Tag Archives: Oil Prices

IEA says OPEC, Russia oil output freeze deal may be ‘meaningless’

SINGAPORE (Reuters) – A deal among some OPEC producers and Russia to freeze production is perhaps “meaningless” as Saudi Arabia is the only country with the ability to increase output, a senior executive from the International Energy Agency (IEA) said on Wednesday.

Brent crude futures are up more than 50 percent from a 12-year low near $27 a barrel hit early this year, bouncing back after Russia and OPEC’s Saudi Arabia, Venezuela and Qatar struck an agreement last month to keep output at January levels.

Qatar has invited all 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and major non-OPEC producers to Doha on April 17 for another round of talks to widen the production freeze deal.

“Amongst the group of countries (participating in the meeting) that we’re aware of, only Saudi Arabia has any ability to increase its production,” said Neil Atkinson, head of the IEA’s oil industry and markets division, at an industry event.

“So a freeze on production is perhaps rather meaningless. It’s more some kind of gesture which perhaps is aimed … to build confidence that there will be stability in oil prices.”

Libya has joined Iran in snubbing the initiative, and the absence of the two OPEC producers – both with ample room to increase output – would limit the impact of any success in broadening the freeze at the April meeting.

The rise in output from Iran in the first quarter post-sanctions has been in line with IEA’s expectation of 300,000 barrels per day (bpd), Atkinson said, adding that Tehran’s output could rise again by the same amount by the third quarter.

“Iran has not exactly been flooding the market with lots more oil. It seems to be far more measured,” Atkinson said.

It will take a while for Iran to regain its pre-sanctions share in Europe, where markets have been taken over by Saudi Arabia, Russia and Iraq, he added.

The IEA, energy watchdog for the Organisation for Economic Co-operation and Development (OECD), expects the wide gap between supply and demand to narrow later this year, paving the way for an oil price recovery in 2017.

“We think the worst is over for prices … Today’s prices may not be sustainable at exactly $40 a barrel, but in this mid-$30s and upward range, we think there will be some support unless there’s a major change in fundamentals,” Atkinson said.

(Reporting by Florence Tan; Editing by Tom Hogue)

Ride to the Bottom: U.S. energy workers hit hard by company stock bets

OKLAHOMA CITY (Reuters) – Nearly 15 years since Enron’s collapse decimated the retirement accounts of its employees, hundreds of thousands of U.S. energy workers remain precariously exposed to big, concentrated bets on company stock in their 401(k) retirement plans.

The slide in oil prices to their lowest levels in over a decade wiped out several billion dollars of retirement wealth in the energy sector in the past year. The losses may prove temporary for companies that successfully navigate the crisis, but tens of thousands of employees of struggling firms may see much of their nest eggs gone for good.

In Oklahoma and Texas, workers are delaying retirement plans, surrendering trucks, cars and land in personal bankruptcy cases, or just praying oil prices will recover.

“I just didn’t see it coming,” said John Thompson, 57, who was laid off in February from Oklahoma City-based SandRidge Energy Inc. SandRidge shares, which peaked above $65 in 2008, are now worth 10 cents apiece. “Because of this, I’m not retiring any time soon.”

SandRidge did not return messages seeking comment.

Almost without exception energy company 401(k) plans offered at least 10 different investment alternatives to company stock, their plans show.

Yet company reports and interviews with more than 20 current and former employees at independent energy firms show many employees have not taken advantage of opportunities to switch out of company shares.

Maureen Nelson, who retired from Chesapeake Energy Corp in 2013, said she lost an estimated $100,000 as she watched the company’s shares plunge in value.

Inertia and a strong faith in company leadership played a role in holding on to company stock, but so did company policies.

Many energy firms continued to match employee contributions with company stock, even as most large U.S. companies stopped the practice after the Enron debacle, according to several corporate benefits consultants.

The energy industry followed the lead of heavyweights such as Chevron Corp and Exxon Mobil Corp, which for years provided matching contributions in company stock in worker 401(k) retirement plans while also funding separate defined benefit pension plans for them.

DOUBLE IMPACT

Smaller companies could not afford to do both, but they typically matched employee contributions in stock. And energy workers often plowed some or most of their own contributions into company stock, benefits consultants said.

“It’s not prudent investing,” said Lou Harvey, chief executive of Boston-based financial research firm Dalbar Inc. “But employees tend to clamor for company stock.”

Typically, workers at larger energy companies would have 20 percent to 60 percent of 401(k) assets in company stock, according to a Reuters analysis of such holdings for more than 400,000 employees.

By contrast, the average U.S. 401(k) plan has about 7 percent of assets in company stock, according to Washington D.C.-based Investment Company Institute.

At Chevron, more than 40,000 participants in its 401(k) plan held $8.9 billion, or 47 percent of investment assets, in company stock at the end of 2014, according to the latest annual report.

Chevron stopped matching in company stock last year for better diversification, spokeswoman Melissa Ritchie said. Exxon stopped new stock contributions after 2006. Its shares still accounted for $12.9 billion of the 401(k) plan’s $22.3 billion in assets in 2014. Exxon declined comment.

When Texas-based Enron filed for bankruptcy in 2001, employees suffered a one-two punch – they lost their jobs and much of their savings because nearly two-thirds of their retirement assets were in Enron stock.

After Enron’s collapse, companies successfully lobbied Congress mostly against proposals to limit company stock ownership in 401(k) plans, fearing billions of dollars of their shares would be offloaded to meet the caps.

“Caps were a bridge too far for companies,” said Sheila Bair, former chair of the Federal Deposit Insurance Corporation and a U.S. Treasury official who worked on President George W. Bush’s 2002 task force on retirement security.

Still, publicly-traded companies have revamped their retirement plans to make them more balanced, even imposing own limits on company stock ownership, said Rob Austin, director of retirement research at Aon Hewitt.

FOLLOW THE LEADER

Diversification has yet to reach much of the energy sector, though. Oil and gas workers had more than $32 billion in company stock in their 401(k) accounts, or about 38 percent of plan assets for the 40 companies in the S&P 500 Energy Sector Index, according to 2014 annual reports filed with the U.S. Department of Labor. Since then, the index has lost 21 percent. Smaller independents have been hit about twice as hard, on average.

With about a third of his 401(k) plan in company stock, retired Chesapeake geologist Keith Rasmussen, 61, looks to sell land he owns in Oklahoma and Idaho to shore up his depleted retirement funds.

Chesapeake, once a shale boom darling, now trades 84 percent below mid-2014 levels, hurt by heavy debt and prolonged slump in natural gas prices. Nearly 8,000 participants in its 401(k) are exposed to the reversal of fortune, holding 35 percent of the plan’s $615 million in assets in company stock at the end of 2014, according to the latest annual report.

Some current and former Chesapeake employees said their decisions to hold onto stock were based partly on their reverence for Aubrey McClendon, its legendary former chief executive, who died in a car crash in early March

“You could be the biggest skeptic in the world, and you listen to him in a room for 30 minutes, and you’re ready to hand him all your money,” said Ginni Kennedy, 58, who retired from her engineering job at Chesapeake in 2013. “I had faith that he’d continue to be able to pull those rabbits out of his hat.”

Chesapeake, which declined to comment, stopped matching in company stock last year.

Many workers are now paying a heavy price for failing to heed warnings about concentration risk.

“Our bankruptcy work has quadrupled over the past six months,” said Roger Ediger, an Enid, Oklahoma lawyer who handles personal bankruptcy cases. “Most of them are energy related.”

A U.S. Supreme Court decision in 2014 underscored the risk of offering company shares in 401(k) plans. Its decision made clear that company stock was not automatically a prudent investment.

The ruling also highlighted the potential conflicts of interest for companies in their role as fiduciary of 401(k) plans.

“It was a wake-up call to companies,” said Bill Ryan, chief fiduciary officer at Evercore Trust, the largest U.S. third-party fiduciary.

At Fort Worth, Texas-based Quicksilver Resources Inc, Evercore Trust took a rare step to block further employee investment in the company’s 401(k) plan in October 2014, as fiduciary for the stock plan. The move preserved some value, but not much, given that by the time the stock fund was liquidated company shares have already fallen to about 50 cents from about $3.50 in 2014. Equity investors lost virtually everything five months later when Quicksilver filed for bankruptcy protection.

Bair, now a college president, said companies with heavy stock concentrations in their 401(k)s should follow peers that have caps in place to protect workers and avoid government mandates.

“If we have another failure like Enron, government regulation may be coming.”

(Reporting By Tim McLaughlin and Luc Cohen; Editing by Tomasz Janowski)

Crude oil drops, dollar gains as markets watch central banks

NEW YORK (Reuters) – Oil prices fell on Monday as Iran dashed hopes of a coordinated production freeze, while the dollar rose ahead of a policy meeting at the U.S. central bank.

A gauge of stocks across the globe ticked up, with Wall Street weighed by commodity shares as Europe rose partly on a positive view of the auto industry.

Attention switched this week to policy decisions from the Bank of Japan, the U.S. Federal Reserve and the Bank of England, among others. They follow last week’s interest rate cut, asset-purchase program extension and new cheap loans for banks pledge at the European Central Bank.

The Fed, which ends its two-day policy meeting on Wednesday, has said it is on track to raise rates gradually in 2016, but doing so will hinge on the health of the economy. Recent data has shown above-forecast jobs creation but wage growth remains a concern.

The euro, which rose last week after ECB President Mario Draghi signaled further rate cuts were unlikely, fell 0.5 percent on Monday to $1.1098. The yen was flat against the greenback while sterling fell 0.6 percent to $1.4302. The dollar index rose 0.5 percent.

“It’s the combination of a market that overextended in the opposite direction because of Draghi’s ‘no more rate cut’ comment and just some corrective natural price action into the risk of (a Fed meeting) that could be a little bit more hawkish,” said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

On Wall Street, the S&P 500 was weighed by declines in basic materials and energy shares as commodity prices fell. As they also wait on the release of economic data, including U.S. retail sales, investors continued to interpret the ECB’s move.

“To me, it’s one of those days were the (stock) market is doing its best to digest some of those factors and to see what’s next,” said Steven Baffico, chief executive officer at Four Wood Capital Partners in New York.

Equity volume on U.S. exchanges was the lightest so far this year.

The Dow Jones industrial average rose 15.82 points, or 0.09 percent, to 17,229.13, the S&P 500 lost 2.55 points, or 0.13 percent, to 2,019.64 and the Nasdaq Composite added 1.81 points, or 0.04 percent, to 4,750.28.

The pan-European FTSEurofirst 300 index, which had climbed 2.7 percent on Friday, ended up 0.67 percent with an index of auto and auto parts shares up 1.56 percent. MSCI’s gauge of stocks across major markets ticked up 0.1 percent. Nikkei futures rose 0.4 percent.

Brent crude oil, whose rise has helped buoy stocks in recent weeks, fell below $40 a barrel, as U.S. crude stockpiles continue to mount and Iran maintained little interest in a global production freeze.

“We feel that the bulk of this stronger than expected 5-6 week price advance has been seen and that prices will be shifting into a near term consolidation phase,” said Jim Ritterbusch of Chicago energy consultancy Ritterbusch & Associates.

Brent last traded at $39.61, down 1.9 percent. U.S. crude fell 3 percent to $37.34 per barrel.

The benchmark 10-year U.S. Treasury note rose 4/32 in price to yield 1.9627 percent from 1.977 percent on Friday.

Spot gold fell 1.1 percent, last trading at $1,234. Copper dropped 0.3 percent.

(Additional reporting by Laila Kearney, Dion Rabouin, Barani Krishnan and Gertrude Chavez-Dreyfuss; Editing by Nick Zieminski and Meredith Mazzilli)

Oil prices rally, S&P 500 up for a fifth consecutive session

NEW YORK (Reuters) – Oil prices jumped on Monday as optimism rose that major producers might reach a price support deal, helping U.S. stocks to notch a fifth straight session of gains.

Brent hit its highest level since December, climbing $2.12, or 5.5 percent, to settle at $40.84 a barrel, while U.S. crude rose $1.98, or 5.5 percent, to settle at $37.90.

Oil has rallied in recent weeks amid increasing hope that OPEC producers may be moving toward a production freeze to support prices in an oversupplied market. On Monday, the Ecuadorean government said Latin American oil producers agreed to meet on Friday in Quito to coordinate a strategy to support crude oil prices.

“It’s more confirmation that oil producers are close to achieving some kind of a deal on price support,” said Phil Flynn, analyst at Price Futures Group in Chicago.

“It’s feeding bullish sentiment into a market that’s turned 180 degrees from where it stood just weeks ago.”

In other commodities markets, spot iron ore prices jumped 19 percent, helped by expectations that Chinese steel mills were planning production cuts.

A 2.4 percent gain in the S&P energy index offset a decline in technology shares, leaving the benchmark S&P 500 slightly positive for the session and extending the recent rise in stocks.

The Dow Jones industrial average gained 67.18 points, or 0.4 percent, to 17,073.95, the S&P 500 rose 1.77 points, or 0.09 percent, to 2,001.76 and the Nasdaq Composite dropped 8.77 points, or 0.19 percent, to 4,708.25.

U.S. stocks have posted gains in each of the last three weeks, thanks in part to the rebound in oil prices, after a steep sell-off at the start of the year.

MSCI’s all-country world stock index edged up 0.03 percent. In Europe, the pan-regional FTSEurofirst 300 index closed down 0.3 percent.

The dollar fell, wiping out its initial gains, as the oil rally rekindled demand for the euro and commodity-sensitive currencies.

The euro’s gains were limited by the view the European Central Bank would embark on more stimulus to support the euro zone’s fragile economic recovery at its policy meeting on Thursday.

The euro edged up 0.1 percent against the greenback to $1.1008 and slipped 0.5 percent versus the yen to 124.75 yen. The dollar index, which measures the dollar against a basket of six currencies, was down 0.2 percent at 97.132.

In the U.S. bond market, U.S. Treasury prices fell as oil prices surged and as traders increased bets in the wake of the strong February jobs report that the Federal Reserve will raise interest rates this year .

The benchmark 10-year note’s yield rose to 1.920 percent, its highest in just over a month. It was last down 6/32 in price to yield 1.902 percent, up from 1.883 percent late Friday.

(Additional reporting by Barani Krishnan in New York, Nigel Stephenson in London, Hideyuki Sano in Tokyo, Marius Zaharia and Patrick Graham in London; Editing by Nick Zieminski, Bernadette Baum and Dan Grebler)

Oil below $37 as record U.S. inventories overshadow output freeze plan

By Alex Lawler

LONDON (Reuters) – Oil fell further below $37 a barrel on Wednesday as U.S. crude stockpiles rose to a new record, underlining the extent of a supply glut and countering support from producer efforts to tackle it.

Crude inventories rose by 10.4 million barrels, the U.S. government’s Energy Information Administration (EIA) said in its weekly report released at 1530 GMT (10:30 a.m. EST), much more than analysts had expected. [EIA/S]

Global benchmark Brent crude <LCOc1> was down 45 cents at $36.36 a barrel by 1548 GMT (10:48 a.m. EST). On Tuesday, it reached $37.25, the highest in almost two months. U.S. crude <CLc1>, also known as WTI, was down 55 cents at $33.85.

“Today’s EIA data will do very little to help oil’s recent bounce,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.

“In short, it’s difficult to make a bullish case. Signs that the glut in oil and reversal of the building trend will subside any time soon seems distant.”

The inventory rise was even larger than the 9.9 million-barrel increase reported on Tuesday by industry group the American Petroleum Institute (API). The API report had weighed on prices earlier in the session.

Brent has risen 34 percent from a 12-year low of $27.10 hit on Jan. 20, adding to expectations that further declines may not be on the cards. An analyst at the International Energy Agency said on Tuesday prices appeared to have bottomed.

Crude has collapsed from more than $100 in mid-2014, pressured by excess supply and a decision by the Organization of the Petroleum Exporting Countries to abandon its traditional role of cutting production by itself to boost prices.

After more than a year of failing to agree any steps, OPEC and outside producers have stepped up diplomatic activity to fix the supply glut. Saudi Arabia, Qatar, Venezuela and non-OPEC producer Russia said on Feb. 16 they would freeze output.

The four countries have agreed to meet again in mid-March, Venezuelan Oil Minister Eulogio Del Pino said last week. The location for the talks has yet to be decided, OPEC delegates say.

In an early sign that Moscow will stick to the plan, Russia reported its oil output was little changed in February and oil company Rosneft <ROSN.MM> is even floating the idea of a domestic production cut, two industry sources said.

Saudi Arabia has yet to report its production, but a Reuters survey this week found no sign of an increase in February. <OPEC/O>

(Additional reporting by Barani Krishnan in New York and Osamu Tsukimori in Tokyo; Editing by Dale Hudson and Susan Fenton)

Wall Street slightly lower as crude oil slips

By Abhiram Nandakumar

(Reuters) – Wall Street edged lower on Wednesday as oil prices slipped after data showed U.S. crude stockpiles touched record highs.

U.S. crude fell about 1 percent after a report from the American Petroleum Institute (API) showed that an increase in crude stockpiles was way above estimates. [O/R]

Wall Street closed sharply higher on Tuesday, helping the S&P 500 claw back most of its losses in the last two months. The index, which had fallen as much as 10.5 percent, is now down only about 3 percent for the year.

“The market got severely overbought yesterday,” said Jeffrey Saut, chief investment strategist at Raymond James Financial in Florida. “It would not be surprising to see stocks pull back a little bit here.”

At 9:41 a.m. ET, the Dow Jones industrial average <.DJI> was down 34.25 points, or 0.2 percent, at 16,830.83.

The S&P 500 <.SPX> was down 2.64 points, or 0.13 percent, at 1,975.71 and the Nasdaq Composite index <.IXIC> was down 1.29 points, or 0.03 percent, at 4,688.31.

Eight of the 10 major S&P sectors were lower, led by the utilities sector’s <.SPLRCU> 1.3 percent decline. The materials sector <.SPLRCM> fell 0.65 percent.

Shares of Monsanto <MON.N> were down 5 percent at $87.85 after the company slashed its 2016 profit forecast. The stock was the second biggest drag on the S&P 500.

Data on Wednesday showed the U.S. private sector added a higher-than-expected 214,000 jobs in February, suggesting solid job growth despite market turmoil and worries about a slowing global economy.

The report serves as a precursor to the more comprehensive monthly jobs report by the U.S. Labor Department on Friday.

The U.S. economy continues to show signs of recovery even as China and euro-zone countries struggle to spark their sputtering economic growth engines, pushing central banks to adopt diverging monetary policies.

Investors are increasingly facing the prospects of higher interest rates from the U.S. Federal Reserve, while also expecting more monetary stimulus from the European Central Bank and the People’s Bank of China.

Zynga <ZNGA.O> was up 6.9 percent at $2.31 after the “Farmville” creator named a new chief executive and said founder Mark Pincus would be executive chairman.

The Fed will also issue its Beige Book report of anecdotes on business activity at 2 p.m. ET. San Francisco Fed President John Williams is slated to speak later in the day.

Declining issues outnumbered advancing ones on the NYSE by 1,361 to 1,271. On the Nasdaq, 1,102 issues fell and 1,057 rose.

The S&P 500 index showed two new 52-week highs and no new lows, while the Nasdaq recorded nine new highs and six new lows.

(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Anil D’Silva)

OPEC veteran urges oil output cut, frets about global glut

DOHA (Reuters) – OPEC and non-OPEC producers should cut production to balance the global oil market before a supply glut becomes unmanageable “like a cancer”, Qatar’s former oil minister Abdullah al-Attiyah said.

Attiyah, influential in OPEC as Qatar’s energy minister from 1992 to 2011, said a deal announced in Doha last week by Saudi Arabia and Russia to freeze production at January levels was not enough to balance the market as an oversupply continues to grow.

“If they want to balance the market the solution will be easy. Don’t go slow. If you do, then every time the market will create a glut. Cut 2.5 million barrels and then you will balance the market in a few years,” Attiyah, who says he is talking to producers in and outside of OPEC, told Reuters.

“I will ask every producer, do you want quantity or price? They say they want a reasonable price but to reach that there has to be sacrifice. If you do not sacrifice the other will not sacrifice,” he said in an interview in Doha on Monday.

“The oversupply has grown from 1.7 million barrels per day (bpd) to 3 million bpd today. I am very worried about oversupply. It is like a cancer. If you did not deal with it quickly, it would spread.”

Oil has slid around 70 percent from more than $100 a barrel in mid-2014, pressured by excess supply and a decision by the Organization of the Petroleum Exporting Countries to abandon its traditional role of cutting production alone to boost prices.

Attiyah spoke before Saudi Oil Minister Ali al-Naimi said on Tuesday he was confident more nations would join a pact to freeze output at existing levels in talks expected next month, but effectively ruled out production cuts by major crude producers anytime soon.

Addressing the annual IHS CERAWeek conference in Houston, Naimi told energy executives that growing support for the freeze and stronger demand should over time ease the glut that has pushed oil prices to their lowest levels in more than a decade.

Traders have been skeptical about whether freezing production near record levels will support the market.

Attiyah, a leading architect of Qatar’s rise to global prominence as gas exporter, said OPEC would not cut production alone but added that Saudi Arabia, the world’s largest oil exporter and defacto leader of OPEC, was willing to cooperate with other producers to balance the market.

“Saudi Arabia needs a commitment from everyone. The Saudis will be big supporters — but others have to join in,” he said.

“OPEC will never do it alone. No way OPEC will do it alone: 100 percent.”

One stumbling block in attempts to forge a wider agreement is Iran, which is increasing output following the lifting of Western sanctions in January and whose oil minister was quoted on Tuesday as calling the deal “laughable”.

(Editing by Susan Thomas)

Saudis and Russia agree to oil output freeze, Iran still an obstacle

DOHA (Reuters) – Top oil exporters Russia and Saudi Arabia agreed on Tuesday to freeze output levels but said the deal was contingent on other producers joining in – a major sticking point with Iran absent from the talks and determined to raise production.

The Saudi, Russian, Qatari and Venezuelan oil ministers announced the proposal after a previously undisclosed meeting in Doha. It could become the first joint OPEC and non-OPEC deal in 15 years, aimed at tackling a growing oversupply of crude and helping prices recover from their lowest in over a decade.

Saudi Oil Minister Ali al-Naimi said freezing production at January levels – near record highs – was an adequate measure and he hoped other producers would adopt the plan. Venezuelan Oil Minister Eulogio Del Pino said more talks would take place with Iran and Iraq on Wednesday in Tehran.

“The reason we agreed to a potential freeze of production is simple: it is the beginning of a process which we will assess in the next few months and decide if we need other steps to stabilize and improve the market,” Naimi told reporters.

“We don’t want significant gyrations in prices, we don’t want reduction in supply, we want to meet demand, we want a stable oil price. We have to take a step at a time,” he said.

Oil prices jumped to $35.55 per barrel after the news about the secret meeting but later pared gains to trade near $33 on concerns that Iran may reject the deal and that even if Tehran agreed it would not help ease the growing global glut.

OPEC member Iran, Saudi Arabia’s regional arch rival, has pledged to steeply increase output in the coming months as it looks to regain market share lost after years of international sanctions, which were lifted in January following a deal with world powers over its nuclear program.

“Our situation is totally different to those countries that have been producing at high levels for the past few years,” a senior source familiar with Iran’s thinking told Reuters.

Iranian Oil Minister Bijan Zanganeh also indicated Tehran would not agree to freezing its output at January levels, saying the country would not give up its appropriate share of the global oil market.

SPECIAL TERMS

The fact that output from OPEC kingpin Saudi Arabia and non-OPEC Russia – the world’s two top producers and exporters – is near record highs complicates any agreement since Iran is producing at least 1 million barrels per day below its capacity and pre-sanctions levels.

However, two non-Iranian sources close to OPEC discussions told Reuters that Iran may be offered special terms as part of the output freeze deal. “Iran is returning to the market and needs to be given a special chance but it also needs to make some calculations,” said one source.

Russian Deputy Prime Minister Arkady Dvorkovich said freezing output was not a problem for his country as he anyway expected its production to be flat this year versus 2015.

An Iraqi oil ministry source said Baghdad was also happy to freeze production if all parties agreed.

“The agreement (if successful) should support oil prices but there are reasons to be cautious. Not all OPEC members have signed up to the deal – notably Iran and Iraq. History would also suggest that compliance may be an issue,” said Capital Economics’ analyst Jason Tuvey.

OPEC has been quarrelling for decades over output levels and Russia, which last agreed to cooperate with OPEC back in 2001, never followed through on its pledge and raised exports instead.

Also complicating any potential agreement is the geo-political rivalry in the Middle East between Sunni Muslim power Saudi Arabia and Shi’ite Iran. Saudi Arabia and its Gulf allies are fighting proxy conflicts with Russia and Iran in the region, including in Syria and Yemen.

In Syria’s five-year-old civil war, Riyadh politically and financially backs some rebel groups battling President Bashar al-Assad’s government, which has gained the upper hand with the help of Russian warplanes and Iranian-backed Shi’ite militias.

RUSSIAN BUDGET

The Doha meeting came after more than 18 months of declining oil prices, knocking crude below $30 a barrel for the first time in over a decade from as high as $115 a barrel in mid-2014.

The slump was triggered by booming U.S. shale oil output and a decision by Saudi Arabia and its OPEC Gulf allies to raise production to fight for market share and drive higher-cost production out of the market.

But although U.S. output has begun to decline and global demand has been robust it has still not been enough to offset booming global production which has led to oil stockpiles rising to record levels.

Saudi Arabia has long insisted it would reduce supply only if other OPEC and non-OPEC members agreed, but Russia – the world’s biggest oil producer and No.2 exporter – has said it would not join in as its Siberian fields were different from those of OPEC.

The mood began to change in January as oil prices fell below $30 per barrel.

While Venezuela has been the hardest-hit producer, current oil prices are a fraction of what Russia needs to balance its budget as it heads towards parliamentary elections this year. Saudi finances are also suffering badly, running a $98 billion budget deficit last year, which it seeks to trim this year.

But while talking about potential cooperation with OPEC, Russia raised its output to a new record high in January. For a table on OPEC and Russian output, click here

“Even if they do freeze production at January levels, you have still got global inventory builds which are going to weigh on prices. So whilst it’s a positive step, I don’t think it will have a huge impact on supply/demand balances, simply because we were oversupplied in January anyway,” said Energy Aspects’ analyst Dominic Haywood.

(Additional reporting by Alex Lawler, Reem Shamseddine, Ahmad Ghaddar and Amanda Cooper; Writing by Dmitry Zhdannikov; Editing by Dale Hudson and Pravin Char)

Wall Street slides with Exxon, oil

(Reuters) – U.S. stocks dropped on Tuesday after another steep fall in oil prices and a disappointing spending forecast from Exxon Mobil.

Shares of Exxon fell 2.2 percent to $74.59 after the oil major reported its smallest quarterly profit in more than a decade, forecast a 25-percent drop in capital spending from 2015 levels and suspended share repurchases.

With Exxon, “not only did the earnings disappoint people, but the fact that they slashed capex so much and they (suspended) their share repurchase program. It’s a good indication that one more large oil company is not seeing an improvement in the environment,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

Data so far this earnings period shows the capital spending slump that originated in the hard-hit energy sector was spreading more widely across other U.S. industries.

Earlier Tuesday, BP Plc reported an annual loss of $6.5 billion, its largest ever.

The S&P energy index slid 3.3 percent, the biggest drag on the S&P 500. Oil prices slid sharply as hopes faded for a deal between OPEC and Russia to cut output. The S&P utility index rose 0.4 percent, the only sector to end in positive territory.

The Dow Jones industrial average closed down 295.64 points, or 1.8 percent, to 16,153.54, the S&P 500 lost 36.35 points, or 1.87 percent, to 1,903.03 and the Nasdaq Composite dropped 103.42 points, or 2.24 percent, to 4,516.95.

The Dow Jones transportation average ended 2.9 percent lower following news of the first U.S. transmission of the Zika virus.

The S&P 500 is down 6.9 percent since the start of the year. Investors have been concerned about a China-led global economic slowdown, tepid U.S. economic data, the pace of interest rate hikes by the Federal Reserve and weak earnings. Fourth-quarter S&P 500 earnings are expected to have fallen 4.4 percent from a year earlier, according to Thomson Reuters data.

Bucking the day’s trend, Alphabet was up 1.3 percent at $780.91. Quarterly profit beat estimates late Monday and the Internet major surpassed Apple as the most valuable U.S. company.

After the bell, shares of Chipotle fell 3 percent after it reported its first fall in quarterly sales at established restaurants since it went public. The stock ended the regular session up 0.6 percent at $475.67.

Also, Yahoo dipped 1 percent in extended trading following its results.

Investors are keeping an eye on the U.S. election cycle. Iowa results created greater uncertainty because there were no clear winners, said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

“The bottom line for people who are investing is they prefer a little more certainty than they are seeing right now in either the election or in the energy markets,” he said.

About 8.5 billion shares changed hands on U.S. exchanges, below the 9.2 billion daily average for the past 20 trading days, according to Thomson Reuters data.

NYSE declining issues outnumbered advancers 2,478 to 603 and on the Nasdaq, 2,237 issues fell and 577 advanced. The S&P 500 posted 15 new 52-week highs and 28 lows; the Nasdaq recorded 22 new highs and 143 lows.

(Additional reporting by Tanya Agrawal and Lewis Krauskopf; Editing by Nick Zieminski and James Dalgleish)

Cheap oil won’t juice the U.S. economy this time: Reuters poll

WASHINGTON (Reuters) – U.S. consumers are cautious about spending their windfall from cheap gasoline and are saving more, according to a Reuters/Ipsos poll and official data, suggesting low oil prices are less of a boon for the U.S. economy than in the past.

Commerce Department data shows that the crude’s 70 percent drop since mid-2014 cut households’ annual spending on gasoline and other energy products by $115 billion, equivalent to roughly 0.5 percent of gross domestic product.

At the same time, however, savings increased by $121 billion and while the data gives no indication where the money has come from, the survey suggests the windfall accounted for a significant part of the sum.

The Reuters/Ipsos poll shows 75 percent of 3,068 Americans who answered questions on gasoline savings said the extra money helped them cover basic needs and the majority have not used their windfall to buy big ticket items. Over 40 percent of respondents said the savings had helped them pay down debts, according to the Jan. 15-27 online poll, which had a credibility interval of plus or minus 1.8 percentage points.

“It obviously hurts less when I go to the grocery store,” said Karen Joines, a recruiting firm product manager from Peachtree City, Georgia. Joines, who participated in the survey, estimates she saves $30 a week thanks to cheaper gasoline but has no plans for big purchases, in part because she worries low prices will not last.

Some economists say such doubts and the still-fresh scars of the 2007-2009 recession could explain the muted effect of cheap gas on consumption. For example, the economy only in mid-2014 recovered the more than 7 million jobs lost during the downturn.

“We don’t seem to be getting the benefits from cheaper gasoline that we did when the economy was healthier,” said veteran oil economist and independent consultant Phil Verleger.

Dallas Federal Reserve President Robert Kaplan said another reason Americans appeared wary of spending what they saved at the pump could be that more and more of them were approaching retirement.

“They are conscious of that (and) they need to save more,” Kaplan told Reuters in an interview.

HALF THE BENEFIT

The Dallas Fed, whose area includes the oil patches of Texas, Louisiana and New Mexico, estimates that a 50 percent fall in oil prices now adds around 0.5 percentage points to economic growth over a year, half of the impact seen before America’s oil boom.

One reason is that the oil sector has grown over the past decade, so spending and job cuts there weigh more on the whole economy. Cheaper oil also helps less because cars and machinery have become more fuel efficient, according to the Dallas Fed.

Thanks to hydraulic fracturing and shale drilling boom that made the United States the world’s top oil producer in 2014, the nation also imports less oil than ever.

That goes to explain why in the public eye the modest benefits of cheap energy enjoyed by all get overshadowed by the havoc the oil slump wreaked in the energy sector and the nation’s oil patches.

Tumbling prices forced producers and oilfield services companies to slash budgets, driving some into bankruptcy and many deep into the red. Markets have grown so bearish about the sector that when oil producer Hess &lt;HES.N> reported a fourth quarter loss of over $1.8 billion, its shares have risen because investors had braced for even more damage.

Yet even as job losses and lost tax revenues hit oil-producing states such as Texas or Alaska, the drag on the U.S. economy as a whole has been limited.

The oil-dominated mining sector accounted for just 1.6 percent of GDP in the third quarter and jobs in oil and gas extraction and services account for 0.3 percent of U.S. employment, down from 0.4 percent during the boom years. (http://tmsnrt.rs/1JZSj7d)

The investment in U.S. mining structures, which is dominated by oil and gas exploration and well drilling, has fallen at a $70 billion annual rate since the fourth quarter of 2014, according to Commerce Department data. Yet as Goldman Sachs estimates the overall drop in energy investment subtracted only about 0.3 percentage points from 2015 economic growth.

Barclays economist Michael Gapen forecasts that a further decline in energy investment could knock another 0.2 percent from this year’s U.S. economic output.

The U.S. job market also appears robust enough to absorb job losses in the energy sector and related industries. Goldman Sachs estimates such losses at 30,000 to 35,000 a month, but that compares with 292,000 jobs U.S. economy as a whole added last month.

(Reporting by Jason Lange and Lindsay Dunsmuir; Editing by David Chance and Tomasz Janowski)