usual idea behind a cartel is: You agree to limit production, and that means you sell less oil, but you make more profit per barrel because prices have to rise to bring demand in line with the reduced supply. Historically, constraining supply has been an effective way to change the oil price, because non-OPEC countries had limited flexibility to increase their production when OPEC production declined, and because consumer behavior is inelastic, especially in the short term. High oil prices might eventually cause you to buy a smaller car or live closer to work, but probably not right away.

The rise of fracked shale oil has changed the non-OPEC production side of that analysis. There have been a lot of headlines recently about how, because of the shale boom, the U.S. is now producing so much oil we are a net oil exporter. But as importantly for OPEC’s loss of control, the shale boom makes the U.S. a more elastic oil producer.

What I mean by that is, some of the oil in the ground under the U.S. is easy (cheap) to extract, and some of it is hard (expensive) to extract. We produce the easy oil in any market condition. But if OPEC moves to cut back supply and drive up prices, U.S. producers will become more inclined to find and extract the expensive oil. In the medium term, that will tend to push U.S. production volumes up and oil prices partially back down.

Among other things, that means a production cut just doesn’t produce as much benefit to OPEC producers as it used to. After a while, they’ll be faced with prices not that much higher than today, and a smaller share of the global market.

With less total benefit to go around from a production cut, cartel members are more likely to get bogged down in fights over who exactly should do the cutting — it’s harder to put together a positive-sum deal for every member of the cartel. And of course, political divisions among OPEC members also don’t help, and neither does Saudi Arabia’s need to stay in the Trump administration’s good graces.

But consumers shouldn’t get too excited about a weak OPEC. It’s likely the fall in oil prices over recent months — the one that raised OPEC’s urgency to find a supply-reduction deal — is driven by some of the same factors that are driving stock prices and bond yields down: a worsened outlook for global economic growth, and therefore lower expected demand for fuel.

http://nymag.com/article/2018/12/heres-why-opec-cant-control-oil-prices-anymore.html

[yota691]

UAE: OPEC is not an enemy of the United States

01:20 - 12/01/2019

 

 

 

( 
Reuters) - OPEC is not an enemy of the United States, UAE Energy Minister Suhail al-Mazroui said on Saturday. 
"The two parties are complementary to each other and there is no hostility between them," Mazroui told a news conference in Abu Dhabi in a commentary on relations between OPEC and major oil consuming countries such as the United States. 
In December, OPEC member states and major producer nations led by Russia agreed to cut oil production by 1.2 million barrels per day (bpd) from January to seek market balance. 
The decision came despite calls from US President Donald Trump to the oil-exporting countries to refrain from cutting production, saying that this will cause the increase in global crude prices.

[danielchu]

The decision came despite calls from US President Donald Trump to the oil-exporting countries to refrain from cutting production, saying that this will cause the increase in global crude prices.

[yota691]

The UAE minister of energy is expected to average $ 70 a barrel this year

 

UAE Minister of Energy Suhail Al Mazrouei. "Reuters"

Arab and international Economy News Baghdad ,  said UAE Energy Minister Suhail Al Mazroui, Saturday, he expects an average oil price of $ 70 a barrel in 2019 on the back of an agreement reached by OPEC countries and oil - exporting non -members with a view to reducing production. The minister made the remarks to reporters in Abu Dhabi. Views 19   Date Added 01/12/2019

[yota691]

World Bank Cuts Oil Price Forecast To $67 In 2019-2020

By Tsvetana Paraskova - Jan 09, 2019, 12:30 PM CST

The World Bank expects oil prices to average $67 a barrel this year and next, down $2 compared to projections from June last year, the bank said in its Global Economic Prospects report, in which it also revised down its global growth projections amid “darkening skies” for the global economy.

Oil prices were highly volatile in the second half of 2018, with sharp plunges toward the end of 2018, chiefly due to supply-side factors, the World Bank said. Last year, oil prices averaged $68 a barrel, slightly lower compared to the bank’s forecast from June 2018, but 30 percent higher than the average price of oil in 2017.

“Oil prices are expected to average $67/bbl in 2019 and 2020, $2/bbl lower than June projections; however, uncertainty around the forecast is high,” the World Bank said in its January 2019 Global Economic Prospects report.

 

This year, oil demand growth is expected to stay robust, but expected slowdown in emerging market and developing economies (EMDEs) “could have a greater impact on oil demand than expected,” the World Bank said.

The outlook for the supply-side is also uncertain as it largely hinges on OPEC and allies’ decisions about production levels, especially after the first half of 2019, according to the bank.

“While these producers have agreed to cut output by 1.2mb/d for six months starting January 2019, few details have been forthcoming about the distribution of the cuts, and they may prove insufficient to reduce the oversupply of oil,” the World Bank said.

The other key uncertainties about oil prices will be the impact of the U.S. sanctions on Iran when the waivers end in early May, as well as the production in Venezuela, which has been steadily falling over the past two years.
 

“Meanwhile, crude oil output in the United States is expected to rise by a further 1mb/d in 2019, with capacity constraints envisioned to ease in the second half of the year as new pipelines come onstream,” according to the World Bank.

Apart from revising down its oil price projections and warning about the uncertainties surrounding oil price trends this year, the World Bank also noted that global economic growth is expected to slow to 2.9 percent in 2019 from 3 percent in 2018, as international trade and investment weaken.

“The outlook for the global economy has darkened. Global financing conditions have tightened, industrial production has moderated, trade tensions have intensified, and some large emerging market and developing economies have experienced significant financial market stress,” the World Bank said. 

By Tsvetana Paraskova for Oilprice.com

[ChuckFinley]

Adam was looking at $70. If it hits $67 I think that will puts us there.  

[new york kevin]

Hey Chuck. Ho.w is everything going for you and family? Great I hope

[ChuckFinley]

33 minutes ago, new york kevin said:

Hey Chuck. Ho.w is everything going for you and family? Great I hope

So far so good. Hoping to close this year out with a BANG. 

[js214]

1 hour ago, ChuckFinley said:

So far so good. Hoping to close this year out with a BANG. 

Right there with you .Anything beats waiting this out till the end of 2020 as some have suggested 

[ChuckFinley]

1 minute ago, js214 said:

Right there with you .Anything beats waiting this out till the end of 2020 as some have suggested 

I hear you. I am getting so long in the tooth (16 years) that I feel like a Saber Tooth Tiger.  

[army03]

ChuckFinley you just need to your KNEES IN THE BREEZE  

[ChuckFinley]

8 minutes ago, army03 said:

ChuckFinley you just need to your KNEES IN THE BREEZE  

Need to check my Can of Peas. 

[Pitcher]

Volatility in oil prices casts shadow over 2019 outlook 

 

Updated 12 sec ago 

The change in speculative flows marks a reversal from last month’s gloomy activities

RIYADH: Oil prices rebounded to their highest level in a month, the Brent crude price rose back above the psychological level of $60 per barrel in the longest rally since 2017, and WTI increased to $52.59 per barrel. The Brent / WTI spread narrowed to $7.41 per barrel. 

Oil market sentiment went from extreme bearishness to extreme bullishness in less than a month. This short cycle disconnects the oil market from earlier bearish sentiments driven by other commodity markets, which had broader support from equity markets. Noticeably, equity markets are still down from a year ago but are steadily clawing back gains.

Speculative short positions over the past two months that took the Brent crude price down to a 16-month low at $50 per barrel amid bearish momentum, and neglected bullish sentiments, proved a huge disconnection from the physical market fundamentals. 

Market sentiments have changed lately, with banks and hedge funds trading oil futures and options while removing new bets from falling oil prices, changing back into rising oil price bets. Consequently, speculators have cut back their previous short positions in Brent futures and extended their long positions. 

This change in speculative flows marks a reversal from last month’s gloomy activities, after tireless efforts to exit bullish oil positions with limited buying interest. Yet some speculators are still cautious in betting on prices’ upward movement. 

Apparently crude oil is back to a bull market, with prices on an upward momentum since the start of 2019. However, the World Bank expects trade tensions to slow global economic growth to 2.9 percent in 2019 from 3 percent in 2018. The divergence from any possible global economic slowdown and oil demand growth has been widely realized by market participants. 

The potential end of the US-China trade war is not adding to oil’s momentum, as demand growth is still upbeat and bull market confidence grows over the global economy and the upcoming tight oil market amid signs of OPEC+ compliance to the new output cuts. The first signs of supply/demand tightening are nonetheless starting to filter in, with dwindling oil tanker freight rates.

The impact of low oil prices in 2015-2016 on upstream investment, which resulted in huge CAPEX cuts, has eventually shown its first signs in the lowest forecasts for Norway’s oil output in three decades.

Extreme oil price volatility in late 2018 has also cast some doubt on oil producers’ capital spending plans in 2019, with Brent now hovering around $60 per barrel after reaching $86 in October.

Norway’s oil output decline was expected to start from mid-2020. But its oil production continues to decline faster than expected due to matured oil fields that caused uncertainty in production forecasts, led by lower upstream investments and a lack of new discoveries to offset any output fall. Norway’s crude oil production currently stands at around 1.3 million barrels per day (bpd), down from 1.5 million bpd a year ago.

 

http://www.arabnews.com/node/1434586/business-economy