Tag: Robert Boslego

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" →

Non-OPEC Deal Delivers "Voluntary" Oil Production Cuts

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Ministers from eleven Non-OPEC oil producing countries, led by the Russian Federation, met at OPEC’s headquarters in Vienna on December 11th. It had been reported for weeks that they would agree to cut their oil production by 600,000 b/d.

What they actually agreed to was a watered-down version of that. It turned out that they did not get to 600,000, that much of the “cut” was due to a natural decline in certain countries, such as Mexico, that Russia’s 300,000 b/d cut would be gradual over the first six months of 2017, and that it was all voluntary.

The key portion of the press release reads as follows: Continue reading "Non-OPEC Deal Delivers "Voluntary" Oil Production Cuts" →

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" →

What OPEC Cut Is Priced-Into The Crude Oil Market?

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


As all seasoned traders know, oil futures contracts reflect the market’s probability-weighted price expectations. In addition, I believe that the market provides a risk premium to the long side which underprices oil to some extent.

One important question now is how much of a potential OPEC/Non-OPEC cut is already priced into futures contracts? The answer determines the risk-reward to being long or short, depending on the outcome of the 171st OPEC Meeting on November 30th.

Before going further, there is no definitive financial theory or procedure of telling specifically. So I have to make some informed guesses based on possible outcomes and past market reactions. Continue reading "What OPEC Cut Is Priced-Into The Crude Oil Market?" →

U.S. Crude Oil Production Did Not Increase 170,000 B/D Last Week

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Contrary to popular belief, although the Energy Information Administration (EIA) reported that U.S. crude inventories rose 170,000 b/d last week, that almost certainly did not happen. The EIA’s weekly production number comes from its production model, which is highly flawed. Its monthly numbers come from a survey, which is a much more reliable source of data.

Not including production data from the early 1970s, crude production in the U.S. peaked in April 2015 at 9.6 million barrels per day (mmbd). Crude production appears to have bottomed in July 2016 at 8.6 mmbd, making the peak-to-trough 900,000 b/d.

In August, the EIA reported that crude production increased by 51,000 b/d as the result of increased production in the Gulf of Mexico. But EIA’s forecast in its Short-Term Energy Outlook (STEO) published in July for August turned out to be 524,000 b/d lower than the actual monthly figure, a huge forecasting error. Continue reading "U.S. Crude Oil Production Did Not Increase 170,000 B/D Last Week" →