Tag Archive for: oil price

Iran’s Oil, Gas Revenues To Hit $41B In 2016/17

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Iran’s crude oil and condensate revenues are expected to reach US$41 billion in the country’s current fiscal year ending on 20 March 2017, Oil Minister Bijan Zanganeh said on Monday.

Zanganeh described the current oil market conditions as ‘satisfactory’, Iranian media reported. For the first nine months of the current Iranian fiscal year, oil revenues reached US$24.7 billion, the minister noted.

Since Western sanctions against Iran were lifted a year ago, Tehran has been quickly ramping up crude oil production, aiming to reach pre-sanction levels. The right to reach pre-sanction levels was the Islamic Republic’s main bargaining chip while pleading for an exemption from the OPEC producers’ supply-cut deal.

Iran was given a leeway not to cut, while Saudi Arabia and its main Gulf Arab allies agreed to shoulder most of the production cuts. Iran’s production was set at 3.797 million bpd as per the deal, below Tehran’s ask for being allowed to reach 4 million bpd, but above Saudi Arabia’s insistence on Iran capping at 3.7 million bpd.

A day after the production deal was sealed, Iran’s oil ministry’s news serviceShana quoted minister Zanganeh as saying that Iran expected to add US$10 billion to its oil income as of this year.

Increased oil production and exports are expected to take Iran out of the recession that it was in in 2015/16 and lead to 6.6 percent growth in real GDP in 2016/17, the International Monetary Fund (IMF) said in an end-of-mission statement last month.

Since the lifting of the sanctions, Iran has been eager not only to increase production to previous levels, but also to lure international oil companies back to developing the country’s vast oil and gas fields.

Earlier this month, the National Iranian Oil Company issued a list of 29 companies that have qualified for bidding in oil and gas tenders of whom only one is a U.S. player: Schlumberger. The biggest European producers including Shell, Eni, Total, and OMV, have all qualified, but BP has pulled out from the race because of worry that relations between Iran and the U.S. will get heated once Donald Trump takes office, according to the Financial Times.

Copyright: Oil Price

Mammoth Texas oil discovery biggest ever in USA

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Geologists say a new survey shows an oilfield in west Texas dwarfs others found so far in the United States, according to the US Geological Survey.

The Midland Basin of the Wolfcamp Shale area in the Permian Basin is now estimated to have 20 billion barrels of oil and 1.6 billion barrels of natural gas, according to a new assessment by the USGS.

That makes it three times larger than the assessment of the oil in the mammoth Bakken formation in North Dakota.

The estimate would make the oilfield, which encompasses the cities of Lubbock and Midland — 118 miles apart — the largest “continuous oil” discovery in the United States, according to the USGS.

“This oil has been known there for a long time — our task is to estimate what we think the volume of recoverable oil is,” assessment team member Chris Schenk told CNN – affiliate KWES Wednesday.

The term “continuous oil” refers to unconventional formations like shale, in which the oil exists throughout the formation and not in discrete pools. The USGS estimates how much oil is considered to be undiscovered but technically recoverable.

“Even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” Walter Guidroz, coordinator for the USGS Energy Resources Program said in a statement. “Changes in technology and industry practices can have significant effects on what resources are technically recoverable, and that’s why we continue to perform resource assessments throughout the United States and the world.”

Oil has been produced in the Wolfcamp area since the 1980s by traditional vertical wells — but now companies are using horizontal drilling and hydraulic fracturing to tap the continuous oil reserve. More than 3,000 horizontal wells are currently operating, according to the USGS.

Morris Burns, a former president of the Permian Basin Petroleum Association, told KWES the low price of oil — currently around $46 a barrel — means the oil will sit underground for the foreseeable future.

“We are picking up a few rigs every now and then but we won’t see it really take off until we (get) that price in the $60 to $65 range,” Burns told the station.

“When we talk about that many millions of barrels of oil in the ground, that doesn’t mean we can recover it all. We recover in the neighborhood of 50 to 60 percent,” Burns said.

Last spring, CNN reported that “fracking” now accounted for more than half of all U.S. oil output. Back in 2000, there were just 23,000 fracking wells pumping about 102,000 barrels of oil a day. Last March there were 300,000 fracking wells, churning out 4.3 million barrels per day.

The fracking production, led by Permian Basin, Bakken formation and Eagle Ford, also in Texas, caused oil prices to tumble — making the $100 barrel ancient history — to as low as $25 a barrel early this year.

 

Copyright: CNN

Oil stays low ahead of Opec meet

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Oil fell to its lowest in three months on Monday, as the prospect of another year of oversupply and weak prices overshadowed chances that Opec will reach a deal to cut output.

Donald Trump’s surprise win in last week’s US presidential election boosted the dollar and stocks but undermined oil. Crude has also fallen because of waning expectations that the world’s largest exporters will agree to reduce production this month.

Brent crude futures fell 50 cents on the day to $44.25 a barrel by 2:50pm GMT, while NYMEX crude futures dropped by 57 cents to $42.84 a barrel.

“In the same way that a strong Opec agreement was needed to continue the rally above $55, a lack of agreement will be needed to break below $40 and right now, we’re at $45,” Petromatrix strategist Olivier Jakob said.

Opec plans to cut or freeze output, but analysts doubt the group’s ability to reach an agreement at its meeting on 30 November.

Opec said on Friday its output hit a record 33.64 million barrels per day in October, and forecast an even larger global surplus in 2017 than the International Energy Agency (IEA) on Thursday.

Yet, Saudi Energy Minister Khalid al-Falih has said it was imperative for Opec to reach a consensus on activating a deal made in September in Algiers to cut production.

“Opec know what needs to be done but too few members will agree to take the production pain for the price gain, knowing also that the price gain incentivises non-Opec to produce more, lengthening the rebalancing process,” PVM Oil Associates analyst David Hufton said.

The dollar index hit an 11-month peak on Monday, driven by an aggressive sell-off in bonds that has pushed Treasury yields to their highest since January.

Ordinarily, a strong dollar would push oil lower, but the correlation between the two is at its most positive in two months, suggesting they are more likely to move in lockstep with one another than in opposite directions.

Data from the InterContinental Exchange on Monday showed investors delivered the largest weekly cut on record to their bets on a sustained rise in the price of oil.

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Copyright: Up Stream

Oil Speculators Most Bullish Since ’14 After Wild Two Months

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Oil investors must be getting dizzy.

In the two months since OPEC began talking about capping production, speculators’ sentiment has swung wildly, with government and exchange data showing the four biggest weekly position changes ever for the two global benchmark crudes. The latest shift is to optimism, with money managers the most bullish on West Texas Intermediate oil in two years.

“Since the summer we’ve had big moves in net length,” said Mike Wittner, head of oil-market research at Societe Generale SA in New York. “It usually has trended up or down over a couple of months. Now this is happening in a matter of weeks. We’re seeing huge shifts.”

Money managers reduced bets on lower WTI prices by more than half in the past three weeks as OPEC agreed to its first deal to cut output in eight years. That drove net length to the highest since July 2014 in the week ended Oct. 11, Commodity Futures Trading Commission data show. Brent longs also rose, leaving the combined length of the two benchmark contracts at the highest in at least five years.

The Organization of Petroleum Exporting Countries agreed on Sept. 28 in Algiers to trim output to a range of 32.5 million to 33 million barrels a day, which is due to be finalized at the Vienna summit next month. OPEC took a step toward coordinated supply curbs with Russia last week and will meet for a “technical exchange” to set a road map for output levels later this month.

The swings in sentiment have tracked the rocky road to $50 a barrel oil. Speculators’ combined WTI and Brent crude net position rose or fell more than 100,000 contracts four times in the past two months, the only moves of that size in CFTC and ICE Futures Europe data going back to 2011.

Prices began to rise after OPEC’s president said Aug. 8 that the group would hold informal talks in Algiers and Saudi Arabia signaled Aug. 11 it was prepared to discuss taking action to stabilize markets. Futures gave up most of those gains amid doubts that Saudi Arabia and Iran to reach an deal, before the agreement in Algiers sparked the latest rally.

“The change in tone from the Saudis is important,” said Kurt Billick, the founder and chief investment officer of Bocage Capital LLC in San Francisco, which manages about $432 million in commodities equities and futures. “Getting to a yes in Vienna is challenging. That they are willing to talk about a deal is a big change.”

Money managers’ short position in West Texas Intermediate crude, or bets on falling prices, shrank by 28 percent to 71,407 futures and options. Longs rose 1.8 percent to the highest since June 2014. The resulting net-long position increased 13 percent.

WTI increased 4.3 percent to $50.79 a barrel in the report week. Prices on Monday were down 0.6 percent at $50.04 a barrel as of 9:13 a.m.

Other Markets

In the Brent market, money managers boosted net longs by 11 percent to 396,694 during the week, according to data from ICE Futures Europe. It was the most bullish total since April.

In fuel markets, net-bullish bets on gasoline rose 19 percent to 36,650 contracts, the highest since March 2015, as futures slipped 1.1 percent in the report week. Wagers on higher ultra low sulfur diesel prices climbed 46 percent to 9,074. Futures rose 2.1 percent.

The scale of the internal differences OPEC must resolve before securing a deal to cut supply was revealed Oct. 12 as the group’s latest output estimates showed a half-million-barrel difference of opinion over how much two key members are pumping.

“The bottom line is that they’ve made an agreement,” Wittner said. “If you are going short you are betting against the Saudis, which isn’t a good thing historically.”

17 Octubre_Oil Speculators

Copyright: Bloomberg

Brent Oil Halts Gain near $50 as Market Eyes November OPEC Deal

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Oil halted gains after rising above $50 a barrel in London for the first time in more than three weeks, as plans by some OPEC members to boost output raised doubts the group will be able to implement its production cut in November.

Brent futures fell 0.4 percent in London after advancing 6.9 percent last week. While OPEC outlined an accord to reduce production by as much as 750,000 barrels a day, its third-largest member Iran wants to increase exports to 2.35 million barrels a day in the coming months, state news agency IRNA reported. The OPEC member is currently shipping 2.2 million barrels a day. Rigs targeting crude in the U.S. rose a fifth consecutive week to the highest level since February, Baker Hughes Inc. said on its website Friday.

Oil capped the biggest monthly gain since April after the Organization of Petroleum Exporting Countries agreed to trim supply for the first time in eight years. While quotas will be decided at the group’s official meeting in November, Nigeria and Iran have said they are exempt and Iraq has said it doesn’t accept OPEC’s estimates of its production levels. Russia boosted output last month to a post-Soviet record.

“Oil will probably trade between $45 and $50 a barrel as we move into November and see what type of deal is done,” said Angus Nicholson, a market analyst in Melbourne at IG Ltd. “There are questions about how OPEC is going to police the new output limits and how they will keep members in line if they breach their production ceiling.”

Brent for December settlement, which became the front-month contract Monday following the expiry of November futures last week, was 5 cents lower at $50.14 a barrel at 8:17 a.m. on the London-based ICE Futures Europe exchange. The November contract fell 18 cents to expire at $49.06 on Friday, while the December contract closed at $50.19. The global benchmark traded at a $1.47 premium to December West Texas Intermediate.

WTI for November delivery was down 17 cents at $48.07 a barrel on the New York Mercantile Exchange. The contract rose 41 cents to $48.24 on Friday, the highest close since Aug. 19. Total volume traded was about 42 percent below the 100-day average. Prices rose 7.9 percent in September.

For a story on OPEC challenges after the output agreement, click here.

U.S. drillers added seven rigs during the week ended Sept. 30, increasing the count to 425, according to Baker Hughes. The U.S. is pumping at a rate of 8.5 million barrels a day, weekly data from the Energy Information Administration show.

 

Oil-market news:

Russian output climbed to 11.11 million barrels a day in September, according to data from the Energy Ministry’s CDU-TEK unit. Investors increased their long position in WTI by 24,131 futures and options, or 8.1 percent, during the week ended Sept. 27, according to the Commodity Futures Trading Commission. Bets on falling prices dropped.

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Copyright: Rig Zone

Oil extends rally to 5-week high, gains 10% in three days

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Oil prices hit five-week highs on Monday, gaining about 10 per cent in a three-day rally as speculation intensified over potential producer action to support prices amid a crude glut.

Data from market intelligence firm Genscape estimating a draw of more than 350,000 barrels at the Cushing, Oklahoma delivery point for US crude futures last week added to the bullish sentiment, said traders who saw the data.

Brent crude rose $1.08, or 2.3 per cent, to $48.05 a barrel by 11:07 a.m. EDT (1507 GMT), after rising to $48.10 earlier, its highest since July 7. Brent has gained about 10 per cent cumulatively in the past three sessions, its most in such a stretch since May. Since the start of August, it is up 12 per cent.

US West Texas Intermediate (WTI) crude gained $1.06, or 2.4 per cent, to $45.55, after rallying earlier to $45.61, a peak since July 21. WTI has gained nearly 10 per cent on the month.

Members of the Organization of the Petroleum Exporting Countries are to meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria from Sept. 26-28.

Russian Energy Minister Alexander Novak bolstered hopes on Monday that oil producing nations could take action to stabilise prices, telling a Saudi newspaper that his country was consulting with Saudi Arabia and other producers to achieve market stability.

“With Russia joining the chorus, an array of bullish oil ETFs saw a sizeable influx of capital that lifted crude values by more than $5 a barrel off recent lows,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

“While we see very little possibility of an actualization of curtailed OPEC output, there will likely be enough chatter during the next five to six weeks to deter selling in allowing WTI to gravitate at around the $45 area, at least through the second half of this month,” he added.

But other analysts were sceptical that the rally would continue.

“In our view a renewed price correction cannot be ruled out if market participants start focusing on the supply side again, for the latest drilling activity figures in the US cast doubts that the oversupply is really being eroded,” Commerzbank analyst Carsten Fritsch said in a note.

There are also doubts that Saudi Arabia and other major OPEC members such as Iran will put aside a market share battle in order to prop up prices.

On the demand side, the world’s three biggest economies – the United States, China and Japan – all published downbeat economic data between Friday and Monday that could signal an erosion soon in oil demand.

Copyright: Emirates 24/7

Global shares climb as firmer Chinese yuan eases deflation fears

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World stocks rose sharply on Monday as China’s central bank fixed the yuan at a much stronger rate and oil cemented recent gains, easing fears of global deflation. 

The rally belied a string of poor economic data from Beijing and Tokyo as demand for safe-haven assets waned, yet investors remained on edge due to lingering concerns about growth and the health of the financial sector. 

European stocks rose 3 percent .FTEU3, having shed nearly 10 percent over the last fortnight, mirroring a bounce in Asia. Futures pointed to notional gains of 1.6 percent on Wall Street ESc1 but U.S. markets will be closed for a holiday.

 Meanwhile, assets that tend to perform well in times of stress lagged. The Japanese yen lost ground against the U.S. dollar, top-rated German bond yields edged away from nine-month lows and gold slipped 2 percent after its strongest week in four years.

“We had a very strong statement from the Chinese authorities signaling they are committed to a stable currency and that’s helped sentiment … safe-haven flows have unwound somewhat,” said RIA Capital Markets strategist Nick Stamenkovic.

In China, spot yuan jumped more than 1 percent to 6.4934 per dollar – its firmest this year – after the People’s Bank of China set its daily midpoint 0.3 percent stronger and the head of the bank was quoted as saying speculators should not be allowed to dominate market sentiment. [CNY/] A stronger yuan reduces the risk that China will export deflation to the world, while worries about consumer price growth have also been helped by bounce back in the oil price.

Brent LCOc1 and U.S. crude futures CLc1 edged up on Monday adding to Friday’s 10 percent surge on speculation that the Organization of the Petroleum Exporting Countries (OPEC) might finally agree to cut output to reduce a world glut.

Euro zone long-term inflation expectations also rebounded from record lows on Monday even as Germany’s Bundesbank cut its forecast for consumer price growth in the bloc’s biggest economy.

Yuan gloabl economy

DISCONNECT

China’s weak exports and imports in January, down 11.2 percent and 18.8 percent year-on-year respectively, seemed not to disturb markets. The resulting jump in the country’s trade surplus to $63 billion for the month might have helped, as that may offer support to the yuan.

The disconnect between markets and economics was perhaps starkest in Japan, where the Nikkei .N225 jumped more than 7 percent, putting its worst week since the depths of the global financial crisis in 2008 quickly behind it.

This came despite data showing the economy contracted by an annualized 1.4 percent in the last three months of 2015, more than expected.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.3 percent .MIAPJ0000PUS, after losing 10 percent of its value so far this year.

European shares followed in their wake, led by a 4 percent rebound in banking stocks .SX7P on news that the European Central Bank (ECB) is in talks to buy bundles of Italian bad bank loans as part of its asset-purchase program.

Yet some strategists cautioned that Monday’s rebound may prove short-lived, with concern that central banks have little ammunition left to fight off the heady mix of an oil-induced deflationary forces, capital outflows and economic weakness in China, and pressure on the world’s financial sector.

“It’s possible we could see calmer markets this week but we are not out of the woods yet,” Thomas Harr. global head of fixed income and currency research at Danske Bank in Copenhagen.

“For the last couple of weeks we have seen a bit of central bank fatigue – they have cut rates into negative but it isn’t having much of an impact.

Against a basket of currencies .DXY, the dollar was up slightly at 96.433 having been at its lowest in almost four months. Likewise, it edged up to 113.99 yen JPY=, having touched a 15-month trough just under 111.00 last week.

The euro was last down 0.6 percent at $1.1184 EUR=, having slipped from a 3-1/2 month peak of $1.1377.

 

Copyright: Reuters

Five Reasons Oil Is Driving The Stock Market

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At its basic level the price of oil is a product of supply and demand. Other factors such as political turmoil can influence it but the main factor is supply and demand. At times and especially now oil is viewed as a proxy for the global economy, which has a ripple effect on the stock market. Over the past month the changes in the price of oil have had a very large influence on the US and international stock markets. There are at least five reasons for this which I’ve outlined below.

1. Lower oil prices may signal the global economy is slowing

Commodities such as copper and oil can be signals that worldwide economic growth is accelerating or decelerating. Oil was $100 a barrel in August 2014 and went into free fall to $45 in January 2015. It bounced back to $60 between May and June and then went into a slide and has been trading between $30 and $35 for the past month.

While lower oil prices are positive for US consumers and other countries that are large oil importers such as China, Japan and most of Western Europe concerns about lower growth rates in China are negating the benefits. China had been the driver for increased oil demand over the past five years and with oil prices collapsing it appears that its economy may be slowing more than anticipated. This is also exacerbated by concerns that the economic data released by China is rosier than it actually is.

2. Oil export nations are tapping into their stock holdings

Every large oil exporting country budgeted their tax revenues from oil at much higher levels. Saudi Arabia had $635 billion in foreign exchange reserves as of November 2015 and withdrew almost $100 billion from global asset managers over the past year. Russia’s monetary reserves dropped by $40 billion and could be exhausted in 2016.

For the 11 OPEC countries it is estimated that their budget deficits increased from $17 to $278 billion in 2015. At the current oil price their deficits will be larger in 2016. Norway has one of the largest sovereign wealth funds at $805 billion and is tapping into it to fill its budget gap. While not all the assets that these companies are selling are equities a large percentage must be due to their liquidity. This creates pressure on stock prices.

3. Oil companies cutting spending

As oil prices went over $100 the oil sector boomed in the US and one state that very high correlation of 0.9 for the 50 day rolling average between the S&P 500 and the price of oil. Back in 2013 people with no experience were being paid $100,000 and unemployment was 1% compared to the national rate of 7.5%.

Certain parts of Texas have also been hit hard. I saw a news story about a small oil supply firm that has seen its business drop 90% with only safety related equipment being sold. Another has  laid off over 150 of its 200 employees. Exxon also announced that it was cutting its capital expenditures in 2016 by 25% which is billions of dollars.

4. Bank loans to the oil sector

Investors are concerned that a large number of loans that allowed US oil companies to rapidly expand fracking operations over the past few years will default. These companies took on a lot of debt based on higher oil prices and are now hanging on by a thread. While the oil companies continue to pump as much as they can, as long as it covers the marginal cost of extracting it, they are trying to generate enough cash to service the debt and stay in business. This of course keeps prices lower.

The ripple effect for the banks is if they have too much of their loan portfolio lent out to these companies the banks will have to write off a large portion of the loans. Investors are taking more of a shoot first (sell bank stocks they believe are exposed) and ask questions later. Having the price of oil stay low only makes this item worse.

5. Algorithms are driving stock movements based on oil price changes

There is a lot of fast money that gravitates to whatever trading system works. For at least the past month there has been a very high correlation of 0.9 for the 50 day rolling average between the S&P 500 and the price of oil (1.0 being that two assets trade in lock step, 0 being there is no relationship and -1.0 being they move in opposite directions).

Oil Is Driving The Stock Market

 

Copyright: Forbes

Oil price faces fresh downturn as Russia, Saudi tussle in Europe

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A sales push by Saudi Arabia into north Europe’s refineries, a step into rival Russia’s backyard, piles fresh pressure on oil prices already struggling against oversupply.

Stung by Russia’s success in supplanting it in the giant Chinese market, Riyadh has embarked on a charm offensive in Europe, cutting its prices for December by more than it has in any other region to their lowest since 2009 during the financial crisis.

Saudi Arabian barrels rarely venture north of the Mediterranean, into the home turf for Russian, African and North Sea crudes. As a result, the kingdom’s success in luring away buyers of rival Russian Urals crude in Poland and Sweden is having an outsized knock-on impact on the market for a wide range of other crudes in the region.

Refiners averted a price drop from a similar build up of surplus oil in spring, snapping up cheaper crude to feed a surge in gasoline demand.

But this time there is a glut of refined fuel too. The crude

surplus is matched by an overhang in oil products which means refineries will not be able to come to the rescue by absorbing the extra.

“The first half of next year looks like a distinctly dangerous period for oil bulls,” brokers PVM Chief Executive David Hufton said in a note.

“It could be the period when tank tops are reached, leading to a price meltdown.”

Homeless barrels are again collecting in the Atlantic market, this time dragging crudes of all kind into a price war that is making $50 a barrel an increasingly impenetrable barrier for benchmark Brent futures.

“There isn’t any denying that the fundamentals are pretty bearish,” said Citi analyst Chris Main. “You’ve got an overhang of cargoes, and it will weigh on the benchmark.”

Saudi Arabia’s fresh European sales have displaced only a small amount of Urals, a heavy grade that has not faced much threat from the year’s excess that has centred on lighter U.S. shale oil. But they suggest a new front in the battle for market share between the two giant producers.

Saudi oil minister Ali al-Naimi on Sunday said demand for oil worldwide would soon reflect the attractiveness of current prices, noting Asia as key to the growth.

URALS HEADS EAST

Russia’s post-Soviet high of 10.78 million barrels per day (bpd) of oil production helped triple the discount of Urals versus dated Brent in just three months to reach 17-month lows.

And as Iran prepares to ramp up sales when and if Western sanctions are lifted next year, the overhang is only likely to aggravate further. BFO-URL-NWE

Discounted Urals cargoes are now muscling out British Forties crude, the largest of the four North Sea streams that make up the dated Brent benchmark.

At least three of the seven supertanker (VLCC) fixtures booked from the North Sea to Asia in November are loading Russian, rather than the North Sea crudes that typically sail.

“What is amazing is to see Forties is still pretty weak despite all the barrels that are going to the Far East,” Petromatrix analyst Olivier Jakob said. “If we did not have those VLCCs going to Asia, it would be a bloodbath.”

Forties price differentials are close to their lowest in five months, having traded at a discount to the dated Brent benchmark more often in 2015 than at any time in the last 20 years, and differentials for a string of crude oil grades now stand at multi-month lows.

Azeri crude price differentials have also more than halved over the past month to an annual low, while premiums for Nigeria’s Qua Iboe have also lost half their value.

A physical excess of more than 60 million barrels of Nigerian oil, and North Sea output at two-year highs, along with nearly full diesel, gasoil and jet fuel tanks in Europe that have already pushed cargoes into floating storage, will only add to the pressure.

Oil Price

Copyright: Reuters