• Tag Archives OPEC
  • Is Oil About to Collapse?

    US producers simply don’t play along with OPEC and Russia.
    WTI really does look like it is about to collapse. Let’s be clear, I am not necessarily talking about a return to the sub-$30 of the beginning of 2016 here, but a return to the more recent lows around $42 before too long is distinctly possible, and if that happens, who knows where we go from there? There are, as I have noted in the past, reasons to believe that the long-term path of oil is still upward, but more immediately there is one dominant factor that keeps adding downward pressure, large and still growing supply from North American shale producers.
    Some say, as in this FT piece, that there are signs that U. S. shale production has peaked, but then that was also supposed to be the case in 2015 and 2016. I am sure that if I could bother to go back further I would find that the same thing was said in previous years too. The fact is though, that as the EIA chart below shows, after dropping off as price declined at earlier this year, U. S. crude production is growing again and will be higher this year than last and is expected to be higher again in 2018.

    This post was published at Wolf Street by Martin Tiller ‘ Dec 9, 2017.


  • The One Indicator OPEC Must Watch

    Authored by Nick Cunningham via OilPrice.com,
    ‘We will not let go of our current approach until we reach a balanced market,’ Saudi oil minister Khalid al-Falih saidMonday at a news conference in Riyadh.
    OPEC ended months of speculation last week when it decided to extend its production cuts through the end of 2018, easing concerns that the limits would be lifted before the oil market was ready. But while it put some uncertainty to rest, the next question is what OPEC does when the oil market becomes ‘balanced’? What is the exit strategy?
    There isn’t one at the moment, and we can assume OPEC doesn’t know what comes next. But we do know that the group has one key metric in mind: inventories. The target is to bring global oil inventories back down to the five-year average.
    Oil inventories exploded between 2014 and 2017, hitting record levels that left the world awash in oil. That metric, arguably more than any other, exemplified the glut of supply that led to the crash of prices.
    It has been a stubborn thing, getting those inventories back down to average levels. A wave of shale bankruptcies didn’t do it, the vanishing rig count didn’t do it either. That led OPEC and a handful of non-OPEC countries led by Russia to limit their production. But even that deal didn’t seem to be doing the trick at the start of 2017, as inventories remained stuck at elevated levels. The euphoria that followed the announcement of the initial deal gave way to a renewed sense of gloom, which pushed WTI back down into the low-$40s by mid-2017.

    This post was published at Zero Hedge on Dec 6, 2017.


  • WTI Slumps Despite OPEC ‘Deal’ As Russia Questions Remain

    Both WTI and RBOB prices are tumbling this morning after OPEC member agree to limit oil output through the end of 2018. While this is bullishly longer-than-expected (6-9mo was expected), OPEC members now rely on Russia to agree to these terms, and it appears the market is questioning that. Furthermore, despite US shale output at record highs, Saudi officials are shrugging off any impact.
    As The Wall Street Journal reports, OPEC members agreed in principle Thursday to keep limiting their output through the end of 2018, according to people familiar with the matter, providing assurance for an oil industry still struggling through a fragile recovery.
    The accord signals that the world’s biggest oil-producing countries believe that a global oversupply of oil is still weighing down oil prices, even a year after they struck their first agreement to cut crude production. Oil in storage – a proxy for the global glut – remains well above historical averages, national oil ministers said.
    Any agreement OPEC strikes will be contingent on support from a group of producers outside the cartel led by Russia, which pumps more crude than any country in the world. The Russia-led delegations are meeting with OPEC to hash out a final agreement.

    This post was published at Zero Hedge on Nov 30, 2017.


  • WTI Tumbles Below $57 As OPEC-Hype Fades

    Goldman’s Damien Courvalin seems to have perfecvtly summed things up – the market was pricing in an OPEC production cut extension of 6-9 months (accounting for around a $2.50 premium in the price). Today’s jawboning from Russia seems to signal April discussions (so a 6-month extension) which is a disappointment – and so WTI prices are tumbling…
    Sell the leaked, jawboned news?
    As we previously wrote, in conclusion, Goldman believes that oil prices have overshot fundamentals and that price risks are skewed to the downside into Thursday’s meeting.

    This post was published at Zero Hedge on Nov 29, 2017.


  • WTI/RBOB Spike On OPEC Headlines After Bearish Inventory/Production Data

    Update: WTI/RBOB was fading after DOE data but then Kuwait dropped the following meaningless headline: OPEC JMMC RECOMMENDS EXTENSION, DIDN’T FINALIZE DURATION. And the algos took over…
    Last night’s API-reported surprise crude build sparked selling that not even Russia/Saudi jawboning could rescue, but DOE data showed the exact opposite with a big crude draw and even bigger gasoline draw. Added to a new record high in US crude production and RBOB is fading and WTI is not rallying.
    As Bloomberg reports, the U. S. has proven at least one thing this year with its expansion of crude and products exports: we are becoming more energy independent than ever before.

    This post was published at Zero Hedge on Nov 29, 2017.


  • OPEC, Russia Said To Announce Oil Pact Extension On Nov 30

    Authored by Tsvetana Paraskova via OilPrice.com,
    Saudi Arabia and Russia have agreed that OPEC and non-OPEC allies should announce an extension of the cuts at the highly-anticipated meeting in Vienna on November 30, Bloomberg reported on Friday, quoting people involved in the talks.
    Recent OPEC/non-OPEC oil pact chatter had it that Saudi Arabia was pushing for an announcement of the cuts extension next week in Vienna, while Russia was more hesitant about telling the market on November 30 how the participants in the deal would act. Russia appeared to be stalling and playing for an announcement to be issued closer to the current expiration deadline of the deal, March 2018.
    According to Bloomberg’s sources, now Russia and Saudi Arabia have agreed on the need to announce some sort of a deal next week, but Russia has insisted on additional phrasing in the extension deal that would link the size of the cuts to the state of the oil market.

    This post was published at Zero Hedge on Nov 26, 2017.


  • Is $40 WTI Now More Realistic Than $60?

    Authored by Tsvetana Paraskova via OilPrice.com,
    The current rise in oil prices is more of a fear trade right now, driven by fear of what is going on in the Middle East, rather than a result of growing OPEC chatter or inventory reports, Todd Horwitz, chief strategist at Bubbatrading.com, told Bloomberg on Wednesday.
    ‘The oil premiums are very narrow going out to the future, which means that this is more of a fear trade in the front month,’ Horwitz said on ‘Bloomberg Markets’. ‘To me, this is more of just another farce of what OPEC is trying to do, and trying to push these prices higher,’ the strategist noted.
    OPEC and its non-OPEC partners in the production cut deal are scheduled to meet in Vienna on November 30 to discuss the extension of their pact.

    This post was published at Zero Hedge on Nov 24, 2017.


  • WTI/RBOB Slide After Smaller Than Expected Crude Draw, New Record High Production

    With WTI at its highest since July 2015, vol at 8mo lows, and the front-end flipped into backwardation for the first time since Nov 2014, it appears a lot of hope is priced into continued equlilibration (and OPEC). Last night’s API (crude draw) provided some more confirmation but this morning’s DOE data disappointed with a smaller than expected crude draw, and production rose once again to a new record high.
    ‘Domestic production is going to be the big nugget that everybody will be racing to see, in terms of whether those levels continue to rise or not,’ John Kilduff, a partner at Again Capital, says.
    ‘They likely will, so that can be a counter-balance to the drawdown’

    This post was published at Zero Hedge on Nov 22, 2017.


  • IEA Pours Cold Water On OPEC Optimism, Warns Global Oil Demand Shrinking

    Pouring cold water on yesterday’s optimistic demand forecast projected by OPEC, which projected global crude demand growth to rise by 1.5mm b/d in 2018, this morning the International Energy Agency warned that the crude oil price rally could be short-lived because, contrary to OPEC’s expectations, global oil demand will be weaker than expected this year and next. In its closely watched monthly oil report, the IEA cut its crude demand growth outlook by 100,000 barrels a day for 2017 and 2018, as the WSJ reported. The agency now expects demand to grow by 1.5 million barrels a day this year and 1.3 million barrels a day next year.
    The IEA predicted that balances will likely show the crude market is oversupplied in Q4 2017 and the first half of 2018, with oil demand in 2017 at 97.7mmb/d, rising to 98.9 million in 2018. Meanwhile, non-OPEC Oil Supply is expected To rise by 700,000b/d In 2017 To 58.1mmb/d, and another 1.4 mmb/d in 2018 to 59.5mm b/d, led by shale output.
    The IEA also noted that global oil inventories fell 63mm barrels In Q3, only second quarterly draw since 2014, with the call on OPEC crude seen at 32.6mmb/d in Q4, declining to 32.0mmb/d in Q1 2018.

    This post was published at Zero Hedge on Nov 14, 2017.


  • Technical Scoop – Weekend Update Nov 12

    Weekly Update
    ‘Buy when it snows, sell when it goes’
    – old stock market proverb
    November traditionally marks the start of the best six months of the year for stock markets. At least, that is what the record shows. The Dow Jones Industrials (DJI) has since 1950 had an average gain of 0.6% from May to October vs. an average gain of 7.5% from November to April. The period November to May has had over three times as many up periods as it has had down periods vs. the period from May to October which had only 1.5 times advantage in ups to down.
    Of course, the strategy doesn’t work all of the time. Double-digit returns for the May/October period have occurred eight times since 1950. The most recent was the period just completed from May 1, 2017 to October 31, 2017 when the DJI jumped 11.6%. The best one was a 19.2% gain in 1958. In 2009, the May/October period gained 18.9%. But that was following one of the worst ever November/April periods that saw the DJI fall 12.4%. The November/April period has seen only three occurrences where it lost more than 10%. The most recent was the above-mentioned 2008 period where the DJI fell 12.4% while the other two occurred in 1969 and 1973. Interestingly enough, the first November/April period in 1969/1970 saw the Cambodian invasion while the 1973/1974 period was the OPEC oil embargo and the Watergate crisis.
    Since we are just coming off a May/October period that saw double-digit returns it is interesting to look at what happened in the ensuing November/April period. As we noted there have been eight occurrences of double-digit returns for the May/October period. We summarize in the table below.
    As can be seen from the table there were no occurrences of the DJI falling in the November/April period following double-digit gains in the May/October period. On five occurrences, the gains were also in double digits. On average, the November/April period saw gains of 14.6% following the May/October period that saw average gains of 14.5%. What all of that suggests is the coming six months could see double-digit gains once again for the DJI and the stock market as a whole.

    This post was published at GoldSeek on 12 November 2017.


  • OPEC’s War Against Shale Is Far From Over

    Authored by Gregory Brew via OilPrice.com,
    Despite the recent market rally and current bullish streak in oil prices, the years-long competition for market share between OPEC and U. S. shale producers shows no sign of abating, and will likely continue for the next several years at least.
    That was OPEC’s conclusion in the group’s World Oil Outlook released this week. OPEC believes U. S. shale production will grow faster than previously expected, reaching 7.5 million bpd by 2021, an increase of 56 percent from the group’s estimate last year.

    This post was published at Zero Hedge on Nov 10, 2017.


  • “A Classic Head Fake”: Why One Trader Is Using The Saudi Turmoil To Sell Crude

    Overnight, following the recent Saudi turmoil, prices in the crude complex jumped to the highest levels in over two years, amid speculation that Saudi Arabia is more likely to back output curbs following this weekend’s crackdown by Crown Prince Mohammed bin Salman. “It creates some hope that the current policy by the Saudis will be continued after March,’ said ABN Amro senior energy economist Hans van Cleef. “We’re still in the longer-term upswing, the uptrend is still intact”, and indeed Dec. WTI rose +31c to $55.95/bbl after earlier touching $56.28, the highest since July 2015, while Jan. Brent was also up +35c to $62.42, after rising to $62.90, highest since June 2015
    And yet not everyone believes that the recent chaos in Saudi Arabia is a bullish catalyst for oil: taking his usual contrarian stance, Bloomberg commentator and ex-Lehman trader Mark Cudmore writes that what happened is “largely irrelevant” for oil prices and the resultant oil price spike has “the look of a classic head fake and may mark the final push higher before a correction.”
    Attacking the key point underscored by oil bulls, Cudmore says that “an extension of OPEC supply cuts is fully expected by the market, and the weekend changed nothing on that front” meanwhile “oil prices are still dominated by the overhang of potential supply that can come online so easily from U. S. shale fields. The rig count may have been dropping recently, but it remains 62% above the level of a year ago. And, crucially, U. S. production is near the highest in more than two years, according to the Energy Information Administration.”

    This post was published at Zero Hedge on Nov 6, 2017.


  • Commodities vs. Technology in Trading

    Guest post from Paul Somerfield:
    In commodity trading, it’s important to take two kinds of technology into account. The first is technology that can affect the underlying price of the commodity and the second is disruptive digital technology that can change the way commodities are traded.
    Technology can be a game changer for commodity prices Take oil. A decade ago we were all being told that we’d reached peak oil, and that declining stocks would mean an astronomically high oil price in the future.
    Yet, at the time of writing, Brent crude is trading at $61.33 a barrel, way below its peak price. So what happened? Technology happened, that’s what. Advances in exploration and drilling technology meant that oil previously locked up in shale could be mined. An enormous amount of new inventory was able to exploited. So much for peak oil and a crude price nudging $200. Right now, the OPEC producers are trying to get the price so low that the US shale industry calls it a day because it’s not worth the expense of fracking and horizontal drilling to extract the oil.

    This post was published at Deviant Investor on November 4, 2017.


  • Dollar Rebounds, Futures Rise Ahead Of Surge In Payrolls

    One day after the dollar slumped sharply on initial disappointment with the GOP tax plan, the greenback has rebounded ahead of a nonfarm payrolls report that is expected to show the US economy gained over 300,000 jobs in the post-hurricane rebound, and as investors reassessed the latest news on U. S. tax-cut plans. Stocks in Europe and Asia advanced, US equity futures were as usual in the green, while oil headed for an eight-month high on signs OPEC will agree to extend supply cuts.
    In an otherwise quiet session, the biggest overnight news was President Nicolas Maduro announcing Venezuela will seek to restructure its global debt after the state oil company makes one more payment. While the risk of contagion is low, the emerging-market index of currencies declined for the first time this week. In early trading, the PDVSA dollar bonds maturing 2027 plunged at the start of trading, slumping 10 cents on the dollar to 20 cents in early London trading. As a result, EMFX weakened across the board with some analysts noting the Venezuela debt restructuring as a driver, though most weakness occurred after Turkey’s inflation report.
    In global macro, markets are in their usual pre-NFP lull, with most G-10 currencies staying within yesterday’s ranges. The weakest quarter for Australian retail sales in seven years sent the Aussie lower and bonds climbing. The Aussie dollar dropped as much as 0.5 percent back below 77 U. S. cents and bond yields extended declines as traders pushed back bets on the timing for an interest-rate increase. The Bloomberg Dollar Index was steady in Asia, amid modest moves in most G-10 currencies, before edging higher with the start of the London session as fast-money names added dollar longs before U. S. jobs report. Treasury futures were stuck in tight ranges through Asian hours, on very muted volumes, just 37% of recent averages, with cash markets closed for a Japan holiday; as Bloomberg reports, TSYs came under pressure in London, widening vs Germany.

    This post was published at Zero Hedge on Nov 3, 2017.


  • “Tomorrow Will Be Ugly”: Venezuela To Restructure All Debt As Creditors Panic Over Imminent Default

    One week ago, we and many others wondered, if the time has finally come for Venezuela, which was facing a “no grace period” $842 million principal payment for bonds issued by state-run energy company PDVSA, to default on its billions of unrepayable obligations. As we reported then, the liquidity crisis for Venezuela was especially acute because even if it did make the first PDVSA payment, it was facing a second, even larger one today, when PDVSA had to make another $1.121BN payment.
    Well, despite a several day transfer delay, Venezuela did make the first payment, however it was not clear if Caracas would also make today’s payment, although as Reuters reported earlier, “markets remained optimistic that President Nicolas Maduro’s government will make the payment, though investors expect delays. PDVSA last week struggled for days to deliver funds for a separate bond payment amid confusion over which banks were charged with transferring the money.”
    PDVSA bonds were down slightly in early trading on Thursday, while Venezuelan bonds were mixed, according to Thomson Reuters data.
    However, as we previewed again last week, and as Reuters confirmed today, “most economists say a default is increasingly likely in the medium term as Venezuela’s collapsing socialist economic model has left the once-prosperous population destitute and led to deterioration of the OPEC nation’s vital oil industry.”
    It now appears that that is indeed the case, and the long overdue Venezuela default, which has been speculated ever since 2014, is finally nigh, because during a nationwide TV address, Venezuela’s socialist president Nicolas Maduro said the country will seek to restructure its global debt after the state-owned oil company makes the PDVSA payment due at midnight. Maduro blamed a financial blockade that is preventing the nation from rolling over its debt, according to Bloomberg.

    This post was published at Zero Hedge on Nov 3, 2017.


  • Is Saudi Arabia’s Oil Strategy Working?

    The IMF estimated that Saudi Arabia will need oil prices to trade at about $70 per barrel in 2018 for its budget to breakeven, a dramatic improvement from the $96.60 per barrel it needed just last year. Saudi’s improvement is the most dramatic out of all the Middle Eastern oil producers, and it also suggests the combination of austerity, cuts to wasteful subsidies, new taxes and economic reforms are starting to bear fruit.
    The improvement is all the more important because Saudi Arabia and its fellow OPEC members are restraining output as a way to boost oil prices. Selling fewer barrels means less revenue, although that is offset by the coordinated production cuts through the OPEC deal, which has helped raise prices.
    Nevertheless, there is something glaring about Saudi Arabia’s breakeven price: It is still far higher than the current oil price, which means Riyadh is still feeling the economic and fiscal pressure from low crude prices. ‘The reality of lower oil prices has made it more urgent for oil exporters to move away from a focus on redistributing oil receipts through public sector spending and energy subsidies,’ the IMF said in its report. Saudi Arabia and other Middle East oil producers ‘have outlined ambitious diversification strategies, but medium-term growth prospects remain below historical averages amid ongoing fiscal consolidation,’ the IMF added. In other words, austerity might help narrow the budget deficit to some degree, but it can also be self-defeating if it slows growth.

    This post was published at Zero Hedge on Nov 2, 2017.


  • WTI/RBOB Sink As Inventory Draws Disappoint

    WTI/RBOB held on to gains overnight following major draws reported by API and more OPEC jawboning (this time from UAE), but the DOE data disappointed compared to API’s huge draws with Crude and Gasoline drawing down but considerably less than API reported (and Distillates barely drawing down at all).
    Bloomberg Intelligence energy analyst Fernando Valle:
    Strong demand continues to spur inventory drains. Crude-oil stocks remain elevated, but refined-product inventories are looking increasingly tight.
    Wide WTI discounts to Brent are likely to push inventories down in coming weeks, driven by exports and increased refinery utilization.

    This post was published at Zero Hedge on Nov 1, 2017.


  • Hedgies Have Never Been ‘Longer’ The Energy Complex As Analysts Raise Oil Price Forecasts (Again)

    With WTI prices holding at 6-month highs around $54 (and Brent at $60), Reuters’ John Kemp notes that hedge funds have never, ever been more bullishly positioned in the entire energy complex.
    Hedge Funds have accumulated a record 1.189 billion bbl of long positions in the five major petroleum contracts (Brent, WTI (x2), RBOB, HO)…
    This surge in buying is coming as analysts once again follow the trend and begin raising oil price forecasts.
    As OilPrice.com’s Tsvetana Paraskova notes, just a few of months ago, analysts and investment banks slashed their oil price forecasts as OPEC’s production cuts drew down the global oil oversupply slower than initially expected, and rising U. S. shale production capped any short-lived oil price gains.
    But at the end of the summer, as OPEC and the International Energy Agency (IEA) started reporting stronger-than expected global oil demand growth and an accelerated pace of inventory declines, the market sentiment began to change. As 2018 and the November 30 OPEC meeting draw nigh, the cartel is said to be favoring a 9-month extension of the deal through the end of next year.

    This post was published at Zero Hedge on Oct 30, 2017.


  • OPEC To Take Drastic Action Despite Shale Slowdown

    WTI recently dipped below $50 per barrel for the first time in a month, erasing the strong September rally. It’s no coincidence that after two weeks of price declines, OPEC has tried to talk up the oil market again, hinting that more drastic action could be forthcoming.
    Echoing the world’s top central bankers, OPEC’s Secretary General said that the oil cartel might need to take ‘extraordinary’ measures to balance the oil market next year. ‘There is a growing consensus that, number one, the re-balancing process is underway,’ OPEC’s Mohammad Barkindo told reporters on Sunday in New Delhi. ‘Number two, to sustain this into next year, some extraordinary measures may have to be taken in order to restore this stability on a sustainable basis going forward.’
    As always, OPEC is vague on the specifics, but the working assumption is that the group will agree to an extension of the cuts until at least mid-2018, or perhaps even as late as through the end of the year. There’s been some discussion about deeper production cuts, but there aren’t a ton of analysts who see OPEC going that far, despite Barkindo’s cryptic language.

    This post was published at Zero Hedge on Oct 11, 2017.


  • “All-In” Hedge-Funds Turn Cautious Ahead Of OPEC As Oil Prices Stumble

    With WTI back below the Maginot Line of $50, speculative investors are growing increasingly anxious about their record extreme bullish positioning across the energy complex.
    As Reuters’ John Kemp reports, hedge fund bullishness towards crude oil and refined products including gasoline and diesel appears to have peaked for now, according to an analysis of regulatory and exchange records.
    Speculative traders’ positioning across crude and especially refined fuels had looked increasingly lopsided in recent weeks as fund managers turned from very bearish in June to super-bullish by the end of September.

    This post was published at Zero Hedge on Oct 9, 2017.