Tag Archive for: OPEC

U.S. oil prices rise as Gulf platforms shut ahead of hurricane

/, , ,

Reuters / Henning Gloystein / September 3

 

* Storm Gordon to make U.S. landfall as hurricane

* Brent dips as India takes steps to continue Iran imports

* Global oil markets have tightened since 2017 – Barclays

By Henning Gloystein

SINGAPORE, Sept 4 (Reuters) – U.S. oil prices edged up on Tuesday, rising back past $70 per barrel, after two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane.

U.S. West Texas Intermediate (WTI) crude futures were at $70.04 per barrel at 0034 GMT, up 24 cents, or 0.3 percent from their last settlement.

Anadarko Petroleum Corp said on Monday it had evacuated and shut production at two oil platforms in the northern Gulf of Mexico ahead of the approach of Gordon, which is expected to come ashore as a hurricane.

International Brent crude futures, by contrast, lost ground, trading at $78.10 per barrel, down 5 cents from their last close.

This came as India allowed state refiners to import Iranian oil if Tehran arranges and insures tankers.

Many international shippers have stopped loading Iranian oil as U.S. financial sanctions against Tehran prevents them from insuring its cargoes.

Mirroring a step by China, where buyers are shifting nearly all their Iranian oil imports to vessels owned by National Iranian Tanker Co (NITC), this means that Asia’s two biggest oil importers are making plans to continue Iran purchases despite pressure by Washington to cut orders.

CHANGING MARKET

Britain’s Barclays bank said on Tuesday that oil markets had changed since 2017 when worries about rising supply were more evident.

“U.S. producers are resisting temptation and exercising capital discipline, OPEC and Russia have convinced market participants they are managing the supply of over half of global production, the U.S. is using sanctions more actively, and several key OPEC producers are at risk of being failed states,” Barclays said.

Crude oil “prices could reach $80 and higher in the short term”, the bank said, although it added that despite these developments global supply may exceed demand next year.

For 2020, Barclays said it expects Brent to average $75 per barrel, up from its previous forecast of just $55 a barrel.

French bank BNP Paribas struck a similar tone, warning of “supply issues” for the rest of the year and into 2019.

“Crude oil export losses from Iran due to U.S. sanctions, production decline in Venezuela and episodic outages in Libya are unlikely to be offset entirely by corresponding rises in OPEC+ production due to market share sensitivities,” the bank said.

“We do not expect oil demand to be materially impacted in the next 6-9 months by economic uncertainty linked to U.S./China trade tensions and recent concerns over emerging markets,” he added.

BNP Paribas expects Brent to average $79 per barrel in 2019.

 

Reuters / Henning Gloystein / September 3

 

Oil prices are poised for a pullback after OPEC announces its output cut decision

/, ,

From CNBC / Tom DiChristopher / 28 de noviembre de 2017

 

Market watchers see few opportunities for oil prices to rally — but plenty of room for them to fall — after a critical meeting of energy ministers later this week.

About two dozen oil exporters, including top producers Saudi Arabiaand Russia, meet on Thursday in Vienna to discuss extending a deal to keep 1.8 million barrels a day off the market. The historic agreement has helped to reverse a three-year oil price downturn that wiped out hundreds of thousands of energy jobs and piled financial pressure on both free market American drillers and countries dependent on oil revenue.

The market largely expects the 14-member OPEC cartel and a group of other producers led by Russia to extend the deal, which began in January and expires in March, through the end of 2018.

But just days before meeting, Russia has not committed to the nine-month extension, raising concerns that OPEC could settle for a shorter extension or push off a decision altogether. Either of those scenarios would spark a sell-off, analysts say, but oil prices will probably struggle to grind higher from recent 2½-year highs even if OPEC lives up to expectations.

Here’s how analysts expect markets to move under three scenarios.
OPEC extends by nine months
Andy Lipow, president of Lipow Oil Associates, expects OPEC to lock down the nine-month extension. But he also expects a pullback on the news.

The reason: Hedge funds have recently increased their long positions in oil futures, or bets that prices will keep rising. That makes prices vulnerable to a slide because traders often book profits by selling high. At the same time, the number of oil rigs operating in U.S. oil fields crept up in November, a trend that tends to weigh on prices.

“The market has gotten very, very long and as a result you can have some profit-taking triggered by the increase in the rig count on Friday,” Lipow said.

Tom Kloza, global head of energy analysis at Oil Price Information Service, also thinks a nine-month extension has been baked into prices, making it hard for U.S. West Texas Intermediate crude to rally beyond Friday’s 2017 intraday high of $59.05.

“We may look back at Black Friday as the as-good-as-it-gets number for U.S. producers,” he said.

U.S. crude could take another run at the $59 per barrel level, but OPEC would have to get the messaging just right, said John Kilduff, founding partner at energy hedge fund Again Capital. That includes a show of unity among regional geopolitical rivals Saudi Arabia and Iran and a clear signal that OPEC will force member countries Libya and Nigeria to cap their output after giving them a pass this year.
OPEC settles for six months
However, Kilduff thinks OPEC will only be able to commit Russia to a six-month extension.

He said the country’s energy companies have pushed back on Russian Energy Minister Alexander Novak and President Vladimir Putin as U.S. producers pick up market share in Asia, an important oil growth market. Russian energy giants are concerned that extending the cuts prematurely could leave the market undersupplied, causing a spike in prices that leads to another crash.

“If they do go six months I would expect them to spin it and say they’re going to review it next year,” Kilduff said. “That’s going to be seen as a disappointment.”

In that scenario, Kilduff sees oil prices falling back to the mid-$50 range.
Barclays expects either a six- or nine-month extension but says the market is asking the wrong question. Michael Cohen, the investment bank’s head of energy markets research, says traders should be asking whether exporters will be held to the same production caps they agreed to last year.

“It would be a misguided assumption in our view to expect the group’s production quotas to remain set in stone in 2018,” Cohen said in a research note Monday. “The sustainability of the deal depends on how much longer Saudi Arabia, Russia, Iran and Kuwait are willing to sacrifice market share in the pursuit of revenue and market stability.”

 

From CNBC / Tom DiChristopher / 28 de noviembre de 2017

Wall St. rises as oil price jump boosts energy shares

/

Tanya Agrawal

 “U.S. stocks opened higher on Monday as a rise in oil prices boosted energy stocks, soothing some nerves following a massive cyber attack that locked up 200,000 computers in more than 150 countries.

Oil hit a three-week high after top exporters Saudi Arabia and Russia said supply cuts needed to last into 2018, a step toward extending an OPEC-led deal to support prices for longer than originally agreed.

Shares of oil majors Exxon (XOM.N) and Chevron (CVX.N) rose in early trading.

“On the one hand, this is good news because we are looking at a situation where we would not have to worry oil production and its baggage for some time,” said Naeem Aslam, chief market analyst at Think Markets UK Ltd.

“On the negative side, we think that traders are reading too much into this situation and … the current production cut has not been able to produce any substantial results so far.”

At 9:34 a.m. ET (1334 GMT), the Dow Jones Industrial Average .DJI was up 60.64 points, or 0.29 percent, at 20,957.25, the S&P 500 .SPX was up 5.95 points, or 0.24 percent, at 2,396.85 and the Nasdaq Composite .IXIC was up 11.74 points, or 0.19 percent, at 6,132.97.

Ten of the 11 major S&P 500 sectors were higher, with the energy index’s .SPNY 1.29 percent rise leading the advancers.

Investors seemed to mostly shrug off fears from a successful missile test by North Korea and a cyberattack that disrupted operations at car factories, hospitals, shops and schools.

Shares of cybersecurity firms such as Fireye (FEYE.O), Symantec (SYMC.O), Palo Alto Networks (PANW.N) and Cyberark Software (CYBR.O) were all up.

U.S. stocks slipped on Friday, ending the week lower as tepid economic data weighed on banks and worries deepened over department stores.

Soft retail sales and monthly inflation data on Friday raised concerns about slow economic growth.

The tepid economic data comes on the heels of a strong quarterly earnings season. Earnings at S&P 500 companies are expected to have grown 14.5 percent in the first quarter – the best showing since 2011, according to Thomson Reuters I/B/E/S.

The NAHB Housing Market Index for May, is expected to remain unchanged at 68 from the month before. The data is expected at 10 a.m. ET.

Tesla (TSLA.O) was down 3.6 percent at $313.30 after Morgan Stanley downgraded its rating on the electric-car maker’s stock.

Patheon NV (PTHN.N) soared 33 percent to $34.59 after Thermo Fisher Scientific (TMO.N) said it would buy Dutch drug ingredients maker for about $5.2 billion.

Advancing issues outnumbered decliners on the NYSE by 1,927 to 597. On the Nasdaq, 1,556 issues rose and 664 fell.

The S&P 500 index showed nine new 52-week highs and four new lows, while the Nasdaq recorded 44 new highs and nine new lows.”

Mon May 15, 2017 | 9:54am EDT

REUTERS

OPEC May Need to Extend Production Cuts to End of Next Year

/

By Anthony Dipaola

“OPEC is certain to extend cuts in oil output when its ministers meet later in May and will need to keep limiting production until as late as the end of 2018, a veteran market analyst said.

The reaction of global crude inventories to the cuts will determine how long the Organization of Petroleum Exporting Countries and allied producers stick with their policy of pumping less oil to counter a global glut, said Fereidun Fesharaki, the head of industry consultant FGE. Oil may drop to as low as $40 a barrel if U.S. stockpiles increase, he said Monday at the Middle East Petroleum and Gas Conference in Dubai.

“The probability that OPEC will agree to extend its cuts is at 100 percent,” said Fesharaki, a former adviser in the late 1970’s to the Iranian Prime Minister. “And the cuts will have to be extended even beyond this year, to the middle or even to the end of next year.”

OPEC and 11 other producers including Russia agreed in December to pare production by 1.8 million barrels a day during the first half of this year. They’re seeking to eliminate an oversupply that depressed prices to less than half of their 2014 high, when benchmark Brent crude sold at $115 a barrel. Brent jumped 52 percent last year for the first annual gain after three consecutive decreases and was trading at $51.65 a barrel, down 40 cents, at 5:18 p.m. in Dubai.

The oil market needs more time to start using up stored inventories, which are on the verge of declining, Harold Hamm, chief executive officer of Oklahoma-based Continental Resources Inc., said at the same conference. U.S. oil output is poised to expand this year by at least 400,000 barrels a day, most of it from the Permian Basin, to a level of about 9.4 million barrels a day, he said.

OPEC plans to decide on May 25 at a meeting in Vienna whether to extend its production limits. There’s a consensus that the group will extend the cuts into the second half, Saudi Arabian Minister of Energy and Industry Khalid Al-Falih said last week.”

1 de mayo de 2017 6:33 GMT-5

Bloomberg

Oil recoups losses, but U.S. oil output growth weighs

/

“Crude oil recouped earlier losses on Monday in subdued trading, but signs that the United States is continuing to add output largely counteracted strong economic growth in China and OPEC-led efforts to cut production.

Benchmark Brent crude futures were down 14 cents at $55.75 at 1350 GMT, after trading as much as 58 cents lower.

U.S. West Texas Intermediate (WTI) crude futures were down 14 cents at $53.04 a barrel, after falling by as much as 55 cents earlier in the day.

Both benchmarks rose last week for a third consecutive week, and were trading close to 12 percent above their 2017 lows. Speculators in the week to April 11 also increased their bets on bullish performance in both contracts.

But in thin trading due to holidays across Europe, the focus was on indications that shale oil output in the United States was creeping higher.

“All the signs of an ever-growing bull market are starting to fade away, (with) Libya and geo-political tensions easing, but also because the Texans are back and they are pumping like there’s no tomorrow,” said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai. “If I were OPEC, I’d be pretty worried.”

Although the failure of a ballistic missile launch in North Korea brought some respite, markets were braced for further tensions in the region.

In Libya, fighting between rival factions has cut oil output, but state oil company NOC was able to reopen at least one field and was pushing to reopen another.

U.S. drillers last week added rigs for a 13th straight week, bringing it to its highest in roughly two years. Investors are also pouring money into the industry, suggesting U.S. output gains will continue. <RIG/U>

“Increasing U.S. output is undermining attempts by the Organization of the Petroleum Exporting Countries and other major oil producers to curb output and sustain a price rally in a market that has been oversupplied since mid-2014.

While Iran fueled hopes that OPEC and non-OPEC oil producers could extend their output cuts beyond the six-month agreement, Saudi energy minister Khalid al-Falih said it was too early to discuss an extension.

U.S. crude oil production reached 9.24 million barrels per day (bpd), according to the latest Energy Information Administration data, making it the world’s third-largest producer after Russia and Saudi Arabia.

The increasing production largely counteracted figures showing first-quarter economic growth of 6.9 percent in China. Forecast-beating March investment, retail sales and exports all suggested China’s economy, the world’s second-largest oil consumer, may carry solid momentum into spring.

China’s March refinery throughput also rose to 11.19 million bpd, just shy of December’s record, as margins remained attractive.”

By Libby George / REUTERS

Mon Apr 17, 2017 | 10:03am EDT

shutterstock_356589947

 

Most oil producers want extension of output cuts: Iran minister

/

“Most oil producers support an extension of output cuts by OPEC and non-OPEC countries, and Iran would also back such a move, Iranian Oil Minister Bijan Zanganeh was quoted as saying.

“(Zanganeh) stressed that most countries want OPEC’s decision to be extended,” the Iranian Students’ News Agency (ISNA) reported.

“Iran also supports such a decision and if others comply, so would Iran,” Zanganeh told reporters late on Saturday, according to ISNA.

The market has been oversupplied since mid-2014, prompting members of the Organization of the Petroleum Exporting Countries and some non-OPEC producers to agree to cut output in the first six months of 2017.

OPEC meets on May 25 to consider extending the cuts beyond June. Saudi Arabia, Kuwait and most other OPEC members are leaning towards this if agreement is reached with other producers, OPEC sources told Reuters last month.”

Reporting by Dubai newsroom; Editing by Sandra Maler / REUTERS

Summer Driving Expectations Get Oil Investors Excited Again

/

“Summer may be a few months away but oil investors are already getting their hopes up that American drivers will do their part to rebalance the market.

Hedge funds increased bets on higher West Texas Intermediate crude prices for the first time in six weeks, shrugging off rising U.S. supplies, as the coming driving season is expected to help ease the glut. Their wagers on more expensive gasoline jumped the most since last year, U.S. Commodity Futures Trading Commission data show.

U.S. fuel producers typically boost crude processing at this time of year as they prepare for the summer surge in demand. In a sign that they’ve already started, a government report showed refineries operating at the highest rate in about three months. Foreign refiners are also developing a taste for American barrels. Crude exports rose to a record in February as China displaced Canada as the biggest customer, Census Bureau data showed.

“As refinery utilization picks up, and if crude exports to Asia remain high, crude supplies will start to deplete,” Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida, said by telephone. “The market is focused on where the market is heading, not where it’s been, and crude supplies are going to be whittled down.”

Money managers’ WTI net-long position, or the difference between bets on a price increase and wagers on a drop, climbed 9.2 percent in the week ended April 4 after tumbling 41 percent in the prior five weeks, according to the CFTC. Net bullish bets on gasoline climbed 59 percent, the biggest increase since December.

Refining Boost

Gasoline and diesel producers used 90.8 percent of their crude-processing capacity in the week ended March 31, the most since Jan. 6, according to the Energy Information Administration. Meanwhile, gasoline inventories have fallen almost 8 percent since mid-February, to 239.1 million barrels.

“Bigger-than-expected draws in gasoline stocks help explain the big gain in gasoline net length,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “It probably helped boost interest in WTI.”

Oil futures touched an 18-month high on the first day of trading this year as an accord between the Organization of Petroleum Exporting Countries and 11 other producers to cut output for six months came into effect. Six members of OPEC and Oman back extending production curbs beyond June, with Saudi Arabia and Kuwait saying oil stockpiles need to fall to the five-year average.

The outlook for an extension of the accord has also helped renew optimism that prices will rebound, according to Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Bears Retreat

“The oil bears were in retreat because OPEC appears to be complying pretty well to the quota and the likelihood that the cuts will be extended,” Lynch said by phone.

The net-long position in WTI rose by 22,415 futures and options to 267,030. Longs advanced 2.3 percent, while shorts retreated 12 percent. WTI rose 5.5 percent to $51.03 a barrel in the report week. The U.S. benchmark crude was trading at $52.59, up 0.7 percent, at 9:47 a.m. London time on Monday.

Gasoline futures increased 5.3 percent to $1.7217 a gallon in the report period. The May contract was trading at $1.7486 on Monday, extending gains from the highest close for front-month prices since August 2015.

“Gasoline is a safe place to hang your hat as summer approaches,” Energy Analytics’ Finlon said. “Crude supplies will fall as utilization ramps up to meet gasoline demand.”

 

by Mark Shenk / Bloomberg

9 de abril de 2017 18:01 GMT-5

 

Gulf Waters

 

OPEC Convinces Investors That Its Oil Output Cuts Are Real

/

OPEC appears to have persuaded investors that it’s making good on promised production cuts.

Money managers are the most optimistic on West Texas Intermediate oil prices in at least a decade as the Organization of Petroleum Exporting Countries and other producers reduce crude output. Saudi Arabia has said more than 80 percent of the targeted reduction of 1.8 million barrels a day has been implemented. Oil shipments from OPEC are plunging this month, according to tanker-tracker Petro-Logistics SA.

“All the signs are pointing to a pretty significant OPEC cut,” Mike Wittner, head of commodities research at Societe Generale SA in New York, said by telephone. “Until this week we were only getting data from the producers, now the tanker traffic seems to be supporting this view.”

OPEC will reduce supply by 900,000 barrels a day in January, the first month of the accord’s implementation, said the Geneva-based Petro-Logistics. That’s about 75 percent of the cut that the producer group agreed to make. Eleven non-members led by Russia are to curb their output in support.

Hedge funds boosted their net-long position, or the difference between bets on a price increase and wagers on a decline, by 6.1 percent in the week ended Jan. 24, U.S. Commodity Futures Trading Commission data show. WTI rose 1.3 percent to $53.18 a barrel in the report week. The U.S. benchmark slipped 1.1 percent to $52.57 at 10:52 a.m.

OPEC members Saudi Arabia, Kuwait and Algeria have said they’ve cut output this month by even more than was required, while Russia said it’s also curbing production faster than was agreed. Saudi Energy Minister Khalid Al-Falih said Jan. 22 that adherence has been so good that OPEC probably won’t need to extend the accord when it expires in the middle of the year.

Shale Headwind

The OPEC-engineered price rally has spurred a surge in drilling in the U.S. shale patch. Rigs targeting crude in the U.S. rose by 15 to 566 last week, the highest since November 2015, according to Baker Hughes Inc.

“There’s one headwind in the oil market: increased U.S. shale production,” Jay Hatfield, a New York-based portfolio manager of the InfraCap MLP exchange-traded fund with $175 million in assets, said by telephone. “U.S. output in 2017 will be 1 million barrels a day higher than last year.”

U.S. crude production climbed to 8.96 million barrels a day in the week ended Jan. 20, the highest since April, according to the Energy Information Administration. That’s already closing in on the EIA’s latest 2017 output forecast of 9 million barrels a day that was issued Jan. 10.

The net-long position in WTI rose by 21,429 futures and options to 370,939, the most in data going back to 2006. Longs rose 3.7 percent to a record high, while shorts slipped 11 percent.

In the Brent market, money managers reduced the net-long position by 3.1 percent to 448,352 during the week, according to data from ICE Futures Europe. Longs slipped, while shorts rose.

In fuel markets, net-bullish bets on gasoline fell 3.4 percent to 61,511 contracts as futures decreased 1.5 percent in the report week. Money managers increased wagers on higher ultra-low sulfur diesel prices by 1.3 percent to 34,978 contracts, while futures slid 0.4 percent.

“For the time being the market is more focused on the OPEC cuts than about how fast U.S. shale drillers are returning,” Wittner said. “There may come a point soon when the support provided by OPEC will be outweighed by the prospect of rising U.S. production. When that happens there will be a big shift in investor sentiment.”

 

opec

 

Copyright: Bloomberg

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

/

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

Crippled Latin Oil Giants Get No Miracle Cure in Post-OPEC Rally

/

For the three titans of Latin American oil — Pemex, PDVSA and Petrobras — last week’s OPEC-driven price rally won’t be enough to halt a slow descent from the ranks of international crude heavyweights.

Even as news of the cartel’s 1.2 million-barrel-a-day output cut spurred the steepest three-day oil gain in 15 months, the biggest Latin American producers remain hobbled by financial, political, technical and structural problems. Mexico and Brazil have been turning to outside investors to help boost output, with Mexico on Monday offering up stakes for the first time to drill in its deep waters.

Oil prices are an especially pressing issue for the behemoths responsible for large chunks of their local and national economies, all while supplying one of every 13 barrels of crude produced around the globe every day. Unlike North American explorers who were free to fire workers and abandon costly, high-risk projects as crude collapsed, the Latin companies operate under close bureaucratic controls that hinder their ability to respond to market forces, said Thomas McNulty of Navigant Consulting Inc.

“Higher prices are always a good thing but these are state-owned quasi-companies that have tremendous social obligations to their countries and little freedom to take rational cost-cutting steps,” said McNulty, director of Navigant’s valuations and financial risk management practice. “U.S. companies have to pay taxes, sure, but they don’t have to build schools.”

Petroleo Brasileiro SA said it isn’t changing its business plan in response to OPEC’s production agreement. Mexico’s Energy Ministry said it won’t change its auction plans because of OPEC. Petroleos de Venezuela SA, as the Venezuelan state-oil company is formally known, didn’t respond to requests for comment.

Brent Surge

Brent crude, the international benchmark, surged as much as 15 percent in the three trading sessions following a Nov. 30 meeting at which the Organization of Petroleum Exporting Countries agreed to individual production cuts for the first time in eight years. The three-day rally was the largest since August 2015. Brent dipped to a 12-year low around $27 a barrel as recently as January; since then, the price has doubled to more than $54.

“Higher prices are positive for these companies to varying degrees,” said Lucas Aristizabal, a senior director at credit-rating company Fitch Inc. For Petroleos Mexicanos and PDVSA, the benefits are diminished by staggering debt loads that eat up cash that could otherwise go toward drilling to sustain production and replenish spent reserves, he said.

“Pemex needs much higher prices than this under the current taxation scheme to become cash-flow neutral while investing enough to replenish reserves,” Aristizabal said.

Mexican Oil

Once the world’s third-largest oil producer, Mexico now pumps less than the U.S. state of Texas, thanks to dwindling output from the once-gargantuan Cantarell field and lack of investment in new drilling technology. Aristizabal estimated the Mexican company, whose nearly $100 billion in debt is more than twice that of Exxon Mobil Corp., needs crude to fetch $80 a barrel to $100 a barrel to escape it downward spiral.

Mexico’s deep-water oil auction is designed to attract international oil giants to develop offshore production. It’s a crucial test of foreign investment, with Mexican oil output forecast to fall below 2 million barrels a day next year, the lowest level since 1980.

Pemex CEO Jose Antonio Gonzalez Anaya praised the OPEC agreement and price rise as “a breath of fresh air.

“It’s a good development for the energy market and for Pemex,” he said in a Dec. 1 interview on Bloomberg Television.

PDVSA Payments

PDVSA, facing $6.4 billion in debts coming due next year, won’t get much relief from its liquidity crisis, despite the nascent crude rally, Aristizabal said. Company Chairman Eulogio Del Pino said the cut may push oil prices to $70 in six months. Added cash is important as the producer uses a 30-day grace period to pay interest due on a 2035 bond. Venezuelan President Nicolas Maduro has blamed the U.S. Treasury and Citigroup Inc. for the delayed payment.

Venezuela is one of only two cartel members in the Western Hemisphere, and PDVSA will be required to cut some output. That means abandoning some of the potential upside from the price increase, Aristizabal said.

Petrobras, which has been enmeshed in Brazil’s biggest corruption scandal, is in a better position to take advantage of rising prices than it was in 2011 when crude surged past $100 a barrel. The previous Brazilian administration of Dilma Rousseff pressured the state-controlled company to keep domestic gasoline and diesel prices below international levels in an effort to contain inflation, costing an estimated $35 billion in fuel subsidies in the middle of a commodities boom.

Fuel Sales

The Rio de Janeiro-based producer has been selling fuel at a premium for the past two years, partially recovering the losses from import subsidies. In October, the company set a policy of monthly revisions to guarantee prices remain above import costs. Petrobras reiterated its commitment to keep fuel prices above international parity in an e-mailed response to questions.

Rising prices will also guarantee the viability of deep-water fields that are estimated to hold billions of barrels of oil. Chief Executive Officer Pedro Parente has said the company’s break-even cost is around $40 a barrel. Petrobras has been in talks with potential bidders, including Total SA, for joint ventures to get oil from the so-called pre-salt areas offshore.

Brazil’s energy ministry has said it has no authority to set production limits for Petrobras and other companies producing in Latin America’s largest economy, offering the potential for it to capitalize with more output as OPEC members scale back.

Copyright: Bloomberg