OPEC Cuts Seem Uncertain

15 hours ago, Guillaume Albasini said:
  • Saudi Arabia producing at record high level
  • US producing at record high level
  • Russia producing at record high level

based on this production cuts will be easy, rather they are already happening in a small degree, because you can only go full bore for so long, this will allow a small "natural" draw back in production

15 hours ago, Guillaume Albasini said:

Iran production not falling as much as originally forecasted.

always a wild card, everyone exaggerates their abilities,,, they've been exaggerating for so long no oneNot even themselves)really knows how much oil is coming out of Iran

15 hours ago, Guillaume Albasini said:
  • US inventories going up (despite reduced shipments from SA)
  • Slowing global oil demand

I feel the global economy is still a team of horses waiting to run,, but the headwinds of the (necessary imho) tariffs and sanctions are holding them back.  I believe Trump and Xi are the players here, just read Nick Cunningham's article and agree with this closing... https://oilprice.com/Energy/Energy-General/Is-The-Trade-War-Coming-To-An-End.html

The bottom line is that the trade war could go one of two ways after this weekend. The ramifications for the oil market are profound. Most economists are already predicting a global economic slowdown in 2019. Any escalation of the trade war will cause more headaches, potentially forcing more downward revisions in oil demand, and thus, drag down crude prices.

On the other hand, Trump may give in to Xi and call off the trade war, just as he did with North Korea and the nuclear program last year. Declare victory and go home. 

15 hours ago, Guillaume Albasini said:

Trump happy with low oil prices

If he is, I think he is wrong,,, need the equilibrium price of oil to foster the necessary forward investments

15 hours ago, Guillaume Albasini said:

Putin OK with a barrel at $60

He's bluffing

15 hours ago, Guillaume Albasini said:

A weak MBS not really in a position to say no to his US protector

Not so sure he feels beholden to the U.S., he should but he's not a thinking man, seems more of a criminal.  Bringing me to his den of thieves called opec,, and their new found partner in Russia,  Mbs has no power to cut production because none of the "members" trust one another either, and will still look out for themselves first, regardless of what they tell each other.

Cutting production means cutting income, and risk of losing market share, that seems counter-intuitive, therefore it take a while for the den of thieves to understand they need to cut production, so the cuts will happen, but will be delayed like last time.

Great thread, thanks Guillaume for concisely listing the main points, and allowing me to jump in on the conversation.

 

 

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5 hours ago, Rasmus Jorgensen said:

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

 

5 hours ago, Marina Schwarz said:

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

Stay woke...………….

https://nypost.com/2015/02/08/chinas-secret-plan-to-topple-the-us-as-the-worlds-superpower/

 

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Brasil about to ramp up with the Pre-salt Santos Basin (Just the Libra field has 3.3Billion Bbls), Bolton is in Brasil today ahead of G20 having talks with the soon to be inaugurated President Jair Bolsonaro and Petroleum is the topic, everywhere we look its Bearish.

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18 hours ago, Guillaume Albasini said:

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.

 

Trump maybe happy with low prices but lets face it Trump has no clue about the Oil Industry both onshore and offshore will suffer, we are already close to to break point for WTI and the Permian Basin, who will supply all this cheap oil when its not viable for some of the players and sub $50/Bbl. Trump is slowly digging a hole with everyone, don't see him lasting- "four more years"-Dont think so Donald

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1 hour ago, TXPower said:

Wow.  I'd like to hear Henry Kissinger's opinion of this article.  Just saying,,, I like the retired guys' perspectives,,,they don't care about hurting anyone's feelings, just put it out there.   Then again, there's always a book to sell, ha!

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(edited)

https://www.theguardian.com/world/2018/nov/29/trump-putin-g20-meeting-buenos-aires-kremlin-white-house

Woah ! So, the meeting is cancelled, building more tension between Russia and USA. Does this mean that putin was bluffing all this time and he could actually stand with KSA for production cuts ? 

Anyways, for the meantime this could have an adverse effect on oil prices and could easily slide it down towards $48.

Edited by aakash kapoor
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5 hours ago, Cowpoke said:

The best-laid plans of mice and men often go awry.

It's a good thing, too.  We could have been vaporized a few times over otherwise.

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(edited)

It is not uncertain. No one is cutting anything. They plan to raise production as much as possible because the oil glut is not big enough. Prices are dropping again now. Trump is a fool for talking down prices now. Elections are over. Putin has no idea about oil prices. He only repeats what the oligarchs tell him. Trump is as weak as Hussein Obama for giving iran waivers. Why quit the deal if you are going to give weak waivers to so many countries?

Edited by Democrats Tax Everything!
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Maybe everyone should be reminded of the bedrock principle -- you cannot put ten gallons of oil in a five gallon bucket. If the production plans for total industry crude output exceeds the total worldwide demand, some producers will be forced to cut production plans. Whether a coordinated decision is implemented to minimize the price drop or not, production expectations will be adjusted down to the demand level. If there is no agreement to spread the pain, the first step will be a price drop. $20/B is not unrealistic when the trading community shifts their attitude from higher prices to lower prices, net long futures contracts are dumped and shorts are added. The second step will be the industry picking up the pieces of a decimated price environment, but at lower prices for less production.

The alternative scenario is for the major players to coordinate their production activities and not try to maintain market share by cutting prices. In that case, if the group stays compliant, the price drop will be only half of the alternative every-man-for-himself scenario.

In both cases, production drops to the level of demand.

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40 minutes ago, William Edwards said:

Maybe everyone should be reminded of the bedrock principle -- you cannot put ten gallons of oil in a five gallon bucket. If the production plans for total industry crude output exceeds the total worldwide demand, some producers will be forced to cut production plans. Whether a coordinated decision is implemented to minimize the price drop or not, production expectations will be adjusted down to the demand level. If there is no agreement to spread the pain, the first step will be a price drop. $20/B is not unrealistic when the trading community shifts their attitude from higher prices to lower prices, net long futures contracts are dumped and shorts are added. The second step will be the industry picking up the pieces of a decimated price environment, but at lower prices for less production.

The alternative scenario is for the major players to coordinate their production activities and not try to maintain market share by cutting prices. In that case, if the group stays compliant, the price drop will be only half of the alternative every-man-for-himself scenario.

In both cases, production drops to the level of demand.

Hi William.  5 and 10.  Nuff said.

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But OPEC can always count on Venezuela! The best compliance country ever!!! It might probably make up for much of the rest of the minor countries share of cuts needed as overall production might fall more and more next year since there is nothing that indicates the contrary or an ascending trend of venezuelan oil production. OPEC needs better prices but definitely as long as Saudi Arabia has the command of the bloc as it does and as it still has alliances and pacts with Washington and Moscow especially on arms trade despite the overall needs of the organisations then i dont think any cut could be relevant, especially given the turbulent geopolitical landscape in the MENA region and the Gulf. 

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At $50, marginal producers start dropping out, and demand goes up (e.g. at $1.99/gal gas in Texas)... together with Trump/Xi's 90-day tariff moratorium and a Saudi cut in production, we'll see another run to $65 over the next 6-7 weeks.  

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Apparently, Putin let the cat out of the bag and they will be "extending their partnership". I'm very disappointed. Could've kept the suspense for a few more days for appearances' sake.

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SInce we have a 90 days truce and wti is close 54; with opec+ ready to cut; are we back at 60-65 or 65-70?

 

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I think AA is referring to WTI prices. Yes, I can see it going back to $60 just on technical alone not to mention the cuts.

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Don't confuse posturing with the underlying facts.  OPEC and Russia have no choice but to cut production given that their fiscal breakeven prices are all above $70/bbl.  With current oversupply estimated to be 1.4 MMBOPD, if they don't make a meaningful cut, WTI will fall below $50 and NSB will fall below $60.  For OPEC and Russia, this would be an unacceptable pricing scenario.  Therefore, expect them to announce cuts in some form.  The question will be the amount that they commit to.

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28 minutes ago, Joseph Castillo said:

Russia have no choice but to cut production given that their fiscal breakeven prices are all above $70/bbl

The Russians disagree.

https://themoscowtimes.com/articles/russia-inc-goes-into-profit-as-the-budget-breakeven-price-for-oil-falls-to-53-60302

Russia Inc is back in profit. Cost cutting and a crackdown on the wasteful spending caused by corruption has reduced the price of Urals blend oil needed for the federal budget to breakeven to $53, according to Renaissance Capital’s calculations. 

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OPEC will cut production.

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On 11/28/2018 at 7:41 PM, Dan Warnick said:

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.

Iran production after sanctions as I know is around 3 million barrel per day now .

1.5 million for export and 1.5 million for eight local refineries(internal use).

The export has been halved now.

I think there will be chaos in Opec after Russia joined opec. Russia and saudi arabia undermine other countries and the other countries does not like this situation. Qatar is leaving Opec on january 2019. 

I think Opec can not decrease production  and the price of brent will be set around 60 USD.

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If there are many oil producers now, and there are, how do you plan to do a oil production cut without hurting yourself, because is very likely that cut will then be absorbed by other oil producing countries that are not in the OPEC

Isn't 1990 anymore, unless the Saudis can convince the USA to keep their oil production growth kinda of stable so they can cut production and elevate oil prices

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