OPEC Cuts Seem Uncertain

So, Nigeria is playing it guardedly and Saudi Arabia's Falih has found it necessary to say the kingdom won't cut alone. If he needs to say it out loud, I don't like their chances right now. Here.

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1 minute ago, Marina Schwarz said:

So, Nigeria is playing it guardedly and Saudi Arabia's Falih has found it necessary to say the kingdom won't cut alone. If he needs to say it out loud, I don't like their chances right now. Here.

This is precisely what Saudi Arabia said during the first talks about OPEC Cuts back in April of 2016. 

This time, I am confident that they will indeed get the job done out of necessity. Saudi Arabia has increased production the most, so they will agree to cut the most. Venezuelan production is already down, they will agree to cap it wherever they are right now, or even less, and that will account for a significant portion of "the cut". 

Wounded by sanctions, Iran will also be part of "the cut". This time they will push for getting Iraq on board with the cuts, but they will find the most resistance here because Iraq does not have complete control over its production and exports. Even if they agree to a cut, they will be unable to stick to it.

 

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20 minutes ago, Guillaume Albasini said:

And Russia ?... Russian oil companies are expanding production. It won't be easy to apply an oil cut.

https://www.reuters.com/article/us-russia-oil-gazpromneft/gazprom-nefts-thirst-for-oil-shows-russian-dilemma-on-opec-pact-idUSKCN1NW19M

Russia will certainly not cut production unless there is something else in it for them. 

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@Rodent, how dare you remember so far back?

1 hour ago, Rodent said:

Russia will certainly not cut production unless there is something else in it for them. 

And it's going to have to be a big something this time what with the latest Ukraine outburst of outrage out of proportions, okay I'm done.

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3 hours ago, Marina Schwarz said:

So, Nigeria is playing it guardedly and Saudi Arabia's Falih has found it necessary to say the kingdom won't cut alone. If he needs to say it out loud, I don't like their chances right now. Here.

I don't care what they say publicly.  The KSA will, or may have already, cut production and, more importantly, sales.  Just my widdle opinion.

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2 hours ago, Guillaume Albasini said:

And Russia ?... Russian oil companies are expanding production. It won't be easy to apply an oil cut.

https://www.reuters.com/article/us-russia-oil-gazpromneft/gazprom-nefts-thirst-for-oil-shows-russian-dilemma-on-opec-pact-idUSKCN1NW19M

That is one of the biggest current risks to OPEC.  Do they see it coming?  Do they think they can trust Russia?

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3 hours ago, Rodent said:

Wounded by sanctions, Iran will also be part of "the cut". This time they will push for getting Iraq on board with the cuts, but they will find the most resistance here because Iraq does not have complete control over its production and exports. Even if they agree to a cut, they will be unable to stick to it.

Iran can hop on board and say they are cutting to hurt the Great Satan.  But since we don't know how much the sanctions have reduced the flow already, they might not need to do anything, other than say they are.

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(edited)

Nobody can challenge the the deep state, FED, and trump together for the next 2 months at least: Oil is routed to fall even below 40s to hurt venezuela and iran together mainly and for others (like some arab leaders that trump is defending against us congress presion) is matter of keeping the crown and the good will of USA.

Edited by Sergio Perez

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Quote

MOSCOW (Reuters) - President Vladimir Putin said on Wednesday Russia is in touch with OPEC and is ready to continue cooperation with it if needed.

Putin, speaking at an economic forum, said Russia would be satisfied with an oil price of $60 per barrel, adding that Russia and OPEC had fulfilled their commitments to the global oil output deal.

Putin seems to be OK with the current price. 

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(edited)

14 minutes ago, Guillaume Albasini said:

Putin seems to be OK with the current price. 

HE AND EVERYBODY KNOWS THAT VOLATILITY IS GOOD FOR OURR BUSINESS, SO WE ALL KNOW THAT LOW PRICES FOR 2 OR 3 MONTHS DOES NO AFFECT... SPECIALLY WHEN MOSTS OF THE YEAR YOU CAN HANDLE HIGHER PRICES ABOVE 60s or 70s AND EVERY BODY IS STILL FRIEND.

Edited by Sergio Perez

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7 hours ago, Marina Schwarz said:

So, Nigeria is playing it guardedly and Saudi Arabia's Falih has found it necessary to say the kingdom won't cut alone. If he needs to say it out loud, I don't like their chances right now. Here.

they will end this argue before the meeting

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5 hours ago, Dan Warnick said:

That is one of the biggest current risks to OPEC.  Do they see it coming?  Do they think they can trust Russia?

Only an idiot would trust Russia, those people have been doing whatever they want for so long, smiling in your face while knifing you in the back. No, only an idiot would trust Russia. I hope OPEC trusts Russia and Russia cuts their throat for it....lmao. That royal family has to be super inbred to even think for a moment that Russia would do something to benefit SA. They only do things that benefit themselves....

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No one is talking about the fact that Saudi has cut oil shipments to the U.S. 

https://www.cnbc.com/2018/11/16/saudi-arabia-cuts-oil-shipments-to-us-in-likely-bid-to-boost-prices.html

 

Sending fewer barrels to the United States means U.S. crude stockpiles are more likely to drop, and shrinking inventories tend to push up oil prices. It's a tactic the Saudis used last year to amplify their main strategy for draining a global crude glut and propping up the market: cutting output alongside fellow OPEC members, Russia and several other producers

 


 

 

 

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So we have...

  • Saudi Arabia producing at record high level
  • US producing at record high level
  • Russia producing at record high level
  • Iran production not falling as much as originally forecasted.
  • US inventories going up (despite reduced shipments from SA)
  • Slowing global oil demand
  • Trump happy with low oil prices
  • Putin OK with a barrel at $60
  • A weak MBS not really in a position to say no to his US protector

That's a lot of bearish news piling up.

OPEC will probably try to stabilize the barrel at the $60 level to avoid  oil going down to lower levels. Inverting the trend and pushing up the oil price could be out of reach in the current context.

 

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1. G20 preceeds OPEC MEETING.

2. SINO / US trade is the lollipop for bullish / bearish oil price. Especially managed money side of the COT.

3. Libyan production is crossing 1.3 Mil up from 600k.

4. Small Production cut is less than what folks expect. If bearish trend prevails then even a cut can be bad news. And they might think of kicking the can down to the next meeting.

5. Ruble is delinked to USD largely.

6. Rusky sino trade is in other currencies.

7. Refinery maintenance time frame.

8. From November till February we have holidays in various countries e.g. Deewali, Thanksgiving, Gurunanak jayanti, 25/12 till 2/01, Sino new year. Thin trading and lull demand.

9. FED put & rate hike.

 

 

 

 

 

 

 

 

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(edited)

4 hours ago, Guillaume Albasini said:

 

  • Saudi Arabia producing at record high level
  • US producing at record high level
  • Russia producing at record high level
  • Iran production not falling as much as originally forecasted.
  • US inventories going up (despite reduced shipments from SA)
  • Slowing global oil demand
  • Trump happy with low oil prices
  • Putin OK with a barrel at $60
  • A weak MBS not really in a position to say no to his US protector

 

I am probably wrong,  but OPEC is more than just Russia and Iran.   There are other players,  all in financial straits,  and all needing to make oil sales to keep their percentage of "market share."

The oil market is "all about the volume of sales". 

You can manipulate many different variables,  but if your "sales volume drops",  you are sunk.

The Saudi's have always been the "boss" of OPEC by controlling the largest percentage of market share.

Being the "boss" gives them political control of OPEC.

To make a "volume of sales cut" at this time will not only bring in "less money" to the Saudi's,  it will "reduce their market share",   and "reduce their "political control" of OPEC.

I doubt the Saudi's will make any kind of significant cut at this time.

There is blood in the water,  and MBS will do nothing to make himself weaker.

If they do anything,  it will be to manipulate the market in some way politically to damage their competition.

To the Saudi's,  the oil market is a chess game.

Edited by Illurion
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11 hours ago, Dan Warnick said:

That is one of the biggest current risks to OPEC.  Do they see it coming?  Do they think they can trust Russia?

I think concepts like trust are largely irrelevant in geopolitics. But based on past experience I suppose OPEC has a good reason to trust Russia. They've played along for two years now. And yet common sense suggests a state's own interest should trump those of its geopolitical partners. Should is not the same as will, though, so it's anyone's guess what will happen in the end. Personally, I'd rather they sat these cuts out so I could gloat.

30 minutes ago, Illurion said:

To the Saudi's,  the oil market is a chess game.

And they're getting worse at it, it seems.

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3 hours ago, Marina Schwarz said:

I think concepts like trust are largely irrelevant in geopolitics. But based on past experience I suppose OPEC has a good reason to trust Russia. They've played along for two years now. And yet common sense suggests a state's own interest should trump those of its geopolitical partners. Should is not the same as will, though, so it's anyone's guess what will happen in the end. Personally, I'd rather they sat these cuts out so I could gloat.

And they're getting worse at it, it seems.

Two years is a blip in Vlad Putin's world.  He plans much farther in advance than most of his contemporaries, who are temporary in their positions anyway.  (that just felt good typing, accurate or not :) )

The Saudis have rarely been credited with high level long term planning.

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You're absolutely right. I find this the right way to plan when you have a country to rule. Long-term thinking, not one-term or two-term.

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1 hour ago, Dan Warnick said:

Two years is a blip in Vlad Putin's world.  He plans much farther in advance than most of his contemporaries, who are temporary in their positions anyway.  (that just felt good typing, accurate or not :) )

The Saudis have rarely been credited with high level long term planning.

Putin is probably aware that low oil price will mainly hurt unconventional oil producers (oilsands, shale) with higher break even and could trigger a burst of the US shale debt bubble sending the US in economic crisis.  And less money means a reduction in US military spending helping to narrow the strategic gab between Russia and USA.

Low oil price is also helping China, the main oil buyer... and somewhat a Russian allied.

So if it's hurting your foes and helping your friends...

 

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2 hours ago, Marina Schwarz said:

You're absolutely right. I find this the right way to plan when you have a country to rule. Long-term thinking, not one-term or two-term.

We're in for a scary future, then. China is better at this than anybody. 

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They certainly are and it seems to be paying off. Maybe it won't be that scary...

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(edited)

32 minutes ago, Marina Schwarz said:

They certainly are and it seems to be paying off. Maybe it won't be that scary...

IMHO it won't be that scary.  The Chinese ARE long-game thinkers and planners.  Throw into the mix that President Xi is now President for life Xi and although he's 65 years old he could be around long enough to have to answer for bad planning, and they have good reasons to do the right thing.  I'm not saying the right thing means the Western way, I'm saying they weigh the pluses and minuses and do what makes sense all around.  I think they know it's time to play on a level field and that they can drag out the process of Trust but Verify for a very long time and in 1,000's of ways, so why not do it now rather than wait until too much damage is done.

Like a new kid on a playground, if I may, nobody stood up to them before so why should they have changed their ways?  Now that someone has stood up to them, they will most likely find a way to play nice(r). 

One further point about how they exercise their newfound powers: China was incredibly abused as a people and as a nation in the last couple of hundred years (for whatever reasons; take your pick) and they for sure at least don't want to see that happen again.  Can you blame them for that?  My feeling is that they'll find the right balance in the international arena, too, but they've got to test it to see what can/cannot be accomplished.

Edited by Dan Warnick
Xu to Xi
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23 hours ago, Rodent said:

This is precisely what Saudi Arabia said during the first talks about OPEC Cuts back in April of 2016. 

This time, I am confident that they will indeed get the job done out of necessity. Saudi Arabia has increased production the most, so they will agree to cut the most. Venezuelan production is already down, they will agree to cap it wherever they are right now, or even less, and that will account for a significant portion of "the cut". 

Wounded by sanctions, Iran will also be part of "the cut". This time they will push for getting Iraq on board with the cuts, but they will find the most resistance here because Iraq does not have complete control over its production and exports. Even if they agree to a cut, they will be unable to stick to it.

 

The USA has also increased production significantly in recent times, how come OPEC+ don't realise that the Americans stand to gain the most from any production cuts and resultant price increase. The Saudi's seem to be working for the USA here, they keep cutting back for the US to gain.

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