Category: Oil

By Scott DiSavino | NEW YORK
Reuters
Dec 16, 2016

Oil rose on Friday, edging closer to new 17-month highs, after Goldman Sachs boosted its price forecast for 2017 and producers showed signs of adhering to a global deal to reduce output.

Brent futures rose $1.19, or 2.2 percent, to settle at $55.21 a barrel, while U.S. West Texas Intermediate crude rose $1, or 2 percent, to settle at $51.90 per barrel.

That put both contracts on track to rise for a fourth week in the last five, with Brent up around 23 percent during that time and U.S. crude up about 20 percent.

The premium of the Brent front-month over the same U.S. contract closed at $2.26 a barrel, its highest since the end of August.

“We’re up today because Goldman Sachs bumped up its oil estimates and the Russians said their oil companies would reduce output,” said Phil Davis, managing partner of venture capital fund PSW Investments in Woodland Park, New Jersey.

The Organization of the Petroleum Exporting Countries agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1, its first such deal since 2008. Russia and other non-OPEC producers plan to cut about half as much. Continue reading “Oil rises on Goldman forecast, signs producers complying with cuts”

By Rania El Gamal and Dmitry Zhdannikov | DUBAI/LONDON
Reuters
Dec 15, 2016

Saudi Arabia has long said it could produce as much as 12 million barrels per day (bpd) of oil if needed, but that pump-at-will claim – which would require huge capital spending to access spare capacity – has never been tested.

Sources say the kingdom may have stretched its current limits by extracting a record of around 10.7 million bpd this year, which could be one reason why Riyadh pushed so hard for a global deal to cut production.

Riyadh, the world’s top oil exporter, felt the burn of cheap oil this year when crude was trading below $50 a barrel, as the reality of its costly war in Yemen and the task of shaking up its economy to create thousands of jobs began to sink in.

With tight resources, Saudi Arabia found itself weighing the prospect of investing billions of dollars to raise oil output further if it wanted to gain more market share under a strategy adopted in 2014.

Instead, cutting production amid a global glut and low prices to take the pressure off its oilfields, secure better reservoir management and save itself unnecessary expenses, seemed the perfect deal.

“You invest in raising your production when prices are high, not when they are low,” a Saudi-based industry source said. Continue reading “Exclusive: Cost of pump-at-will oil policy spurred Saudi OPEC U-turn”

by Will Martin
Business Insider
FEB. 8, 2016

The price of oil might never go above $100 per barrel ever again, and will stay beneath $60 for as long as ten years, according to the boss of the world’s biggest independent oil trader.

In an interview with Bloomberg TV, Ian Taylor, CEO of Vitol Group said: “It’s hard to see a dramatic price increase. You have to believe that there is a possibility that you will not necessarily go back above $100, you know, ever.”

The price of Brent crude, the European benchmark, peaked at around $140 in 2008 before crashing as low as $45 per barrel in early 2009.

It then recovered substantially, and traded around the $100 mark for nearly three years between 2011 and 2014.

However, since summer 2014, the huge supply glut in global markets, driven by OPEC, has forced prices down as low as $28 per barrel. Right now, both major benchmarks are hovering between $32-35 per barrel. Continue reading “The world’s biggest oil trader thinks we may never see $100 oil again”

Anthony Dipaola and Hashem Kalantari
Bloomberg
January 17, 2016

Iran is beginning efforts to boost oil production and exports amid a global supply glut after the removal of sanctions that shackled its economy and capped crude sales.

The Persian Gulf country is targeting an immediate increase in shipments of 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday in an interview in Tehran. Iran plans to add another half million barrels within months. The additional crude will push prices lower when it enters markets that are already oversupplied, said Robin Mills of Dubai-based oil consultant Qamar Energy.

“The oil ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran’s crude exports by 500,000 barrels,” the official Islamic Republic News Agency reported. Zamaninia said the plan is “still valid” and will be done in a “managed way to minimize the negative impact” on prices.

Buyers of Iranian crude are free to import as much of its oil as they want after the International Atomic Energy Agency determined that the country had curbed its ability to develop a nuclear weapon. As holder of the world’s fourth-largest reserves of crude and biggest deposits of natural gas, Iran gains immediate access to about $50 billion in frozen accounts overseas, funds the government says it will use to rebuild industries. The end of sanctions also opens the door to foreign investors such as Total SA and Eni SpA.

Benchmark Brent crude has dropped 22 percent this year, closing last week at less than $29 a barrel amid oversupply and the looming surge in Iranian output. Gordon Kwan, a Hong Kong-based analyst at Nomura Holdings Inc., said by e-mail that prices may drop as low as $25 a barrel on Monday. Continue reading “Iran Kicks Off Plan to Boost Oil Exports as Sanctions Lifted”

By CLIFFORD KRAUSS and STANLEY REED
New York Times
SEPT. 28, 2015

As oil prices have continued their steady decline this year, rig after rig has been shut down, costing thousands of jobs in the United States. Yet major oil producers have been loath to pull the plug on their most ambitious projects — the multibillion-dollar investments that form the backbone of their operations.

Until now. On Monday, Royal Dutch Shell ended its expensive and fruitless nine-year effort to explore for oil in the Alaskan Arctic — a $7 billion investment — in another sign that the entire industry is trimming its ambitions in the wake of collapsing oil prices.

The announcement was hailed as a major victory by environmentalists, who had fought the project for years, only to be stymied by pressure inside and outside the industry to increase domestic oil production. Continue reading “Shell Exits Arctic as Oil Slump Forces Industry to Retrench”

Gregory Meyer
Financial Times
July 17, 2015

For a brief, brave moment this year there was a sense the worst was over for the oil sector. This week, that feeling evaporated.

Iran’s agreement to curtail its nuclear programme, potentially restoring its place as a leading crude exporter, was just the latest hunk of bearish news thrown at the oil market. Saudi Arabia and Iraq are pumping record volumes. US drillers have again added rigs to probe for oil in shale rocks. China’s furious fuel demand growth is easing. For investors pondering exposure to oil through futures, shares or bonds, standing back seems the safest course.

The $50 a barrel plunge in spot oil prices from a year ago has been breathtaking. But to grasp the industry’s deepening woes, look at what futures markets are saying.

The price of West Texas Intermediate crude delivered in December 2016 has fallen below $60 a barrel, the lowest since any exchange listed that futures contract. Between the financial crisis and last year, the contract levitated between $80 and $100. Continue reading “Futures markets have much to say about oil’s direction”

by Eric Yep
Wall Street Journal
July 16, 2015

With ample supply, oil refineries in Asia have increasing influence over prices

SINGAPORE—With oil prices at half what they were a year ago and crude flooding into Asia from all directions, buyers from the west coast of India to southern Japan are, for the first time in decades, spoiled for choice.

The changing balance of power is already affecting the regional market share of key producers. With a full return of Iranian supplies now looming, following a nuclear accord this past week, competition will likely heat up further.

Oil consumers, mainly the refineries that turn crude into products such as gasoline and jet fuel, face a dilemma in this “new normal” era. Do they stick with multiyear contracts with long-established suppliers, primarily from the Middle East, or buy more oil on spot markets, getting cheaper prices but risking security of supply?

Asian refiners, located far from major oil-producing regions, previously have tied up as much as 95% of their crude intake through long-term contracts with reliable producers such as Saudi Arabia’s state-owned oil giant Saudi Aramco. Continue reading “For Asia’s Oil Consumers, It’s a Buyer’s Market”

By M K Bhadrakumar
Asia Times
January 8, 2015

As an energy-deficient country whose import bill for oil in the last financial year stood at $150 billion, the sharp fall in oil prices is a moment to celebrate. There are two ways to celebrate. One could be to open the champagne bottle and enjoy the good things in life. Then, there is a second way – the Chinese way – which is to seize the happy hour to plan for the future.

The Indian government is sipping champagne. The budget deficit significantly narrows and that is good news for the upcoming annual budget. A Morgan Stanley report in September calculated that a mere 10 percent drop in oil price could bring down the current account deficit by 0.6 percent of India’s GDP – no small matter.

However, how is the government taking advantage of the unexpected windfall? Plainly put, the benefit has not been passed on to the consumer. Whereas in the US, the average gasoline prices have reached their lowest level in the past four-year period, there is no such luck for the Indian consumer. Worse still, the government’s price fixation method is so opaque that a suspicion forms that private oil companies are being enabled to make huge profits. Continue reading “India fails to exploit oil price slump”

The Malaysian Insider
31 December 2014

The retail prices for fuel in the country will be reduced between 30 sen and 35 sen from tomorrow following the downtrend in global crude oil prices, said Deputy Finance Minister Datuk Ahmad Maslan today.

He tweeted that RON95 petrol will be priced at RM1.91 a litre, a reduction of 35 sen, RON97 at RM2.11 a litre (35 sen drop) and diesel at RM1.93 a litre (30 sen drop). Continue reading “Fuel prices drop 30 sen, 35 sen”

By Ben Casselman
Five Thirty-Eight
Dec 18, 2014

In 2008, I moved to Dallas to cover the oil industry for The Wall Street Journal. Like any reporter on a new beat, I spent months talking to as many experts as I could. They didn’t agree on much. Would oil prices — then over $100 a barrel for the first time — keep rising? Would post-Saddam Iraq ever return to the ranks of the world’s great oil producers? Would China overtake the U.S. as the world’s top consumer? A dozen experts gave me a dozen different answers.

But there was one thing pretty much everyone agreed on: U.S. oil production was in permanent, terminal decline. U.S. oil fields pumped 5 million barrels of crude a day in 2008, half as much as in 1970 and the lowest rate since the 1940s. Experts disagreed about how far and how fast production would decline, but pretty much no mainstream forecaster expected a change in direction.

That consensus turns out to have been totally, hilariously wrong. U.S. oil production has increased by more than 50 percent since 2008 and is now near a three-decade high. The U.S. is on track to surpass Saudi Arabia as the world’s top producer of crude oil; add in ethanol and other liquid fuels, and the U.S.is already on top. Continue reading “The Conventional Wisdom On Oil Is Always Wrong”

Malcolm Maiden
The Age
December 2, 2014

Oil is a key economic input and its price has fallen sharply. All things being equal, that’s a plus for global growth, but the markets are in turmoil. Here are six key reasons why oil’s price plunge has the markets gyrating.

THIS IS AN OIL PRICE SHOCK

In 2011, 2012 and last year oil averaged $US95.13 a barrel, $US94.15 a barrel and $US98.05 a barrel respectively, a spread of just $US3.90. It averaged $US100 a barrel in the first six months of this year and got to $107.26 a barrel on June 20. Monetary policy was still loose and the consensus was that the oil price would not move sharply in either direction.

Instead, it tipped into an accelerating price slide, to about $US75 a barrel ahead of last week’s meeting of the Organisation of the Petroleum Exporting Countries (OPEC). It hit $US66.15 a barrel on Monday, after the world’s biggest producer, Saudi Arabia, failed to back OPEC production cuts, and was still below $US70 a barrel on Tuesday despite a 3 per cent-plus bounce. Investors didn’t see the price slide coming, and haven’t worked out what it means. Continue reading “Six reasons oil’s price plunge has shaken the markets”

NBC News
1.12.2014

Remember way back in June, when oil was $115 a barrel? Now it’s trading at around $67.90 a barrel for Brent crude and some analysts are predicting, given the right conditions, it could tumble to as low as $40 a barrel.

Weak demand, a strong U.S. dollar and booming U.S. oil production are the three main reasons behind the fall, according to the International Energy Agency (IEA), which warned of a “new chapter” for oil markets, which could even affect the social stability of some countries. Russia is already feeling some pain: the ruble tumbled about 4 percent on Monday, on course for its biggest daily drop since the 1998 financial crisis.

Saudi Arabia sparked talk of an oil price war as it has cut its official selling prices for some customers for four consecutive months through November. Part of oil’s drop has to do with supply conditions. Increased U.S. oil production has added to a glut in the world oil market. The U.S. now produces about 8.9 million barrels a day, while Saudi Arabia, the world’s largest producer, pumps about 9.6 million barrels a day. Continue reading “Can Oil Prices Drop to $40 a Barrel? Some Say It’s Possible”