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Wed, 29th March 2017

Anirudh Sethi Report

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Archives of “Crude” Category

OPEC Panics, Warns US Shale Not To “Assume” Production Cut Extension

All it took for OPEC to panic, was the sharpest drop in oil prices since last summer, sending WTI not only back under $50, but also wiping out all gains since the November Vienna “supply cut” deal.

With the cartel suddenly finding itself in unfamiliar territory, where neither the daily barrage of “flashing red headlines” sparks a headline-scanning algo buying frenzy, nor the alleged production cuts leading to a reduction in inventory (quite the contrary, US commercial stocks just hit a new all time high) OPEC had no choice but to make a  threat to its biggest competitor: US shale companies.

According to Reuters, Saudi energy officials told top independent U.S. oil firms in a closed-door meeting this week that they should not assume OPEC would extend output curbs to offset rising production from U.S. shale fields. The reason for Saudi ire is simple: it is producing less, having shouldered the bulk of OPEC cuts, and yet with prices once again declining, and US shale producers ramping up production, not only are Saudis pocketing less revenue, but they are also are permanently giving up market share to US producers whose production in recent months has soared, especially in the Permian, where breakeven costs are as low as $30 for some producers. 

CRUDE -Crucial Update

CRUDE- OIL

It’s Bloodbath……………………….as expected (Tons of Money Minted in hrs only )

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Private oil inventory data shows bigger than expected build in crude stocks

The official data (from the US Energy Information Administration) is out  Wednesday morning, US time.

Until then its over to this private survey  
The forecast (Reuters poll) is for a 1.9 million-barrel build for last week. This would be the ninth consecutive weekly increase in stocks, already at record highs.
Crude stocks build, gas and distillates draws, Cushing build
This despite the production cuts agreed to between OPEC and non-OPEC producers
  • The agreement expires in June
  • But may be extended
  • Meetings again in May to discuss extending the cuts

Prices reacted instantly by puking lower in both WTI and RBOB but the RBOB draw saw prices reverse…

Iraq says OPEC will likely need to extend output cuts

Iraq talks OPEC cuts

  • Iraq ready to cut in the second half if OPEC decides to extend policy
  • OPEC will likely need to extend cuts
  • Iraq ‘somewhat’ satisfied with oil price, hopes for improvement

A second OPEC cut will put a squeeze on a few producers. Much of the Saudi cut, for instance, was window dressing because a seasonal slowdown was imminent.

OPEC Oil Output Cut Deal: ‘It Has Been More Successful Than Many Thought’

OPEC sealed a deal on November 30, 2016, agreeing to cut its oil output by 1.2 million barrels per day for the first six months of 2017 in an effort to stabilize the oil market and bring oil prices to the healthy range of $50-60 per barrel. The deal went into effect in January.

Eleven non-OPEC countries, including Russia, Mexico and Kazakhstan, later joined the deal, pledging to reduce production by a total of 558,000 barrels per day on a voluntary basis.

“This historic OPEC/non-OPEC agreement is very much on the mindset of everybody,” Yergin said. “It has been more successful than many would have thought.”

He continued that at the conference the stakeholders “are going to be looking ahead to May and June and say what’s going to come after, and then to what degree is the market rebalancing. I think that will be a great question that everybody will to try to assess.”

Qatari Energy Minister Mohammed Saleh Sada said in February that the level of OPEC states’ adherence to the agreement is unprecedentedly high, and while they aim for it to reach 100 percent, it now stands at 94 percent.

(Oil – Weekend piece on) Floating LNG production- “superseded” by rising U.S. output

An item over the weekend with some background on developments in floating liquefied natural gas (FLNG)

There is nothing new, but it’s a reminder of what’s been going on in that space.
It says:
  • FLNG projects have been firmly relegated to the backburner as global gas producers seek cheaper ways to compete with a surge in U.S. shale supplies and slumping prices
  • monthly U.S. LNG exports have risen above 1 million tonnes since the start of this year
  • Hit a record 1.05 million tonnes in February (Thomson Reuters Eikon trade flow data)
  • 8.6 billion cubic feet per day of U.S. gas production (68.3 million tonnes per annum of LNG) is currently under construction and scheduled to come on stream by 2020

Titans of oil world meet in Houston after two-year price war

The biggest names in the oil world come together this week for the largest industry gathering since the end of a two-year price war that pitted Middle East exporters against the firms that drove the shale energy revolution in the United States.

When OPEC in November joined with several non-OPEC producers to agree to a historic cut in output, the group called time on a fight for market share that drove oil prices to a 12-year low and many shale producers to the wall.

Oil prices are about 70 percent higher than they were the last time oil ministers and the chief executives of Big Oil met in Houston a year ago at CERAWeek, the largest annual industry meet in the Americas.

The ebullience as both sides enjoy higher revenues will be a welcome relief from the gloom of a year ago, near the depths of the price war.

“The oil market has been rebalancing and the powerful forces of supply and demand have been working,” said Dan Yergin, vice chairman of conference organizer IHS Markit and a Pulitzer Prize-winning oil historian.

“The mood will be different this year.”