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OPEC Early Meeting Seen More Likely by Analysts on Prices

The Organization of Petroleum Exporting Countries, responsible for 40 percent of the world’s oil production, is facing pressure to have an extraordinary meeting as prices keep falling, according to analysts from Energy Aspects Ltd., RBC Capital Markets and Petromatrix GmbH. OPEC will probably have the meeting in the first quarter, Amrita Sen, chief oil market analyst at London-based Energy Aspects, said at a Platts conference in Dubai today. The pressure to meet will come from financially-strapped members such as Iran, Iraq and Venezuela, she said. RBC Capital Markets and Petromatrix have also pointed to the possibility of a special meeting. OPEC’s next scheduled summit is June 5. Crude has tumbled into a bear market as the highest U.S. production in three decades exacerbates a global glut. Saudi Arabia , which led OPEC’s decision to maintain rather than cut output at a Nov. 27 meeting, last week offered supplies to […]

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News Of OPEC’s Demise Has Been Much Exaggerated

Analyst John Kemp asks, "if OPEC cannot act to defend the prices and revenues of its member countries, does the organization still serve any purpose?" John Kemp is a Reuters market analyst. The views expressed are his own LONDON, Dec 3 (Reuters) – The Organization of the Petroleum Exporting Countries (OPEC) last week made no change to its production target despite a 40 percent slide in oil prices over just five months, causing some commentators to pronounce the cartel irrelevant. If OPEC cannot act to defend the prices and revenues of its member countries, does the organisation still serve any purpose? There is an assumption among some commentators that OPEC is only relevant and working if ministers can reach a production agreement in response to shifts in prices, and that strong disagreement is a sign of dysfunction. But the record suggests that ambitious production-cutting agreements are rare, rather than […]

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OPEC’s War Won’t Be All Over by Christmas

ENLARGE Like invasions of Russia and land battles in Asia, a war on U.S. shale promises to be a protracted and unpredictable campaign. Rising U.S. shale oil output is one target of Saudi Arabia’s push to have OPEC members maintain their output and so depress oil prices . Even leaving aside OPEC’s clutch of internal divisions, though, fighting U.S. shale will prove a grind —with substantial attrition on the cartel’s side. Part of OPEC’s problem is that U.S. shale is a many-headed beast, with multiple resource basins and operators. So there isn’t a single price below which production gets shut down. Rather, estimates of break-even prices in U.S. shale span a range: Citigroup , for one, estimates this to be around $70 to $90 a barrel using full-cycle costs. “Full-cycle costs” is the crucial phrase, as it incorporates big up front charges such as acquiring land. In core shale […]

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Free Fall in Oil Price Underscores Shift Away From OPEC

HOUSTON — Since the economically crippling oil embargo of 1973, every American president has pledged to seek and achieve energy independence. That elusive goal may finally have arrived, at least for the foreseeable future, with the failure of Saudi Arabia and its 11 oil cartel partners in the Organization of the Petroleum Exporting Countries to agree to a production cut that would put a brake on plummeting crude prices. On Friday, the benchmark American price for crude oil continued the free fall that began on Thursday, closing at $66.15, its lowest price in more than four years. The inability or unwillingness of OPEC to act showed that the cartel was no longer the dominating producer whose decisions determine global supplies and prices. Suddenly, the United States — which is poised to surpass Saudi Arabia as the world’s top producer, possibly in a matter of months — is in that […]

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Turnabout: OPEC shows U.S. oil producers who’s boss

To paraphrase Mark Twain: Rumors of OPEC’s demise have been greatly exaggerated. Breathless coverage of the rise in U.S. oil production in the last few years has led some to declare that OPEC’s power in the oil market is now becoming irrelevant as America supposedly moves toward energy independence. This coverage, however, has obscured the fact that almost all of that rise in production has come in the form of high-cost tight oil found in deep shale deposits. The rather silly assumption was that oil prices would continue to hover above $100 per barrel indefinitely , making the exploitation of that tight oil profitable indefinitely. Anyone who understood the economics of this type of production and the dynamics of the oil market knew better. And now, the overhyped narrative of American oil self-sufficiency is about to take a big hit. After weeks of speculation about the true motives  behind […]

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IEA Chief Economist Urges Oil Producers to Invest in New Projects

Petroleum storage tanks at the Suncor tar sands operations near Fort McMurray, Alberta, Canada. IEA… ENLARGE Petroleum storage tanks at the Suncor tar sands operations near Fort McMurray, Alberta, Canada. IEA has singled out Canada as a key focus area for future oil production. Reuters MADRID—The International Energy Agency’s chief economist on Friday urged oil producers to boost investment in new projects to meet an anticipated rise in demand, a move that he said may avoid oil price spikes in coming years. Speaking in Madrid during the presentation of the IEA’s annual report, Fatih Birol said that a tumble in oil prices makes it hard to believe a supply crunch may happen any time soon, but the slow pace of development of new projects makes it imperative to act. “We shouldn’t just ignore tomorrow’s challenges,” Mr. Birol said. “This is hard point to make in this context of lower […]

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OPEC Gusher to Hit Weakest Players, From Wildcatters to Iran

The refusal of Saudi Arabia and its OPEC allies to curb crude oil output in the face of plummeting prices has set the energy world on a painful course that will leave the weakest behind, from governments to U.S. wildcatters. A grand experiment has begun, one in which the cartel of producing nations — sometimes called the central bank of oil — is leaving the market to decide who is strongest and how to cut as much as 2 million barrels a day of surplus supply. Oil patch executives including billionaire Harold Hamm have vowed to drill on, asserting they can profit well below $70 a barrel, with output unlikely to fall for at least a year. Marginal producers in less profitable U.S. shale areas, as well as countries from Iran to Russia and operations from Canada to Norway will see the knife sooner, according to analyses by Wells […]

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OPEC is playing a dangerous game with oil markets

(The Platts’ OPEC team in Vienna was headed by Margaret McQuaile, and also included Stuart Elliott, Adal Mirza, Jacinta Moran and Herman Wang.) Saudi Arabian oil minister Ali Naimi left OPEC’s Vienna meeting on Thursday saying the group had made “a great decision.” Oil markets didn’t agree. In the weeks leading up to the decision, expectations had built for a cut in output, not least because of the sharp fall in demand for OPEC oil that forecasting organizations–including OPEC itself–were projecting for the first half of next year. But when Naimi signaled early Wednesday that the oil market would eventually stabilize itself, it became clear that the Saudis were not interested in cutting output. The confirmation on Thursday that OPEC would simply roll over its 30 million b/d ceiling and arrange to meet again in June next year sent prices into freefall. Brent, having closed the previous day at $77.75/barrel, […]

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Oil Seen in New Era as OPEC Won’t Yield to U.S. Shale

OPEC’s decision to cede no ground to rival producers underscored the price war in the crude market and the challenge to U.S. shale drillers. The 12-nation Organization of Petroleum Exporting Countries kept its output target unchanged even after the steepest slump in oil prices since the global recession, prompting speculation it has abandoned its role as a swing producer. Yesterday’s decision in Vienna propelled futures to the lowest since 2010, a level that means some shale projects may lose money. “We are entering a new era for oil prices, where the market itself will manage supply, no longer Saudi Arabia and OPEC,” said Mike Wittner , the head of oil research at Societe Generale SA in New York. “It’s huge. This is a signal that they’re throwing in the towel. The markets have changed for many years to come.” The fracking boom has driven U.S. output to the highest […]

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Energy Quakes as OPEC Stands Pat

OPEC Secretary General Abdalla Salem El-Badri, center, is interviewed in Vienna ahead of the oil… ENLARGE OPEC Secretary General Abdalla Salem El-Badri, center, is interviewed in Vienna ahead of the oil cartel’s meeting on Thursday. Agence France-Presse/Getty Images Energy company stocks and the currencies of major oil-producing nations stumbled Friday as OPEC’s decision to maintain crude output levels despite a glut rippled across the globe. The Organization of the Petroleum Exporting Countries’ decision knocked down U.S. benchmark oil prices on Friday by 10% to $66.15 a barrel, the lowest level since September 2009. Uneasy investors dumped energy stocks. Among the hardest hit were U.S. domestic oil producers including Continental Resources Co., the biggest producer in North Dakota’s Bakken Shale. Its shares plunged on Friday nearly 20%, to $40.98. Exxon Mobil Corp. fell 4.2%, BP PLC dropped 5.5% and Royal Dutch Shell PLC lost 7%, all in abbreviated New York […]

Posted On : Published By : Tom Whipple