Tag: saudi arabia

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" →

Refinery Acquisitions Reduce Saudi Risks, Increase U.S. Energy Security Risks

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


A recent article noted that Saudi Arabia Is Buying Up America's Oil Assets. Saudi Aramco is buying U.S. refining and petrochemical assets as well as energy and technology companies through its Saudi Aramco Energy Ventures LLC fund.
Congress has recently received a Long-Term Strategic Review (LTSR) of the Strategic Petroleum Reserve. The SPR's mission is to protect the U.S. from severe petroleum interruptions. The LTSR was intended to identify the key challenges that could impact the ability of the SPR to accomplish its mission.

I submit that it ignores a key challenge, the foreign ownership of refineries and petrochemical plants, that could render the SPR crude supplies meaningless.

The existence of the SPR is a key factor determining oil prices because the market does not have to factor in large interruptions of crude supply into prices because it knows the government has the SPR and will use it. Continue reading "Refinery Acquisitions Reduce Saudi Risks, Increase U.S. Energy Security Risks" →

Oil And Trump Both Need To Pause And Catch Their Breath

Posted on by Adam Feik

Adam Feik - INO.com Contributor - Energies


Oil has come a long ways, in really short order, rising from $26.21 on February 11 to over $38 as of March 31 (a 46% increase).

Hedge funds have become “as bullish on crude as they’ve ever been, according to the latest CFTC data,” said CNBC’s Melissa Lee on Wednesday.

Is the bullishness justified? Let’s try to sort all this out.

To start, here’s video of a Lee’s and Timothy Seymour’s CNBC interview of PR Advisors founder Robert Raymond. To me, Raymond’s analysis makes a lot of sense. See what you think. I’ve excerpted several statement from Mr. Raymond, followed by my comments (labeled Feik) to give you my view.

Raymond: “(The bullishness) is actually part of what has us concerned.”

Feik: I agree. John Templeton provided a favorite investing maxim of mine (and of many others) when he said, “Bull-markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” With so many people trying to bottom-fish in oil and energy right now, I don’t see the kind of pessimism or skepticism that sparks bull markets. So, like Mr. Raymond, that has me concerned. Continue reading "Oil And Trump Both Need To Pause And Catch Their Breath" →

Russia's Achilles' Heel

Posted on by The INO.com Team

No doubt by now, you've heard of the problems in Russia with its currency. You have to say to yourself, "a 17% return on my money sounds pretty good," but when the ruble sinks more than that in one day, you say, "WHOA, will I get my money back?" And that my friends is Russia’s Achilles' heel right now, as investors ponder whether they going to get their money back before capital controls are put in place.

If you didn't think commodity markets are important, think again. The correlation between the collapse of the Russian ruble (CME:6R.Z14.E) and the collapsing oil market is extraordinary and I will illustrate it for you in today's video.

Who knew that Saudi Arabia alone could, in essence, break the Russian economy almost in half, not with tanks and bombs, but with a commodity called crude Oil (NYMEX:CL.F15.E).

Saudi Arabia has continued to push production from its vast oil fields in order to lower the price of oil and make it difficult for competitors to stay in business. One of the amazing side effects to all this is the fact that Saudi Arabia has basically ripped the guts out of the Russian economy and its cash cow, crude oil. Continue reading "Russia's Achilles' Heel" →

Potential Oil Glut! Raymond James Analyst's Contrarian Forecast

Posted on by admin

The Energy Report: Why are you expecting an oil glut in 2014?

Andrew Coleman: Because of the evolution of North American shale oil plays, we are on track to add about 3 million barrels (3 MMbbl) of new supply over the next five years. Yet we know oil demand has been falling across the developed nations and is still weak coming out of the global financial crisis. Those developments point toward a glut.

TER: Saudi Arabia surprised you last year by cutting production when oil was more than $110 per barrel ($110/bbl). Why would Saudi or other suppliers not do that again?

AC: What hurt production outside the U.S. last year and helped keep the demand side a little more in balance was that Saudi cut 800,000 barrels a day (800 Mbbl/d) in Q4/12, sanctions in Iran reduced exports by about 800 Mbbl/d as well, conflict in Sudan took 300 Mbbl/d offline and the North Sea average was lower by about 130 Mbbl/d. These reductions kept last year's supply more balanced than we thought it would be. Going forward, Saudi's ability or willingness to cut is certainly going to be tested, because by our model the country may need to cut 1.5 million barrels a day (1.5 MMbbl/d), about double what it cut last year. It would have to do that for a longer period of time, given the amount of excess storage that could show up on the global markets.

TER: But, as you just pointed out, Saudi Arabia's cut came in the context of actions by other players. The other players are going to be as unpredictable as they were last year, aren't they? Continue reading "Potential Oil Glut! Raymond James Analyst's Contrarian Forecast" →