Tag: Crude Oil

Saudi Arabia Assumes $55 Oil Price in 2017

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Saudi Arabia's energy minister, Khalid Al-Falih, clarified his position on the cuts and oil price target. After the meeting with non-OPEC producers, there was a press conference, and the media reported that he had implied Saudi Arabia would make deeper cuts than agreed at the OPEC meeting. Also many commentators seem to think Saudi Arabia’s price objective is in the $60s or $70s.

But in conjunction with announcing Saudi Arabia's 2017 budget, Mr. Al-Falih said that the kingdom sees no need for addition production cuts than the ones already pledged by the OPEC and some non-OPEC producers. He said the market intervention is intended only to "nudge along" the re-balancing of an oversupplied global oil market. He said he expects oil prices to rise "tangibly" from the 2016 average, and assumes oil will average $55 in 2017 and $61 in 2018. OPEC's Reference Basket (ORB) was $52.25 on December 21st, so it appears prices are close to where he expects them to average next year.

OPEC Basket Price Crude Oil

Economists have estimated that the new Saudi 2017 budget is based on oil prices in a range of $47 to $55/b. Al-Falih said that the budgeted oil price is a "conservative" scenario. Continue reading "Saudi Arabia Assumes $55 Oil Price in 2017" →

OPEC's Cut Could Lead To American Oil Independence

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


OPEC

In line with the ‘Algiers Accord,' OPEC reported an agreement to limit its production to a new OPEC-14 production target of 32.5mb/d, “in order to accelerate the ongoing drawdown of the stock overhang and bring the oil market rebalancing forward. The Agreement will be effective from January 1, 2017.“ It will last six months but is “extendable” for another six months.

It did so by announcing “adjustments” to a “reference” case as follows. Three countries were not assigned cuts: Indonesia, which suspended its membership, and Libya and Nigeria, which are in the process of restoring their output from disruptions. Continue reading "OPEC's Cut Could Lead To American Oil Independence" →

How The OPEC Deal Impacts The FX Arena

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The much-anticipated OPEC deal to cut oil production has finally been reached. Brent and WTI Oil futures were not too late to react and jumped more than 7% with Brent Oil futures surpassing the $50 mark. And if momentum continues we could very well be looking at $60, perhaps rather soon. If that is the case, this can change the picture, not only for Oil futures and Oil companies but for currencies of Oil exporting countries, many of which were hit hard when Oil prices took a nose dive and could benefit now that oil prices are taking off.

The question is how exactly would an Oil rally play in petro-currencies in the current macro environment? Is it a good opportunity to buy into the battered Ruble? Or maybe a Norwegian Krona rally against the Euro? The options are numerous, but once we delve into the economic dynamics of each currency, the options narrow fast. Continue reading "How The OPEC Deal Impacts The FX Arena" →

How Saudi Arabia Will Manage the Oil Market in 2017

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


OPEC agreed in Algeria to limit future oil production. This represents a major shift in the policy announced in November 2014 to compete for market share through lower prices.

The OPEC communique stated the group will retain output to a "target range of 32.5 to 33.0 million barrels per day" (mmbd). In the latest OPEC Monthly Oil Market Report (MOMR), OPEC reported that production average 33.4 mmbd in September. While that is not far above the target range, there are other problems looming on the horizon; several countries—Nigeria, Iran, Iraq, and Libya—all want to restore their output to levels they were at before their supplies were disrupted, and that could push OPEC’s output up to nearly 35 mmbd if they succeed.

Saudi Energy Minister Khalid Al-Falih reversed KSA’s position from last April when it would not freeze output without Iran’s agreement to do the same. Instead, he said, Iran, Nigeria and Libya would be allowed to produce "at maximum levels that make sense as part of any output limits which could be set as early as the next OPEC meeting in November."

My interpretation is that Saudi Arabia and the smaller Gulf producers are therefore going to have to absorb the cuts if they intend to achieve the target. Continue reading "How Saudi Arabia Will Manage the Oil Market in 2017" →

OPEC's Algiers Meeting

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


If you are having trouble keeping up with all of the rhetoric in the oil market over the past two months, you are not alone. That’s the oil producers’ basic idea, create as much uncertainty as possible in a bid to scare traders from shorting oil, thereby preventing oil prices from cratering.

Lead-Up to Algiers

Oil prices bottomed in mid-February, following the slide that had begun in June 2014. The trigger was a meeting between energy ministers from Saudi Arabia and Russia, along with a couple of smaller OPEC Gulf producers. They could not agree to a production cut, so they came up with a “freeze” proposal, whereby producers would agree not to increase production further.

Although this would not take one barrel of production out of the market, it was enough to spook traders who had large short positions to cover (buy). Random statements by producers created price spikes, and the resulting “headline risk” cause short sellers to progressively cover more and more positions. The effect was a sizable price rise. Continue reading "OPEC's Algiers Meeting" →