•  
Sun, 28th May 2017

Anirudh Sethi Report

  •  

Archives of “opec” Tag

OPEC Is Studying The Following Three Options Ahead Of Thursday’s Meeting

Last week, ahead of the OPEC meeting, BofA commodity analyst Francisco Blanch said the oil cartel faced three specific choices ahead of its May 25 meeting in Vienna, when it is widely expected to extend the November 2016 production cut:

  1. First, OPEC could cut production beyond the 1.2mn b/d agreed in December and encourage non-OPEC members to deepen the cuts.
  2. Second, OPEC could increase output aggressively and restart the oil price war.
  3. And third, OPEC could keep the cuts at the current levels for the next 6 to 9 months and hope for oil market demand conditions to improve.

BofA also presented the following table adding the proposed likelihoods of any given choice of action, of which a simple deal extension had the highest probability of taking place.

Oil Market to Balance at Around $55-60/Bbl as Deeper OPEC Output Cuts Expected

Despite the rise in US shale oil production, the expected extension of the OPEC oil extraction caps will provide a moderate support to global oil prices in the near-term, with boom or bust scenarios almost ruled out as the global energy market balances gradually.

Kristian Rouz – OPEC member-states and other oil-producing nations are meeting on May 25 to discuss, among other things, the extension and deepening of oil extraction caps in order to support crude prices and ease the supply-side glut issue.

An oversupply of oil has been affecting the global oil producers since the second half of 2014, when US shale production skyrocketed, proving disruptive to the existing structure of global oil trading.

Even though, according to the Saudi Energy Minister Khalid Al-Falih, all oil producers have agreed to extend oil caps by nine months, also possibly decreasing the current levels of extraction, global oil prices are not expected to post a significant rally in the near-term. The main reason is that the OPEC and non-OPEC oil cuts might be effectively offset by an increase in US shale oil production.

Last year, the US lifted a 40-year oil export embargo, and this February, the US shipped record-high volumes of crude overseas. While OPEC oil cuts have resulted in a decrease in the global market share occupied by members of the energy cartel (most notably Saudi Arabia), US oil started to fill this niche.

Coming Week Eye on :Trump, Fed minutes, Opec

Investors will keep a close eye on US politics next week as US President Donald Trump’s first foreign trip coincides with a growing White House scandal at home.

Here’s what to watch in the coming days.

Trump

The nine-day tour will also see Mr Trump visit Israel and continue on to Rome before heading to a Nato summit in Brussels. The meeting comes as the president’s attempts to give Nato a more formal role in the anti-Isis coalition has faced resistance from France and Germany. Mr Trump will also attend a G-7 meeting in Sicily.

The overseas trip comes with Mr Trump under siege at home following revelations that he pressed James Comey, the FBI director who was abruptly dismissed last week, to drop a probe into the Trump administration’s ties with Russia. Mr Comey has been invited to testify before Congress on Wednesday.

Further complicating matters, new Russia claims were published just after Mr Trump departed Washington on Friday, casting more clouds over the trip even as it got underway.

Fed minutes

OPEC Capitulates, Forecasts Surge In Shale Oil Production As Saudi Output Rises

The biggest highlight in today’s latest monthly OPEC oil market report for the month of May was OPEC finally capitulating to the “shale threat” and raising estimates for for non-OPEC supply growth in 2017 to 950Kbpd from the year prior, 64% or 370k higher than in the April estimate, amid a surge in U.S. output. In context, the outlook for non-OPEC growth is now 4 times higher than when OPEC announced cuts in November.

As shown in the table below, OPEC raised its 2017 U.S. supply growth outlook by 282kbpd in the past month, to 820k bpd.

The OPEC report also noted that OECD Inventories remains 276MM bbl above the five-year average. It also showed OPEC crude output declining by 2k bpd in April to 31.732m b/d according to secondary sources as 7 out of 13 members reduced output, however offset by a rebound in Saudi production to 9.954mmbpd, the highest since January. The biggest m/m changes:

  • Angola +97k b/d;
  • UAE, Libya -62k each
  • Saudi +49.2k b/d m/m to 9.954m b/d: OPEC secondary sources
  • Saudi +46.4k b/d to 9.946m b/d: Saudi direct comms to OPEC

Market Mocks OPEC Crude Jawboning; Morgan Stanley Warns Of Risks To 2018 Oil Price

In the clearest indication yet that OPEC jawboning no longer has an effect on markets, and especially headline scanning algos, following numerous headlines from Saudi energy minister Khlaid Al-Falih overnight warning that the oil rebalancing is imminent, and in case it isn’t, it will come in 2018 when OPEC and Non-OPEC producers may extend their production cuts, this morning oil is firmly hugging the flatline after a failed attempt to push higher earlier in the session.

As Bloomberg reports, Saudi Arabia and Russia signaled they may extend production cuts into 2018, doubling down on an effort to eliminate a supply surplus as oil prices continue to drop. 

 In separate statements just hours apart on Monday, the world’s largest crude producers said publicly for the first time they would consider prolonging their output reductions for longer than the six-month extension widely expected to be agreed at the OPEC meeting on May 25. “We are discussing a number of scenarios and believe extension for a longer period will help speed up market rebalancing” the Russian Energy Minister Alexander Novak said in a statement.

Speaking in Kuala Lumpur earlier Monday, Saudi energy minister Khalid Al-Falih said he was “rather confident the agreement will be extended into the second half of the year and possibly beyond” after talks with other nations participating in the accord.

Brazil Reports 14.6% Jump In February Oil Output, Exports Almost Double

Brazilian oil output in February was 14.6 percent higher year-over-year, according to the latest data released by ANP, the South American country’s petroleum regulator.

February production touched 2.676 million barrels per day, an ANP statement said, adding that natural gas output also rose 9.2 percent compared to the same month last year.

Figures released earlier in March from the nation’s Trade Ministry said that oil exports had jumped 94 percent year-over-year in February at 45.7 million barrels – a figure that topped the January 2017 record by 12 percent.

he surge in oil exports was a function of higher production from the offshore areas in Brazilian waters, where huge oil finds were made in the pre-salt and sub-salt layers in the past few years.

 

OPEC, Non-OPEC Oil Producers Recommend Extending Production Cuts By Six Months

Having failed to “rebalance” the oil market in the first six months following the implementation of the Vienna production cut agreement, with crude inventories in the US hitting all time highs in the interim…

… OPEC and non-OPEC oil producers found themselves in the unpleasant position of scrambling for solutions at this weekend’s Kuwait meeting – in which Saudi Arabia was conspicuously missing – where just two things were discussed: deal compliance, which OPEC paradoxically claims is more than satisfactory despite the relentless climb in inventories, and whether to extend the production cuts by another six month.

And as the Kuwait meeting in which OPEC and rival N-OPEC producing countries met to review progress with their pact to cut supplies drew to a close, a joint committee of ministers from OPEC and non-OPEC oil producers recommended extending by six months the global deal to reduce oil output by 1.8 million barrels, a draft press release from their meeting on Sunday showed.

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.”

Oil – overnight piece says Saudi the biggest OPEC cutters

Just doing a bit of a catch-up, this from Bloomberg overnight on the OPEC supply cuts:

  • Saudi Arabia continued to lead OPEC’s efforts to cut production
  • Organization of Petroleum Exporting Countries’ production fell to 32.17 million barrels a day in February, a 65,000 barrel-a-day drop from January
  • Increases from Iran, Nigeria and Libya (permitted under the terms of the agreement)
  • OPEC’s total output remains 415,000 barrels a day above the target set out in the Nov. 30 deal
  • The group as a whole is only about 70 percent of the way toward the production level it deemed necessary to eliminate a global oversupply and boost prices

 

RBOB Slides After Surprise Gasoline Inventory Build; New Record Glut In Crude

After a volatile day of White House rumors and denials, and OPEC headlines, WTI and RBOB ended the day lower ahead of tonight’s API data which showed a slightly smaller than expected crude build (+2.5mm against expectations of +3mm). However RBOB prices tumbled after an unexpected build.

API

  • Crude +2.502mm (+3mm exp)
  • Cushing +544k
  • Gasoline +1.84mm (-1.5mm exp)
  • Distillates -3.73mm

While crude built again (the 8th week in a row), it was the swing back to a build in gasoline that is most notable…