Posts Tagged ‘production cut’

Oil rallies after Opec agrees to cut output by 1.2m barrels a day

December 7, 2018

Brent crude jumps 5 per cent on news of pact

By David Sheppard in Vienna

Oil prices jumped 5 per cent as Opec broadly agreed a deal to cut oil production by 1.2m barrels a day.

One Opec delegate said the pact between cartel members had been reached for a combined cut with allies outside the group led by Russia. Iran has been granted an exemption from the cuts as it is under sanctions from the US, the delegate said. Brent was recently up 5 per cent to $63 a barrel.

More to come….

https://www.ft.com/content/490597a8-fa28-11e8-8b7c-6fa24bd5409c

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Oil dives after OPEC delays output decision

Saudi Arabia’s Energy Minister Khalid Al-Falih, left, at the OPEC conference in Vienna, Austria. (AFP)
Updated 07 December 2018
  • OPEC met in Vienna to decide production policy in coordination with other countries including Russia, Oman and Kazakhstan
  • An OPEC delegate said the organization had agreed on a tentative deal to cut oil output but had not come up with a final figure

NEW YORK: Oil prices fell in choppy trading on Thursday after OPEC and allied exporting countries ended a meeting without announcing a decision to cut crude output, and prepared to debate the matter on Friday.

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The Organization of the Petroleum Exporting Countries (OPEC) met in Vienna to decide production policy in coordination with other countries including Russia, Oman and Kazakhstan.
An OPEC delegate said the organization had agreed on a tentative deal to cut oil output but had not come up with a final figure.

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Earlier, Saudi Energy Minister Khalid Al-Falih said OPEC needed Russia to cooperate, and said a decision was likely by Friday evening.

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“If everybody is not willing to join and contribute equally, we will wait until they are,” Al-Falih said.

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Market watchers had expected a joint cut of 1 million to 1.4 million barrels per day (bpd).

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Brent crude futures were down $2.57, or 4.2 percent, on the day to $58.99 a barrel by 4:41 p.m. GMT, off the session low of $58.36. US crude futures fell $2.37, or 4.5 percent, to $50.52 a barrel, bouncing off the session low of $50.08 a barrel.

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The crude benchmarks have slumped about 30 percent this quarter.

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Prices found support briefly after data showed US crude stockpiles declined last week for the first time in 11 weeks. The US became a net exporter of crude and refined products for the first time since at least 1991, data from the US Energy Information Administration showed.

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“Fears of a further escalation in the US-China trade war, and potential for OPEC+ not cutting oil production deep enough will continue to weigh on oil prices in today’s trading session,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

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“All eyes are now fixated on (an) OPEC+ joint declaration, and a combined output cut of at least 1 million barrels per day will be required to see a meaningful recovery in oil prices.”

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Led by Saudi Arabia, OPEC’s crude oil production has risen by 4.1 percent since mid-2018, to 33.31 million bpd.

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European equities hit their lowest in two years and commodity-sensitive currencies such as the Russian rouble fell sharply, in part because of the slide in the oil price, but also with the arrest of a top executive of Chinese tech giant Huawei in Canada for extradition to the US. The arrest came just as Washington and Beijing prepare for crucial trade negotiations.

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Barclays said in its Global Outlook published on Thursday that “investors need to lower their expectations” and “2019 should be a period of lower returns and higher volatility.”

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Barclays said it expected “the global economy to slow over the next several quarters” although it added that “not one major economy is near recession.”

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US crude inventories have climbed steadily as domestic production surged to new peaks. Exports of US crude also jumped to a record 3.2 million barrels per day last week, adding to global supplies. Stockpiles at Cushing, Oklahoma, the delivery point for US crude futures, rose to the highest in nearly a year.

Reuters

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OPEC yet to agree on final deal as Iran seeks exemptions

December 7, 2018

Saudi Arabia’s energy minister said he wasn’t confident OPEC would reach a deal on Friday to cut oil output as sources said the producer group’s leader had yet to agree on exemptions for sanctions-hit Iran.

Image result for iran, oil, flag, pictures

The Organization of the Petroleum Exporting Countries resumed discussions in Vienna at around 0900 GMT, before a meeting later in the day with non-OPEC oil producers led by Russia.

On Thursday, OPEC tentatively agreed an oil output cut but could not decide concrete parameters for reductions as it was waiting for a commitment from non-OPEC heavyweight Russia, sources from the group said.

On Friday, two OPEC sources said Saudi Arabia’s arch-rival Iran, which came under fresh U.S. sanctions in November, was also holding up a final deal.

“Iran will insist on an exception until sanctions are removed,” one of the OPEC sources said.

Saudi Arabia faces pressure from U.S. President Donald Trump to help the global economy by refraining from cutting supplies.

And with Trump seeking to squeeze Tehran with sanctions, an OPEC output cut would provide additional support to Iran by increasing the price of oil.

Saudi Energy Minister Khalid al-Falih, asked on Friday whether he was confident the day’s meetings would produce a deal, said: “No.”

OPEC’s battle to coax Russia to cut oil output as the US ramps up: tmsnrt.rs/2RzCE3J

Difference in OPEC oil output between Nov 2018 and Oct 2016: tmsnrt.rs/2RqgBMS

Possibly further complicating any OPEC decision is the crisis around the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October. Trump has backed Saudi Crown Prince Mohammed bin Salman despite calls from many U.S. politicians to impose stiff sanctions on Riyadh.

U.S. special representative for Iran Brian Hook met Falih in Vienna this week, in an unprecedented development ahead of an OPEC meeting. Saudi Arabia first denied the Hook-Falih discussion took place but later confirmed it.

“U.S. political pressure is clearly a dominant factor at this OPEC meeting, limiting the scope of Saudi actions to rebalance the market,” said Gary Ross, chief executive of Black Gold Investors and a veteran OPEC watcher.

(Graphic: Who might agree to an OPEC crude supply deal? – tmsnrt.rs/2Ru61od)

RUSSIAN DILEMMA

The price of crude LCOc1 has fallen almost a third since October to below $60 a barrel as Saudi Arabia, Russia and the United Arab Emirates raised output to offset lower exports from Iran, OPEC’s third-largest producer.

The price decline prompted OPEC and its allies to discuss output cuts, and Falih said on Thursday possible reductions by those involved ranged from 0.5-1.5 million bpd.

Oil producers’ budget-balancing act: tmsnrt.rs/2QfNS0J

“The Iran exemption is the biggest hurdle … If there is no agreement, the timeline for a deal will be pushed to the first quarter of 2019,” Energy Aspects said in a note.

A reduction of 1 million bpd would be acceptable and so far was the main scenario, Falih said, but he added that Russia needed to commit significant volumes.

Russian Energy Minister Alexander Novak met with President Vladimir Putin in St Petersburg on Thursday and returned to the Austrian capital on Friday morning.

OPEC delegates have said the group and its allies could cut by 1 million bpd if Russia contributed 150,000 bpd of that reduction. If Russia contributed around 250,000 bpd, the overall cut could exceed 1.3 million bpd.

A Russian Energy Ministry source said on Friday Moscow was ready to contribute a cut of around 200,000 bpd and that Iran, not Russia, now seemed the main hurdle for a deal.

OPEC crude production in November – Reuters Survey: tmsnrt.rs/2RqgctQ

Russia, Saudi Arabia and the United States have been vying for the position of top crude producer in recent years. The United States is not part of any output-limiting initiative due to its anti-trust legislation and fragmented oil industry.

On Thursday, U.S. government figures showed the country had become a net exporter of crude oil and refined products for the first time on record, underscoring how the surge in production has altered the supply equation in world markets.

Additional reporting by Shadia Nasralla and Alex Lawler; Writing by Dmitry Zhdannikov; Editing by Dale Hudson; Graphics by Amanda Cooper

Reuters

Oil price drops as Opec and Russia meet to agree production cut

December 7, 2018

Oil prices slipped below $60 a barrel on Friday as Opec and Russia work to overcome the last remaining obstacles to a production cut deal designed to bolster the market, in defiance of US president Donald Trump who has called on Saudi Arabia to keep production high.

By David Sheppard and Anjli Raval in Vienna

A meeting of Opec oil ministers ended on Thursday without agreement, with the cartel gathering again in Vienna on Friday morning ahead of talks with Russia and other global producers, who are seen as key to the success of any deal.

Even as Khalid Al Falih, Saudi Arabia’s energy minister reiterated on Friday he was “not confident” of an agreement, others have said they still believe oil producers will be able to secure a deal to remove around 1m barrels a day from the market, following the 30 per cent drop in prices in the last two months.

Saudi Energy Minister Khalid Al-Falih  (Reuters)

Brent crude fell nearly 3 per cent on Thursday and started Friday below $60 a barrel as the level of cuts being discussed is slightly below what most oil market analysts believe is necessary to balance the oil market. By early morning in London it was down 25 cents at $59.81 a barrel.

Saudi Arabia, Opec’s de facto leader and largest producer, has asked for all countries to contribute to curbs, even as Iran, Venezuela and Libya have sought exemptions because of hardship in their countries and sanctions against their economies. Russia, the biggest exporter outside of the cartel, has been less enthusiastic about a big cut to production but has still said it will co-operate with producers on oil policy, continuing an alliance in place with Saudi Arabia since 2016.

Alexander Novak, Russia’s energy minister, said he plans to meet his counterparts from Iran and Saudi Arabia on Friday ahead of talks between Opec and non-Opec countries later in the day. Saudi Arabia has ramped up production to record levels in recent months in response to demands from US president Donald Trump who has called on Opec to keep output high and prices low.

Yet the US’s decision to issue waivers to consumers of Iranian oil as it reimposed sanctions against Tehran has meant output from global producers, including the US, has overwhelmed demand and risks creating a new glut. Opec delegates said they believed it was possible to overcome objections to the countries seeking exemptions given their output has largely fallen below the level it was in 2016.

Oman, which is not an Opec member but carries sway as an interlocutor between various factions, cautioned countries against being “macho” on Thursday evening, warning of the risk of a further drop in prices without a deal.

Oil Soars on Optimism Over OPEC Deal

November 30, 2016

Prices lifted after Iranian oil minister sounds positive note about prospects of an output cut

Iran’s oil minister Bijan Zanganeh

Updated Nov. 30, 2016 5:14 a.m. ET

Crude futures surged Wednesday on growing optimism that OPEC would be able to deliver a production-cut deal later in the day.

Prices jumped after Iran’s oil minister, Bijan Zanganeh, said in Vienna that he believed Organization of the Petroleum Exporting Countries would reach a deal, though he said an immediate freeze of his country’s output wasn’t on the agenda.

An OPEC deal would be aimed at cutting into a global oversupply of oil that has severely depressed prices since 2014. A proposal would likely have the group cut production by more than a million barrels a day, which represents about 1% of the global oil supply.

The February contract in Brent crude, the global oil benchmark, was up 5.7% to $50.02 a barrel on London’s ICE Futures exchange, according to Factset. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 5.3% at $47.61 a barrel, Factset said.

“The communication this morning is extremely positive from Iran,” said Bjarne Schieldrop, a commodities analyst from Sweden’s SEB bank, adding that the market was volatile ahead of the meeting’s outcome.

Iran’s willingness to participate in some way—a long-held Saudi demand—signals a greater likelihood that all OPEC members will agree to a deal.

A successful OPEC accord is also crucial in getting non-OPEC producers—like Russia—to slash production in a collective effort to lift global oil prices. Russia has said it wouldn’t make any commitment until an agreement was forged by OPEC members.

In the past year, OPEC leaders have tried several times to agree on production curbs, but these attempts have failed.

Tension between Iran and Saudi Arabia has also been a sticking point. Even though Iran has relaxed its position by agreeing to hold production levels steady—a step back from a previous demand to keep pumping—it remains to be seen whether Saudi Arabia will be satisfied.

“The fact that geopolitical rivals, Saudi Arabia and Iran, appear to have problems resolving their differences on the allocation of any cartel-wide production cuts seems to be the major stumbling block to any agreement,” said Barnabas Gan, an economist at OCBC bank in Singapore.

Iraq, OPEC’s second-largest producer after Saudi Arabia, also wants to be excluded from a deal, saying it would only go as far as capping production at present levels. Iraq says it needs the oil revenue to fund its war against Islamic State.

OPEC's headquarters in Vienna on Tuesday.
OPEC’s headquarters in Vienna on Tuesday.PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
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If OPEC fails to reach an agreement, a “blame game” could ensue, with Saudi Arabia pointing fingers at Iran and Iraq for being unwilling to compromise, said Tim Evans, a Citi Futures analyst.

“This apparent stalemate has seen investors take an increasingly bearish view on oil prices,” said ANZ Research. ANZ added that despite the squabbling, OPEC is under growing pressure to deliver a deal to protect its relevance.

Nymex reformulated gasoline blendstock—the benchmark gasoline contract—rose 3.6% to $1.43 a gallon. ICE gasoil changed hands at $445.75 a metric ton, up $20.25 from the previous settlement.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

http://www.wsj.com/articles/opec-deal-to-curb-production-in-doubt-oil-prices-rebound-1480481281

OPEC Oil Deal is Likely, Officials Say

November 22, 2016

Comments come ahead of a summit to approve a final output deal next week

Iraqi Oil Minister Jabar Ali al-Luaibi said Sunday he would come up with new proposals to resolve the differences over oil output.

Iraqi Oil Minister Jabar Ali al-Luaibi said Sunday he would come up with new proposals to resolve the differences over oil output. PHOTO:REUTERS

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Updated Nov. 22, 2016 7:47 a.m. ET

 

VIENNA—OPEC officials said Tuesday they were close to agreement on the outlines of a production-cut deal, but warned there were sticking points to be resolved next week when the group formally meets in Vienna.

Notably, the Organization of the Petroleum Exporting Countries is considering a deal that would last for six months rather than the previously discussed year, officials said.

“It is likely everybody will be on board by the end of the day,” said Ibrahim Waya, a member of Nigeria’s delegation to OPEC after a meeting at the cartel’s headquarters.

“Everybody knows that the stakes are high,” he said.

The 14-nation group that controls over one-third of global oil production is trying to nail down the details of a production-cut pact agreed to in September. This week’s meeting is making more progress than a gathering in October that ended in discord when OPEC members Iraq and Iran indicated they wouldn’t participate.

Tuesday’s more positive tone sent oil prices higher. Prices for Brent crude, the international benchmark, rose 1.66% to $49.70 a barrel in London, while U.S. light crude prices rose 1.45% to $48.94.

Nigeria’s Mr. Waya said the curb being discussed would be monitored by a committee and would start on January 1.

Areas of disagreement will likely be discussed at length at OPEC’s formal gathering on Nov. 30, with Iraq and Iran—the organization’s second- and third-largest producers—presenting hurdles to a deal, OPEC representatives said.

Both countries have disputed the production numbers that OPEC wants to use as a baseline for cuts. They want the ability to keep raising output—Iraq because it needs oil revenue to finance its fight against Islamic State militants and Iran because it wants to regain the market share it lost while under international sanctions.

Mr. Waya said Iran and Iraq appeared likely to reach a consensus. Country officials couldn’t be reached for immediate comment, but Iraq’s oil minister, Jabar al-Luaibi, said Sunday he would come up with proposals to resolve the differences. However, a Reuters report Tuesday cited Iraq’s foreign minister, Ibrahim al-Jaffari, as saying Baghdad still wanted to increase production.

OPEC has said it wants producers outside the group to join the curb. Mr. Waya said a weekend statement by Vladimir Putin, the president of non-OPEC country, Russia, showed Moscow was committed to do so.

Write to Benoit Faucon at benoit.faucon@wsj.com

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http://www.wsj.com/articles/opec-likely-to-reach-consensus-on-output-tuesday-delegate-says-1479809752