Written by rjs, MarketWatch 666
Here are some more selected news articles about the oil and gas industry from the week ended 16 December 2018. Go here for Part 1.
This is a feature at Global Economic Intersection every Monday evening.
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This Bird Breeding Haven Could Be Next in Line for Arctic Oil Drilling – Each spring, hundreds of thousands of birds from five continents follow an ancestral tug toward Teshekpuk Lake, a 320-square-mile marvel surrounded by ponds, wetlands, and soggy tundra in far northern Alaska, where shorebirds raise chicks and geese hunker down to molt their feathers. They’re not the only ones lured to the remote spot. For decades, energy companies have eyed the same swath of coastal plain, an area as rich in oil as it is in bird life – and recent fossil-fuel discoveries have intensified their interest. This tension between wildlife and energy is inherent to the 23-million-acre National Petroleum Reserve-Alaska (NPR-A), the nation’s biggest chunk of federal land. Although the reserve was created in 1923 as an oil resource for the U.S. Navy, Congress later broadened its purpose to provide “maximum protection” for wildlife and subsistence hunting. That includes the birds and herds around Teshekpuk Lake, in the NPR-A’s northeastern corner. Unlike other parts of Alaska’s oil-rich North Slope, development in the reserve is still in its infancy. The first NPR-A oil production began on Alaska Native land in 2015, and oil started flowing from a federal NPR-A lease this past October. But it’s likely to accelerate soon as the Trump administration prepares to write a new management plan for the NPR-A. On November 20, the Bureau of Land Management (BLM) announceda 45-day public scoping period to shape what should be considered in a new plan, one that will promote “clean and safe development in the NPR-A while avoiding regulatory burdens that unnecessarily encumber energy production” and could open new, sensitive areas to development. It’s part of Zinke’s broader push, outlined last year, to boost oil and gas production across the far north, including in the Arctic National Wildlife Refuge. “These are the two places we should be conserving, yet there’s a headlong rush to open them up and put infrastructure in there and start drilling,” says Susan Culliney, policy director for Audubon Alaska. “Given the Trump administration’s ‘energy dominance’ rhetoric, we’re concerned, especially with Teshekpuk Lake in the bullseye.”
Trump Administration’s Alaska Oil and Gas Lease Sale a ‘Major Flop’ – Despite the Trump administration’s unrelenting quest to drill the Arctic, Wednesday’s oil and gas lease sale in the National Petroleum Reserve-Alaska (NPR-A) yielded a “disappointing” return of $1.5 million, E&E News reported. Oil and gas giants ConocoPhillips, Emerald House and Nordaq Energy were the three companies that made uncontested bids on 16 tracts of land out of 254 tracts made available by the Bureau of Land Management’s (BLM) annual sale in the western Arctic.In all, the companies swooped up roughly 174,000 acres of the 2.85 million acres offered, working out to an average of just $6.50 an acre.”Federal officials [cited] a lack of access to the most promising areas as a reason for the modest bidding,” theAnchorage Daily News reported.But the Center for American Progress said the result was a “major flop that shortchanged taxpayers” and also puts the nearby Arctic National Wildlife Refuge (ANWR) environment at risk.”These results show that the fiscal arguments – including promises of more than $1 billion, or bids of $1,000 per acre – made for drilling in the neighboring Arctic National Wildlife Refuge were a complete scam,” the organization tweeted. “Taxpayers are being sold a false bill of goods in the Arctic Refuge, and stand to lose America’s last best wilderness in the process.” The Trump administration is moving forward on its controversial oil and gas drilling plans in the pristine Arctic reserve, a habitat for polar bears, caribou, migratory birds and other species.
Cuadrilla pauses gas fracking at English site after more tremors (Reuters) – British shale gas company Cuadrilla has again paused fracking at its Preston New Road site in Lancashire, northwest England, after tremors were detected, the company said. This marks the third time operations have been halted at the site following seismic activity under Britain’s so-called traffic light regulation system, since they began in October. “A series of micro seismic events in Blackpool have been recorded on the British Geological Survey website this morning following hydraulic fracturing at our shale gas exploration site in Preston New Road, Lancashire,” Cuadrilla said in a statement. The largest tremor, of 1.5 magnitude, took place after fracking activities had already stopped, it said. “According to recent research by the University of Liverpool the impact would be like dropping a melon,” Cuadrilla said. Fracking, or hydraulically fracturing, involves extracting gas from rocks by breaking them up with water and chemicals at high pressure. It is opposed by environmentalists who say extracting more fossil fuel is at odds with Britain’s commitment to reduce greenhouse gas emissions. However, the government is keen to reduce the country’s reliance on imports of natural gas, which is used to heat around 80 percent of Britain’s homes. The company, which is 47.4 percent owned by Australia’s AJ Lucas and 45.2 percent owned by a fund managed by Riverstone, first attempted to frack gas near the coastal town of Blackpool in northwestern England in 2011, but the practice led to a 2.3 magnitude earth tremor. It said then that the quakes at that site were caused by an unusual combination of geological features, but they led to an 18-month nationwide ban on fracking while further research was carried out. The government has since introduced a traffic-light system that immediately suspends work if seismic activity of magnitude 0.5 or above is detected.
Biggest tremor on record forces immediate halt to fracking in Lancashire – A tremor measuring 1.5 magnitude has forced Cuadrilla to halt fracking at the Lancashire site. The British Geological Survey (BGS) recorded a series of tremors this morning at the controversial fracking site at Preston New Road, Little Plumpton. Nine tremors were detected at the site within 90 minutes this morning, with the latest tremor measuring a magnitude of 1.5ML. Regulations state that fracking must be halted if tremors exceed 0.5ML. According to the BGS database, the 1.5 magnitude tremor is the largest detected at the site since monitoring began. It has been claimed the tremor was felt in the Blackpool area. The nine tremors recorded today are also the most recorded at the site in a single day. The earlier eight tremors measured magnitudes between – 0.4 and 0.0, between 9.35am and 10.18am this morning. But the latest 1.5ML tremor,which occurred at 11.21am, exceeds the maximum magnitude allowed for fracking. Caudrilla has now been forced to take immediate action and halt fracking at the site for 18 hours. A quake measuring a magnitude of – 0.3 was also recorded at the site yesterday. They are the latest in a series of minor tremors since Cuadrilla began fracking at the site in October, after spending two years exploring the site. “Cuadrilla will pause and continue to monitor micro seismicity for at least the next 18 hours, in line with the traffic light system regulations. Well integrity has been checked and verified.”
Activist on Fracking: They Could Damage Infrastructure, Damage Well – Caudrilla has had to halt its fracking operation in Lancashire in Britain after the largest tremors registered to date. Earlier Sputnik spoke to Activist Tina Rothery who is at the site about the latest tremors and what it will mean for the future of fracking in the UK.
- Sputnik: What do you make of the latest tremors from fracking by Caudrilla?
- Tina Rothery: We are unsurprised, but deeply concerned. They are residents that went to bed worried last night, totally terrified. I’m standing outside the frack site, and the neighbours are talking that it might be well and good Caudrilla saying it’s about as much energy as dropping a watermelon on the floor, they didn’t hear the bang or feel the shaking that our neighbours felt. The protests have been going on here at the side of this road for 712 days now continuously and non-stop and the only time we get earthquakes is when they frack. Now we’ve had a total of 48 earthquakes, this area has not seen this level seismic activity ever.
- Sputnik: How damaging is fracking having on the environment in the area?
- Tina Rothery: What concerns us most is deep underground where they are fracking and where the fracking are occurring is around the pipe, so they could damage the infrastructure down there and they could damage the well. Then all of the substances they are using down there could leak into our water supply. We haven’t got to that stage yet but these are the things we see that are evident in Canada, Australia and America
North Sea oil field reawakened seven years after leak – An oil field in the central North Sea has resumed production seven years after a leak forced its shutdown.Current operator Tailwind Energy said late Sunday evening that the redevelopment of Gannet E had been a success.Shell initially developed the field via three wells connected to the Gannet Alpha platform, about 110 miles east of Aberdeen.First oil was achieved in 1998, some 16 years after the field’s discovery. But production was halted in 2011 in the wake of a pipeline leak, which led to 200 tonnes of oil escaping into the sea.The incident cost Shell about £45 million.Aberdeen Sheriff Court fined the Anglo-Dutch major £22,500 in 2015. But Gannet E came back online after a new pipeline was installed connecting the field to the nearby Triton floating production, storage and offloading vessel, which is operated by Dana Petroleum. Tailwind chief executive Stephen Edwards said the project was completed in September with first oil delivered “on budget and on schedule”.That same month, Tailwind completed the acquisition of Shell and ExxonMobil’s stakes in the Triton cluster.London-headquartered Tailwind became operator of Gannet E, with a 100% interest. Mr Edwards said Gannet E is currently producing about 10,000 barrels of oil per day (bpd).
Inside the Dutch province where gas extraction tremors left houses crumbling – The village of Doodstil – which translates as ‘dead quiet’ in Dutch – feels like it could have been named as part of an elaborate joke.Despite its name and appearance, this cluster of homes surrounded by flat, green fields and picturesque dykes actually sits in an unlikely earthquake zone.Fifty-five years of conventional gas extraction from Europe’s largest field h ave made The Netherlands’ province of Groningen anything but calm. Now, warned of the risk of a catastrophic earthquake that could cost lives and homes, the Dutch government is gradually turning off the tap to a gas field that has delivered it more than €265 billion (£237 billion) since 1963.
EU lawmakers repeat call to stop Russia’s Nord Stream 2 natural gas link – The European Parliament has called for Russia’s planned 55 Bcm/year Nord Stream 2 natural gas link to Germany to be cancelled in a non-binding resolution adopted late Wednesday. The resolution has no legal force but reinforces the parliament’s long-standing opposition to what it sees as a “political project” intended to undermine Ukraine’s position as a key Russian gas transit partner for the EU. Russia plans to bring both Nord Stream 2 and its 31.5 Bcm/year TurkStream pipeline to Turkey online by the end of 2019, after which it will be able to cut flows to the EU via Ukraine from some 94 Bcm in 2017 to just 10-15 Bcm/year from 2020. The European Commission, which is also a vocal critic of Nord Stream 2’s expected impact on Ukraine, has proposed changing the EU’s gas directive to apply internal energy market rules to offshore gas links with non-EU countries. If approved into law — which is not guaranteed — these proposals could see Nord Stream 2 having to submit to transparent, non-discriminatory tariff regulation for the EU section of the pipeline, for example. That could make it easier for Ukraine to know what transit tariffs to offer in order to compete more successfully with Nord Stream 2 from 2020. Both the parliament and the EU Council, representing the 28 national governments, have to agree a common text before the EC’s proposals can become law. The parliament adopted its negotiating position in March, in which it backed the EC’s proposals and called for any agreed waivers from the rules to be limited to five years. The parliament is now waiting for the council to agree a negotiating position so that informal talks can start between them on a final text.
US State Department sees increased interest from Congress in targeting Russian energy exports – – The US Congress appears increasingly interested in legislation targeting Russian energy exports to counter Moscow’s aggression against Ukraine since the Sea of Azov incident, a top State Department official said Monday. The House of Representatives is set to vote Tuesday on a non-binding resolution expressing opposition to the completion of the 55 Bcm/year Nord Stream 2 natural gas pipeline from Russia to Germany. “We certainly are monitoring the level of interest that Congress has,” Assistant Secretary for Energy Resources Francis Fannon told reporters during a briefing. “We’ve been monitoring the bills — something like 10 bills out there — all of which include Russian energy as a key component.” Fannon said he cannot comment on any particular legislation. Last month, Moscow seized three Ukrainian navy ships and their crews in the Kerch Strait offshore Crimea. Russia’s state-owned gas company Gazprom plans to build Nord Stream 2 across the Baltic Sea along a similar route to the original 55 Bcm/year Nord Stream pipeline, which came online in 2011. The US has long opposed the Nord Stream expansion, arguing that Europe should not be so dependent on Moscow for energy. The government has recently been touting US LNG exports as an alternative to Russian gas, in addition to supporting the Southern Gas Corridor from the Caspian region to the EU. The House resolution up for vote on Tuesday, if passed, would offer support for imposing sanctions on Nord Stream 2 under the Countering America’s Adversaries Through Actions Act. The resolution would also call on European governments to reject Nord Stream 2 and urge President Donald Trump to “use all available means to support European energy security through a policy of diversification to lessen reliance” on Russia. The House bill says Nord Stream 2 would increase Russian control over the European energy market. It says Russia already controls 40% of Europe’s gas supply, and 11 European countries rely on Russian gas for at least 75% of their needs. “Russia’s geopolitical interest in Nord Stream II is not to increase European energy security, but rather to drive a wedge between countries in Europe and drastically diminish the existing Ukrainian gas transit system,” the bill says. Representative Michael Conaway, Republican-Texas, introduced the bill in July.
China increases natural gas imports to avoid winter shortage – China National Petroleum, the country’s biggest gas producer supplying more than half of winter demand, is running its fields at full tilt and has made more storage available after promising to increase supply to customers. CNPC has also hooked up its pipelines with domestic rivals to help better distribute gas from the south and east to the chillier north. And, the nation is buying more from abroad, helping to soak up a global glut of the fuel, with imports surging 34% in the first 11 months of the year. China’s gas use has jumped more than a fifth this year to 226 Bcm through October. Better-organized supply and warmer weather have so far helped avoid last year’s failures.
China becomes world’s largest natural gas importer, overtaking Japan – China’s combined imports of natural gas by pipeline and in the form of liquefied natural gas (LNG) have become the world’s largest consistently for the past six months, overtaking Japan, and exceeding 12 billion cubic feet per day (Bcf/d) in August and September, according to data from China’s Administration of Customs. In the first nine months of this year, China’s total natural gas imports averaged 11.4 Bcf/d, a 2.9 Bcf/d (34%) increase over the same period last year, and more than doubled since 2014, when imports averaged 5.6 Bcf/d. Strong growth in China’s natural gas imports was led by the increase in domestic consumption, stimulated by government policies promoting coal-to-natural gas switching in an effort to reduce air pollution and meet emissions targets. While China’s domestic natural gas production, which provides more than one half of its total supply, has also grown, it was outpaced by the growth in imports. Between 2014 and 2017, domestic production in China increased by a net of 1.4 Bcf/d, according to BP’s Statistical Review of World Energy, while combined pipeline and LNG imports have increased by 3.4 Bcf/d during the same period. The growth in China’s natural gas imports was led primarily by the growth in LNG imports. In 2017, China became the world’s second largest LNG importer, with LNG imports growing steadily every year since 2006 – when China began importing LNG – except 2015. In the first nine months of 2018, LNG imports averaged 6.5 Bcf/d, 1.5 Bcf/d (30%) higher than in 2017, and are poised for further growth as China continues to expand its LNG import capacity. China’s current LNG import capacity stands at 8.6 Bcf/d, and two more terminals (totaling 0.4 Bcf/d) are expected to come online by the end of the year. Once all the terminals currently under construction are completed, China’s LNG import capacity is expected to reach 11.2 Bcf/d by 2021.
LNG Project Sanctions Set to Surge in 2019 – Uncontracted demand by the world’s seven largest liquefied natural gas (LNG) buyers could increase four-fold to 80 million tonnes per annum (mtpa) by 2030, according to Wood Mackenzie. “As China pushes on towards a lower-emission economy, its demand for gas and LNG has grown significantly and we expect the trend to continue in the longer term,” Nicholas Browne, research director with Wood Mackenzie, said in a written statement emailed to Rigzone. “Other traditional major buyers, on the other hand, are facing legacy contract expiries and will be on the hunt for a mix of contracts to lower average costs and security in supply sources.” According to Wood Mackenzie, the top seven LNG buyers – accounting for more than one-half of the global LNG market – have become increasingly active in global LNG contracting activity. The consultancy added that thsee Northeast Asian buyers have announced more than 16 mtpa of contracts in 2018. In addition, it noted that the growth in contracting is happening at a time when supply growth is poised to surge. Wood Mackenzie stated that it predicts 2019 could be a record year for LNG project sanctions, with more than 220 mtpa of gas targeting final investment decision (FID). A “bumper year beckons,” the firm stated. LNG projects that Wood Mackenzie considers “frontrunners” to reach FID include:
- The $27 billion Arctic LNG-2 project in Russia
- One or more projects in Mozambique
- Three U.S. projects
- “Expansion and backfill projects” in Australia and Papua New Guinea
As LNG buyers seek a variety of contracts to meet their different needs, LNG suppliers will need to ensure that they can address these changing needs, Wood Mackenzie cautioned. The firm noted that, in addition to price, LNG buyers will be sensitive to considerations such as contract flexibility, index, source diversification, upstream participation and seasonality. Browne emphasized that 2019 should be unprecedented in terms of LNG liquefaction capacity sanctioned. “Asia’s major buyers will be at the forefront in ensuring this next generation of LNG supply is brought to market,” Browne concluded.
Mexico Cancels Two Oil and Gas Auctions Mexico’s administration, led by new president Andres Manuel Lopez Obrador, has canceled two February bidding rounds, including one auction that would have been the first in Mexico’s history offering blocks targeting shale resources. In a release published Dec. 11 on the website of Mexico’s independent oil regulator the National Hydrocarbon Commission (CNH), the CNH announced it had canceled bid rounds 3.2 and 3.3, the latter which include nine unconventional onshore blocks with wet and dry gas. Round 3.2 include 37 conventional onshore blocks with light crude oil and wet and dry gas. The release also stated that the CNH would be postponing seven farmouts with PEMEX. Mexico’s president Lopez Obrador, who took office Dec. 1, stated in July that he wanted to boost Mexico’s crude output to 2.5 million barrels per day. The veteran leftist also previously said that Mexican oil auctions would be suspended until contracts already awarded had been reviewed. Lopez Obrador has been critical of former president Enrique Pena Nieto’s administration of opening the oil industry to private capital and plans to strengthen PEMEX during his time as president of Mexico.
Italy’s state-backed oil giant makes a major discovery off the shores of Angola — Eni, the state-backed Italian oil giant and 10th largest producer in the world by revenue, said it has made a new oil discovery in offshore Angola. The Afoxé exploration prospect is located offshore in a deepwater region West of Soyo and is estimated to hold between 170 million and 200 million barrels of light oil in place, according to company. “Eni is committed to developing this discovery leveraging its best-in-class time-to-market, whilst at the same time launching an intense exploration campaign that will fully support the Company’s mid-term organic growth in the Country,” chief executive Claudio Descalzi said in a statement Monday.Eni’s production has been on the rise, boosted by its presence in offshore Angola. In October, the company said its Ochigufu start-up helped production rise by 3.9% in the nine months through September to more than 1.8 million barrels of oil equivalent per day. The discovery comes at an uncertain time for the energy market. Oil prices have lost nearly a quarter in value over the past three months, with the global benchmark currently trading around $60 per barrel. In attempt to support prices, OPEC and other major producers agreed this month to cut coordinated production levels. As a net importer of crude oil and natural gas, Italy depends on foreign countries for about 93% of its energy needs to maintain exports of refined petroleum products, according to the Energy Information Administration.
Chevron Bets Big On Supergiant Oil Field -Chevron announced last week its capital and exploratory budget for 2019, which sees the first annual increase in spending since the 2014 oil price crash.While most of the investment is geared toward short-cycle projects that could start bringing in cash flows within two years, the U.S. supermajor continues to channel a significant portion of its upstream investment into a major capital-intensive project to boost the production of a supergiant oil field in western Kazakhstan. Chevron will invest US$4.3 billion in 2019 in the Future Growth Project at the Tengiz field which lies deep beneath the western Kazakhstan steppe – the deepest producing supergiant oil field and the largest single-trap producing reservoir in existence. The investment in boosting production at the giant oil field will take most of Chevron’s US$5.1 billion upstream program for major capital projects in 2019. For this year, Chevron had allocated US$3.7 billion to the Tengiz field expansion project. The Kazakhstan field expansion and the U.S. shale patch are the two pillars of Chevron’s capital spending for next year – growing shorter-cycle shale production and continuing investments in a supergiant oil field that is expected to pump oil for decades. For 2019, Chevron has earmarked US$3.6 billion for expanding its production in the Permian and another US$1.6 billion will be invested in other shale plays in the United States. That makes a total of US$5.2 billion for U.S. shale, which is substantially higher than this year’s shale budget of US$4.3 billion. The so-called Future Growth and Wellhead Pressure Management Project (FGP-WPMP) is planned to increase crude oil production at Tengiz by about 260,000 bpd, and was estimated to cost US$36.8 billion when Chevron approved the expansion project back in 2016. Tengiz and Kazakhstan operations continue to be a priority for Chevron, while the U.S. major is considering selling its interests in the oil industry of another former Soviet republic – Azerbaijan, as it is re-aligning its global operations to its new priorities after the downturn. Chevron is looking to sell its 9.6-percent stake in the giant Azeri oil field Azeri-Chirag-Gunashli (ACG) in the Caspian Sea and its 8.9-percent interest in the BTC pipeline, which carries oil from the ACG field and condensate from Shah Deniz across Azerbaijan, Georgia, and Turkey.
60,000 Liters of Oil Spills From Pipeline Into Brazilian Bay –About 60,000 liters (15,850 gallons) of oil spilled from a pipeline into the Estrela River and spread to Rio de Janeiro’s famed Guanabara Bay over the weekend, according to Reuters and local reports.The pipeline is owned by Transpetro, the largest oil and gas transportation company in Brazil, and a subsidiary of Petroleo Brasileiro (commonly known as Petrobras). Transpetro claims the leak resulted from an attempted robbery. “It was a leak of significant proportions, with an impact on the mangroves,” said Maur’cio Muniz, an analyst at the Instituto Chico Mendes, which is associated with the Brazilian environment ministry, according to Reuters.Aerial footage of the accident shows large slicks of oil contaminating the waters.Guanabara Bay was also the site of a major spill in January 2000, when a pipeline released 1,300,000 liters (340,000 gallons) of oil into the waters. The leak stemmed from an oil refinery operated by Petrobras.Muniz said Saturday’s spill was the worst he has seen in the decade at his job, as quoted by the news website Project Colabora. He added that the bay has not fully recovered since the 2000 spill. “The scene I witnessed was devastating: oil concentrated with garbage mainly at the mouth of the Rio Estrela,” he explained (via Google translate). “The oil stain is almost reaching Paquetfl [an island in Guanabara Bay].
Libya’s NOC demands immediate withdrawal of PFG forces at Sharara oil field – Libya’s National Oil Corporation (NOC) has declared force majeure on crude oil loadings from the country’s biggest oil field due to a forced shutdown caused by the presence of militia, it said Monday. NOC demanded that the armed militia claiming attachment to the local Petroleum Facilities Guard (PFG) immediately withdraw from the Sharara field without “pre-condition.” “The shutdown of Sharara will result in a daily site production loss of 315,000 b/d, with an additional loss of 73,000 b/d at El Feel due to its dependence on Sharara for electricity supply,” NOC said in a statement. Operations at the Zawiya refinery are also at risk due to their dependence on Sharara and the refinery “will cease producing essential fuels for local consumption unless alternative supply is identified,” it said. The “unnecessary shutdown” at Sharara will cost the Libyan economy $32.5 million/day, NOC said. The PFG occupied the field on Saturday with the help of locals. The country’s southern region is suffering from severe economic conditions and frequent power outages. Earlier this week, NOC also warned that the forced closure would have “devastating” effects on the country’s economy, other nearby upstream and downstream projects and would exacerbate a local fuel supply crisis. “The presence of this group is a real threat to the field and to the future of our country” said NOC chairman Mustafa Sanalla. “I want to be clear, this militia has to leave the field immediately. We stand wholeheartedly with the people of the south and understand their concerns. At NOC we are doing all we can to improve the living conditions of the residents. Their legitimate demands and grievances however have been used by criminals who are only in pursuit of self-interest.”
Struggling OPEC Agrees on Cuts, Crisis Not Over — OPEC officials have stated that the oil cartel has agreed on an 800,000-barrel per day (bpd) production cut, while non-OPEC is being asked to commit to around 400,000 bpd to be cut at the same time. Optimism surfaced straight away within the oil markets as crude oil prices jumped immediately after the news. However, the optimism should still be taken with a pinch of salt, as discrepancies in views inside of OPEC will continue, and a large part of the success depends on the willingness of non-OPEC members, especially Russia, to cut their production by 400,000 bpd. Optimism could also falter if OPEC and non-OPEC will decide that the cuts being made are related to current production levels, and not to former production agreements. In recent months Russia, Saudi Arabia and the UAE have substantially increased their overall production, while others have shown a tendency to grow production too. Normally, OPEC meetings in Vienna are mainly for visibility while trying to get a country’s message into the media. The last couple of meetings however have shown a much more politicized approach, as regional power politics have taken over the normal focus on oil prices and market fundamentals. The last OPEC meeting already showed that there was a major conflict brewing between the Saudi-Russia led production cut approach and the Iran-Venezuela anti-cut movement. The latter, especially Iran, has been vehemently against any production cuts or market regulating arrangements, as Tehran is currently in a conflict with Saudi Arabia regionally, while at the same time its hands are bound behind its back due to US sanctions. Tehran, partly right, perceived any Saudi movement as a potential threat to its own market share. Riyadh and Abu Dhabi, partly supported by Moscow, were expected to fill in the gaps caused by the U.S. sanctions on Iran. Tehran, supported by hardliners such as Venezuela and hit by U.S. sanctions, put all its might behind a blockade of the Saudi-Russian approach. The latter failed. The current OPEC meeting reflected the same scenario again. Iran bluntly said not to accept any production cuts, especially if this would include Iranian production. At the same time, Qatar announced it would leave the cartel, supposedly due to a lack of influence and reorientation on LNG. The Qatari move has clearly put additional pressure on the cartel, and we now see the result. The position of the total OPEC group is now being questioned, as major partners such as Venezuela, Algeria or Nigeria feel sidelined. The role of Iran is that of an outsider, as it can’t influence the market at present anymore. At the same time, several small producers are asking themselves if they need to follow Qatar’s steps, as the cartel now seems to be the one-man show of Saudi Arabia, based on support of the UAE, Kuwait and Bahrain.
OPEC Is Alive and Highly Relevant – OPEC is alive and well and highly relevant. That’s according to a new report from Fitch Solutions Macro Research, which was sent to Rigzone following OPEC+’s decision to cut 1.2 million barrels per day from the market. “Despite Qatar’s departure from OPEC, the group was able to build consensus internally and effect substantial cuts,” the report stated. “This action has reassured markets of OPEC’s commitment to act as a moderator of the oil markets, providing stability and long-term oversight of prices,” the report added. “In addition, this re-establishes the availability of spare capacity among OPEC members, which would help buffer prices against unexpected supply shocks,” the report continued. Fitch Solutions Macro Research believes cuts made at the level announced will not hike up oil prices to threatening levels for the United States or emerging market economic growth. The company is forecasting Brent to average $75 per barrel next year. “President Trump’s reaction to the efforts to reduce production will be closely watched, in particular his support of embattled Saudi Arabia’s Crown Prince Mohammed Bin Salman,” the report stated. “Rhetoric from Trump is to be expected, but we believe U.S. and Saudi Arabian relations will not be diminished through this level of OPEC action,” the report added. “The Trump administration could even put a positive spin on the cuts, given that price stability will be supportive of growth in the U.S. shale patch,” the report continued. ‘We Expected a Deal’Wood Mackenzie (WoodMac) expected an output cut deal at the latest OPEC+ meeting, according to Ann Louise Hittle, vice president of macro oils at WoodMac, who stated that “the stakes were high given the excess supply the market faces in 2019.” “The complicated issues facing OPEC delayed the agreement, in what seemed like a replay of the delicate talks that led to the first OPEC/non-OPEC production cut agreement in December 2016,” Hittle said in a statement sent to Rigzone. “This time, however, rather than the talks leading up to the deal being held over months, they were largely held [over a] week,” Hittle added. The WoodMac representative said a production cut of 1.2 million barrels per day would tighten the oil market by the third quarter of 2019 and cause prices to rise back above $70 per barrel for Brent.
OPEC Cut Was Not Easy – The move to cut 1.2 million barrels per day from the market was not easy, Suhail Mohamed Al Mazrouei, UAE minister of energy and industry and president of the OPEC conference, has revealed in a television interview with Bloomberg. “I think this is first of all a very responsive move from both OPEC and non-OPEC. It was not easy because of the dynamics since the summer,” Mazrouei said in the interview. “The market have asked us to take action and increase production a few months ago and we did. So to come and convince all of those countries that you need to reverse that and go and remove production again was not easy but I think the trust on the organization, the trust of the technical team, on their analysis, have led us to become responsive,” he added. The production cuts are effective as of January 2019 for an initial period of six months. The contributions from OPEC and non-OPEC will correspond to 800,000 barrels per day and 400,000 barrels per day, respectively. The next OPEC and non-OPEC ministerial meeting is scheduled to convene in Vienna, Austria, in April next year.
Defying Trump, Saudi Arabia chooses ‘Saudi first’ oil policy at OPEC meeting — President Donald Trump has told foreign leaders that “America First” means he will always put the needs of America ahead of the needs of other nations – and that they should do the same for their own country.Saudi Arabia’s leadership appears to be on board with that message.Last week, Saudi Arabia disregarded Trump’s public pressure campaign to keep pumping at full throttle and cut fuel costs. The kingdom instead persuaded two dozen oil producers to cut output and announced a steep drop in Saudi production over the next two months.”Saudi Arabia today had a ‘Saudi first’ policy,” Helima Croft, global head of commodity strategy at RBC Capital Markets, said on Friday. Hours earlier, OPEC, Russia and several other producers agreed to take 1.2 million barrels per day off the market beginning in January.The decision marks a reversal in Saudi energy policy. Over the last six months, the Saudis ramped up production by more than 1 million bpd – a move cheered by Trump. Now, the kingdom will endeavor to cut about 900,000 bpd in just two months.On the surface, the decision looks like a stinging and risky insult to a critical ally. It comes as U.S. lawmakers are threatening to punish the kingdom after Saudi agents killed U.S. resident and Washington Post columnist Jamal Khashoggi in Istanbul in October. But with oil prices mired in a bear market, few commodity analysts doubted Saudi Arabia would cut production. The kingdom needs Brent crude to rise about $25 a barrel just to balance its budget, according to the International Monetary Fund.
US’ Perry pushes for stable oil supply in talks with Saudi minister, Aramco CEO – US Energy Secretary Rick Perry stressed the importance of “stable supply and market values” during a meeting last week with Saudi energy minister Khalid al-Falih and the CEO of Saudi Aramco, the Department of Energy said Monday. The Trump administration has not yet reacted to OPEC and its non-OPEC partners’ decision Friday with to cut oil production by 1.2 million b/d starting January in an effort to stabilize prices. DOE’s statement about Perry’s visit to Saudi Arabia and Qatar did not comment on the OPEC outcome.DOE said Perry and Falih discussed this year’s sharp increase in Saudi oil production and the impact it had on world markets in the wake of the US re-imposing sanctions on Iran.In Qatar, Perry met with Qatar’s new energy minister Saad al-Kaabi, urging him to expand joint partnerships with the US as Qatar seeks to grow its LNG operations around the world. They also talked about Qatar Petroleum potentially increasing investment in the US energy sector.
US pushes Iraq to boost crude exports to Turkey ahead of sanctions deadline – – US Energy Secretary Rick Perry pressed Iraq’s new government Tuesday to boost crude production and exports north to Turkey, as the US considers extending Baghdad’s sanctions waiver, allowing it to import Iranian natural gas. In a readout of the Baghdad meeting, the Department of Energy suggested that an extension of the waiver may be tied to Iraq’s ability to increase crude exports “to levels not seen since 2017.” DOE did not immediately respond to a request for comment.Perry told the Iraqi leaders that the US is “serious about its desire to help make Iraq energy independent; however, further steps are needed to improve the business climate and reduce the malign influence of Iran,” DOE said. The US pushed Iraq to significantly increase crude exports, increase domestic electricity generation and decrease natural gas flaring.DOE said Perry “reiterated that it is a priority of the US government to make this happen and we stand ready to offer our assistance in achieving this goal.”The US granted Baghdad a waiver last month allowing it to import natural gas and electricity from Iran in the face of chronic power shortages, especially in the oil-rich province of Basra in the south. The waiver expires December 18.US sanctions against Iran’s oil customers went back into force November 5, with Iraq receiving relief for electricity imports, while eight other countries including China and India secured permission to keep importing Iranian crude at reduced levels. While rolling out the sanctions and waivers last month, the State Department touted Iraq as one of four countries — along with the US, Saudi Arabia and Russia — that were pumping oil at record levels. It was the first visit to Iraq by a member of President Donald Trump’s cabinet, and only the second such visit since Trump took office.
Saudi oil exports seen down 1 mln bpd in Jan from Nov levels – sources (Reuters) – Saudi Arabia’s crude oil exports are expected to drop next month by some 1 million barrels per day (bpd) from November levels, two sources familiar with the matter said on Saturday. The world’s top oil exporter is expected to ship about 7.3 million bpd in January, one of the sources said, due to softening seasonal demand and as Riyadh follows through on a global deal to cut output to prevent a build up in oil supplies. The sources did not give a figure for December oil exports. OPEC and its Russia-led allies agreed on Friday in Vienna to slash oil production by more than the market expected in a bid to shore up prices despite pressure from U.S. President Donald Trump to reduce the price of crude. Saudi Energy Minister Khalid al-Falih said in Vienna this week that the kingdom’s oil exports would be less than 8 million bpd in December, down from around 8.3 million bpd in November. He also said Saudi Arabia would pump about 10.2 million bpd in January, down from about 10.7 million bpd in December. His ministry tweeted on Saturday that the decision taken by the oil exporters who met in Vienna would be “reflected in the stability and the equilibrium of the oil market.”
Venezuela’s Oil Cuts Beat Saudi Arabia in the Worst Way – Almost a week on from OPEC’s theatrical deal with Russia and others to cut oil supply, the market just isn’t feeling it. Brent crude traded below $60 a barrel on Thursday morning, having closed last Friday at almost $62. Skepticism about the group’s ability to deliver persists, and such hopes as there are on the part of bulls rest largely on involuntary cuts from the likes of sanctioned Iran and collapsing Venezuela.The latter, in particular, hit a grim milestone last month.Since the first round of supply targets kicked in at the start of 2017, I’ve been tracking cumulative adherence by the original 11 OPEC members subject to them. In broad terms, that group held a theoretical 948 million barrels of crude oil off the market through the end of November, which is actually more than the 814 million the targets implied, for compliance of 116 percent (all data are taken from OPEC’s monthly reports, using secondary sources). Beneath this, however, the real story was that, for much of the period, Saudi Arabia, Angola and Venezuela went above and beyond to curb supply.That changed this summer, when Saudi Arabia began to raise production aggressively. In November, its output breached 11 million barrels a day, versus a target of 10.1 million, and its cumulative contribution dipped sharply to 292 million barrels withheld. Venezuela’s collapse, on the other hand, kept right on going, and its cumulative cuts jumped to 296 million barrels – surpassing those of Saudi Arabia for the first time.It is shocking that Venezuela has surpassed Saudi Arabia in absolute terms; its production was less than one-fifth that of OPEC’s de facto leader when the cuts were agreed. In terms of compliance, the picture is even starker:Venezuela stands out in the worst possible way when it comes to compliance with OPEC targets, even as Saudi Arabia has slipped below 90 percent Little wonder Venezuela was made exempt from targets in last week’s updated agreement. Not that it matters for practical purposes. There is little to stop Venezuela’s downward spiral from continuing. On Thursday, the International Energy Agency took an ax to demand forecasts for the country as its economy looks set to end 2019 at half the size it was in 2013 in real terms. If your first thought is that this frees up more supply for export, bear in mind that domestic demand fell by perhaps 80,000 to 90,000 barrels a day this year, but production is down nearly 600,000 barrels a day for the year through November. And potential U.S. sanctions over President Nicolas Maduro’s efforts to change Venezuela’s constitution could add further pressure in 2019.
Uncertainty Lingers In Oil Markets Despite OPEC Cuts – Saudi Arabia will lower oil exports by 1 mb/d beginning in January. Sources told Reutersexports will drop to 7.3 mb/d, down from 8.3 mb/d in November. Despite the hyped Trump-Xi truce, the trade war may only be on hold. U.S. Trade Representative Robert Lighthizer said on Sunday that tariffs would rise on March 1 if a significant deal cannot be reached. Meanwhile, the political turmoil in the UK following the cancelled parliamentary vote on the Brexit package also fed uncertainty. Financial markets started the week in the red. Russia and other non-OPEC producers agreed to cut a combined 400,000 bpd at the OPEC+ meeting, but the reality is beginning to sink in. The cuts may only be phased in over time. Russia may only cut output by 50,000 to 60,000 bpd in January, according to Russian energy minister Alexander Novak. That could mean that actual reductions from the entire group may trail the headline figure of 1.2 mb/d in cuts. The U.S. shale industry is likely rejoicing after the successful OPEC+ meeting, which should tighten the market and push up prices. But some analysts believe the deal won’t significantly alter the shale supply picture. “I just think there’s a lot of uncertainty and this is a pretty small cut,” Amy Myers Jaffe, director of the Council on Foreign Relations’ energy security and climate program, told S&P Global Platts. The duration of the deal is an open question, as is compliance. The outlook for the global economy could loom much larger for shale operators. “I don’t think OPEC has the will to make the kind of cuts we’d need to make if we saw a real recession,”
Shale growth may force OPEC into another production cut in April, Citi says – OPEC may not have gone far enough to hoist oil prices through 2019 – and a weak demand outlook could prompt the need for another production cut by the cartel and its allies by spring next year, Citi’s top commodities analyst said Wednesday.”I think they went far enough for the time being,” Ed Morse, Citi’s global head of commodities research, told CNBC, describing last weekend’s OPEC and non-OPEC agreement led by Saudi Arabia and Russia to cut crude output by 1.2 million barrels per day (bpd) by January.”They’re going to have to re-address this issue sometime next year, but I’m glad they’re meeting for their sake in April, and it may be by April they’re going to have to confront another cut,” Morse said of the organization’s next summit in Vienna.When asked about the size of this potential cut, Morse stopped short of making a call, instead pointing to the bigger picture: booming production volumes from the U.S. threatening OPEC’s power to shape the oil market.”I like to call it the struggle of the bear, the camel and the eagle,” Morse said, referring to Russia, Saudi Arabia and the U.S., the world’s top three oil producers. “Saudi Arabia discovered that OPEC doesn’t have the clout it used to have.”The 15-member cartel has a current output of roughly 35 million bpd. That’s just over its late 1970s level of around 30 million bpd, when global oil demand was in the 60 million bpd range, according to the Energy Information Administration (EIA). Global demand is now in the 100 million bpd range.”So by definition, they lost market clout,” Morse said. The recent departure announcement by Qatar, scheduled for January 1, has added further questions as to the future of the group. “[OPEC is] now confronting the result of the higher prices that they’ve orchestrated, namely this incredible rebound in U.S. production which is overwhelming their efforts to deprive the world of inventory.” -Ed Morse, Global head of commodities research, Citi
Analysis- Oil and gas traders fret over elevated risks in US-China trade – An unrealistic window for Chinese importers to ramp up purchases of US oil and gas, and unstable relations between the US and China have elevated the risks of US-China trades, according to market participants in China and Singapore. Commodity traders said boosting purchases of US crude oil for a 90-day period is inconsistent with the normal trading cycle for physical barrels, and for natural gas the prevailing conditions in the Asian LNG market make an immediate increase in spot procurement very difficult. In most cases, Chinese oil and gas companies will struggle with reconciling commercial interests with Beijing’s diktats, and are likely to take market positions that involve significantly higher risk. Market uncertainties surged with the mid-week arrest of the chief financial officer of China’s Huawei Technologies in Canada after an extradition request by the US, the latest jolt to the trade war ceasefire. Several Singapore- and Shanghai-based commodity traders said the incident forced them to reconsider any opportunities that had emerged after the trade talks between US President Donald Trump and Chinese President Xi Jinping last weekend. The lack of details around the agreement has not helped market confidence. Chinese oil and gas companies had to wind down exposure to US energy supplies when the trade war escalated earlier this year, resulting in disruptions to trade flows, losses and general market uncertainty. They could now be forced to ramp up trades in a short 90-day span ending March 1. This is problematic for several reasons. A Sinopec refinery typically submits its crude purchasing plan to the trading arm Unipec at least three months ahead of actual procurement, an executive with a Sinopec refinery, said. Additionally, it takes around 50-60 days for a crude cargo to be shipped from the US to China. That is at least a five-month trading cycle for importing a US oil barrel into China, not counting the amount of time taken by Unipec to conduct spot trades. A key sticking point is the 90-day window. A vessel that departs the US by end-December will barely make it to Chinese ports by the end of February when the deadline ends. But the Lunar New Year in February will mean that ports are congested and risks of delays are high.
Oil traders focus on deteriorating economic outlook rather than OPEC: Kemp (Reuters) – The weakening outlook for oil consumption coupled with rising output from U.S. shale and softer than expected U.S. sanctions on Iran have convinced most traders the market is moving into a period of oversupply. In the run up to last week’s OPEC meeting in Vienna, hedge fund managers had little confidence in the organisation’s ability to cut production by enough to avoid an oversupplied market next year. Fund managers sold another 32 million barrels of Brent futures and options in the week to Dec. 4, bringing total sales over the last 10 weeks to a record 360 million barrels. Funds now hold just over two long positions for every short one, down from a ratio of more than 19:1 at the end of September, and the least-bullish position for 17 months. Bearish short positions have risen to 117 million barrels, up from just 27 million at the end of September, and the largest number since June 2017. Pessimism about the outlook for crude prices was reflected by a similar collapse in sentiment towards middle distillates such as gasoil (https://tmsnrt.rs/2PtIemz ). Fund managers sold another 20 million barrels of European gasoil, bringing total sales in the last eight weeks to 82 million barrels. Funds are the least-bullish towards middle distillates since July 2017, according to an analysis of position data from ICE Futures Europe. Middle distillates are heavily geared towards the economic cycle because most distillate fuel oil is used in freight transportation (shipping, railroads, aviation, trucks), manufacturing, mining and farming. So the collapse in sentiment towards distillates is consistent with growing concerns about the outlook for the global economy in 2019. Investors’ fears about the impact of trade tensions and heightened uncertainty on business investment and growth next year is darkening the outlook for distillates just as it is hitting equity markets.
Oil extends gains after OPEC-led group seals deal to cut supply – Oil prices rose on Monday, extending gains from Friday when producer club OPEC and some non-affiliated producers agreed a supply cut of 1.2 million barrels per day (bpd) from January. Despite this, the outlook for next year remains muted on the back of an economic slowdown. International Brent crude oil futures were at $62.21 per barrel at 0218 GMT, up 54 cents, or 0.9 percent, from their last close. Prices surged on Friday after the Organisation of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including heavyweight Russia announced they would cut oil supply by 1.2 million bpd, with an 800,000 bpd reduction planned by OPEC-members and 400,000 bpd by countries not affiliated with the group.U.S. West Texas Intermediate (WTI) crude futures were at $52.63 per barrel, up 2 cents, held back as the booming U.S. oil industry is not taking part in the announced cuts.The OPEC-led supply curbs will be made from January, measured against October 2018 output levels.”Our key conclusion is that oil prices will be well supported around the $70 per barrel level for 2019,” analysts at Bernstein Energy said on Monday.Despite the cuts, that was still a price forecast reduction of $6 per barrel as Bernstein reduced its crude oil demand forecast from 1.5 million bpd previously to 1.3 million bpd for 2019.U.S. bank Morgan Stanley said the cut was “likely sufficient to balance the market in 1H19 and prevent inventories from building”.It added that it expected “Brent to reach $67.5 per barrel by 2Q19, down from $77.5 before.”Oil prices have been pulled down sharply since October by signs of an economic slowdown, with Brent losing almost 30 percent in value.Japan, the world’s third biggest economy and No.4 oil consumer, on Monday revised its third quarter GDP growth down to an annualized rate of -2.5 percent, down from the initial estimate of -1.2 percent. Meanwhile the two world’s biggest economies, the United States and China, are locked in a trade war which is threatening to slow global growth and battering investor sentiment.
Oil Prices Slump on Profit-Taking After OPEC Production Curb –– Oil prices slumped on Monday, erasing some of last week’s strong gains from an agreement among major producers to curb output in the coming year, while analysts debated whether the deal is enough to rebalance the market. New York-traded West Texas Intermediate crude futures fell 96 cents, or 1.82%, at $51.65 a barrel by 9:02 AM ET (14:02GMT). Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., traded down 78 cents, or 1.26%, to $60.89. OPEC announced Friday that it will reduce overall production among its members by 1.2 million barrels per day (bpd) during the first six months of 2019 in an effort to stave off a global glut in supplies and prop up prices. The cartel will curb output by 0.8 million bpd from October levels, while non-OPEC allies contribute an additional 0.4 million bpd of cuts, in a move to be reviewed at a meeting in April. The agreement initially sent oil prices sharply higher. West Texas Intermediate and Brent ended the week with gains of around 3.3% and 5% respectively. U.S. bank Morgan Stanley said the cut was “likely sufficient to balance the market in 1H19 and prevent inventories from building”. It added that it expected “Brent to reach $67.5 per barrel by 2Q19, down from $77.5 before.” Merrill Lynch said the reduction “should lead to a relatively balanced global oil market and will likely push Brent and WTI prices back to our respective expected averages of $70 per barrel and $59 per barrel in 2019.” But the bank still warned on Monday that “the surge in U.S. supply in recent months should be a reason for caution”. Along similar lines, Edward Bell of Emirates NBD bank said “the scale of the cuts … isn’t enough to push the market back into deficit” and that he expected “a market surplus of around 1.2 million bpd in Q1 with the new production levels”.
Oil Prices Settle Lower – West Texas Intermediate (WTI) crude oil for January delivery declined by $1.61 Monday to settle at an even $51 a barrel. During the early-week session, the WTI traded between a low of $50.68 and a high of $52.81. The February Brent crude oil price also ended the day $1.70 lower, settling just shy of the $60 mark at $59.97 a barrel. Barani Krishnan, senior analyst with Investing.com, told Rigzone that Monday’s drop in oil prices stems in part from a slump in the equities markets and concerns about the world economy. “Today’s play in oil is more about equities than crude, with the combination of the rout in tech and pharma stocks along with global growth, trade war and Brexit worries leading to risk aversion across the board,” Krishnan said. Additionally, Krishnan pointed out that the recent decision by OPEC members and Russia to curb output raises an important question for traders. “There’s another question which will be asked with greater resonance in the coming days and weeks and that is: are the cuts pledged by OPEC+ enough?” said Krishnan. “On the surface, 1.2 million barrels (per day) is pretty close to what the market was promised. But what the Vienna meeting also appears to have completely ignored is the sheer tsunami of U.S. supply that could come on board if you add another $5 or $10 to crude prices.” Like the WTI and Brent, reformulated gasoline (RBOB) also declined Monday. The January RBOB contract price shed nearly 7 cents to settle at $1.42 a gallon. “RBOB is taking its hit from crude as well with the crack, or margin, versus WTI down to just over $15 a barrel now, from highs above $18 when U.S. crude stood at four-year highs in early October,” Krishnan explained. “To the regular guy, the most visible clue of what’s going on would be the pump price of gasoline, which is averaging at just around $2.50 a gallon in the East Coast. That’s down 40 cents a gallon over the past three months and 22 cents in the last three weeks alone.”
Citi forecasts oil goes nowhere in 2019 as OPEC cuts and US pumps more -Citi believes international oil prices will average $60 a barrel in 2019, remaining near current levels as OPEC-led production cuts encourage U.S. drillers to put more crude on the market. OPEC, Russia and other producers agreed on Friday to remove 1.2 million barrels per day from the market beginning in January. The move follows a more than 30 percent collapse in oil prices that saw international benchmark Brent crude fall from more than $86 a barrel to a 13-month low of $57.50 last month.Some analysts forecast the production cuts will cause Brent to rebound back toward $70 or $80 a barrel.However, Citi says an earlier round of production cuts from the so-called OPEC+ alliance has only delayed the inevitable. Rather than putting oil on a steady upward trajectory, the new supply cuts “almost certainly” set up another sell-off.”OPEC+ did the work of drawing down inventories that otherwise would have to be done through a painful period for shale producers,” Citi said in a research note written by a team led by Ed Morse, the firm’s global head of commodities.According to the bank, “the more OPEC+ tries to support prices by withholding oil from the market, the more they give the US shale sector an out from rationing supply growth themselves.” Citi says U.S. crude prices would need to hold steady around $45 a barrel in order keep American production flat. U.S. output has recently risen to an estimated 11.7 million barrels per day, making the United States the world’s biggest crude oil producer. In its primary forecast, Citi sees Brent crude trading at $55 to $65 a barrel in 2019, as global oil stockpiles continue to rise through the middle of the year. If the OPEC+ production cuts fall apart, Brent could fall back into the $40s, Citi says. On the other hand, if OPEC and its partners decide to take more oil off the market, or if supply disruptions develop, Brent could rise back to $70 or $80.
Bank of America is more bullish than most on its oil price forecast for 2019 –Despite dramatic slides in the oil market, some forecasters remain positive on prices and demand going into 2019. A year ahead outlook report from Bank of America Merrill Lynch expects Brent crude to regain its recent losses in 2019 and settle at $70 a barrel. But amid mounting global uncertainty on everything from trade and monetary policy to politics, that forecast is far from consensus. “Volatility will be high in the near future, but going into 2019, we are constructive on oil prices,” Hootan Yazhari, head of global frontier markets equity research at Bank of America Merrill Lynch, told CNBC’s Dan Murphy on Tuesday. “We believe oil prices will resume their path back up to $70 average next year, potentially higher in the second quarter for a brief spell of time. We believe the (OPEC) cuts were sufficient,” Yazhari said, predicting a “relatively balanced oil market” and stable inventories next year. But worries over the strength of crude remain rife, with other market analysts pointing to $60 barrels or lower in the coming year. Brent crude is down nearly 30 percent from its October highs of more than $86. After a dramatic summit of OPEC and non-OPEC members over the weekend that triggered an immediate boost in oil prices, the commodity has already dropped back to pre-meeting levels, falling 3.1 percent by the end of Monday. The 15-member cartel, led by Saudi Arabia, agreed with Russia to cut production by 1.2 million barrels per day (bpd) by January to support prices amid a global supply glut and fears of waning demand.
STEO highlights: EIA cuts Brent, WTI 2019 forecasts nearly $11/b amid supply glut – The US Energy Information Administration on Tuesday reduced its forecasts for WTI and Brent spot prices in 2019 by nearly $11/b, largely due to record global output, particularly in the US, and lower-than-expected demand. In its Short-Term Energy Outlook, EIA forecast WTI to average $54.19/b in 2019, down $10.66/b from the agency’s forecast last month, and Brent to average $61/b in 2019, down $10.92/b from last month’s forecast.The dramatically reduced price forecast comes after Brent traded within a range around $17.49/b in November, its most volatile month since 2012, and WTI traded in a range around $15.98/b, its most volatile month since 2014.”The implied volatility of Brent and WTI, calculated from options prices, more than doubled during the month, reflecting the market’s heightened uncertainty regarding future oil supply and demand,” EIA said. EIA expects that the magnitude of the recent price declines combined with the OPEC production cuts will bring 2019 supply and demand numbers largely into balance, which EIA forecasts will keep prices near current levels in the coming months.”EIA’s December short-term outlook largely attributes the recent decline in Brent crude oil spot prices, which averaged $65 per barrel in November, to record production among the world’s largest crude oil producers and concerns about weaker global oil demand,” EIA Administrator Linda Capuano said in a statement.Other highlights from the report include:
- **EIA forecasts WTI to average $65.18/b this year, down $1.61/b from last month’s forecast, and Brent to average $71.40/b, down $1.72/b from last month.
- **EIA attributed recent a decline in prices to: output at or near record levels from the US, Russia and Saudi Arabia; the US issuing waivers to some of the largest purchasers of Iranian crude, including China and India, as it reimposed sanctions on November 5; and stagnant economic growth.
- **EIA forecasts US oil production to average 10.88 million b/d in 2018, up from 9.35 million b/d in 2017, and then climb to 12.06 million b/d in 2019.
- **Capuano said that the US will end 2018 as the world’s largest crude oil producer.
- **EIA forecasts oil production in the Lower 48 states, which averaged 7.18 million b/d in 2017, to climb to 8.68 million b/d in 2018 and then to 9.63 million b/d in 2019. US Gulf of Mexico production, which averaged 1.68 million b/d in 2017, will climb to 1.73 million b/d in 2018 and 1.95 million b/d in 2019, EIA said Tuesday.
- **EIA called last week’s agreement by OPEC, Russia and other producing countries to reduce production by 1.2 million b/d a “response to increasing evidence that oil markets could become oversupplied in 2019.”
- **OPEC members produced 32.98 million b/d in November. EIA expects OPEC production to average 32.57 million b/d in 2018, down 70,000 b/d from last month’s outlook, and average 31.79 million b/d in 2019, down 410,000 b/d from last month’s outlook.
- **EIA expects OPEC production to average 32.06 million b/d in first-quarter 2019 and 31.8 million b/d in Q2 2019, down 300,000 b/d and 400,000 b/d, respectively, from last month’s forecast.
Oil logs a modest gain as traders weigh output-cut pact, demand prospects — Oil futures edged higher Tuesday, in the wake of a short-term disruption in Libyan output, but settled off the session’s high on the back of uncertainty surrounding compliance with an oil-producer agreement to cut output, as well as concerns over a potential slowdown in energy demand. Meanwhile, in a report issued Tuesday, the Energy Information Administration reduced its oil-price forecasts for this year and next, following the recent price declines that came ahead of Friday’s decision by the Organization of the Petroleum Exporting Countries and some nonmember allies to cut production starting in January. West Texas Intermediate crude for January delivery tacked on 65 cents, or 1.3%, to settle at $51.65 a barrel on the New York Mercantile Exchange, after trading as high as $52.43. It lost 3.1% Monday to settle at $51, the lowest since Nov. 30. Global benchmark February Brent crude edged up by 23 cents, or 0.4%, at $60.20 a barrel on ICE Futures Europe after finishing Monday at $59.97, also the lowest in just over a week. Libya’s national oil company has declared force majeure on exports from its El Sharara field after a weekend militia attack on the facility, The Wall Street Journal reported. Commerzbank analysts said in a note Tuesday that “just short of 400,000 barrels per day of Libyan oil are currently missing because production has been interrupted at Libya’s largest oil field.” On Friday, OPEC agreed to reduce its overall member production by 800,000 barrels a day from October’s levels for six months, beginning in the new year. The cartel didn’t specify the output cut by nonmember allies, which include Russia, but news reports pegged the nonmember cuts at 400,000 barrels a day, to bring the total reduction to 1.2 million barrels a day. “While the general OPEC+ agreement on additional supply cuts could still support the market in the months ahead, the lack of country-specific targets has the market hesitant to aggressively price in those actions,”
Oil rises more than 1 percent on OPEC-led supply cuts, trade talk hopes – Oil prices climbed by more than 1 percent on Wednesday, lifted by expectations that an OPEC-led supply cut announced last week for 2019 would stabilise markets as well as hopes that long-running Sino–American trade tensions could ease.Disruptions to Libyan oil exports after local militia seized the country’s biggest oil field, El Sharara, were also buoying prices, traders said. International Brent crude oil futures were at $60.89 per barrel at 0212 GMT, up 69 cents, or 1.15 percent from their last close.U.S. West Texas Intermediate (WTI) crude futures were at $52.25 per barrel, up 60 cents, or 1.2 percent.The higher prices came amid a broader increase in Asian stock markets after U.S. President Donald Trump told Reuters in an interview that trade talks with China were taking place to defuse the trade disputes between the world’s two biggest economies.Core to oil markets was a decision by the Organisation of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including Russia last week to cut supply by 1.2 million barrels per day (bpd).”OPEC production curbs will stabilise the market,” ANZ bank said on Wednesday.Crude prices had lost a third of their value between early October and the announcement of the cuts. Some analysts warn, however, that the agreement may not have the effect OPEC is hoping for.
OPEC’s oil production dips in November as Iranian output plunge offsets Saudi surge — Oil production from OPEC nations dipped in November, as a sharp drop in Iranian supplies offset a surge in Saudi output to all-time highs. The group’s latest monthly report comes just days after the 15-member organization reached a deal with 10 exporter nations, including Russia, to remove 1.2 million barrels per day from the market. OPEC alone will slash output by 800,000 bpd. The decision follows a plunge in oil prices since the start of October, in part due to projections that the oil market will be oversupplied next year. Slowing economic growth and financial strain in key oil-consuming nations are also raising concerns about energy demand in 2019. “After a healthy start to the year, the world economy in 2018 was marked by a rising divergence in growth trends,” OPEC warned in a statement. “Rising trade tensions, monetary tightening and geopolitical challenges are among the issues that skew economic risks even further to the downside in 2019.” In November, OPEC’s output slipped by about 11,000 bpd to 32.965 million bpd, according to independent sources that OPEC cites in its monthly report. Saudi Arabia pumped just over 11 million bpd, with monthly production jumping by 377,000 bpd. Figures provided directly by the Saudis indicate the kingdom pumped at nearly 11.1 million bpd. That is set to plunge over the next two months. Saudi Energy Minister Khalid al-Falih said he expects output to drop to about 10.2 million bpd in January. The November increase from Saudi Arabia was wiped out by a 380,000 bpd plunge in Iran’s output, as the nation grapples with U.S. sanctions that snapped back into place on Nov. 5. Last month, Iranian production dipped below 3 million bpd for the first time since January 2016, when international sanctions on the country over its nuclear program were lifted during the Obama administration. The United Arab Emirates and Kuwait also raised output last month, but those increases were offset by declines in Iraq, Gabon, Libya, Nigeria and Venezuela. The remaining OPEC members held production roughly steady.
WTI Tumbles After Surprisingly Small Crude Draw — Having surged overnight on the heels of a huge API-reported crude draw (don’t forget the seasonal incentive to lower taxable inventories), WTI Crude has quickly faded back this morning (despite dollar weakness) as OPEC dats this morning suggests a deeper supply cut may be needed in late 2019 to balance world markets.As Bloomberg notes, even if OPEC cuts as planned, a surplus will re-emerge in late 2019… Traders remain concerned that record American oil production and shaky fuel consumption could foment a new glut.“The agreed production cuts will not be enough to ensure sustained and immediate recovery in oil prices,” consultants at Oslo-based Rystad Energy ASsaid. “However, the decision does stand as a Christmas gift to budget-setters in the U.S. shale industry, where the relentless growth in production is set to continue also for the second half of 2019 and beyond.” DOE:
- Crude -1.21mm (-3.5mm exp)
- Cushing +1.148mm (+1.1mm exp)
- Gasoline +2.09mm (+2mm exp)
- Distillates -1.475mm (+1.6mm exp)
After last week’s huge draw, DOE reports a considerably smaller than expected 1.21mm barrel crude draw and a surprise distillates draw. Production has been flat at record highs for the last few weeks (remember only moves in 100k increments now), but slipped lower last week…
Oil Stays Below $52 — Oil traded below $52 a barrel after U.S. crude inventories slid less than expected and added to concerns that the OPEC+ coalition’s output cuts won’t be enough to avert a supply glut. Futures in New York were little changed, after sliding 1 percent in the previous session. U.S. Energy Information Administration data showed inventories fell by 1.21 million barrels last week, well below the 10.2 million cited in an industry report Tuesday. Meanwhile, an OPEC report showed deeper supply cuts may be needed in late 2019 to counter a looming surplus of oil. Crude’s still in a bear market after reaching a four-year high in October as investors remain worried over supply and demand. Record American output, which is expected to boom to more than 12 million barrels a day in 2019, is threatening to overwhelm the market. The U.S. has also allowed some nations to temporarily buy Iranian oil despite the implementation of sanctions, while the unity of the Organization of Petroleum Exporting Countries is at risk. West Texas Intermediate for January delivery traded 4 cents lower at $51.11 a barrel on the New York Mercantile Exchange at 8:35 a.m. in London. Prices decreased 50 cents to $51.15 on Wednesday after the stockpiles data, erasing earlier gains of as much as $1.23. Total volume traded was 44 percent above the 100-day average. Brent for February settlement lost 5 cents to $60.10 a barrel on London’s ICE Futures Europe exchange. Futures settled 0.1 percent lower at $60.15 on Wednesday. The global benchmark crude traded at an $8.75 a barrel premium to WTI for the same month. While U.S. crude inventories declined for a second week to about 442 million barrels, they are still above the five-year average of 410 million barrels, according to data compiled by Bloomberg. Stockpiles at the nation’s storage hub of Cushing, Oklahoma, increased for a third week to the highest since January, the EIA data showed. While production curbs agreed by OPEC and its allies are on track to balance global oil markets in the first half of next year, rising U.S. shale supplies mean they would need to almost double the cutback to prevent a new surplus in the fourth quarter, according to a report from the group. Supplies from outside OPEC, boosted by U.S. shale drillers, are poised to expand by more than global oil demand next year, at 2.16 million a day versus 1.29 million a day, the report showed. Even if the cartel restricts output to the level agreed last week, the market could tip into oversupply again during the second half of next year.
Oil ends lower as U.S. crude supplies post smaller-than-expected decline – Oil prices gave up earlier gains Wednesday to finish a bit lower, after U.S. government data showed domestic crude supplies declined for a second week in a row, but by much less than the market expected. The Energy Information Administration reported early Wednesday that U.S. crude supplies fell by 1.2 million barrels for the week ended Dec. 7. Supplies had also declined the week before, marking the first weekly decline in 11 weeks. However, analysts and traders, on average, expected to see a larger decline of 2.8 million barrels in crude supplies, according to a survey conducted by The Wall Street Journal, while the American Petroleum Institute on Tuesday reported a drop of 10.2 million barrels. West Texas Intermediate crude for January delivery CLF9, +0.49% fell 50 cents, or 1%, to settle at $51.15 a barrel on the New York Mercantile Exchange. Prices, which touched an intraday high of $52.88, had pared earlier gains shortly after the release of the supply data. Global benchmark February Brent crude LCOG9, +0.23% shed 5 cents, or less than 0.1%, to $60.15 a barrel on ICE Futures Europe. After Tuesday’s “mammoth drop from the API, this morning’s EIA report has yielded a much more modest draw,” said Matt Smith, director of commodity research at ClipperData. “Refinery runs ticked a little lower, but still remain nearly half a million barrels per day above year-ago levels.” “Crude exports continue to be robust, also helping to keep inventories in check,” he told MarketWatch. “Implied demand for last week ticked higher, keeping a gasoline build in check, while encouraging a distillate draw.” The EIA reported that gasoline stockpiles climbed by 2.1 million barrels last week, while distillate stockpiles, which include heating oil, declined by 1.5 million barrels. The Wall Street Journal survey had shown expectations for supply increases of 1.8 million barrels in gasoline and 1.3 million barrels in distillate inventories.
Oil prices inch up amid US stockpile drop, signs of easing trade tensions – Oil prices rebounded in choppy trading on Thursday, with traders pointing to a report indicating that crude stockpiles are falling at a closely-watched delivery hub in Cushing, Oklahoma. Benchmark North Sea Brent crude oil was up 30 cents at $60.45 per barrel by 10:30 a.m. ET (1530 GMT).U.S. West Texas Intermediate light crude was 29 cents higher at $51.44.Crude futures gave up overnight gains earlier in the session, under pressure from high global inventories and a smaller-than-expected drawdown in U.S. crude stockpiles last week.U.S. crude inventories fell by 1.2 million barrels in the week to Dec. 7, disappointing some investors who had expected a decrease of 3 million barrels. The data showed stockpiles jumping by 1.1 million barrels in Cushing, the deliver point for the benchmark WTI contract.But data cited by traders indicates that stocks are now falling at Cushing.Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil to its lowest in more than a year at the end of November.OPEC and other big producers, including Russia, said last week they would try to trim surplus supply, agreeing to cut production by a total of 1.2 million barrels per day.That should be enough to give the market a supply deficit by the second quarter of next year, if OPEC and the other large producers stick to their deal, the International Energy Agency said in its monthly Oil Market Report on Thursday. “The Brent crude oil price seems to have found a floor, remaining close to $60 a barrel,” IEA said.
Saudis Reportedly Target US Inventories By Slashing Oil Exports – WTI prices briefly popped above $52 before fading quickly after Bloomberg reported that after flooding the US market in recent months, Saudi Arabia plans to slash exports starting in January in an effort to dampen visible build-ups in crude inventories. Bloomberg reports that, according to people briefed on the plans of state oil company Saudi Aramco, American-based oil refiners have been told to expect much lower shipments from the kingdom in January than in recent months following the OPEC agreement to reduce production Oil traders were not that impressed… And while the plan to slash Saudi exports to America may ultimately convince a skeptical oil market about the kingdom’s resolution to bring supply and demand incline, it may anger President Trump, who has used social media to ask the Saudis and OPEC to keep the taps open. Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices! – Donald J. Trump (@realDonaldTrump) December 5, 2018 We wonder how quick the response will be from POTUS – will he suddenly be convinced that MbS is guilty?
Oil prices rise as Sino-U.S. trade tensions show signs of easing (Reuters) – Oil prices climbed more than 2 percent on Thursday, after data showed inventory declines in the United States and as investors began to expect that the global oil market could have a deficit sooner than they had previously thought. OPEC’s output agreement with Russia and Canada’s decision to mandate production cuts could create an oil market supply deficit by the second quarter of next year, if top producers stick to the deal, the International Energy Agency said in its monthly Oil Market Report. [IEA/M] U.S. crude inventories at Cushing, Oklahoma, the delivery point for U.S. crude futures, fell by nearly 822,000 barrels in the week through Dec. 11, traders said, citing data from market intelligence firm Genscape. Brent crude LCOc1 settled $1.30, or 2.16 percent, higher at $61.45 per barrel while U.S. light crude CLc1 rose $1.43, or 2.8 percent, to end the session at $52.58 a barrel. “Other than some additional bullish statement out of the Saudis or Russians regarding strict adherence to last week’s agreement or a supply disruption somewhere around the globe, we don’t expect any headlines capable of pushing oil values much above this month’s highs even when stretching a view through year’s end,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil’s price at the end of November to its lowest in more than a year. But the Organization of the Petroleum Exporting Countries and other big producers including Russia said last week they agreed to cut production by 1.2 million barrels per day (bpd). Still, oil demand growth is slowing, OPEC said. OPEC said on Wednesday that demand for its crude in 2019 would fall to 31.44 million bpd, 100,000 bpd less than predicted last month and 1.53 million bpd below what it currently produces.
Oil prices fall as investors take profits amid China economy worries –Oil prices fell on Friday after China reported slower economic growth, pointing to lower fuel demand in the world’s biggest oil importer, although market sentiment was supported by supply cuts agreed last week by major crude producers.Brent crude was down 41 cents at $61.04 per barrel, on course for a decline this week of around 1 percent.U.S. light crude was 32 cents lower at $52.26.”The energy complex is on the back foot this morning as a batch of soft Chinese economic data triggers a flurry of pre-weekend profit-taking,” PVM Oil analyst Stephen Brennock said.”This pullback provides a timely reminder that current levels of upside potential are meek at best.”China, the world’s No.2 economy, on Friday reported some of its slowest growth in retail sales and industrial output in years, highlighting the risks of its trade dispute with the United States.Chinese oil refinery throughput in November fell from October, suggesting an easing in oil demand, though runs were 2.9 percent above year-ago levels. Concerned by mounting oversupply, the Organization of the Petroleum Exporting Countries and other oil producers including Russia agreed last week to reduce output by 1.2 million barrels per day (bpd), or more than 1 percent of global demand.
Oil ends lower for the week; natural gas sees biggest weekly plunge since 2016 – Oil prices fell on Friday, settling lower for the week, as a stronger dollar cut global demand for U.S.-priced commodities and a slide for the stock market sullied the risk-taking mood.Meanwhile, natural-gas futures took a plunge that left them down nearly 15% for the week – the largest such loss in nearly three years, as weather forecasts dulled prospects for demand.Oil prices had climbed Thursday as traders contemplated data showing a blip higher in monthly OPEC output even as future cuts loom, as well as a recent report of a weekly decline in U.S. crude supplies and production. Gains picked up late Thursday after a news report said Saudi Arabia plans to cut shipments to U.S. refiners to avoid an expansion of U.S. stockpiles.On Friday, West Texas Intermediate crude for January delivery fell $1.38, or 2.6%, to settle at $51.20 a barrel on the New York Mercantile Exchange. The contract was down 2.7% for the week. Global benchmark February Brent crude fell $1.17, or 1.9%, to $60.28 a barrel on ICE Futures Europe, down about 2.3% for the week. U.S. stocks traded lower as signs of China’s economic slowing hit equities and raised fresh concerns about the economic giant’s thirst for oil moving forward. The U.S. Dollar Index DXY, +0.34% meanwhile, rose 0.6%, as growth worries and geopolitical jitters sparked haven-related flows.In its closely watched monthly oil market report, the International Energy Agency said Thursday that crude output by OPEC rose by 100,000 barrels a day on month to reach 33.03 million barrels a day in November. Saudi Arabia – the de facto head of OPEC – churned out 410,000 barrels a day to a historic high of 11.06 million barrels a day.But the agency’s report stands in contrast to OPEC’s own monthly oil market data, which was released Wednesday and showed a slight decline in the cartel’s November output despite ballooning Saudi production. Both reports come less than a week after OPEC agreed with its nonmember partner producers – led by Russia – to collectively cut crude output by 1.2 million barrels a day starting in January. OPEC is slated to curb production by 800,000 barrels a day, while Russia and nine allied producers will shoulder the remainder of the cuts.
Has OPEC+ Stabilized Oil Markets? – The OPEC+ deal put “a floor” beneath oil prices, according to the IEA’s latest Oil Market Report. The agency said that non-OPEC supply could still outgrow demand next year, expanding by 1.5 mb/d while demand may only soak up 1.4 mb/d of that additional supply. As such, OPEC+ might be forced to maintain the cuts through the end of the year. However, there are plenty of uncertainties, including the extent of losses from Iran and Venezuela, while additional outages could come from Libya or elsewhere. For now, the IEA says the production cut deal will keep prices from falling further, but it is still too early to tell if the agreement will significantly boost prices. EIA said in its latest Short-Term Energy Outlook that the U.S. should average 12.1 mb/d in 2019, up sharply from a 10.9 mb/d average this year. Notably, the production estimate is mostly unchanged from previous months, even though oil prices have crashed. The EIA even lowered its expected price for Brent and WTI in 2019 by roughly $10 per barrel, but the agency clearly thinks that the production gains are mostly baked in already. Refining figures in Asia suggest demand could be slowing down in the region, Bloomberg reports. Asian refining margins are at an eight-month low, which could be a leading indicator of slowing consumption. OECD stocks rose above the five-year average in October (the latest month for which data is available) for the first time since March. Saudi Arabia and Kuwait are nearing a deal to restart idled oil fields in disputed territory along their shared border. The so-called Neutral Zone oil fields have the capacity to produce 500,000 bpd, but have been offline for several years. The U.S. government has leaned on both countries to resolve their differences, with an eye on shrinking supply from Iran. Chevron, which jointly operates one of the fields in Kuwait, said it maintains “readiness for a production restart when that time comes,” according to the Wall Street Journal.
OPEC’s Unplanned Supply Losses Could Double Its Cut — OPEC may be about to succeed by accident, again. Unplanned supply losses from members Iran and Venezuela could effectively double the intended cutback of 800,000 barrels a day the cartel pledged last week, according to the International Energy Agency. There’s a precedent for this: It was the Latin American country’s collapsing oil industry that accelerated OPEC’s effort to clear a supply glut in 2017. This time, U.S. sanctions on the Persian Gulf nation could amplify that effect. OPEC production may decline by 1.4 million barrels a day from October levels to 31.5 million a day during the first quarter and then slip further to 31.2 million in the second, according to the IEA’s monthly oil market report. The reduction, which the agency says is an assumption rather than a forecast, includes both the planned OPEC cutback of 800,000 barrels a day, plus involuntary losses of 600,000 barrels day in the first quarter from Iran and Venezuela — both of whom are exempt from making voluntary cuts. In the second quarter, the pair’s reduction will rise to 900,000 barrels a day, the IEA said. If the agency’s assumptions are correct, global oil inventories could shrink substantially in the second quarter, a phenomenon that’s often accompanied by rising prices.
Market Could be Oversupplied by 2020 – The market could be quite tight in the first half of 2019 but oversupplied again by 2020, according to a new industry note from Jefferies, which was sent to Rigzone on Thursday. “The combination of OPEC+ cuts, curtailments in Canadian production and further sanctions-related declines in Iranian exports should be sufficient to drive OECD inventories back below their trailing five-year average during 1H19,” the note stated. “The market could be quite tight and the forward curve could very well shift into backwardation. We estimate the market will be undersupplied by 800,000 barrels per day in 1H if OPEC adheres to its production targets,” the note added. Jefferies warns in its note however that U.S. growth looms. “U.S. growth will almost inevitably re-accelerate in 2H19 as incremental pipeline capacity is installed in the Permian Basin. This means that by early 2020 the market could move back into oversupply,” the note stated. “By 2020 the Saudis would need to reduce their production to 9.2 million barrels per day to keep the market in balance. We are thus lowering our Brent price forecast to $65.75 per barrel from $75.00 per barrel in 2019 and to $62.75 per barrel from $70.00 per barrel in 2020,” the note added. OPEC+ production cuts are effective as of January 2019 for an initial period of six months. The contributions from OPEC and non-OPEC will correspond to 800,000 barrels per day and 400,000 barrels per day, respectively. The next OPEC and non-OPEC ministerial meeting is scheduled to convene in Vienna, Austria, in April next year. OPEC was described as “alive and well and highly relevant” following the announcement of its latest output cut deal in a Fitch Solutions Macro Research (FSMR) report. FSMR is forecasting Brent to average $75 per barrel next year. Wood Mackenzie’s Vice President of Macro Oils, Ann Louise Hittle, believes a production cut of 1.2 million barrels per day would tighten the oil market by the third quarter of 2019 and cause prices to rise back above $70 per barrel for Brent.
Why The OPEC+ Deal Won’t Cut It – Now nearly a week removed from the OPEC+ agreement, confidence in the efficacy of the deal is becoming shaky.Immediately after OPEC+ announced cuts of 1.2 million barrels per day (mb/d), a flurry of reports from oil analysts and investment banks congratulated the group on a job well done. After all, the 1.2 mb/d figure was larger than the market had anticipated.However, reality is beginning to set in. First, the cuts might not be realized in January, despite the promise. Russia indicated that it was going to slow walk the cuts, phasing in an initial 50,000 to 60,000 bpd in reductions in January. This is significant because Russia is the main actor in the non-OPEC cohort. The non-OPEC group is expected to slash output by 400,000 bpd, but if Russia is only going to do its part gradually over the next few months, the non-OPEC cuts might not reach the promised levels anytime soon. Moreover, because there are no country-specific allotments, it will be hard to hold any producer accountable.That undermines confidence in the deal.“Compared to early last week, the outcome was rather disappointing, the whole process wasn’t convincing, and it’s still uncertain whether they will actually cut,” ABN Amro senior energy economist Hans van Cleef told Bloomberg.While oil traders are suddenly doubting the integrity of the deal, even if OPEC+ were to adhere to its promised cuts, it still might not be enough. That’s because there are other factors that could leave the market oversupplied. Cracks in the global economy are growing, demand is showing signs of strain, and supply continues to rise.The EIA just issued its latest Short-Term Energy Outlook, and the agency still expects significant production growth from U.S. shale despite the downturn in prices. The EIA lowered its forecasted 2019 WTI prices by $10 per barrel from its previous report, yet it kept its supply forecast unchanged – it still thinks that U.S. oil production will rise from 10.9 mb/d in 2018 to 12.1 mb/d in 2019, despite the significant downward revision in prices. In other words, U.S. shale production may not be slowed by the recent downturn in prices in any dramatic way, and at the same time, with its production cut agreement, OPEC+ reassured shale executives that it wouldn’t let prices fall any lower. “The US is not only the world’s largest oil producer at present, but will also remain the leading marginal producer in future,” Commerzbank said in a note.
Saudi Arabia Sets Up a Scrappy New Year With Trump — If Friday’s last-minute deal by the OPEC-plus group sparks a big rally in oil prices, then it and Saudi Arabia, especially, can probably expect a few holiday tweets from a certain president. Judging from comments made by Khalid Al-Falih, the country’s energy minister, they seem to expect as much.OPEC says it will cut 800,000 barrels a day of production starting in January, while its 10 partner countries have pledged to take out 400,000 a day. Oil prices jumped, erasing the plunge that followed Thursday’s inconclusive meeting. Even so, Brent crude oil is still only at $63 a barrel. That could change, however, if Saudi Arabia follows through on comments made by Al-Falih at Friday’s press conference.While the group didn’t give specific quotas for each member, the overall figure implies a cut of 3 percent versus October production except for the three countries exempted (Iran, Libya and Venezuela). That would mean Saudi Arabia going from about 10.6 million barrels a day to 10.3 million. However, Al-Falih said the country produced 11.1 million barrels in November and guided for 10.2 million barrels a day in January, when the cuts are due to begin. So rather than cutting 300,000 barrels a day, Saudi Arabia may be taking out three times that amount in the near term, more than OPEC’s entire pledge.That sharp cutback looks designed to mitigate the seasonal slowdown in oil demand. While OPEC’s forecasts imply a pre-cut surplus next year of almost 1.5 million barrels a day, the figure for the first quarter is almost 1.8 million barrels a day. If Saudi Arabia held that January level for the whole quarter, and the rest of the OPEC-plus group fulfilled their obligations, then the overall cuts would almost exactly match that projected surplus, wiping it out. Saudi Arabia’s move could push oil prices back toward the $70 or $80 level where Trump’s twitter fingers get itchy.
Free Gas Over Yemen’s Skies- Saudi Jets Refueled By American Taxpayers Due To Accounting Errors – The White House wants to stay the course in Yemen even as the Senate is set to push back against US military support to the Saudi-led bombing campaign. But now a bombshell report reveals the Pentagon has been fueling Saudi and UAE jets free of charge due to “errors in accounting where DoD failed to charge” according to US defense officials. The huge significance is summarized in the opening lines of The Atlantic report which broke the story over the weekend: President Donald Trump, who repeatedly complains that the United States is paying too much for the defense of its allies, has praised Saudi Arabia for ostensibly taking on Iran in the Yemen war. It turns out, however, that U.S. taxpayers have been footing the bill for a major part of the Saudi-led campaign, possibly to the tune of tens of millions of dollars.For the entire three-and-a-half years of the program, the Pentagon never had an official servicing agreement in place with the Saudis and further never informed Congress.The vital refueling role that the US military has played in the war goes back to March 2015 and is reported to be “enormously expensive”. The recipient country, in this case the Saudis, is required by law to pay the costs but the Pentagon now admits “they in fact had not been charged adequately” in an official DoD letter obtained by The Atlantic.The Pentagon is now “currently calculating the correct charges” but it’s unclear if the missing funds going back years – footed by the American taxpayer – will ever be obtained especially as the DoD doesn’t even know what it’s owed. Information on the “accounting errors” began to emerge after Senators asked defense officials last March to account for Saudi coalition refueling costs. After eight months, just a day ahead of the Nov. 28 Senate vote to debate ending the war in Yemen, the Pentagon admitted it could answer this question. Senator Jack Reed, the top Democrat on the Senate Armed Services Committee, told The Atlantic that likely “tens of millions of dollars” worth of fuel was supplied to the Saudi coalition for free. However, this figure (again which the Pentagon says it can’t account for) is possibly in the hundreds of millions, considering the following: Records provided by the Defense Logistics Agency this March indicated that since the start of fiscal year 2015 (October 2014), more than 7.5 million gallons of aerial refueling had been provided to the UAE, and more than 1 million gallons to the Saudis. Those figures were for all aerial refueling, not necessarily only related to operations in Yemen.
Warring Sides in Yemen Agree to Truce in Key Port City – NYT – Yemen’s warring parties have agreed to a cease-fire in the crucial port city of Hudaydah, the United Nations chief said on Thursday, announcing the biggest step toward peace in years for a war that has produced the world’s worst humanitarian crisis.The Saudi-led coalition and Houthi rebels have agreed to withdraw their forces from Hudaydah, the main conduit for humanitarian aid entering Yemen, and to implement a cease-fire in the surrounding province, Secretary General António Guterres told reporters.He made the announcement in Rimbo, Sweden, at the end of a week of negotiations intended to pave the way for full peace talks. Amid smiles and handshakes, representatives from the two sides also agreed to a prisoner exchange involving as many as 15,000 people, and to allow a humanitarian corridor into the city of Taiz, Yemen’s third-largest city. They agreed to meet again in January.The terms of the deal announced by Mr. Guterres were vague in places, with talk of a “mutual redeployment” to stop the fighting in Hudaydah, and a “leading role” for the United Nations in the city. The United Nations is due to oversee the withdrawal of all combatants from the city within 21 days, but there was little detail about how that will happen.Although the agreement offered a glimmer of hope for a conflict whose dire toll has drawn global outrage, numerous earlier peace efforts in Yemen have quickly crumbled, and analysts warned that this one required urgent, concerted international support to save it from a similar fate.
Mohammed bin Salman, Regional Menace – Hisham Melhem has written a searing denunciation of Mohammed bin Salman’s disastrous foreign policy record and his destabilizing domestic power grabs. Here he calls out the crown prince’s responsibility for the destruction and starvation of Yemen: But the culprit responsible in the main for condemning the country once known as Arabia Felix for an agonizing slow death is Saudi Arabia. For this reason alone, Mohammed Bin Salman should be boycotted by the democracies of the world. The war on Yemen has been the crown prince’s signature policy, and it was the very first thing that he did after he was made defense minister by his father. The reckless decision to intervene and the stupid determination to persist in an unwinnable war told us everything we needed to know about Mohammed bin Salman’s judgment and competence a long time ago, but unfortunately it took several more years and many more outrages and crimes for a lot of people to catch on that he was a menace and a war criminal rather than a reform-minded visionary. It isn’t surprising that someone as ignorant and hapless as Jared Kushner has been taken in by Mohammed bin Salman, but what is everyone else’s excuse? Many American policymakers and politicians have downplayed and whitewashed Saudi coalition crimes in Yemen because of our government’s involvement in the disaster, and some of them are so obsessed with Iran that they have been prepared to ignore or explain away any number of atrocities as long as they can claim that opposing Iran is the goal. Mohammed bin Salman hasn’t had many successes in the last few years, but he did know which buttons to push to get credulous Western pundits, businessmen, and politicians to fawn over him as if he were Ataturk reborn. To their lasting discredit, the crown prince’s fan club were more concerned with “rooting” for his success than they were about the lives of Yemeni civilians and the rights of his many jailed, tortured, and murdered critics. Every puff piece profile of Mohammed bin Salman has been sure to mention that he permitted women to drive, but there have not been nearly as many articles talking about the torture of women’s rights activists detained by the Saudi government: Following the interrogations, sources said, the women showed physical signs of torture, including difficulty walking, uncontrolled shaking of the hands, and red marks and scratches on their faces and necks. At least one of the women attempted to commit suicide multiple times, the sources said.
MbS Tries to Restart the Lebanese War – The record of Crown Prince Mohammed bin Salman (MbS) as de facto ruler of Saudi Arabia has included a trail of regional destabilization. Foremost on this record has been an air war in Yemen that has turned that nation into a humanitarian disaster. Other entries on MbS’s foreign affairs resumé have included extraterritorial reprisals against domestic critics (most notably the murder in a consulate in Turkey of Jamal Khashoggi) and an attempt to foment a governmental crisis in Lebanon by detaining its prime minister and coercing him into a short-lived resignation. Now the Lebanese-American journalist Hisham Melhem reports another attempt by MbS to destabilize Lebanon – one that, if successful, would involve nothing less than restarting the Lebanese civil war that raged from 1975 until the end of the 1980s. MbS reportedly tried to drum up interest in both Washington and Beirut in a scheme to arm the Lebanese Forces, the Christian-dominated Lebanese political party that, despite its name and its history during the civil war as a militia, has renounced violence and no longer has a military wing. The purpose of such arming would be to turn the party into a lethal opponent of Hezbollah. MbS failed to get support for his project, but that did not stop him from a parallel effort to interest Palestinian leader Mahmoud Abbas in arming Palestinians in Lebanon to make them combatants in a fight against Hezbollah. Abbas politely rejected the proposal. The Lebanese civil war had significant negative repercussions beyond Lebanon’s boundaries, including on U.S. interests. The world, the region, and the United States do not need that war to resume. External actors had major effects on the war, some positive. Saudi Arabia, then ruled by King Fahd, played a key role in brokering the power-sharing agreement, signed in the Saudi city of Taif, that brought most of the fighting in Lebanon to an end.
How a chilling Saudi cyberwar ensnared Jamal Khashoggi – When Jamal Khashoggi entered the Saudi Consulate in Istanbul on Oct. 2, he didn’t know he was walking into a killing zone. He had become the prime target in a 21st-century information war – one that involved hacking, kidnapping and ultimately murder – waged by Saudi Crown Prince Mohammed bin Salman and his courtiers against dissenters. How did a battle of ideas, triggered by Khashoggi’s outspoken journalism for The Post, become so deadly? That’s the riddle at the center of the columnist’s death. The answer in part is that the United States, Israel, the United Arab Emirates and other countries that supported Saudi counter-extremism policies helped sharpen the double-edged tools of cyberespionage that drove the conflict toward its catastrophic conclusion in Istanbul. Ground zero in this conflict was the Center for Studies and Media Affairs in Riyadh, run by Saud al-Qahtani, a smart, ambitious official in the royal court who played Iago to his headstrong, sometimes paranoid boss. Qahtani and his cyber colleagues worked at first with an Italian company called Hacking Team, and then shopped for products produced by two Israeli companies – NSO Group and its affiliate, Q Cyber Technologies – and by an Emirati firm called DarkMatter, according to many knowledgeable sources who requested anonymity to discuss sensitive intelligence matters. Gradually, Qahtani built a network of surveillance and social-media manipulation to advance MBS’s agenda and suppress his enemies. For the Saudis, as for Russian hackers in their assault on the 2016 U.S. presidential election, the information space became a zone of warfare. The weapons of defense and offense became interchangeable. As one European intelligence official told me ruefully: “The tools you need to combat terrorism are the same ones you need to suppress dissent.” The Saudis pushed hard on this double throttle. “Every new surveillance tool has a potential for abuse. That’s why in this country, we have a robust system of law and even a special court to oversee how they are used. In places with fewer legal protections for individuals and no real oversight from other parts of government, these tools are easily abused, and that should concern us all.”
Iran Confirms Pompeo’s Charge Of Testing New Ballistic Missile “Capable Of Hitting Europe” – Iranian media has quoted a senior Revolutionary Guards commander on Tuesday as confirming Iran had recently carried out a ballistic missile test, which is the first time the country has owned up to allegations made by US officials previously this month. The confirmation appeared in the semi-official Fars News Agency and is the first time Iran affirmed charges made by US Secretary of State Mike Pompeo, who earlier this month said Iran had test-fired “a medium range ballistic missile that is capable of carrying multiple warheads.” Pompeo made the charge on December 1st while calling on Iran “to cease immediately all activities relating to ballistic missiles designed to be capable of delivering nuclear weapons.” The “senior IRGC commander” did not specify precisely what type of missile had been tested, nor the range or capabilities. Though Pompeo’s identifying it as a “medium-range” missile means it would be capable of hitting southeastern EU states, according to recent reports. Despite US condemnation, Iranian leaders have remained defiant after the US pullout of the 2015 JCPOA last May. Brigadier General Amirali Hajizadeh, head of the Revolutionary Guards’ airspace division, told Iranian media, “We will continue our missile tests and this recent action was particularly significant.” And he added: “The reaction of the Americans shows that this test was very important for them and that’s why they were shouting.”The IRGC airspace division commander further said Iran carries out out up to 50 missile tests a year, and that it would continue to doing so; however, he denied pursuing nuclear-capable missiles and described the program as “defensive” in nature.
Lira Tumbles After Erdogan Says Turkey Will Launch New Military Operation In Syria “In Days” – The Turkish Lira tumbled to session lows after President Recep Tayyip ErdoÄŸan said that Turkey will start a new military operation in Syria east of the Euphrates river in northern Syria in a “few days”. “It is time to realize our decision to wipe out terror groups east of the Euphrates,” Erdogan said in a speech at the Turkish Defense Industry Summit held at the presidential complex in Ankara on Dec. 12.”We will start the operation in east of the Euphrates in a few days to save it from the separatist terrorist organization,” ErdoÄŸan added, referring to the YPG. “Turkey’s target is never the U.S. soldiers, but rather the members of the terror group.”Turkey has repeatedly threatened to attack Kurdish militants in the region, who are backed by the U.S. but viewed by Turkey as an extension of a terrorist organization, the PKK.The Pentagon had announced on Dec. 11 that American observation posts in northern Syria, meant to prevent altercations between the Turkish army and US-supported YPG, have been erected, despite Ankara’s request to scrap the move. The Turkish army since 2016 has already launched two military operations in Syria, the last of which saw Ankara-backed Syrian rebels take the border city of Afrin from the YPG in March.the United States has long been complained that tensions between Turkey and the SDF, of which the YPG is the backbone, have at times slowed down progress on fighting the ISIL.In the same speech, ErdoÄŸan also slammed the new US plan for ‘protecting terrorists, not Turkey.’“There is no Daesh threat in Syria any longer,” ErdoÄŸan said accusing the U.S. of “delaying tactics” regarding its promise to clear the northeastern Syrian town of Manbij from YPG members. “It is clear that the purpose of U.S. observation points in Syria is not to protect our country from terrorists but protect terrorists from Turkey,” he noted.
“Unacceptable”: Pentagon Warns Against Turkish Invasion of Syria – The latest in months of such threats, Turkish President Recep Tayyip Erdogan announced Wednesday that Turkish forces will invade northeastern Syria “within a few days,” aiming to clear all territory held by the Kurdish YPG east of the Euphrates River. This is virtually all of the territory east of the Euphrates within Syria. The Pentagon responded to Erdogan’s threat by saying any Turkish invasion would be “unacceptable” and a grave concern to the US military forces present in Syria. Pentagon spokesman Commander Sean Robertson warned that the war against ISIS is not over and the Kurds are a “committed partner” against them. Kurdish officials have warned that a Turkish invasion would derail their fight against ISIS further to the south. Early in the Kurdish offensive against ISIS, they’d also had to withdraw for a time because of Turkish threats. Turkey has repeatedly attacked Kurdish territory in Syria throughout the Syrian War, and Erdogan had previously insisted that the Kurds could hold no land west of the Euphrates. Now, he is vowing to clear out all land east of the Euphrates as well. But Erdogan has threatened to attack this area a lot of times, without having done so before. US officials have made efforts to placate him with promises of observation posts on the border, though Erdogan is now accusing the US of building such posts to protect the “terrorists” and not Turkey.
15,000 Syrian Rebels Ready to Back Turkish Military Against US-Backed Forces – Up to 15,000 Syrian rebels are ready to join a Turkish military offensive against US-backed Kurdish forces in northeast Syria, but no date has been set for the operation, a spokesman for the main Turkish-backed Syrian rebel group said on Thursday, reported Reuters. #Infographic: More than 1.5 million #Syrians are now living with permanent, war-related impairments. READ: http://ow.ly/8l7f30l7Z47