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2019-04-24 11:20:00

OIL PRICE: OPEC + RUSSIA

OIL PRICE: OPEC + RUSSIA

PLATTS - The rise of US shale is "diminishing" the influence of OPEC, Russia and their allies, and the coalition would be better off leaving the oil market to its own devices, the International Energy Agency's executive director Fatih Birol told S&P Global Platts in an interview.

"Those days that oil markets, developments and prices are determined by resolutions, discussions and so on are over. There are very strong market forces now, mainly driven by the US shale revolution," Birol said in reference to OPEC's market management strategy.

OPEC, Russia and nine other non-OPEC partners are in the midst of a 1.2 million b/d production cut that has helped oil prices recover from a slump in the last three months of 2018. The cut agreement is scheduled to run through June and is likely to be adjusted after the US announced it would end all waivers from Iran oil sanctions when they expire at the start of May.

Saudi Arabia and the UAE are expected to compensate for the shortfall, but global output cooperation is seen as more complicated.

While the 24-country coalition controls almost 50% of the global oil market, the relentless rise of US crude supply means there will be "more competition between the resolutions in Vienna and the production in the Permian."

Birol predicts the US will make up 70% of the rise in global oil production over the next five years, suggesting a futility in OPEC's actions.

"The voice of Mozart will not be heard in Pennsylvania," he said, speaking at the IEA headquarters in Paris. Birol explained that "the economic effect is stubborn, there is a lot of oil coming onto the market, with the expansion of the pipelines," which will increase the ability and speed of US shale to "react to international price developments big time."

Birol added that on top of US shale there is the progress of clean technologies, especially with the rise of electric vehicles, which adds to OPEC's challenge and eats into their global energy mix.

"My humble suggestion as a former OPEC employee is that it is now the highest time in the history that they need to diversify their economic base," he said.

Birol is less concerned with the impact US shale is having in terms of lightening the overall global crude slate. US crude is generally much lighter and sweeter than the majority of OPEC crudes and thus these recent developments have changed the diet for refiners and types of oil products. Lighter crudes tend to produce more gasoline and naphtha, which is already in abundance.

"The complexities of the refineries will be less and less in the future. A reversal of the trend we have been seeing in the past. So from our point of view we don't see a major problem and shale quality is very much in line with the development with the oil demand," he explained.

GEOPOLITICAL RISK PREMIUM

Oil market volatility has been driven by the rise of geopolitical risks in recent times and Birol said these risks continue to worsen.

He highlighted Iran, Libya, Venezuela, Algeria, China-US trade tensions and said these would influence the market more in the coming quarters than supply and demand fundamentals.

"I am an energy man, therefore I don't like it, I would like to see oil markets determined by market forces than such developments," Birol said.

Sanctions and power outages have crippled Venezuela's oil industry, Iran faces the full force of US sanctions on its oil exports and Libya is suffering from political infighting which could once again wreck production that only recently climbed above 1 million b/d. Meanwhile Iran has threatened to close a key shipping chokepoint, the Strait of Hormuz, in retaliation against the US.

He warned of the risk of oil prices heading well above $70/b to the oil market and the global economy, while also saying that if prices were too low it would hit investment in the industry and key oil producing countries.

"An optimum price for everyone to agree is very difficult," he said, but the executive director is clearly concerned over the impact increasing geopolitical risk is having on oil prices and market stability and the risk of a continued spike in oil prices. Brent crude oil prices have risen from $50/b at the end of 2018 to close to $75/b as of Tuesday.

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Earlier:

OIL PRICE: OPEC + RUSSIA
2019, April, 22, 08:50:00
OPEC + RUSSIA IS HERE
"Cooperation will continue between Russia and Saudi Arabia," Ibrahim al-Muhanna said at the International Oil Summit in Paris, stressing that "it is the core of OPEC+ cooperation."
OIL PRICE: OPEC + RUSSIA
2019, April, 22, 08:45:00
RUSSIA'S OIL PRODUCTION 11.24 MBD
Russian oil production was around 11.24 million barrels per day (bpd) between April 1 and April 18,
OIL PRICE: OPEC + RUSSIA
2019, April, 17, 11:40:00
СТАБИЛЬНОЕ РАЗВИТИЕ МИРОВОЙ ЭНЕРГЕТИКИ
«Коммуникация в рамках МИРЭС предоставляет самые широкие возможности для выработки транспарентных подходов и стратегических решений в атмосфере тесного сотрудничества между странами и направлена на обеспечение стабильного развития мирового ТЭК», - сказал Александр Новак.
OIL PRICE: OPEC + RUSSIA
2019, April, 17, 11:35:00
OIL PRICES: TROUBLED WATERS
On BRENT ;The Bulls are still gathering through the 71.72$ price mark. A hold of the 63.45$ price mark indicates a strong bull market in the June WTI Futures market,a fall below creates a range bound trade.
OIL PRICE: OPEC + RUSSIA
2019, April, 15, 12:10:00
FRAGILE OIL MARKET
Iranian Minister of Petroleum Bijan Zangeneh said the current crude oil market was in a fragile state, adding, “If the US decided to exert more pressure on Iran, the oil market would become unpredictably more fragile.”
OIL PRICE: OPEC + RUSSIA
2019, April, 12, 11:55:00
2019 GLOBAL OIL DEMAND EXCEED 100 MBD
Total world demand for the year is now expected to reach 99.91 mb/d and exceed the 100.00 mb/d threshold during 2H19. OECD oil demand growth is projected to reach 0.21 mb/d, with OECD Americas leading the increase, while oil demand in the non-OECD region is projected to rise by around 1.0 mb/d, with Other Asia and China being the primary contributors to growth.
OIL PRICE: OPEC + RUSSIA
2019, April, 12, 11:45:00
RUSSIA COMMITTED TO OPEC+
“Russia will not increase its output unless in coordination with the rest of OPEC and OPEC+ countries,” Mazroui said. “I believe in the wisdom of Russia, and I believe that Russia has benefited from this agreement... I don’t see any reason for Russia not to continue with us.”
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Tags: OIL, PRICE, OPEC, RUSSIA, US