Tag Archive for: OIL PRICES

Saudi Arabia, Venezuela talk of co-operation to stabilize oil market

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Saudi Arabia’s oil minister Ali al-Naimi discussed cooperation between OPEC members and other oil producers to stabilize the global oil market with his Venezuelan counterpart on Sunday, state news agency SPA reported.

Venezuela’s Oil Minister Eulogio Del Pino, who is on a tour of oil producers to lobby for action to prop up prices, said his meeting with Naimi was “productive”, his ministry reported.

Cash-strapped OPEC member Venezuela has been calling for an emergency meeting of producers to discuss steps to prop up prices, which are close to their lowest since 2003.

The prospect of supply restraint by the Organization of the Petroleum Exporting Countries and rivals helped oil prices LCOc1 rise above $34 a barrel on Friday from a 12-year low close to $27 last month, despite widespread scepticism that a deal will happen.

“It was a successful meeting and (conducted) in a positive atmosphere,” SPA cited Naimi as saying.

Both ministers discussed Del Pino’s visits to other oil producers and the outcome of his “meetings that aim towards the cooperation of those countries to stabilize the international oil market”, Naimi said.

“During the meeting, there were discussions about the cooperation of the producing countries within OPEC and outside (OPEC)… and the importance of the continuation of such consultations,” SPA added.

However, the comments by Saudi Arabia, the world’s largest oil exporter, show no indication of a shift in the country’s policy of refusing to cut supplies to prop up crude prices, some OPEC delegates said.

“They seem like just general talk about cooperation, but nothing about cutting production,” said one OPEC source.

“It’s always good to say discussions were positive and productive. Never say they were negative. The issue is not with Venezuela, it is with Iran,” said another OPEC source.

Sources familiar with the matter say Iran is reluctant to restrain crude supply as it wants to recover the market share it lost during sanctions that were imposed in 2012 because of its nuclear program. International sanctions were lifted in January.

OPEC oil production jumped to its highest in recent history in January as Iran increased sales and its rivals Saudi Arabia and Iraq also boosted supply, a Reuters survey showed.

Last Wednesday, the Iranian news agency Shana quoted Del Pino as saying six producing countries, including OPEC members Iran and Iraq and non-members Russia and Oman, supported a producer meeting.

But so far, none of OPEC’s Gulf members, including OPEC heavyweight Saudi Arabia, has publicly backed a meeting.

Saudi Arabia stabilize oil market

Copyright: Reuters

Oil Price Will Increase in Next ‘Few Months’

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Oil prices will only stay at current levels for the next few months, according to Stuart Amor, the ex-head of oil and gas research at financial advisory firm RFC Ambrian. Amor, who made the statement in a presentation at the Finding African Oil event in London Monday, which was attended by Rigzone, said that around 10 percent of non-OPEC supply is cash-flow negative at the operating level in the low oil price environment affecting the industry today. “At $30 per barrel, which is where we are today, about ten percent of non-OPEC supply is cash flow negative at the operating level, so I don’t think the oil prices can stay down here for more than a few months. If they do, then some of that supply is going to get shut-in,” Amor said, addressing oil and gas delegates at Finding Petroleum’s conference. In spite of the decreasing oil price, Amor suggested in his presentation that the oil and gas industry wouldn’t see an increase in M&A (merger and acquisition) transactions until the volatility of crude prices subsided: “The biggest determinant in the number of M&A transactions is the commodity’s volatility. Highly volatile prices, particularly at the long end of the curve, and we’ve seen a lot of that over the last couple of weeks, make it much harder for buyers and sellers to agree prices. So we live in an uncertain world and it’s got a whole more uncertain in the last two weeks. Indeed the recent spike in crude volatility hasn’t been seen since the height of the global financial crisis in 2008. That will need to change for a lot of M&A transactions now to occur.” Amor held the position of head of oil and gas research at RFC Ambrian for almost four years, covering several Africa-focused mid-cap and junior oil companies including Tullow Oil, Ophir Energy, Seplat and African Oil Corp. He was previously the head of global equity research at ING.

oil price 2016

Copyright: RIGZONE

OPEC decision to keep output high pulls oil prices close to 2015 lows

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Crude prices fell on Monday in the first trading session after OPEC-members failed to agree on output targets to reduce a bulging glut that has resulted in oil prices falling by more than 60 percent since June 2014.

The Organization of the Petroleum Exporting Countries failed to agree on an oil production ceiling on Friday at a meeting that ended in acrimony after Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions.

This compounded an oil glut that sees production exceed demand between 0.5-2 million barrels per day and that has resulted in a more than 60 percent price drop since 2014.

U.S. crude was trading at $39.58 a barrel at 0038 GMT, down 39 cents. Internationally traded Brent futures were down 16 cents at $42.84 per barrel. This left both benchmarks near 2015 lows and not far off levels seen during the peak of the global financial crisis of 2008/2009.

Analysts said that OPEC would likely maintain its production around current levels of 31.5 million barrel per day and that a decision on how to handle new volumes expected to come to the market once western sanctions against Iran are dropped would be delayed until the group’s next meeting in June 2016.

“Past communiques have at least included statements to adhere… or maintain output in line with the production target (of 30 million barrels per day). This one glaringly did not,” Barclays bank said.

Not only did OPEC decide to keep its output target high, but analysts said that it would likely continue to exceed its quota as individual members offer discounts to customers in defense of market share.

Barclays said that OPEC faced an “impossible trinity of achieving higher market share, higher prices and higher demand through a nominal target which members continue to breach.”

As a result of ongoing oversupply, analysts said that prices would fall further, with Goldman Sachs seeing a possibility of $20 per barrel.

“The effective removal of the OPEC quota leaves the market in a more vulnerable position. Prices are likely to weaken this week as the market turns its attention back on U.S. supply,” ANZ bank said, referring to near record U.S. crude inventories of almost 490 million barrels.

“The formal production target was not even discussed, essentially signalling to the market that members would continue production at individual requirements. With Iran exports likely to start increasing next year, this increases the likelihood of further weakness in crude oil markets,” it added.

OIL PRICES OPEC

Copyright: Bakken

Oil prices slip on Chinese demand concerns, weak Saudi exports

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Oil prices fell on Monday on concerns about the pace of economic growth in China, the world’s largest energy consumer, and signs that global oversupply is curbing Saudi crude exports.

China’s economy grew at the slowest pace in six years in the third quarter, according to official data released on Monday, making it more and more likely Beijing will cut interest rates to stoke activity.

Brent for December delivery LCOc1 was down 38 cents at $50.08 a barrel at 0807 GMT. U.S. crude for November delivery CLc1 traded down 35 cents at $46.91 a barrel, extending last week’s steepest losses in eight weeks.

“Chinese GDP data and the rise in the Saudi stockpile due to falling crude oil exports are weighing on prices,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

Saudi Arabia, the world’s biggest crude exporter, shipped 278,000 barrels a day less crude oil in August, trade data showed, suggesting demand for Saudi oil is sliding as the global supply glut persists.

Meanwhile Austrian oil producer OMV lowered its oil price forecasts on Monday, seeing 2016 prices at $55 a barrel and rising to $70 a barrel in 2017, $80 a barrel in 2018 and $85 a barrel from 2019 onwards.

As a result the company also said it would take a 1 billion-euro impairment charge on asset values in its upstream business.

Investors were also eyeing progress in the removal of western sanctions on Iran that will allow the oil-rich nation to revamp oil production and resume exports to western consumers.

The United States and the European Union on Sunday took formal legal steps to lift sanctions on Iran once Tehran meets the conditions tied to a landmark nuclear agreement with major world powers. 

Copyright: Reuters

Gas pipeline in Wyoming

Gas pipeline in Wyoming

US Shale Firms Snap Up $50 Oil Hedges, Risking Rally Reversal

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Welcome to the oil market’s new vicious cycle.

This past week, as oil prices barrelled over 9 percent higher to break out of a weeks-long trading range, U.S. shale producers jumped at the chance to lock in $50-plus crude for the first time in months, making up for lost time after holding off hedging during the market’s late-summer slump.

U.S. crude oil futures for December 2016 delivery, a favored contract for hedgers, saw trading volume spike to a weekly record high of nearly 190 million barrels, twice as much as the average for the previous four weeks, in what market sources and industry executives said was the biggest wave of hedging since a fleeting rush in late August.

The price premium for the Dec 2016 contract against the same month in 2015 has shrunk to just $4 a barrel, down from more than $7 a barrel two months ago, due partly to forward selling.

Oil producers’ rapid response to the latest move upward comes in contrast to the second quarter, when a moderate price recovery was met with only modest hedging interest as many executives bet – wrongly – that the worst was already behind them.

It also highlights the far more precarious financial position for many shale firms facing rapidly tightening credit conditions, expiring legacy hedges and a deepening fear that prices may stay much lower for much longer than they thought.

For some, hedging is now less an insurance policy than a lifeline as those who have scrimped on protection watched with despair oil prices shuffling between $43 and $48 for six weeks.

Yet their activity also threatens to undermine one of the fundamental reasons for oil’s gains: falling U.S. output.

In addition to creating immediate headwinds by selling into the rally, drillers whose future profits are insured with new hedges will be better able to keep on pumping oil, adding to a global oversupply, the thinking goes.

“Any little rally ends up getting suffocated by the new production it unleashes,” said Vikas Dwivedi, Houston-based global oil and gas strategist at Macquarie Group.

Underhedged, Overtaxed

The push-pull between current prices and future production highlights a new normal for oil markets, in which the short-run cycles of the agile U.S. shale sector have replaced OPEC as the world’s swing supplier. The $50 hedges also illustrate how shale firms have been able to keep drilling at lower and lower costs thanks to efficiency gains and focus on the most productive spots; a year ago, break-even costs were seen nearer $70.

As a result, producers are moving more quickly than ever to catch what may be a fleeting price recovery.

In a push that started Tuesday and continued through Friday, U.S. producers have locked in new production in greater volumes for 2016 and 2017, according to three market participants who watch money flows.

Copyright: Rigzone

US Shale