Tag: Robert Boslego

OPEC Appeases Russia To Stick With Deals

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


The 173rd OPEC Meeting and 3rd non-OPEC Ministerial Meeting concluded with an agreement to extend the production cuts all the way through 2018. Saudi minister Khalid Al-Falih also implied that production in 2018 by Nigeria and Libya would not increase, based on information from those countries. In 2017, large increases by the pair undermined cuts made by others.

The official OPEC press release included two caveats, though not unusual but were obviously a concession to Russia, that the deals could be modified, depending on market conditions:

"In view of the uncertainties associated mainly with supply and, to some extent, demand growth it is intended that in June 2018, the opportunity of further adjustment actions will be considered based on prevailing market conditions and the progress achieved towards re-balancing of the oil market at that time."

"To support the extension of the mandate of the Joint Ministerial Monitoring Committee (JMMC) composed of Algeria, Kuwait, Venezuela, Saudi Arabia and two participating non-OPEC countries of the Russian Federation and Oman, chaired by Saudi Arabia, co-chaired by the Russian Federation, and assisted by the Joint Technical Committee at the OPEC Secretariat, to closely review the status of and conformity with the Declaration of Cooperation and report to the OPEC – non OPEC Conference."

Saudi minister Khalid Al-Falih

Initially, at the meeting a year ago, the oil ministers predicted that the glut would disappear within six months. Then at the May meeting, the Saudi minister predicted that the extension would "do the trick" of draining the glut "within six months."
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Oil Market Waiting For A Catalyst

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


On November 15th, Saudi Energy Minister Khalid al-Falih said, “We need to recognize that by the end of March we’re not going to be at the level we want to be which is the five-year average, that means an extension of some sort.”

He went on to say that Saudi Arabia favors making an extension decision at the OPEC meeting at the end of this month. “My preference is to give clarity to the market and announce on November 30 what we’re going to do.”

At the conclusion of the last OPEC meeting in May, the Saudi minister had stated that the current production quotas will “do the trick” of rebalancing stocks to normal levels within six months. Earlier this month, the DOE projected that global OECD stocks at end-2017 would be right where they were at end-2016. And it projected that 2018 inventories will be higher, not lower.

Russia’s continued participation seems to be a linchpin, and the Russian energy minister, Alexander Novak, reportedly met with Russian oil producers about their view of extending the production deal. According to TASS, everyone but Gazprom Neft agreed to a six-month extension, not the nine-month extension favored by Mr. Al-Falih. Gazprom Neft expects to launch new projects in 2018. Continue reading "Oil Market Waiting For A Catalyst" →

Oil Price Surge May Become OPEC's Worst Enemy

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Crude prices bottomed in the current price cycle during the third week of June. Subsequently, there has been a surge to the highest crude prices in two years. My theory is that the market has priced-in a geopolitical risk premium given the de-certification of the Iran nuclear deal by President Trump as signaled by the White House on October 5th.

Another factor has emerged. It has become increasingly clear that the DOE’s estimates of weekly U.S. crude production have overestimated the actual monthly figures, as reported two months in arrears. The errors since April have been large. Some have concluded that American shale oil production is not as big of a countermeasure to rising oil prices as had been believed.
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Oil Prices Break-Out of Trading Range

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Oil futures prices have broken above the trading range where they have been since February when the market was expecting supply and demand would balance quickly as a result of the OPEC/non-OPEC deals. But those hopes were dashed because the global demand was in a seasonal decline, and inventories remained stubbornly high.

Prices managed to break higher due to a combination of circumstances:

U.S. and Global Inventories

Hurricane Harvey in the U.S. Gulf of Mexico (GOM) disrupted refinery operations, causing product stocks to draw rapidly. It was followed by Hurricane Nate, which disrupted crude oil production in the GOM.

In addition, U.S. crude exports reached record levels recently, averaging 1.744 million barrels per day (mmbd) over the past four weeks, a gain of 293 % from the same weeks a year ago. Petroleum product exports have also been strong, averaging 5.125 mmbd in the same period, up 23% v. a year ago.

Together, these trends have reduced U.S. inventories by 40 million barrels since the week ending September 8th. Global OECD stocks have dropped about 51 million barrels from May through September, though this is largely due to normal seasonal trends. Continue reading "Oil Prices Break-Out of Trading Range" →

OPEC's Fake Results and Upcoming Quagmire

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


OPEC’s market monitoring committee reported that OPEC reached “120% compliance” with the production adjustments. It also reported that commercial OECD stocks had been reduced by 178 million barrels “since the beginning of the year.”

In reality, OPEC exceeded its collective production limit by about 850,000 b/d in September. It reported production at 32.748 million barrels per day, but that level must be adjusted to be comparable to the 32.5 million production ceiling it set last November.

To get a comparable figure, two adjustments must be made. Production from Indonesia must be added (740,000 b/d) because its output was included in the ceiling, notwithstanding it was dropping out. And production from Equatorial Guinea (140,000 b/d) must be deducted because it was not an OPEC member and its output was not included. Continue reading "OPEC's Fake Results and Upcoming Quagmire" →