IEA Urges OPEC to 'Think Twice' About Cutting Oil Production

Fatih Birol, executive director at the International Energy Agency, said for Bloomberg,  "oil demand is still strong and OPEC should "think twice" before cutting production" 
Oil slipped on concern that an escalating trade dispute between the U.S. and China will dampen global growth at a time when American crude inventories are growing.The U.S. is said to prepare another round of tariffs on all remaining Chinese imports if talks between the presidents of the two countries fail to ease trade friction. Meanwhile, American crude stockpiles are forecast to have risen for a sixth straight week.Crude has retreated almost 9 percent this month, the worst monthly decline since July 2016. While ongoing trade tensions between the world’s two largest economies stoke concerns over global energy demand, traders continue to watch how much Iranian supply will be taken out of the market when U.S. sanctions hit early next month.

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Typical IEA looking backwards not forwards.....still dealing with the consequences, not the causes

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Yup. "High oil prices hurting consumers, says IEA" Tell me something new....🚩

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13 minutes ago, rainman said:

Fatih Birol, executive director at the International Energy Agency, said for Bloomberg,  "oil demand is still strong and OPEC should "think twice" before cutting production" ...(..)
 

Will we get repeat of 06-08 when OPEC policy led to $145/b?

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Petrochemicals are rapidly becoming the largest driver of global oil demand, in front of cars, planes & trucks. They will account for more than 1/3rd of world oil demand growth to 2030 & nearly half of growth to 2050– adding nearly 7m barrels of oil a day.

https://www.iea.org/petrochemicals/?utm_content=buffer3eb7e&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

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Don't commute: go electric, buy local :) 

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Russia Saudi Arabia and USA are on historical maximal output and in price enviromenment of 70-80 $.

I see no reason for them to change this situation because it suits everyone.

Of course KSA and Russia would like to see the price a little bit higher but they are aware this promotes green Energy so they recalculated their budgets to lower oil price assumptions.

Russian budget break even is now under 60 $ KSA higher but also lower than in 2014.

That was painful but should have been done long time ago.

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1 hour ago, Tomasz said:

Russia Saudi Arabia and USA are on historical maximal output and in price enviromenment of 70-80 $.

I see no reason for them to change this situation because it suits everyone.

Of course KSA and Russia would like to see the price a little bit higher but they are aware this promotes green Energy so they recalculated their budgets to lower oil price assumptions.

Russian budget break even is now under 60 $ KSA higher but also lower than in 2014.

That was painful but should have been done long time ago.

I agree with all the points, I think that KSA and Russia won't be able to force that much more supply to drop prices below 65 this year even though IEA and Trump want 50 dollar oil.

The other points above are also valid with respect to oil market share. 60-80 is the range where profits are enough, and market share is not being lost bc of overpriced oil.

The EV market isn't entirely driven by oil prices either, people want them whether oil is at 30 or 100, and the cheapest EV's are $30k+ and same model but ICE cost $17-22. Not everyone is willing to spend 12,000 more on a Ford Focus as a way to 'save money on gas'. EV's are not cost saving vehicles, it's more about the environment/novelty/driving experience right now than saving money.

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(edited)

We cannot also forget about dolar exchange rate.

1 $ was for example worth 0,75 euro in 2014

Now its worth 0,88 euro

So 75 $ for brent means 88 $ in euros before oil crisis when we take under consideration change in $ exchange rate

Sorry for my english I hope you undestand what I mean.

Edited by Tomasz
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That is a good point. Higher dollar index drives the price of crude down, at least it applies downward pressure on crude, and all commodities.

At the points in time when both crude AND the dollar index are increasing in value, it means that crude is gaining value. When they converge/diverge, the ACTUAL VALUE of crude has to be taken into consideration with the value of the dollar, as there is a cancellation effect. Crude VALUE can be stationary while the dollar is strengthening, therefore the $/barrel goes down, and vice versa.

As an example, from Sept 21 to Oct 3, both Brent AND the Dollar index were increasing, so that means that crude oil VALUE was really going up. Same goes for Apr-May. Currently the dollar is rallying so oil is feeling downward pressure. WHEN the dollar reverses, oil price will respond unless supply/inventories is enough to counter the dollar's effect.

2 hours ago, Tomasz said:

We cannot also forget about dolar exchange rate.

1 $ was for example worth 0,75 euro in 2014

Now its worth 0,88 euro

So 75 $ for brent means 88 $ in euros before oil crisis when we take under consideration change in $ exchange rate

Sorry for my english I hope you undestand what I mean.

 

Screen Shot 10-30-18 at 08.21 PM.PNG

Screen Shot 10-30-18 at 08.36 PM.PNG

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3 hours ago, NatGasDude said:

The EV market isn't entirely driven by oil prices either, people want them whether oil is at 30 or 100, and the cheapest EV's are $30k+ and same model but ICE cost $17-22. Not everyone is willing to spend 12,000 more on a Ford Focus as a way to 'save money on gas'. EV's are not cost saving vehicles, it's more about the environment/novelty/driving experience right now than saving money.

Well said.

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(edited)

If you get 20mpg (just to be conservative), and drive 300 miles per week, with gas at 2.50, for 4 years, that's 7800 dollars.

A Ford Focus EV battery costs $5500+ to replace, and that is obviously on TOP of the $10k+ markup you paid for out the gate. So a 4-5 year old EV with crappy range left on the battery vs having bought the ICE version and paid for gas still has a differential of $8-10k in additional costs for the EV lifetime ownership option.

And a Focus can do better than 20mpg.

This is why Honda Clarity and Honda Fit EV's are lease only at the moment. They would rather not bother with consumers dealing with driving the car for the full lifetime of the vehicle, who knows, to avoid bad press from the hassle and expense of changing the battery. I assume that Honda will find ways to recycle the vehicles, or refurbish them and sell them after they milked the leases, I haven't read into that yet.

Whoa, not to mention that the $30,000  Focus EV only gets 100 miles per charge, and they recommend that you only use the battery from 80-20%....so 60 miles per charge eh. And similarly priced Nissan Leaf gets 150 mi per charge, that gives you about 80 miles using 80-20% to avoid wrecking the battery too quickly. What a raw deal....

Edited by NatGasDude

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3 hours ago, Tom Kirkman said:

Well said.

 

2 hours ago, NatGasDude said:

If you get 20mpg (just to be conservative), and drive 300 miles per week, with gas at 2.50, for 4 years, that's 7800 dollars.

A Ford Focus EV battery costs $5500+ to replace, and that is obviously on TOP of the $10k+ markup you paid for out the gate. So a 4-5 year old EV with crappy range left on the battery vs having bought the ICE version and paid for gas still has a differential of $8-10k in additional costs for the EV lifetime ownership option.

And a Focus can do better than 20mpg.

This is why Honda Clarity and Honda Fit EV's are lease only at the moment. They would rather not bother with consumers dealing with driving the car for the full lifetime of the vehicle, who knows, to avoid bad press from the hassle and expense of changing the battery. I assume that Honda will find ways to recycle the vehicles, or refurbish them and sell them after they milked the leases, I haven't read into that yet.

Whoa, not to mention that the $30,000  Focus EV only gets 100 miles per charge, and they recommend that you only use the battery from 80-20%....so 60 miles per charge eh. And similarly priced Nissan Leaf gets 150 mi per charge, that gives you about 80 miles using 80-20% to avoid wrecking the battery too quickly. What a raw deal....

Some factors people are ignoring about EV economics: 

1) EV's have dramatically lower maintenance costs.  This is particularly important for commercial vehicles, which suffer down time, cost of paying employees to shuttle vehicles to service, and higher labor rates (diesel mechanics are expensive).

2) EVs are more convenient for wealthy drivers. No gas stations + less maintenance = saved time.

3) Batteries are already life-of-vehicle components. Tesla batteries, in particular, are lasting 250k+ miles while the next generation is aiming for 500k.

4) EVs make sense in high-mileage applications.  E.g. taxis and ride-sharing. 

5) Battery costs are still falling. Even if you have to replace your battery pack - which will be as likely as replacing an engine - the cost 5 years hence will be far lower than it is today. 

The idea that EVs are expensive novelties is driven by a single use case: the average consumer. Even then, the analyses used to make this claim ignore half the cost savings and all of the time savings. Why do we cling to this analysis?  Because consumer EVs were the first application.  Why were they the first application?  Because in the beginning, EVs truly were an expensive novelty.  The technology also hadn't been proven reliable, preventing use in commercial vehicles.  Are consumer EVs still the only application? Absolutely not.  Commercial vehicles of all types - from semis to urban delivery to off-road construction equipment - are coming online today.  Consumer EVs were just a gateway; it's inappropriate to confine our analysis to them.  

If we want to discuss oil demand, we must broaden our analysis to all use cases. What happens when Tesla et al. start cranking out Class 8 trucks? What happens when urban delivery goes EV?  What happens when off-road construction & mining equipment finishes hybridizing, cutting their fuel use 50%? What happens when taxis & ride-sharing operators realize a Nissan Leaf pays for itself?  These are applications that pencil out today; the only limitation is manufacturing capacity. 

Then there are different markets. What happens when the entirety of Europe - with its high fuel prices and oil imports - begins the switch to EVs?  Or as China, in the same boat as Europe, continues to ramp up EV production?  I would bet the limit on that is, again, manufacturing capacity. 

So no, a non-commercial EV in the US won't pay for itself on fuel savings alone - but that's a meaningless question.  EVs will begin by consuming the best use cases.  As they do that, battery prices will fall, bringing new use cases into range.  EVs are happening.  

 

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the space is changing rapidly;

ex wiki -"The Nissan Leaf 2019 model year, to be offered in late 2018, will have a 60 kWh battery pack for over 360 km (225 miles) of range. The electric motor produces 110 kilowatts (147 hp) and 320 newton metres (236 lb⋅ft) of torque.[123] It charges through either a 6.6 kW regular plug (SAE J1772 in US/Japan, or a Type 2 connector in EU countries) or a 100+ kW CHAdeMO, and has the ability to send power back to the grid. "

charge that sucker by day with your rooftop solar and reuse your power by night drawing from the battery. going to the effort of plugging your car in and unplugging it everytime you wanna drive i can see as an inconvenience however... giant inductive charging coil in your garage floor or car park at work would be ideal but bulky and $$$ to fit high power inductive coils into a vehicle. Something else might be a self aligning drive in/out dock mounted on your garage wall or floor to alleviate the inconvenience problems.

Seen the smog in large capitol cities? guess where it comes from? EVs will solve air quality problems big time - i personally cant stand breathing that stuff up whenever i have the misfortune of having to travel to a large city.

Were not there yet, but things are moving along year by year making constant improvements to the practicality and performance and relative cost of ownership of EVs... wont be too much longer and there will be wholesale shift to mainstream thinking when it comes to buying a new car....

 

 

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