2017-07-24 13:55:00

OIL OUTPUT CONSENSUS

OIL OUTPUT CONSENSUS

OPEC OIL PRODUCTION 2015 - 2017

 

PLATTSThe monitoring committee overseeing the OPEC/non-OPEC production cut agreement met this weekend in Russia with no shortage of advice from analysts, consultants and Twitter pundits on how to rally the oil market's flagging confidence in the deal.

With prices still languishing below the $55-$60/b that some ministers have said they are targeting, some market watchers say OPEC and its non-OPEC partners have no choice but to deepen cuts to make up for output gains from exempt Nigeria and Libya, as well as sliding compliance from other members.

At the opposite end of the spectrum, some experts say that the producer coalition would do well enough to leave the deal alone and let the market rebalance on its own, rather than fatten the coffers of US shale producers who are only too happy to steal any market share ceded by the OPEC/non-OPEC cuts.

Based on their limited public comments in recent weeks, key members Saudi Arabia and Russia are leaning towards keeping the status quo, with their ministers having said that it is still too early to call for deeper cuts, particularly with peak summer demand season just underway.

"It's too soon to shift strategy when the question all along has been how much progress can be made in Q3 to Q4," said Matthew Reed, an analyst with Middle East consultancy Foreign Reports who closely follows energy policy.

The committee, composed of ministers from Kuwait, Russia, Venezuela, Algeria and Oman, is tasked with reviewing compliance with the deal and monitoring market conditions.

It is empowered to recommend any changes to the deal as it sees fit, and with dramatic recoveries in output from Libya and Nigeria in recent months, along with Ecuador's declaration Tuesday that it was quitting the deal, speculation has been swirling about what the committee might do.

The committee's technical staff meets in Saint Petersburg on Saturday, followed by a ministerial meeting on Monday.

While the behind-closed-doors discussions are sure to be wide-ranging and perhaps even contentious, many analysts say that any changes to the deal, including output caps on Libya and Nigeria, as has been mooted, would likely not be declared until OPEC's next full meeting November 30 or at the very least not until after summer.

"My hunch is that OPEC [and] Saudi Arabia will wait until the July supply/demand balance figures are in before making any decisions," said Tamas Varga, an analyst for oil brokerage PVM Associates. "After all, the second half of the year should see a big jump in demand for OPEC crude."

Still, several Russia-based analysts indicated that Russia, while publicly supportive of the deal as it stands, expects Saudi Arabia, as OPEC's de facto leader, to respond to rising Libyan and Nigerian output.

"[Russian] oil companies are not very happy, but [energy minister Alexander] Novak is still peddling the issue that if it wasn't for the deal oil would be in the mid- $30s/b," said one Moscow-based analyst who spoke on condition of anonymity.

The agreement, which began January 1 and was recently extended through March 2018 with inventories still stubbornly high, calls on OPEC and 10 non-OPEC producers led by Russia to cut a combined 1.8 million b/d in supply.

SAUDIS WITH ROOM TO CUT

Consultancy Petroleum Policy Intelligence on Wednesday said Saudi Arabia was considering a 1 million b/d export cut, among other options, in response to Russia's demand that the kingdom back supply caps on Libya and Nigeria.

While many other analysts said that such a drastic move by the Saudis was unlikely, Sara Vakhshouri, who heads consultancy SVB Energy International, noted that the kingdom's production was still significantly above its production level in November 2014, when OPEC launched its pump-at-will market share strategy.

Saudi production was 9.97 million b/d in June, according to the latest S&P Global Platts OPEC survey, compared to 9.60 million b/d in November 2014.

That means Saudi Arabia theoretically has room to cut, should it decide to do so, said Vakhshouri, who is also a fellow at the Atlantic Council.

"Saudi petroleum officials on different occasions have indicated that they are not only interested in maintaining their market share but also to control and manage the market," she said.

If Saudi Arabia were to agree to a cut, the market's heavy/light imbalance could be exacerbated. The current oversupply in the oil market primarily rests in light, sweet barrels due to production growth in US shale, along with Libya and Nigeria.

Saudi Arabia and most of OPEC's key Middle East members, who have shouldered the bulk of the cuts, largely produce sourer and heavier grades, and the market in those crudes has tightened substantially from the deal.

As a result, the price spread between heavy and light crudes has tightened significantly, negatively impacting refinery margins in demand-thirsty Asia where refineries are optimized to run heavier grades.

If lighter grades become more price-competitive due to further Saudi cuts, "the battle for Asian market share will intensify," Varga said.

Alternatively, Saudi Arabia, which has continued to pump its lighter grades, even as they have cut output in its heavier crudes, could be persuaded to change its balance of production, Vakhshouri said.

SIGNALS ON LIBYA, NIGERIA

Output caps on Libya and Nigeria would help with the light, sweet glut and widen price differentials.

Neither country seems inclined to agree to production restraints, however, with the head of Libya's National Oil Company saying his country's humanitarian situation should be taken into account and Nigeria's oil ministry deeming its oil recovery in recent months as "fragile."

But analysts say the market will be looking for signs that the monitoring committee is at least considering its options on how to absorb any further gains from Libya and Nigeria, without adding to the oversupply.

Representatives of both countries have been invited to the meetings to explain their production outlook.

"It is increasingly looking like their time is up from being exempted from the deal," said Joe McMonigle, an analyst with Hedgeye. "There is a way to get them on board by providing some escape hatch if there's further disruption."

As for Russia, experts say they do not expect the country to agree to any further cuts beyond the 300,000 b/d it is committed to.

Alexander Kornilov, an analyst at Aton Capital, said many Russian oil companies that have been compelled to curb their production due to the agreement are not convinced of the cuts' effectiveness.

"I think they also feel that it's a losing proposition and that shale is just going to become more and more competitive and you will just keep losing market share," he said, adding that the Russian companies are likely to abide by the deal for its current timeframe, but it would be much harder to secure their cooperation if the deal had to be extended further.

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Earlier:

RUSSIA: 

 

SAUDI: 

RUSSIA SANCTIONS ANEW 

 

SAUDI ARAMCO INVESTMENT: $300 BLN 

U.S. & RUSSIA: LIMITED IMPACT 

 

SAUDIS WILL CUT 

IMF NEED RUSSIA 

 

SAUDIS OIL RESOURCES UP 

RUSSIA'S INVESTMENT POTENTIAL 

 

SAUDIS ASSETS DOWN 

RUSSIAN OIL PRODUCTION DOWN 0.6% 

 

NO ONE ENVIES THE SAUDIS 

RUSSIA FINANCES U.S. 

 

SAUDIS & U.S. DEALS: $50 BLN 

AGAINST RUSSIA SANCTIONS

 

SAUDIS FINANCIAL PRESSURE

     

OPEC: 

 

NIGERIA: 

OPEC PRODUCTION UP TO 32.49 MBD 

 

NIGERIAN OIL: 2 MBD 

MORE MONEY FOR OPEC 

 

IMF HAS NIGERIA 

OPEC OIL PRODUCTION UP: 32.12 MBD 

 

NIGERIAN OIL CRISIS 

BAD NEWS FOR OPEC 

 

NIGERIA INTO RECESSION 

OPEC & NON-OPEC AGREEMENT

 

NIGERIA'S OIL SETTLEMENT: $5.1 BLN 

OPEC: THE LOWEST REVENUES 

 

NIGERIAN OIL WILL UP TO 3 MBD 

OIL PRODUCTION CONSENSUS

 

NIGERIA'S OIL PRODUCTION UP TO 1.9 MBD

     

LIBYA: 

   

LIBYA NEEDS $100 BLN 

 

 

LIBYAN OIL WILL UP 

 

 

LIBYA WON'T CUT 

   

LIBYA CAN INCREASE 

   

LIBYA RISES PRODUCTION 

   

LIBYA'S OIL PRODUCTION: 300 TBD 

   

LIBYA HAS STARTED

   
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: OIL, PRODUCTION, OPEC, RUSSIA, PRICE

Chronicle:

OIL OUTPUT CONSENSUS
August, 16, 09:45:00

OIL PRICE: NOT ABOVE $52 YET

Brent crude futures LCOc1 were at $51.02 per barrel at 0218 GMT, up 22 cents or 0.4 percent from their last close. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $47.70 a barrel, up 15 cents, or 0.3 percent.

OIL OUTPUT CONSENSUS
August, 16, 09:40:00

OIL PRICES TAKES TIME

New data suggests that in 2Q17 global stocks fell by 0.5 mb/d and preliminary data for July, particularly in the United States where stocks fell by 790 kb/d, is supportive. Even so, we must not forget that they are falling from a very great height in volume terms. At the end of 2Q17, OECD commercial stocks, which are the component of the global total for which we have the most visibility, stood at 3 021 million barrels, still more than 219 mb above the five-year average although they have now fallen below 2016 levels. As an exercise, if OECD stocks fell by 0.5 mb/d until the end of 1Q18 when the current output agreements expire they would still be about 60 mb above the five-year average.

OIL OUTPUT CONSENSUS
August, 16, 09:35:00

ЦЕНА URALS: $ 49,94

Средняя цена нефти марки Urals по итогам января - июля 2017 года составила $ 49,94 за баррель.

OIL OUTPUT CONSENSUS
August, 16, 09:30:00

OPEC: GLOBAL OIL DEMAND WILL UP TO 97.8 MBD

OPEC said world oil demand in 2018 will grow 1.28 million b/d from 2017 levels, meaning that total oil consumption is expected to hit a new record high of 97.8 million b/d in 2018.

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