Tag Archives: OPEC

Oil Prices Dip as banks caution on impact of producers meeting

Pump jacks are seen at the Lukoil company owned Imilorskoye oil field, as the sun sets, outside the West Siberian city of Kogalym, Russia, January 25, 2016. REUTERS/Sergei Karpukhin

By Karolin Schaps

LONDON (Reuters) – Oil prices slipped on Monday after banks dampened hopes that the meeting of producers in Doha next Sunday, aimed at freezing current output levels, would improve the demand-supply balance.

Brent crude futures, the global benchmark, fell by 10 cents to $41.84 a barrel by 1208 GMT, retreating from last week’s rally to a three-week high reached on Friday after a drop in the rig count of U.S. drillers to its lowest since November 2009.

U.S. WTI crude also eased on Monday, falling to $39.50 a barrel, down 22 cents from the previous session.

“Prices will move back and forth this week on expectations for Doha. This morning it seems that speculation is being scaled back again,” Commerzbank senior oil analyst Carsten Fritsch said.

Analysts at Goldman Sachs, who expect oil prices to average $35 a barrel in the second quarter, cautioned that the outcome of the meeting in Qatar could prove bearish for the market.

A production freeze at recent levels would not accelerate a rebalancing of the market, the analysts said, citing Russian and non-Iranian OPEC output that has remained close to the bank’s 2016 average annual forecast of 40.5 million bpd.

Azerbaijan, the energy minister of which will attend the Doha meeting, said on Monday that its output had dropped by 1.6 percent in the first quarter compared with a year earlier to 10.496 million tonnes.

Barclays, meanwhile, gave warning that the Doha meeting could have limited impact because some producers are unlikely to take part in an output freeze.

Bearish sentiment was further reflected in price expectations. BMO Capital Markets lowered its 2016 Brent and WTI price forecasts to $41 and $38 a barrel respectively, down from the $45 and $41.50.

Many oil market speculators agreed with a more bearish outlook as data from the InterContinentalExchange (ICE) showed that net long positions on Brent had been cut to 355,225 contracts in the week ending April 5.

However, analsts are forecasting firmer demnd for oil over the longer term.

Researchers at Bernstein expect global oil demand to increase at a mean annual rate of 1.4 percent between 2016 and 2020, compared with annual growth of 1.1 percent over the past decade.

“We expect oil markets to rebalance by the end of 2016. This will allow prices to recover towards the marginal cost of $60 per barrel,” Bernstein said, adding that global demand reach 101.1 million bpd by 2020, from the current 94.6 million bpd.

(Additional reporting by Henning Gloystein in Singapore; Editing by Greg Mahlich and David Goodman)

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)

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)

Crude Oil Prices Rise Slightly After Hitting 8-Year Lows

Crude oil prices bounced slightly back Monday after hitting their lowest price in nearly a decade.

Oil prices have been closely monitored since Dec. 4, when the Order of Petroleum Exporting Countries (OPEC) announced at a meeting it would not place a cap on its oil production. That has allowed the organization’s 12 members to keep flooding an oversaturated global market with more of the commodity, sending the prices tumbling to levels not previously seen in years.

Monday’s developments were the first hint of a rebound since that meeting, Reuters reported.

The price of U.S. crude rose 69 cents and closed at $36.31, an increase of 1.94 percent.

However, the price of Brent crude, which is widely seen as a benchmark for global oil purchase prices, dropped a penny to $37.92. The Wall Street Journal reported it was the seventh straight day Brent crude saw its price decline, the commodity’s longest losing streak since July 2014.

Barrels of both oils were trading below $35 earlier Monday. Before the rebound, Reuters reported the prices were as cheap as they’ve been since the 2008 financial crisis started.

OPEC hasn’t capped its oil production because it wants to retain its share in the global market, Al Jazeera reported. If OPEC limited its output, other countries are in a position to produce oil that the organization otherwise could.

While U.S. drivers are certainly enjoying the cheap oil — AAA reported the national average dropped to $2.014 per gallon, about 55 cents cheaper than this time last year — the low price represents a significant challenge to some countries that depend on oil for their revenue.

CNN reported Monday that Russian finance officials were anticipating oil could drop to $30 a barrel in 2016. The country, which is not an OPEC member, based its budget on an oil price of $50 per barrel and the country’s oil and gas exports represent about 50 percent of its revenue.

AAA said the national average gas price has not fallen below $2.00 a gallon since 2009.

OPEC Leader Vows To Not Cut Output

The de facto leader of OPEC has told the press production of oil will not be reduced even if the prices fall to $20 a barrel.

Ali al-Naimi, Saudi Arabia’s Oil Minister, is basically telling the world that the group is now focused on maintaining their market share in light of the U.S. shale oil boom.

“It is not in the interest of OPEC producers to cut their production, whatever the price is,” al-Naimi told the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”

The most shocking comment from the man who is considered one of the most influential figures on the oil market was that the world may never see $100 a barrel oil again.

“We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility,” Jamie Webster, oil analyst with IHS Energy told the Financial Times. “Just about everything will be touched by this.”

Oil prices have tumbled almost 50 percent since June because of both a huge supply gain from U.S. shale output along with decreased demand in Europe and Asia.  The market dove more than a dollar after the comments from al-Naimi.

OPEC had been well known for cutting production when oil prices fall in an attempt to keep up profit margins.  When the U.S. was in the midst of recession in 2008, OPEC cut production to raise prices to make it harder on the U.S. during the economic downturn.

OPEC Collapsing Says Bank of America

The world’s oil market is o the verge of collapse according to experts at Bank of America.

The bank warned that the OPEC oil cartel has essentially collapsed and that prices will fall below $50 dollars a barrel.  The weakest oil producers will be run from the industry and power will consolidate into a handful of producers.

“The consequences are profound and long-lasting,“ bank commodity chief Francisco Blanch told the London Daily Telegraph.

The move could drive many American oil producers out of the business.  At least 15 percent are unable to cover costs at the current oil price level and experts say that when prices fall below $55 a barrel over half the American producers will be forced to shut down.

The benefit then comes to middle east powerhouses such as Saudi Arabia which have large cash reserves that can help them weather a prolonged decline in oil prices.

Bank of America’s competitor Citibank has posted an opposite view, saying American shale oil producers can withstand as low as $40 a barrel.