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2017-10-25 12:30:00

OIL PRICES NO OPPORTUNITIES

OIL PRICES NO OPPORTUNITIES

PLATTS - Major Middle Eastern crude producers may not keep their exports to Asia too tight in 2018 as any substantial uptick in international oil prices would reignite strong investment in global oil projects and prompt new competition to emerge, director for energy markets and security at the International Energy Agency Keisuke Sadamori said Monday.

Any rise in global crude prices as a result of maintaining tight supplies to Asia could work against Middle Eastern producers as lower prices have been one of the main drivers of strong demand so far this year, while putting the brakes on a slew of new drilling projects around the world, Sadamori said during a group interview session on the first day of Singapore International Energy Week.

"They [big OPEC and Middle Eastern producers] cannot be too ambitious [on their oil price targets]...there's not much [upside] room for them to hope for," Sadamori said.

"Once the oil price goes to certain levels, this will stimulate new drilling and investments in North America," he added.

Middle Eastern crude exports to Asia have fallen sharply over the past several months, with major Persian Gulf producers, including Abu Dhabi National Oil Co, recently slashing its allocations for November-loading crude oil by up to 15% to most of its customers.

Before that, various Asian end-users had their crude oil term allocations from Saudi Arabia slashed for September, with at least two South Korean refining companies receiving around 10% cuts in monthly contract volumes for light and medium sour grades.

More recently, Saudi Aramco fielded demand for 7.711 million b/d in November loadings but would only allocate 7.150 million b/d, the Saudi energy ministry said earlier this month, as the kingdom aims to keep the OPEC/non-OPEC production cut agreement on track in its efforts to rebalance the market.

The cuts signal Saudi Arabia and the UAE's strong commitment to OPEC's November 30, 2016, deal to reduce production by 486,000 b/d and 139,000 b/d, respectively, from October levels last year.

Sadamori said OPEC and non-OPEC producers' compliance with their respective output cut targets had been positive so far, but he also pointed out that Middle Eastern producers were likely well aware of the importance of Asian market share as the region is expected to play a major role in global demand growth.

"China, India and ASEAN would continue to contribute to the additional demand [going forward] and that's what [key Middle Eastern and OPEC producers] will be mindful of," he said, when asked about the rising competition from North American crude producers.

North American suppliers have slowly been gaining market share in the Far East, as multiple waves of US arbitrage crude cargoes reached Asian ports so far this year, while multiple VLCC vessels carrying WTI, Midland and Eagle Ford crude are expected to arrive during late in the fourth quarter and early January, market sources have said.

OIL PRICE UPSIDE

International crude prices have staged a sharp rebound since hitting multi-year lows in late Q2 this year, with expectations of an extension to OPEC production cuts beyond March 2018 and recent concerns over supply disruptions in Iraq providing support, market participants said. Front-month ICE Brent crude futures contract rallied to a two-year high of $59.49/b on September 26, from a June 21 low of $44.35/b, the lowest since November 14 last year.

Accordingly, Dated Brent, also rose sharply. Dated Brent averaged $56.05/b in September, up from $51.64/b in August and the highest monthly average since July 2015 when it was $56.54/b, according to S&P Global Platts data.

However, macro-economic analysts have said oil prices could also find some support in the near term as the current environment of rising US interest rates would mean US producers would be less able to obtain favorable financing for projects.

"If US Treasury yields continue to rise (We expect 10-year Treasury yield to increase to 2.5% by the end of 2018), the financing of these investments will become more difficult," ABN Amro senior energy economist Hans van Cleef said in a note last week.

"Therefore, it will be uncertain whether the US oil production will grow as fast as financial markets currently anticipate," he added.

At 4:30 pm Singapore time (0830 GMT) on October 22, ICE December Brent crude futures were up 6 cents (0.1%) from Friday's settle at $57.81/b.

-----

Earlier:

Prices
October, 23, 11:45:00

OIL PRICE: STILL ABOVE $57

Brent crude futures were at $57.87 at 0622 GMT, up 12 cents, or 0.21 percent, from their last close. U.S. West Texas Intermediate (WTI) crude was at $52.04 per barrel, up 20 cents, or 0.39 percent.

 
 Prices
October, 16, 12:20:00

WORLD OIL DEMAND UP BY 1.5 MBD

World oil demand growth in 2017 is now expected to increase by 1.5 mb/d, representing an upward revision of around 30 tb/d from last previous report, mainly reflecting recent data showing an improvement in economic activities. Positive revisions were primarily a result of higher-than-expected oil demand from the OECD region and China. In 2018, world oil demand is anticipated to grow by 1.4 mb/d, following an upward adjustment of 30 tb/d over the previous report, due to the improving economic outlook in the world economy, particularly China and Russia.

 

 Prices
October, 11, 12:50:00

OIL PRICES 2020: $50 - $60

Based on a “lower-for-longer” base-case scenario, global oil prices will remain in the $50-60/bbl range until late 2020, due to increasing supply that breaks even at $50/bbl, according to to the most recent global oil supply and demand outlook from McKinsey Energy Insights (MEI).

 

 Prices
June, 7, 18:05:00

GLOBAL OIL OVERSUPPLY

The US Energy Information Administration lowered its crude-oil price forecast and raised its US production outlook for 2018. The lower price forecast reflects the possibility of a return to modest oversupply in global oil markets in 2018.

 

 Prices
December, 29, 18:45:00

OIL PRICES 2017: $58

The analysts predicting that Brent will average $58 a barrel next year expect $53 in the first quarter and $56 in the second. West Texas Intermediate will be about $1.40 cheaper than Brent in 2017, the estimates show. WTI settled at $53.90 in New York on Tuesday.

 

 Prices
September, 13, 14:50:00

MARKET IS OWERSUPPLIED

The producer cartel revised higher for this year and next oil supply forecasts from non-member countries, implying that demand for its crude will remain far lower than current near record output of more than 33m barrels a day.

 

 Prices
July, 13, 14:28:00

2017: OIL MARKET BALANCE

Global consumption of petroleum and other liquid fuels is estimated to have grown by 1.4 million b/d in 2015. EIA expects global consumption of petroleum and other liquid fuels to increase by 1.4 million b/d in 2016 and by 1.5 million b/d in 2017, mostly driven by growth in countries outside of the Organization for Economic Cooperation and Development (OECD). Non-OECD consumption growth was an estimated 1.0 million b/d in 2015, and it is expected to be 1.3 million b/d in 2016 and 1.5 million b/d in 2017.

 

 

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