Tag: Saudi Energy Minister Khalid Al-Falih

Analysis Of Saudi Export Reduction For August

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


On July 24th, Saudi energy minister, Khalid Al-Falih, announced that Saudi Arabia would limit its exports to 6.6 million barrels a day (mmbd) in August. He noted that other producers were still exporting larger volumes of oil than their production cuts imply.

“We are not doing this to allow other countries to free ride and undercut the agreement by overproducing,” said Mr. Al-Falih, reflecting a high level of frustration. Observers described Mr. Al-Fahil as “very nervous” over the weekend.

Saudi energy minister Khalid Al-Falih
Saudi Energy Minister Khalid Al-Falih. PHOTO: IGOR RUSSAK/ZUMA PRESS

I believe he sensed or was advised that oil prices may drop precipitously if OPEC only reported continued-high compliance. Last Friday, John Kilduff had said this was a “make or break” meeting, and “that if nothing comes out of this meeting, the cartel and Russia will be punished mightily.” Continue reading "Analysis Of Saudi Export Reduction For August" →

OPEC Deals Have Effectively Collapsed

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


When OPEC announced its agreement 30 November 2016, it pledged to bring its collective ceiling to 32.5 million barrels per day (mmbd), effective 1st of January 2017. At the time, that ceiling included Indonesia, which was in the process of withdrawing from the cartel. The adjusted ceiling, therefore, became about 31.76 mmbd, excluding Indonesia’s 740,000 b/d output.

The deal was extended at the end of May for an additional nine months through March 2018. At the press conference, OPEC president and Saudi energy minister, Khalid Al-Falih, answered a question about the rising production in Libya and Nigeria. He responded by saying that other OPEC members would adjust their output accordingly to allow, for their increases.

But data throughout 2017, and most recently June, reveal no such adjustments have been made. According to Reuters, June production averaged 32.57 mmbd, about 820,000 b/d above its ceiling, as adjusted.

And Libyan production has continued to rise, topping 1.0 mmbd at month’s end. Nigerian exports are scheduled to reach at least two mmbd in August, 500,000 b/d higher than in the cartel’s base month (October 2016).

OPEC’s output in October was around 33.7 mmbd (including Indonesia). And so June’s production of 33.3 mmbd (including Indonesia) is only about 400,000 b/d lower.

Based on the above expectations for rising output in August, the OPEC deal is effectively dead. OPEC production will be back to about where it was in October. Continue reading "OPEC Deals Have Effectively Collapsed" →

Saudi Arabia's Regime Change Risk

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Risks of Saudi Arabia requiring a regime change are increasing, despite the OPEC production and non-OPEC production agreements. Fitch Ratings reduced Saudi Arabia’s rating to A+, the fifth-highest investment grade, and changed the outlook to stable from negative. The downgrade “reflects the continued deterioration of public and external balance sheets, the significantly wider than expected fiscal deficit in 2016 and continued doubts about the extent to which the government’s ambitious reform program can be implemented," Fitch said.

Saudi foreign currency reserves peaked at about $745 billion in 2014. They have dropped to about $525 billion, down $222 billion, or 30%. And despite higher oil prices in January, the reserves fell by $12.5 billion. The IMF has projected that the reserves may be entirely expended by 2020 if world oil prices do not recover sufficiently.

Saudi Arabia Foreign Exchange Reserves
Note: The chart above provides reserves in SAR million

The government had budgeted crude prices in 2017 to average around $53 per barrel. I deduced that from the 2017 Budget of the Kingdom of Saudi Arabia (Page 21): Continue reading "Saudi Arabia's Regime Change Risk" →

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 Oil Export Revenues Lowest Since 2003

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


But No Agreement To Cut Production Likely

OPEC President, H.E. Dr. Mohammed Bin Saleh Al-Sada, Qatar's Minister of Energy and Industry, issued a press release August 8th announcing that an informal meeting of OPEC member countries would take place on the sidelines of the 15th International Energy Forum in Algeria from 26 to 28 September 2016. There was an initial price rise, but that faded on Tuesday and Wednesday. Continue reading "OPEC Oil Export Revenues Lowest Since 2003" →