opec
Read: OPEC THREATENED TO KILL US SHALE

1 minute ago, Old-Ruffneck said:

I can see more power-plants coming online when more pipeline capacity to the east gets built. That's a good thing. Semi-trucks I not so sure about. As long as diesel stay under 3.00 a gallon probly not much investment to switch. I am also in favor of more nuke power. More bang for the buck.

Nuclear is not cost effective in any free country. Americans have recently spent billions trying to build new plants and billions on shutting down the ventures.

It is possible that diesel will hang on a long time, but governments are demanding cleaner fuels. There was just a new report today on the dangers of particulates associated with diesel. Cleaner and cheaper will eventually overcome the diesel habit. Biogas is an even "greener" option. 

Biogas https://docs.google.com/document/d/1N-TLMeHsKYBCirxS0vbqMGHpU2SmyLuCc7bqp8eYXVM/edit

http://www.ngvglobal.com/blog/new-near-zero-emissions-natural-gas-trucks-funding-for-southern-california-fleets-0309

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On 3/14/2019 at 10:10 PM, Tom Kirkman said:

You are not including the mandatory social costs (money to rank and file to prevent a revolt), money to the huge, extended Royal family, etc.

Factor all those required costs in and the Saudis actually need somewhere around $80 oil to break even.

Why do you think the Saudi royals keep pushing for $80 oil?

A personal question, Tom. Is your income determined by your household's spending wishes, or your work value? Unless you have a friendly banker, the value of your work prevails. So it will be with the Saudis. Do not forget that the IMO slammed the door on the Saudi sour crude reserve growth(demand).

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10 hours ago, JJCar said:

 Shell said Deep water oil now and going forward produced at sub $30 bbl. 

That is an operating cost

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11 hours ago, JJCar said:

New technology is not limited to shale oil alone

There has been no new technology applied to oil shale.  Horizontal drilling and fracturing has been around for ever but was not required.  Economics have driven the decision to drill longer horizontals which must be fractured.

Deep water drilling requires new technology to be possible.  Its not cheap.

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In Texas, there are 187,401 oil wells with an average daily production of 18.63 barrels per well.

https://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/historical-production-data/crude-oil-production-and-well-counts-since-1935/

Hasn't there been some 20,000 wells drilled in the Permian?  Aren't there approximately 5,000 wells to be completed?

The only way shale will be compromised will be if the wells go dry, all eleven thousand of them in the Bakken alone.  Until then, the market will decide.  

Doesn't look like anybody is going to lose any market share when the world is consuming one hundred million barrels per day.

Nuclear waste can be remediated.

http://www.teslatech.info/ttstore/conftapes/1998jul/600127.htm

The babushkas of Chernobyl refused to leave.  The wolves returned after everybody left.

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(edited)

9 hours ago, ronwagn said:

Nuclear is not cost effective in any free country. Americans have recently spent billions trying to build new plants and billions on shutting down the ventures.

It is possible that diesel will hang on a long time, but governments are demanding cleaner fuels. There was just a new report today on the dangers of particulates associated with diesel. Cleaner and cheaper will eventually overcome the diesel habit. Biogas is an even "greener" option. 

Biogas https://docs.google.com/document/d/1N-TLMeHsKYBCirxS0vbqMGHpU2SmyLuCc7bqp8eYXVM/edit

http://www.ngvglobal.com/blog/new-near-zero-emissions-natural-gas-trucks-funding-for-southern-california-fleets-0309

Arghhhh, diesel trucks going into California should stop at the border and tell the recievers/shippers to meet at the border. My sister goes there everyweek. Buys 0 diesel as cost is over 4.00 a gallon. Sorry but I feel Zero Compassion as they mandate laws that cost business. Many business' are leaving California just like here in Illinois. The price point of borrowing to buy a fleet of NG trucks makes it unpopular. I would say more benefit would be the converting light truck and cars. They pollute 10x's as the ratio is that much higher. But why would anyone want to switch? 

https://www.arb.ca.gov/msprog/moyer/source_categories/moyer_sc_ld_vehicles.htm

I am not a fan of Californias Politics. They try to mandate for the rest of the country. At 1500 for cars allowance, good luck with the millions of autos. 

Edited by Old-Ruffneck
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3 hours ago, NWMan said:

There has been no new technology applied to oil shale.  Horizontal drilling and fracturing has been around for ever but was not required.  Economics have driven the decision to drill longer horizontals which must be fractured.

Deep water drilling requires new technology to be possible.  Its not cheap.

No New Technology in Shale ? ? ?    There have been over 1100 patents filed in the last 2 years related to shale oil recovery.  

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Majors like Exxon Mobil are getting big in the Permian to secure cheap feedstock for their refinery expansions. They can run at below break-even costs forever. They will make this up in the downstream refining profits. This is the magic of integrated oil companies. 

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17 hours ago, JJCar said:

I seriously wonder if the Middle East will ever stabilize. 

Trump wants to use Saudi prince MBS to broker an Israeli/Palestinian deal.  What does Trump have to give Saudi's for there efforts to close that deal.

Viewed through the lens of time you'd have to say the west doesn't want a stabilized Middle East. I don't really think that is true, but our efforts are too centric to our perspective to be anything but counter-productive. Not saying we are always acting in our selfish interests, but we are so clueless to the reality of their perspectives we can't help but make it worse. 

The Trump notion Saudi can make a deal happen is a great example. The Saudi's are loathed in Palenstine. They think the Saudis, with their money and influence with the USA, could make USA quit giving Israeli blanket support, no matter what the Israelis do. The locals do remember King Faisal, the '73 embargo, and once upon a time Saudi Arabia did stand up to the USA. Maybe twice if you include 9-11, though they was not a nation-state attack, though powered with oil money and Saudi bodies deeply resentful of the USA presence in KSA (after 9-11 we moved the bases to Bahrain, E.A.U., Qatar). Palestinians are Sunni, have no love for Iran at all, but respect Iran for standing up to the USA and Israeli, which pretty much no one else does.

Understand Saudi support is pretty useless if you think that is going to cause peace in the Middle East. Even more so with MBS and his my way or get the Khashoggi treatment way approach. So of course you don't hear dissent. Even the nation-state as Europeans know it, is a relatively new, forced construct on the region. And Saudi Arabia in particular is a very young country. Yemen, Oman, that has a some long history. But KSA, nope.

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On 3/16/2019 at 12:33 PM, John Foote said:

Viewed through the lens of time you'd have to say the west doesn't want a stabilized Middle East. I don't really think that is true, but our efforts are too centric to our perspective to be anything but counter-productive. Not saying we are always acting in our selfish interests, but we are so clueless to the reality of their perspectives we can't help but make it worse. 

The Trump notion Saudi can make a deal happen is a great example. The Saudi's are loathed in Palenstine. They think the Saudis, with their money and influence with the USA, could make USA quit giving Israeli blanket support, no matter what the Israelis do. The locals do remember King Faisal, the '73 embargo, and once upon a time Saudi Arabia did stand up to the USA. Maybe twice if you include 9-11, though they was not a nation-state attack, though powered with oil money and Saudi bodies deeply resentful of the USA presence in KSA (after 9-11 we moved the bases to Bahrain, E.A.U., Qatar). Palestinians are Sunni, have no love for Iran at all, but respect Iran for standing up to the USA and Israeli, which pretty much no one else does.

Understand Saudi support is pretty useless if you think that is going to cause peace in the Middle East. Even more so with MBS and his my way or get the Khashoggi treatment way approach. So of course you don't hear dissent. Even the nation-state as Europeans know it, is a relatively new, forced construct on the region. And Saudi Arabia in particular is a very young country. Yemen, Oman, that has a some long history. But KSA, nope.

It is my understanding that the key to the Administration's plan is their effort to  foster MESA or  "Middle East Strategic Alliance".  I'm told it is supposed to be a kinda Suni NATO look alike ( including Palestine)that would accomplish at the very least some stability and hopefully peace. 

When one looks below the surface of the Saudi / US relationship it is obvious they are no friends of US.  The outward  appearance of the US / Saudi relationship was born out of necessity  . . .  US needed their oil and the Saudi's need our help to protect them (to survive).  As Senator Graham recently said, " Saudi Arabia wouldnt last two weeks without us".

Unfortunately , oil and geopolitics are inextricably connected.  

Edited by JJCar
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9 hours ago, Old-Ruffneck said:

Arghhhh, diesel trucks going into California should stop at the border and tell the recievers/shippers to meet at the border. My sister goes there everyweek. Buys 0 diesel as cost is over 4.00 a gallon. Sorry but I feel Zero Compassion as they mandate laws that cost business. Many business' are leaving California just like here in Illinois. The price point of borrowing to buy a fleet of NG trucks makes it unpopular. I would say more benefit would be the converting light truck and cars. They pollute 10x's as the ratio is that much higher. But why would anyone want to switch? 

https://www.arb.ca.gov/msprog/moyer/source_categories/moyer_sc_ld_vehicles.htm

I am not a fan of Californias Politics. They try to mandate for the rest of the country. At 1500 for cars allowance, good luck with the millions of autos. 

I am just telling you the way the wind is blowing. California is too big to ignore. The politics is not to my liking but I do favor natural gas and believe it would save money and clean the air in the long run. Trump is trying to stop their ability to mandate who uses what fuel. 

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19 minutes ago, ronwagn said:

I am just telling you the way the wind is blowing. California is too big to ignore. The politics is not to my liking but I do favor natural gas and believe it would save money and clean the air in the long run. Trump is trying to stop their ability to mandate who uses what fuel. 

The free market will determine what fuel choice will eventually win out. I don't give in the theory that climate change is man made, the climate is always changing and when one thinks of the trillions of dollars to switch from say gasoline/diesel to CNG LNG Propane or whatever the new gas on the market of the day is, someone is making big big bucks on the initial investments. Subsidized programs to save the earth from mankind while might have good intentions, big money comes in and fouls it all up. We grew up in the 70's listening to acid rain from all the polluting factories. Well they got em shut down in Peoria.....Caterpiller is a non-player here now, and the thousands of jobs are gone. About 30,000 all told. Company broke up and now make equipment in Brazil, Mexico, China.....and so on. Just one company. The Federal Government wasn't friendly here in Central Illinois and by 1995 after the big strike, handwriting was on the wall. Just one city in the USA that lost it's main money. Many others out there, and I think Trump realizes he's just the president. Can't force industry to come back to here, as once burnt twice shy. Go buy a freakin' Buick, China bought out the ailing piece of GM and look where their at now. Big money will do what is best for the industries they are in and relying on the Government tit is the only way all the solar and windmills are up. Sad the way abuse of power is in this country. End rant!

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On ‎3‎/‎14‎/‎2019 at 10:22 PM, JJCar said:

Say Goodbye to your "Vision 2030"  Say goodbye to your Invest Saudi Arabia program.

I would not be so fast to write them off:

"several U.S. multinationals told Reuters they are building on their plans in the largest Arab economy.

Dow Chemical said it was committed to construction of a $100 million polymer plant in Jubail and will complete a feasibility study by the end of 2019 for another complex to produce siloxanes and silicones.

 

Technology and manufacturing group Honeywell International Inc is going ahead with projects as part of a $3.6 billion agreement in 2017 to deliver projects localizing goods and services for state oil giant Saudi Aramco.

General Electric Co, said it was building on $15 billion of Saudi deals it signed in 2017.

“We continue to build upon our agreements to support local infrastructure and growth across the power, oil and gas, healthcare, aviation and digital sectors,” a GE spokesman said.

Riyadh wants to show it is business as usual. It sent a senior delegation to the World Economic Forum in Davos and packed executives’ agendas with meetings.

Last month it announced $54.4 billion in deals and offered fresh incentives under a 10-year industrial program that aims to attract $427 billion in investment.

 

The crown prince, who is the driving force behind the reforms, agreed several deals last month during an Asian tour including $28 billion with China."

 

“Business tends to forget more quickly than social conscience,” the diplomat said.

https://www.reuters.com/article/us-saudi-khashoggi-investment/big-investors-look-past-khashoggi-to-opportunities-in-saudi-arabia-idUSKBN1QS1EF

 

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3 hours ago, Old-Ruffneck said:

The free market will determine what fuel choice will eventually win out. I don't give in the theory that climate change is man made, the climate is always changing and when one thinks of the trillions of dollars to switch from say gasoline/diesel to CNG LNG Propane or whatever the new gas on the market of the day is, someone is making big big bucks on the initial investments. Subsidized programs to save the earth from mankind while might have good intentions, big money comes in and fouls it all up. We grew up in the 70's listening to acid rain from all the polluting factories. Well they got em shut down in Peoria.....Caterpiller is a non-player here now, and the thousands of jobs are gone. About 30,000 all told. Company broke up and now make equipment in Brazil, Mexico, China.....and so on. Just one company. The Federal Government wasn't friendly here in Central Illinois and by 1995 after the big strike, handwriting was on the wall. Just one city in the USA that lost it's main money. Many others out there, and I think Trump realizes he's just the president. Can't force industry to come back to here, as once burnt twice shy. Go buy a freakin' Buick, China bought out the ailing piece of GM and look where their at now. Big money will do what is best for the industries they are in and relying on the Government tit is the only way all the solar and windmills are up. Sad the way abuse of power is in this country. End rant!

Rant on Reverend Roughneck!!!

 

R2020

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(edited)

On 3/16/2019 at 10:00 PM, Cowpoke said:

 

The crown prince, who is the driving force behind the reforms, agreed several deals last month  . . . . . 

 

Was the crown prince the driving force behind the plot to cut up journalist Khashoggie with bone saws and despose of his body parts so his fiance' could not even have a decent burial . . . . .  so much for reforms.

Talk is cheap 

Feasibility studies are talk. Let me know when they're pouring the foundation. 

"GE said building on $15 Billion of agreements".  Yea right.  Promised . . . . .  Promised. . .. . . Promised. First of all deal was dated 2017 before most understood the true extent of the US shale growth.  Second go back and read the articles.  The agreements are " Memorandums. Of Understanding".  Worthless.  Now if you told me GE's Medical Products division was building a plant to manufacture bone saws I might believe you.

Agreements are talk.  Saudi's signed an agreement with Trump to buy $200 Billion of US goods 2 years ago. Haven't seen any yet.

Big oil has been doing business in KSA forever.  ARAMCO started as a US JV of US oil companies before the House of Saud took it.  If you invest in assets that are in their Kingdom be aware Prince Mohammad Bin Salman can wake up one morning and decide to nationalize it. 

Let's see who starts investing real money on hard assets on the ground. Investors are going to go slow when evaluating opportunities inside KSA GOING FORWARD.

 

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On 3/16/2019 at 8:04 AM, Oil Dude said:

Majors like Exxon Mobil are getting big in the Permian to secure cheap feedstock for their refinery expansions. They can run at below break-even costs forever. They will make this up in the downstream refining profits. This is the magic of integrated oil companies. 

There are several multi-billion dollar chemical factories going into operation because of our shale operations. 

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On 3/16/2019 at 8:34 PM, Oil Dude said:

Majors like Exxon Mobil are getting big in the Permian to secure cheap feedstock for their refinery expansions. They can run at below break-even costs forever. They will make this up in the downstream refining profits. This is the magic of integrated oil companies. 

This is complete BS - and defies the laws (to whatever extent they are) of economics.

Seen this multiple times in the Metals industry - two types of players integrated and standalone converters. When input prices (say ore) and spreads (steel-ore) are both low, integrated players take a hit. And this is not an usual situation - imagine an iron ore oversupply situation - say (for arguments sake) US$10 iron ore goes to US$1 - means there is lot to go around. So there is plenty of ore - now who is going to process this - the converter with the more efficient operation. If an integrated player has a factory with US$2 operating spread versus independent/standalone converter with more efficient factory (US$1 spread) - the latter wins. The world enjoys steel at US$2 (vs US$12). What matters is which cost quartile your iron ore and steel conversion operations are - if both are first quartile, you will make money in any environment - if both are fourth quartile, start packing cause your time is coming (sooner or later).

If fact, high oil prices (thanks to OPEC, and quite antithesis to the start of this whole discussion) are what are breaking the above cycle and helping Exxon/Chevron with this plan (if it is one - I doubt) - loss-making Shale/profit-making downstream - but not gonna work long term. If shale (whether Exxon/Chevron or independents) has to truly/sustainably break OPEC, it needs to be (more) cost competitive.

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Sirs,

   With all due respect, America is presently able to live without Saudi oil.

We are exporting our own oil and gas while simultaneously propping up the corrupt, and morally bankrupt, House of Saud by importing their crude.

If the Saudis were not our largest buffer against the EVEN MORE corrupt and morally bankrupt Iranians, we would have no need for them.

Drill, Drill, Drill  Coming soon: East Coast of Florida and ANWAR.

SEA-YA!!

JB 

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OPEC Welcomes Forecasted Wave Of US Shale Production

Emily
Patsy
Hart Energy
Mon, 03/11/2019 - 22:20

A second wave of production growth from U.S. shale may be forecasted by the International Energy Agency (IEA), but OPEC Secretary-General Mohammad Barkindo is not fazed.

Instead, Barkindo told attendees of CERAWeek by IHS Markit on March 11 he not only welcomes the revival of the U.S. oil and gas industry but attributes its strong rebound partly to the cooperation between OPEC and non-OPEC producers led by Russia over the past couple of years.

Despite restored confidence in the U.S., Barkindo issued a warning for the need of additional oil supply growth, not only from the U.S. but other regions as well, in order to meet global oil demand, which he said will remain strong.

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10 hours ago, Drillship Guy said:

Sirs,

   With all due respect, America is presently able to live without Saudi oil.

We are exporting our own oil and gas while simultaneously propping up the corrupt, and morally bankrupt, House of Saud by importing their crude.

If the Saudis were not our largest buffer against the EVEN MORE corrupt and morally bankrupt Iranians, we would have no need for them.

Drill, Drill, Drill  Coming soon: East Coast of Florida and ANWAR.

SEA-YA!!

JB 

Dear Sir,

Technically not correct. US shale produces LTO which is great for gasoline (individual transport) - not so much for diesel (industrial transport). So one (US refineries complex) needs heavy grades also produced by the likes of Venezuela, Middle East and Canada. Venezuela is anyways under sanction. Yet Suadi exports to US are declining (see link below) - surprise! Canada is definitely helping bridge the shortfall partly but cant be alone in this. Even so US-Canada political equation was dicey till some time back.

Trump fights everybody - understand China but even low-income democracies like India. Will US have any friends/allies left by the time trump is gone?? 2020, or will we have to suffer him till 2024?? Unbearable...

https://www.rt.com/business/452733-saudi-arabia-oil-us-drop/

PS: Sorry for the rant at the end - couldnt control myself...

Edited by AcK
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9 hours ago, ceo_energemsier said:

OPEC Welcomes Forecasted Wave Of US Shale Production

Emily
Patsy
Hart Energy
Mon, 03/11/2019 - 22:2
 

Emily Patsy must be new to this industry to believe OPEC PR campaign.  Probably an intern.

OPEC welcomes shale like I welcome hemmoroids. 

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Saudi-Russia oil alliance shows signs of strain

Saudis previously favored agreeing cuts extension next month
- Planned April talks likely to be canceled at Russia's request

By Grant Smith, Salma El Wardany, Dina Khrennikova, and Annmarie Hordern / Bloomberg

BAKU/LONDON
03 19 2019

The partnership at the heart of the OPEC+ alliance showed further signs of strain after Russia pressured the Saudi-led group to delay a decision on the future of their production cuts.

The unusual recommendation to cancel next month's scheduled meeting means the group probably won't decide whether to prolong its supply curbs until late June, just days before they expire.

At talks in Baku, Azerbaijan, on Monday, Russian Energy Minister Alexander Novak convinced the committee overseeing the output cuts that the scheduled April meeting would be too soon to agree to an extension. Khalid Al-Falih, the Saudi energy minister who had initially been in favor of making a decision at that time, acquiesced, saying “April will be premature.

For now, the supply curbs that have buoyed Brent crude by 25 percent this year are secure, and the nations present in the Azeri capital said they will go beyond their pledged cuts in the coming months. Still, the cancellation is the latest in a number of disagreements between the two largest and most powerful members of the 24-nation coalition.

While there's general backing within the Organization of Petroleum Exporting Countries for an extension, with members including Iraq voicing support behind closed doors, Novak remains opposed, according to one delegate, who asked not to be named because the talks were private.

If that difference can't be resolved in the coming months, it sets up a high-stakes meeting in Vienna on June 25 to 26 that could give oil traders very little time to adjust to a major shift in supply.

"The need for close ties between Saudi and Russia has diminished," said Andrew Dodson, founder of commodity hedge fund Philipp Oil. "The delay of the OPEC meeting seems to point to a Russia reticence to commit to more cuts and to leave any decision as late as possible before committing further."

Since OPEC ended decades of rivalry by forging an alliance with Russia in late 2016, the cordial relationship between Novak and Al-Falih has been one of its defining features. The two men ushered in an unprecedented period of cooperation that re-shaped the global oil market and created the beginnings of a new geopolitical partnership that's extended to cooperation over Syria and mutual investments.

Yet there's an imbalance at the heart of the alliance. Saudi Arabia needs its oil to sell for $95 a barrel to cover government spending this year in an economy that relies almost entirely on petroleum. Russia is more resilient , with a more diversified industrial base and a less bloated state that means it based its 2019 budget on $40 crude.

Since the OPEC+ production cuts entered their third year -- having originally been slated to last for six months -- Moscow has shown less enthusiasm. It's drawn criticism from Saudi Arabia for making slow progress toward its output target. By March 12, Russian producers had implemented half their pledged cuts , giving them just a couple of weeks to go the rest of the way.

Russia will take a wait-and-see approach on whether to extend the OPEC+ deal because the market has achieved a fragile balance, Novak said in an interview with Bloomberg Television on Sunday.

“Currently, the price is acceptable to all the parties, both to consumers and producers,” Novak said. Uncertainties, including fluctuations in Venezuelan production amid a political and economic crisis, make it difficult to say what steps the group should take in the second half, he said

 

That contrasted with the message from Al-Falih, who said at a news conference in Baku that the job of rebalancing the oil market was nowhere near done because U.S. inventories remain significantly above normal levels. The kingdom will continue to cut deeper than required under the deal through to the end of April, he said.

OPEC Secretary-General Mohammad Barkindo sought on Tuesday to play down uncertainties arising from supply issues in Venezuela as well as Iran.

Venezuelan Oil Minister Manuel Quevedo assured him in Baku that Venezuela is addressing the impact of power blackouts on the country's oil industry, Barkindo said in an interview with Bloomberg Television. In spite of U.S. sanctions on Iran's energy industry, it's “practically impossible” to completely halt Iranian oil exports, he said.

“The Saudis do have a preference to keep the cuts going and just come out and announce it straight away,” Amrita Sen, chief oil analyst at Energy Aspects Ltd., said in a Bloomberg Television interview. The kingdom “is not going to do anything unilaterally and Russia does represent the biggest of the non-OPEC countries.”

Events in Baku certainly don't signal the end of the OPEC+ deal or the Saudi-Russia partnership, “but there are a lot of uncertainties right now” and everyone in the group is buying time, Sen said.

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(edited)

41 minutes ago, ceo_energemsier said:

Saudi-Russia oil alliance shows signs of strain

Saudis previously favored agreeing cuts extension next month
- Planned April talks likely to be canceled at Russia's request

By Grant Smith, Salma El Wardany, Dina Khrennikova, and Annmarie Hordern / Bloomberg

BAKU/LONDON
03 19 2019

The partnership at the heart of the OPEC+ alliance showed further signs of strain after Russia pressured the Saudi-led group to delay a decision on the future of their production cuts.

The unusual recommendation to cancel next month's scheduled meeting means the group probably won't decide whether to prolong its supply curbs until late June, just days before they expire.

At talks in Baku, Azerbaijan, on Monday, Russian Energy Minister Alexander Novak convinced the committee overseeing the output cuts that the scheduled April meeting would be too soon to agree to an extension. Khalid Al-Falih, the Saudi energy minister who had initially been in favor of making a decision at that time, acquiesced, saying “April will be premature.

For now, the supply curbs that have buoyed Brent crude by 25 percent this year are secure, and the nations present in the Azeri capital said they will go beyond their pledged cuts in the coming months. Still, the cancellation is the latest in a number of disagreements between the two largest and most powerful members of the 24-nation coalition.

While there's general backing within the Organization of Petroleum Exporting Countries for an extension, with members including Iraq voicing support behind closed doors, Novak remains opposed, according to one delegate, who asked not to be named because the talks were private.

If that difference can't be resolved in the coming months, it sets up a high-stakes meeting in Vienna on June 25 to 26 that could give oil traders very little time to adjust to a major shift in supply.

"The need for close ties between Saudi and Russia has diminished," said Andrew Dodson, founder of commodity hedge fund Philipp Oil. "The delay of the OPEC meeting seems to point to a Russia reticence to commit to more cuts and to leave any decision as late as possible before committing further."

Since OPEC ended decades of rivalry by forging an alliance with Russia in late 2016, the cordial relationship between Novak and Al-Falih has been one of its defining features. The two men ushered in an unprecedented period of cooperation that re-shaped the global oil market and created the beginnings of a new geopolitical partnership that's extended to cooperation over Syria and mutual investments.

Yet there's an imbalance at the heart of the alliance. Saudi Arabia needs its oil to sell for $95 a barrel to cover government spending this year in an economy that relies almost entirely on petroleum. Russia is more resilient , with a more diversified industrial base and a less bloated state that means it based its 2019 budget on $40 crude.

Since the OPEC+ production cuts entered their third year -- having originally been slated to last for six months -- Moscow has shown less enthusiasm. It's drawn criticism from Saudi Arabia for making slow progress toward its output target. By March 12, Russian producers had implemented half their pledged cuts , giving them just a couple of weeks to go the rest of the way.

Russia will take a wait-and-see approach on whether to extend the OPEC+ deal because the market has achieved a fragile balance, Novak said in an interview with Bloomberg Television on Sunday.

“Currently, the price is acceptable to all the parties, both to consumers and producers,” Novak said. Uncertainties, including fluctuations in Venezuelan production amid a political and economic crisis, make it difficult to say what steps the group should take in the second half, he said

 

That contrasted with the message from Al-Falih, who said at a news conference in Baku that the job of rebalancing the oil market was nowhere near done because U.S. inventories remain significantly above normal levels. The kingdom will continue to cut deeper than required under the deal through to the end of April, he said.

OPEC Secretary-General Mohammad Barkindo sought on Tuesday to play down uncertainties arising from supply issues in Venezuela as well as Iran.

Venezuelan Oil Minister Manuel Quevedo assured him in Baku that Venezuela is addressing the impact of power blackouts on the country's oil industry, Barkindo said in an interview with Bloomberg Television. In spite of U.S. sanctions on Iran's energy industry, it's “practically impossible” to completely halt Iranian oil exports, he said.

“The Saudis do have a preference to keep the cuts going and just come out and announce it straight away,” Amrita Sen, chief oil analyst at Energy Aspects Ltd., said in a Bloomberg Television interview. The kingdom “is not going to do anything unilaterally and Russia does represent the biggest of the non-OPEC countries.”

Events in Baku certainly don't signal the end of the OPEC+ deal or the Saudi-Russia partnership, “but there are a lot of uncertainties right now” and everyone in the group is buying time, Sen said.

Those of us who have observed OPEC over the decades recognize a familiar pattern. When they feel a severe price crunch, they get serious about cooperation. When the price crunch eases, so, also, does the spirit of cooperation. Russia is now, in reality, a member of the group, and their actions will be no different from the other participants. OPEC has often been referred to as a cartel, but that notion is false. A cartel works under the principle of each member acts for the good of the group. In OPEC, each member acts for the good of each member. Thus OPEC is not a cartel and, accordingly, will not produce cartel-like stable pricing. So we should borrow Amrita's assessment that OPEC is borrowing time and apply the same to our expectations. But be sure that your expectations are consistent with the reality that the price will fluctuate dramatically, and will likely be much lower before it gets much higher.

Edited by William Edwards
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(edited)

10 hours ago, William Edwards said:

Those of us who have observed OPEC over the decades recognize a familiar pattern. When they feel a severe price crunch, they get serious about cooperation. When the price crunch eases, so, also, does the spirit of cooperation. Russia is now, in reality, a member of the group, and their actions will be no different from the other participants. OPEC has often been referred to as a cartel, but that notion is false. A cartel works under the principle of each member acts for the good of the group. In OPEC, each member acts for the good of each member. Thus OPEC is not a cartel and, accordingly, will not produce cartel-like stable pricing. So we should borrow Amrita's assessment that OPEC is borrowing time and apply the same to our expectations. But be sure that your expectations are consistent with the reality that the price will fluctuate dramatically, and will likely be much lower before it gets much higher.

Agree what you say about OPEC not being the perfect cartel. But also your point is the definition of stable pricing (highlight mine). 4Q18 supply-demand balance was massively skewed (around 1.5mbd) - yet OPEC was able to limit downside till $45. Of course it cant control pricing on the upside, given OPEC+ is not even 50% of world production. The moment oil goes to $70, Russia has incentives to produce more - the rest of the world (>50% share of oil market) much before that level. And thank god (from the rest of the world) for that OPEC cannot get cartel pricing - one thing Trump noted rightly, that global economy is fragile!

Given past experience that doing nothing is not an option (on the downside) - OPEC has been fairly proactive. And prices [relatively] stable.

Edited by AcK

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The whole point of OPEC is to increase the price.  This means they maximise the returns on their product.  If it goes too high other more expensive product comes on the market and there starts to be an over supply and the price reduces.  This is effectively a balance.  This balance is lost when somewhere like the states starts to produce oil at a loss.  This is oil that should not been on the market.  The oil that has gone off the market in this situation has been offshore.  When oil shale declines in the near future it will need to be replaced by offshore which has the longest lead time.  So as the EIA and OPEC point out there will be a supply crunch.  The price of oil does not reflect this inevitable supply crunch because the brokers believe that renewable energy will step into that gap! 

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