Showing posts with label Brent Crude. Show all posts
Showing posts with label Brent Crude. Show all posts

Saturday, November 11, 2023

Can oil really hit $150? (And more!)

As the current crude oil trading year enters its final two months marked by festive breaks and potentially higher consumer demand as the Northern Hemisphere's winter approaches - thoughts inevitably turn to what price levels we will likely encounter in 2024.

With hostilities in the Middle East failing to lift crude prices despite all the talk of risk premiums and potential supply disruptions, being bullish about oil early in 2024 is proving hard. That's because concerns over crude demand are outweighing concerns over supply. 

We're talking muted demand from the economic powerhouses of Germany and China, lower consumer confidence levels in key OECD markets and elevated interest rate levels kept there by major global central banks, especially the US Federal Reserve. 

It therefore came as a surprise to The Oilholic when the World Bank opined that crude prices could hit $150 if hostilities in the Middle East escalate! Here are this blogger's thoughts on that via Forbes. Simply put - don't hold your breath! 

And let's not forget, Brent hasn't even capped a more realistic $100 per barrel level the bulls crave. The benchmark's January 2024 contract is barely higher than current levels, and contracts further out into the summer of next year are even lower. That implies Brent remains in backwardation mode.

Away from the crude price, the latest quarterly earnings posted by energy majors provided plenty of talking points. More so, after the return of megadeals as ExxonMobil swooped for Pioneer Natural Resources and Chevron swooped for Hess Corp. 

Other deals may follow as the energy majors fish for viable plays. It's led many, including this blogger, to wonder if a supermajor itself could be vulnerable? The prime candidate for finding itself in this position is BP; a chronically undervalued supermajor in the Oilholic's opinion. More on the subject here via Forbes

Is it possible? Yes, especially in a industry built on big ticket deals. Will it happen? Probably no, not least down to BP's $100 billion plus valuation (however discounted that may appear to some). But as yours truly noted on Forbes - that the company has had to bat away questions about being a takeover target is pretty extraordinary and indicative of how far it has fallen. Well that's all for now folks. Keep reading, keep it here, keep it 'crude'!

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To email: journalist_gsharma@yahoo.co.uk  

© Gaurav Sharma 2023. Photo: Oil pump jack model at the AVEVA World 2023 Conference, Moscone Center, San Francisco, US© Gaurav Sharma October 2023. 

Wednesday, July 05, 2023

All about crude "market stability"

The Oilholic arrived at the first day of the OPEC International Seminar to find the oil producers' group in a belligerent mood led by kingmaker Saudi Arabia. The kingdom's energy minister Prince Abdulaziz bin Salman said recent OPEC+ actions demonstrate the strength of the partnership and teamwork with Russia. 

Furthermore, he uttered two words that shaped the entire day - "market stability". Addressing delegates, Abdulaziz said his country will do whatever it takes to ensure it, and looks like Riyadh is not ditching its stance of unilateral voluntary oil production cut of 1 million barrels per day (bpd) in a huff. Though Abdulaziz did go to some length to say the Kingdom's current stance does imply it was returning to its 1980s swing producer status.

His address followed that of several of his OPEC ministerial peers repeatedly mentioning the need for "market stability" - cue a higher crude price, perhaps one that's above $81 per barrel the Saudis need to balance their budget. UAE Energy Minister Suhail Al Mazrouei chimed in by adding that if anything OPEC deserves an even larger market share in a "balanced" energy market, and added that market commentary on the group's intentions had been a tad er....unbalanced. 

And not to be outdone, Azerbaijan's Minister of Energy Parviz Shahbazov quipped that if OPEC+ or OPEC didn't hypothetically exist as groups, "we would need to create them" across the energy value chain, and not just oil, in the interests of well, you guessed it - "market stability". 

But one of the main reasons a higher oil price that OPEC+ craves is proving elusive is down to the 6 million bpd of Russian oil that is still finding its way to the market despite a near absence of Western buyers, and India and China duly obliging by importing copious amounts it

Canada, Guyana, US, Brazil and Norway are all also pumping more. But the biggest weight on the crude price is the uncertain economic climate and the hawkish stance of global central banks, especially the US Federal Reserve. More to follow from Vienna, but that's all for the moment folks! Keep reading, keep it crude! 

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© Gaurav Sharma 2023. Photo © Gaurav Sharma, July 5, 2023.

Wednesday, August 12, 2020

Joining Citi Private Bank

It has been a fantastic 'crude' journey for the Oilholic in the energy market and this blog has been with yours truly every step of the way for over a decade. Thank you all for your support. While long may that continue, commentary here would be a little tempered and slightly irregular as this blogger has taken up a Vice President / Lead Analyst's position at Citi Private Bank. 

Things won't be coming to a close here, but whatever appears on this blog would be in a private capacity only. That also applies to any commentary published here in the past prior to Aug 1, 2020. That's all for the moment folks! Keep reading, keep it 'crude'!

© Gaurav Sharma 2020.

Tuesday, December 24, 2019

Ten years of 'crude' blogging & a big thank you!

Its a day to say thanks and feel a tad nostalgic, as the Oilholic woke up this Christmas eve morning to the realization that today marks 10 years of this oil and gas market blog's appearance on cyberspace!

Boy does time fly! When yours took this blog live and put his first post up on December 24, 2009, Barack Obama had been in the White House for less than a year; Gordon Brown was still in Downing Street; the global economy was limping back from the financial crisis; the US shale revolution's impact hadn't been felt; OPEC had held its latest minister's meeting in Luanda, Angola instead of its secretariat in Vienna, Austria; and Brent and WTI futures closed at $76.31 and $78.05 per barrel respectively, with a premium in the latter's favour! That's a 10-year decline of $9.84 (-12.9%) for Brent and $17.5 (-22.42%) for WTI versus this European morning's prices in Asia.  

Back then, all this blog had was a handful of readers comprising of mutual acquaintances in the trading community who had been providing tips and invaluable feedback since 2007, when yours truly was working on concepts, and a trail site/domain. The subsequent blogging journey began on Christmas eve of 2009 when the Oilholic registered the www.oilholicssynonymous.com domain, and it has been quite a ride, and more, ever since. 


The blog underwent a complete template overhaul in 2011 as the readership started gaining traction. Well past its millionth pageview, it currently averages 12,000 reads a month. 

Well above average readership points are often brought about by posts on energy sector developments and events such as IPWeek, CERAWeek, OPEC and ADIPEC, where this blogger often takes speaking engagements at, resulting in monthly pageviews jumping above 100,000 reads a month. 

As in previous years, bulk of the readers who browse and read this blog in 2019 have come from the US, UK, Norway, Germany and China in that order, with American and British readers leading the pack by some distance. 

Many have logged in from some 127 countries week in, week out. So a massive thank you to all of you because without your readership, feedback and support this blog wouldn't be here. Alongside regular readers who find this blog via established routes, analytics also reveal the impact of Google, where many of you find your way to the Oilholic alongside LinkedIn, Twitter and Forbes.

What this blog has been about over the last 10 years is what it will be about in the future, carrying the Oilholic's analysis, thoughts, rants, musings and social media flags, about past events, developments and emerging scenarios in the sector, and the comments of fellow market experts one is able to interact with. 

It'll also continue to complement the Oilholic's analysis and media career, speaking circuit engagements, serve as a published clippings portfolio hub, broadcast commentary, work undertaken over the last 20 years (and counting), some favourite photographs and a selection of book reviews.

As the years go by, here's hoping this blog is (and will be) as much fun for those reading it as it is for the one writing it. So keep reading, keep it 'crude' and once again thank you for all your support.

To follow The Oilholic on Twitter click here.
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© Gaurav Sharma 2019. Photo: Screenshot of Oilholics Synonymous Report's homepage in 2010 © Gaurav Sharma.

Friday, December 06, 2019

OPEC+ announces deeper cuts of 500kbpd

It's official - OPEC+ has decided to "deepen its cuts" by ~500,000 barrels per day (bpd), thereby upping its output reduction from 1.2 million bpd, 1.7 million bpd.

And if the new chief OPEC powerbroker Prince Abdulaziz bin Salman is to be believed, and every participant well...err....participates, the market could well be looking at a real terms cut of 2.1 million bpd. 

That is wishful thinking and will be severely tested as the Saudis say OPEC+ compliance would be keen monitored. To this effect, OPEC will have an extraordinary meeting of ministers in March 2020, on top of its regular meeting in June. 

For its part Saudi Arabia will up its cuts "voluntarily" to 400,000 bpd (+167,000 bpd) bringing its headline production down to 9.744 million bpd. Errant Iraq has promised to cut 50,000 bpd. Nigeria, Libya and Iraq remain exempt, but Nigerian Minister Timipre Marlin Sylva said his country would be cutting production "voluntarily."

There seems to be no shortage of volunteers. Here are two other key quotes:
  • "Signal we want market to take is that we are collectively showing readiness to rebalance the market, prevent heavy inventory buildup in Q1 2020," - Abdulaziz bin Salman.
  • "Russia wants to avoid any oil market turbulence in 2020. We are not concerned with US shale, seeing signs of shale slowdown," - Russian Oil Minister Alexander Novak. 

Finally, the Saudi Minister sounded pretty peeved about getting a "battering from the media" about the Saudi Aramco IPO, adding that the company's valuation would hit $2 trillion very soon. And that's that; more composed thoughts upon the Oilholic's return to London, but that's all for the moment from OPEC folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: Saudi Oil Minister Abdulaziz bin Salman speaks at the conclusion of the OPEC+ meeting in Vienna, Austria © Gaurav Sharma December 6, 2019.

Saturday, July 06, 2019

A rollover and a poem for OPEC

As widely anticipated, OPEC did indeed rollover its ongoing oil production cuts of 1.2 million barrels per day (bpd), set in place with 10 other non-OPEC producers for another nine months to March 2020.

The announcement was accompanied by a "charter of co-operation", even a poem about that charter (see left, click to enlarge), in-house conjecture that US shale production would eventually decline like the North Sea but not much by way of how the cartel intends to exit from its current output cuts strategy. 

Here is the Oilholic's analysis via Forbes. More to follow via other forums and publications. In a nutshell, one's price outlook for crude remains bearish and 2020 could get even more ugly. There is also little on the horizon to ditch $65-70 per barrel average price range for Brent, and $55-60 per barrel price range for WTI, with both likely to be at the lower range rather than the upper range. That's all for the moment folks! Keep reading, keep it 'crude'! 

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© Gaurav Sharma 2019. Photo: Poem released on OPEC's new charter © OPEC, July 2019.

Friday, June 14, 2019

A calmer view on oil market volatility

The Oilholic is just about to end his latest visit to Oslo, Norway following a two-day energy technology event but decided to stop en route to the airport to admire the calm waterfront off the Fornebu business district. Here's a view of the Fornebukta. Its serenity is as far removed from the ongoing kerfuffle in oil market as can be.

Both Brent and WTI ended the month of May some 11% lower, with the market just not buying the geopolitical risk angle following attacks on tankers off the Port Of Fujairah. 

Now it seems two more tankers have been attacked in the region, but apart from a brief uptick, the bears are still in control. The WTI is well below $60 per barrel, and Brent is struggling to hold the floor at $60. That's because regardless of the market discourse over geopolitical risks in the Middle East and US-Iran tensions; what's actually weighing on the market is the trade tension between US and China. 

Were that to be resolved, it would in the Oilholic's opinion be a much bigger bullish factor than skirmishes in the Middle East. Another factor is what is OPEC going to, or rather isn't going to, do next? Its ministers' meeting for April was postponed to June 25-26, and now it seems that going to postponed again to July. All of that at a time when the market remains cognisant of the fact that the cartel does not have an exit strategy for the cuts drive. 

Here is this blogger's latest take on the subject for Rigzone published overnight. OPEC is doing a balancing act of compromising its market share in a bid to support the price; but its a temporary stance that can be prolonged, but one that cannot become a default position give US production is tipped to rise over the short-term.

Additionally, should the Russians call off participation in the ongoing OPEC and non-OPEC cuts of 1.2 million barrels per day (bpd); the desired effect of any standalone cuts made by the cartel of the sort it made in the past, would not be quite the same given the ongoing cooperation in itself is extraordinary in nature, and has held firm since December 2016, for the market to price it in as such. 

Many fellow analysts here in Oslo share the same viewpoint. OPEC's production came in at a record low of 30.9 million bpd in May, according to the latest S&P Global Platts survey. That's the lowest level since February 2015, before Gabon, Equatorial Guinea and Congo joined, and when Qatar was still a member.

How the cartel reasserts its credibility is anyone's guess but all things considered, it remains difficult to see crude oil benchmarks escape the $50 to $70 price bracket anytime soon. That's all from Oslo folks! But before this blogger take your leave here's another view of the scenic, albeit rain-soaked Oslofjord (above right). It was a pleasure visiting Norway again, reconnecting with old friends and contacts and making yet newer ones. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo 1: Fornebukta, Fornebu, Norway. Photo 2: Oslofjord, Oslo Norway © Gaurav Sharma June, 2019.

Sunday, May 13, 2018

Crude talk in H-Town

As the Oilholic prepares to say yet another goodbye to Houston, one cannot but help wondering why the new found pragmatism here over the possible direction of the oil price is not reflected elsewhere in the oil market.

Brent is currently within touching distance of $80 per barrel, while the West Texas Intermediate is firming up above $71 per barrel. 

Having spent a whole week deliberating with market participants out here in America's oil capital, including physical traders, few seem to think the oil price can sustain three figures, even if it gets there.

The sentiment was echoed by several delegates at the Baker McKenzie Oil & Gas Institute 2018 with most there, including leading legal and financial advisers, dismissing a sustainable return to a three-figure oil price. In fact, most are advising their clients not to get carried away, and mark a return to the profligacy of the sort we saw in the US oil patch when the price was last in three figures back in 2014.

Their clients, i.e. representatives of leading oil companies and project sponsors also share the sentiment, and while appreciative of relatively higher oil prices, are in no mood to get carried away.

Yet with Venezuelan production heading to a historic dive below 1 million barrels per day, US President Donald Trump's withdrawal from the Iran nuclear deal and the general geopolitical malaise in the Middle East, hedge funds and money managers are piling in to the futures market in the hope of extending a rally largely supported by OPEC's output cuts.

Plenty of food for thought, but the oil market is in real danger of overstretching itself! And on that note, that's all from Houston folks. Time for the ride home to London. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: View of downtown Houston, Texas, USA from Burnett Street on the outer edge of town. © Gaurav Sharma, May 2018.

Tuesday, May 08, 2018

In Houston Town To Trump's Iranian Frowns

The Oilholic is back in Houston, Texas for another round of events and networking. However, getting stuck in one's hotel room watching CNN on a sunny Texan afternoon certainly wasn't part of the plan.

Of course, with US President Donald Trump taking on himself to single-handedly tearing up the Iran Nuclear deal, there was little choice but add to the afternoon news-watchers ranks. 

And with customary aplomb, the Donald annulled the US end of a "very bad deal" with Tehran at 2pm Eastern. It's something he had always criticised, and had promised he'd annul if he won the Presidency. So, the Oilholic wonders, why is the market surprised? 

Here are one's thoughts on what the President's move could mean for the global supply and demand dynamic via a Forbes post. In fact, Moody's Analytics reckons Trump's sanctions have the power to knock off 400,000 barrels per day (bpd) of Iranian crude off the global market. 

But given the President's move is unilateral, unlike Barack Obama's multilateral sanctions, the volume would be less than half of what his predecessor managed inflict on the Iranian before they came to the table (i.e. 1 million bpd).

Of course, both leading up to and in the hours after Trump's announcement, both Brent and WTI fell by as much as 3% only to gain 2%, before ending the day firmly on a bullish note. While this blogger is not offering investment advice, a bit of caution is advised.

The Oilholic, for the moment is minded to stick to his average Brent price forecast range of $65-75 per barrel. These are early days, much needs to unfold here. But that's all for the moment from Houston folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: Billboard in Houston, Texas, USA © Gaurav Sharma, May 2018. 

Monday, January 29, 2018

On Brent at $70/bbl & crude blockchain moves

Crude year 2017 is firmly behind us, and the Oilholic has summed up weekly closing prices for you on the chart adjacent, along with key points of the year which ended on a high for the oil market (see left, click to enlarge). 

That uptick has extended well into January. It can certainly be said that 2018 has started on a frantic, interesting and massively bullish note for the oil market. Brent, the world’s preferred proxy benchmark, finally closed at $70 per barrel on Friday (26 January); a first Friday-close above the said level since 28 November 2014.

However, that doesn’t necessarily mean yours truly has turned bullish. The Oilholic continues to follow his preferred mantra of being net-short over the long term, and long over the short term. The reasons are simple enough – more US oil, even if purely for domestic consumption – is inevitable.

Inventories have rebalanced, and demand is picking up, but relative to that, there is still plenty of oil in the market. Yet, there is a school of thought out there that the International Energy Agency (IEA) has exaggerated the significance of shale. The Saudi Oil Minister Khalid Al-Falih, among other influential voices at OPEC, has endorsed such a thinking

However, with US production tipped to cap 10 million barrels per day (bpd) in the first quarter of 2018, and may even touch 10.3 million bpd, one doubts the IEA has exaggerated things. US rig counts have continued to rise in step with the oil price rise. As such, there's little to have faith in a long-term $70 Brent price, especially as OPEC itself will ramp up production at some point. 

To get an outside-in perspective, on 25 January this blogger spent most of his day interacting with physical crude traders in Amsterdam and Rotterdam. Hardly anyone seemed to buy in to the bullish chatter that was coming out of the World Economic Forum 2018 in Davos. So the Oilholic is not alone, if you take him at his word. 

Away from the oil price, many say the biggest contribution of cryptocurrencies has not been Bitcoin and Ethereum, but the creation of blockchain, which is akin to a digitally distributed ledger that can be replicated and spread across many nodes in a peer-to-peer network, thereby minimising the need for oversight and governance of a single ledger.

This is now being actively pursued by major energy sector players, and developments at their end have kept the Oilholic busy for better parts of two weeks scribbling stories for Forbes

On 18 January, Shell’s trading arm unveiled its investment in a London-based start-up Applied Blockchain. Just days later on 22 January, Total and several energy traders joined TSX Venture Exchange-listed BTL's blockchain drive aimed at facilitating gas trading reconciliation through to settlement and delivery of trades using blockchain.

BP, Statoil and other traders such as Koch Supply & Trading and Gunvor have all recently gone down the blockchain path.

Then on 26 January, Blockchain outfit ConsenSys and field data management firm Amalto announced a joint venture to develop a platform to facilitate the automation of ticket-based order-to-cash processes in the oil and gas industry.

The emerging blockchain infrastructure aims automate all stages of the process associated with field services in upstream, midstream and downstream markets. Many of the processes, like field ticketing or bill of lading, are still largely manual and paper-based and primed for the blockchain revolution.

So from back-office functions to gas trading, blockchain is coming to shake-up the industry. Expect to hear more of the same. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2018. Graph: Oil benchmark Friday closing prices in 2017 © Gaurav Sharma 2017.

Wednesday, November 29, 2017

Feeling the crude temperature ahead of OPEC 173

The Oilholic has arrived in Vienna, Austria to gauge the crude temperature ahead of the 173rd meeting of OPEC ministers.

Going by the events of the last 24 hours, looks like the Russians, in town leading the 10 non-OPEC producers, seem to be giving the most briefings, and mostly to Russian journalists and analysts.

You could be forgiven for thinking they'd joined OPEC; but the Kremlin's message to analysts and scribes alike seems to be a simple one - the current production cut agreement reached in concert with OPEC producers for taking out 1.8 million barrels per day (bpd) out of the market is valid until March 2018, so why tamper with it now? 

On the other hand the few odd soundbites coming out of OPEC seem to "express hope" the cut agreement, of which the cartel has a lion's share of 1.3 million bpd, is rolled over for a further nine months. With both parties not appearing to be on the same page, oil futures are sliding. 

At 7:45pm GMT, Brent is down 0.53% or 34 cents to $63.27 per barrel, while WTI is down 1.09% or 63 cents to $57.36 per barrel, making it a second successive session of intraday declines extending from European hours to US trading hours.

Expect more of the same, though OPEC's problem is the lack of an exit strategy, which is why some in its ranks want to kick the can down the road even if the Russians aren't keen. Meanwhile, since its been over 10 years of covering OPEC by the Oilholic, here's a look back at the last ten years for IBTimes UK. A whole lot memories, episodes and experiences to narrate

Finally, here is one's take on what to expect on IG Markets TV and Core Finance TV. 



And that's all from Vienna, for the moment folks! Plenty more to follow. In the meantime, keep reading, keep it crude!

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© Gaurav Sharma 2017. Photo: OPEC signage outside its secretariat in Vienna, Austria © Gaurav Sharma. 

Monday, October 30, 2017

Oil bulls being cautious in Zurich

The Oilholic finds himself in the financial hub of Zurich, Switzerland for a splash and dash trip and afterhours ‘crude’ banter here suggests oil bulls are being cautious ahead of the 30 November OPEC and non-OPEC oil ministers’ meeting.

Market anticipation that the ongoing 1.8 million barrels per day (bpd) production cuts would be rolled over beyond March 2018 has sent the Brent front month contract well north of the $60 per barrel mark. As yours truly was boarding his flight out of London, Brent was trading at $60.73 per barrel and heading higher, notching its highest level since July 2015 and marking a rise of more than 36% from the lows seen in June. Some are quite excited.

Take Paul Mumford, fund manager at Cavendish Asset Management, for instance. He notes: “With each dollar trickling straight through to the bottom line, if prices remain at these levels we’d see a rapid increase in oil firms’ cash flows – something that could mean a significant shake up. Asset values would increase sharply in line with projected earnings, banks would be more relaxed about borrowings and farm-out agreements would become easier and more lucrative.

“The lives of mature fields may be extended deferring steep decommissioning costs, exploration would become increasingly viable, and project financing should be easier to obtain. Higher prices could also be an incentive for consolidation in the industry. The downside however might be that we see an increase in drilling costs, but this would benefit the oil service companies. There is every reason to have confidence in the oil market – $50 a barrel and below is a struggle, $55 is good and $60 and above means cigars for everyone!"

Be that as it may, oil market observers in Zurich, and the few who kindly made their way from Geneva to speak to the Oilholic, say the situation warrants caution.

Spot Brent lags a good $3-plus per barrel. And while it’s all good to go long based on the daily newsflow in the run-up to the OPEC meeting, the absence of an exit strategy by those partaking in the production remains a big question-mark.

If the cuts are rolled over – as is appearing increasingly likely – folks here in Zurich opine, and the Oilholic concurs, that the bears would only be going into hibernation for a limited time. The cuts have to end at some point.

Away, from the oil price, MarketLine’s latest industry assessment released last week, suggests the global oil & gas market shrank by 13.6% in 2016 as low crude oil prices pushed down revenues. Overall, the global oil & gas market saw its value fall from $1,395.7 billion in 2015 to $1,205.6 billion in 2016.

The research outfit’s latest forecasts predict a market value of $1,624.7 billion over the period 2016 – 2021; coming to a Compound Annual Growth Rate (CAGR) of 6.1%. Volume growth during the same period is forecast at 1.6% reaching a total consumption of 52,619.8 million barrels of oil equivalent.

The MarketLine report also highlights that the US oil & gas market is the largest domestic oil & gas market in the world, with a total value of $286 billion in 2016. This means that the US market alone accounts for almost 24% of the global oil & gas market.

Those shale players haven’t gone away. If higher prices benefit OPEC, US independents prosper too. Question here in Zurich and beyond is what happens when more barrels – both OPEC and non-OPEC – start hitting the market? Fondue for thought indeed, but that’s all from Switzerland folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2017. Photo: Zurich, Switzerland © Gaurav Sharma 2017.

Sunday, October 22, 2017

Rig count falls and crude oil bulls rise!

Another Baker Hughes weekly rig count gives the oil bulls crumbs of comfort. Perish the thought, if you are thinking the Oilholic is understating the recent price rises. 

The current climate does offer the bulls a position of relative strength compared to how the quarter before was panning out. 

The latest count shows the biggest one-week rig drop in US Permian Basin in 19 months, with the headline count down by 15 to 913 operational oil and gas rigs stateside. 

Last week, Brent was up 1.22% week-over-week to $57.87 per barrel and nudging up to $60, while the West Texas Intermediate front-month contract was up 1.97% to $52.03. OPEC’s basket of crude oils also appears to have perked up, notching a gain of 1.98% to $55.52. (See chart above, click to enlarge)

More so, because the Russian and Saudi heads of state do seem to be contemplating an extension of the OPEC and non-OPEC production cut agreement ahead of the 30 November meeting of oil ministers in Vienna. Add all of it up and you’ll find the mildly bullish sentiment is not misplaced. 

In fact, the probability of the ‘on-paper’ cut of 1.8 million barrels per day (bpd), of which OPEC’s share is 1.3 million bpd, being rolled over beyond March is pretty high. The Oilholic would say 80%. Of course, these are bizarre times in the crude market, as the recent appeal by OPEC Secretary General Mohammed Barkindo to US shale players to also cut production suggests. 

Right now, signatories to the OPEC / non-OPEC agreement appear to have little choice but to roll over the cuts as there is a clear absence of an exit strategy. However, the cap has to end someday, and that’ll be a field day for the bears (at some point in 2018) with Saudi Arabia, US and Russia all tipped to have production levels above 10 million bpd next year. 

That presents little prospect of the so-called ‘elevated’ oil price to escape its current range, as yours truly noted in a recent Forbes post. Have a read, alternative viewpoints are most welcome – just ping an email across. 

For the moment, it’s about playing the longs week-on-week in the run up to the OPEC meeting based on the newsflow. However, 12 months out, the oil price would struggle to stay above $65 per barrel using the West Texas as a benchmark, as more non-OPEC oil is bound to come on to the market the moment it caps the $60-mark. That's all for the moment folks! Keep reading, keep it crude!

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© Gaurav Sharma 2017. Graph: Oil benchmarks closing prices on Friday from January 2017 to date  © Gaurav Sharma 2017.

Sunday, July 23, 2017

Of long calls and more Colombian barrels

Despite an awful lot of bearishness in the market, and global inventories showing no tangible signs of rebalancing, the Oilholic finds the number of long plays in the market to be astounding.

In fact, US shale producers are in their element, and producing comfortably at the current oil price range. 

As the International Energy Agency noted at the recently concluded 22nd World Petroleum Congress - "the only oil producing region that has actually seen a rise in investment has been American shale, where compared to 2016, investments are up 53%."

Here are yours truly's thoughts in greater detail via a Forbes op-ed. Away from the oil price, given  a sequence of the OPEC meeting, a trip to New York and the World Petroleum Congress, a report on Colombian oil production - published by GlobalData earlier in the month - escaped this blogger's attention. 

It is well worth a crude read, for the research and analysis outfit suggests Colombia is well on track to reinvigorate its upstream sector after the oil price shock. 

"Improvements already made to the country's royalty framework will benefit licenses currently held in the exploration phase, which may provide some stimulus in the short to medium term, and more flexible licensing procedures are likely to lead to greater uptake of available exploration acreage. However, based on recent life-cycles from exploration to production any newly awarded areas over the next two years will be unlikely to add significant production before 2025," GlobalData notes. 

This could change; and as for offshore development, Colombia represents one of the most competitive regimes in Latin America and interest in its Caribbean exploration has been steadily growing over recent years. 

The fiscal regime, according to GlobalData, is currently geared to foster investment with a regionally and internationally low fiscal take. The government is reportedly planning to include areas in the Caribbean Sea as part of the open areas to be made available in 2018, and a recent large gas discovery in the area by Anadarko highlights the potential of this underexplored region.

Colombia's Agencia Nacional de Hidrocarburos (ANH) is set to open onshore areas in the North and Northwest of the country in the Sinú-San Jacinto, Llanos Orientales and Medio Valle del Magdalena basins on an open basis and adding areas in the Caguan-Putamayo basin in 2018, with the number of areas available for exploration potentially rising from 20 to 40. 

The country's current production level is in the region of 706,000 barrels per day (bpd). While that is considerably below its 2015 peak of 1.005 million bpd, more barrels are imminent over the medium term. That's all for the moment folks! Keep reading, keep it crude!

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© Gaurav Sharma 2017. Photo: Oil tankers in the Persian Gulf off Musandam Peninsula, Oman © Gaurav Sharma 2013.

Sunday, July 09, 2017

Time for Istanbul and WPC 22

The Oilholic has arrived in Istanbul, Turkey for 22nd World Petroleum Congress, with the 2017 edition being this blogger’s third. 

Oh how time flies! Many in the industry must be wondering the same – from Doha (2011) to Moscow (2014) to Istanbul in 2017, the price of crude, using Brent as a benchmark, has fallen considerably, even if it was not a steady downward trajectory.

In 2011, the industry was looking at three-figure prices following a recovery from the global financial crisis. In 2014, the signs of an oil price slump were visible and in here in Istanbul we see it crudely languishing in the $40s despite an OPEC production cut - of 1.8 million barrels per day - in concert with 10 non-OPEC players, at least on paper, and in place until March 2018.

With customary aplomb over 6,000 delegates are expected at the industry’s premier jamboree with 500 chief executive officers, 50 ministers and around 25,000 visitors for the World Petroleum Exhibition; one of the largest strategic oil and gas expos in the world.

Over coming days we can expect to hear from the bosses of Shell, BP, Total, ExxonMobil, Chevron and many more, and ministerial soundbites from India to Iran, Kuwait to Russia and then some. Watch this space, but that’s all from Istanbul for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2017. Photo: Istanbul Congress Center, venue of the 22nd World Petroleum Congress © Gaurav Sharma 2017.

Thursday, May 25, 2017

No surprises! OPEC & non-OPEC cuts rolled over for 9 months


If you were secretly hoping for a surprise at the 172nd OPEC ministers' meeting, consider your hopes dashed, as things went perfectly according to script.

Except of course Equatorial Guinea became the 14th member of OPEC out of the blue, and with little prior intimation to half of the world's press. 

That meant 24 oil producers - including 10 non-OPEC nations led by Russia, and 14 OPEC participants headed by kingpin Saudi Arabia - rolled over their 1.8 million barrels per day (bpd) output cut to March 2018. 

Libya and Nigeria were exempt, Iran will be given some leeway, and Russia reaffirmed it was sticking to its 300,000 bpd pledge; the largest non-OPEC output cut of its kind on paper. (Here's the full IBTimes UK report). 

Big question is where from here? If Saudi Oil Minister Khalid Al-Falih is to be believed, this is all about rebalancing the market back to its five-year average. Problem here is that a buffer producer in the shape of the US keeps plugging away with some predicting its output to touch 10 million bpd in 2018. 

Were that to be the case, is OPEC not in effect subsidising shale players? Thrice yours truly asked Al-Falih whether that was the case, and thrice the question was ignored. The Oilholic is not convinced the extension of this cut would provide short-term support to the oil price that some are hoping for. 

In fact the initial response of the market has been something of a mini selloff, as many were hoping the cuts would either be deepened or be extended by 12 months. Nether happened, but the market got plenty of food for thought. That's all from Vienna in this instance folks. More when the Oilholic can make a more considered assessment and has gathered his thoughts. Till then, keep reading, keep it crude!

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© Gaurav Sharma 2017. Exterior of OPEC Secretariat, Vienna, Austria © Gaurav Sharma 2017. 

Two summits, one 'crude' venue

Holy mackerel! Was there an almighty crush, or was there an almighty crush getting into Helferstorferstrasse 17 this morning. 

So many scribes and analysts, or in the case of yours truly, those who wear both hats, trying to get in before the whole jamboree began. 

Not bad for a place struggling to get this crude world's attention, according to some, to attract so many people. Of course, it’s not a regular occurrence that non-OPEC Russia’s Energy Minister and the Saudi Energy Minister hold a joint press conference after an OPEC ministers’ meeting ends; that's exactly what is on the agenda today. In the morning we’ll have the OPEC ministers’ meeting and then in the afternoon, we will have the OPEC and non-OPEC ministers’ meeting.

So here's to more than 150 of us all trying to get that elusive crude exclusive, including, if the Oilholic may add, quite a few Russian journalists here to cover the 2nd OPEC and non-OPEC ministers meeting after the 172nd OPEC meeting ends. 

And if you were in any doubt whether or not, its a done deal here, Saudi Oil Minister Khalid Al-Falih has said Opec's plan was to "stay steady" and go through the next nine months of oil production cuts. (Here's the full report). 

"The drawdown of inventories has clearly begun. OPEC and non-OPEC producers will work to bring inventories down to 5-year averages," Al-Falih added, saying he looks forward to working with non-OPEC colleagues.

That's all from Vienna, for the moment folks! More shortly! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2017. Photo: Media Scrums at OPEC Secretariat, Vienna, Austria © Gaurav Sharma 2017. 

Sunday, December 25, 2016

Merry Christmas & a few crude notes!

Yes! Its that time of the year to wish you the dear readers of this blog the joys of the season and a very Merry Christmas, as another eventful year comes to a close. The Oilholic has been busy these past few weeks scribbling one's crude notes on oil market affairs for the International Business Times UK and Forbes

For starters, here is this blogger's take on US President-elect Donald Trump's nomination of ExxonMobil CEO Rex Tillerson as his Secretary of State

When the news emerged, as usual there were oversimplifications in the media, saying the nomination had much to do with Tillerson being close to Russian President Vladimir Putin. However, the Oilholic believes there's much more to the appointment; Tillerson for intents and purposes would be a formidable top US diplomat, not just Putin's mate. 

Additionally, here is one's commodities market year-ender, and some predictions on gold, silver and of course crude oil for 2017. Finally, here are some reasons - as outlined on Forbes - for why methinks the oil price might not rise further beyond $60 per barrel in 2017, as there is limited upside to such an an occurrence over the next 12 months. 

That's all on Christmas day folks! Keep reading, keep it Christmasy and 'crude'!

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© Gaurav Sharma 2016. Photo: Christmas tree at Rotterdam Station, The Netherlands © Gaurav Sharma.

Monday, November 12, 2012

A brilliant catalogue of ‘crude’ expressions

As paper barrels increasingly get the upper hand in an intertwined global network of crude oil and distillates trading, whether it is the virtual crude you are after or the physical stuff – getting a hang of the market jargon is crucial.
 
Perhaps you are familiar with terms such as contango, backwardation or crack spreads – as many readers of this blog would be. But can you confidently define what a PIONA test is? Or for that matter what’s a No. 6 Fueloil? Or maybe what demulsibility implies to in a crude context or what are charter parties?
 
If you are stumped or curious or unsure or perhaps all three, then – The Oil Traders’ Word(s) – a brilliant compendium of ‘crude’ knowledge containing oil traders’ expressions, trading floor jargon, measurements, metrics and terms put together by Statoil executive Stefan Van Woenzel is just the tonic!
 
In a painstaking endeavour, Van Woenzel has penned the A to Z of oil trading jargon banking on his decades of experience as a trader. In order to put the veracity of his research work to test, the Oilholic subjected The Oil Traders’ Word(s) to a simple test. To begin with yours truly tallied common oil trading expressions to check the author’s description of them, then on to terms that only readers with a mid to high level of investment knowledge would be familiar with and finally to random jump searches by alphabet.
 
The Oilholic is delighted to say that Van Woenzel’s ‘glossary-plus’ emerges with full marks and more on all counts. Expressions, words and jargon aside, metric to imperial measures and explanatory notes make this work of just under 550 pages one of the most purposeful reference books of the oil sector. With close to 2,000 definitions, one would struggle to find a better or even a comparable product to the author’s arduous effort.

This book is not limited to a role of a ‘crude’ dictionary or an industry communications guide. Going beyond that, Van Woenzel has shared his two decades-plus worth of industry wisdom with readers in a separate chapter. Overall, it was a joy to read the book and put the glossary to a very enjoyable test. A multibillion dollar industry must appreciate the value of the author’s commendable research.
 
For his humble part, the Oilholic would be happy to recommend it to fellow ‘crude’ individuals, oil & gas executives, oil traders, energy project financiers, shipping personnel, banking sector professionals, energy journalists and academics. Students of economics, business and energy studies might also find it worth their while to have it handy. If you needed a one-stop oil industry jargon guide, then this book really is the ‘real deal’.
 
© Gaurav Sharma 2012. Photo: Front Cover – The Oil Traders' Word(s) © AuthorHouse.

Monday, September 17, 2012

On Brent's direction, OPEC, China & more

Several conversations last week with contacts in the trading community, either side of the pond, seem to point to a market consensus that this summer’s rally in the price of Brent and other waterborne crudes was largely driven by geopolitical concerns. Tight North Sea supply scenarios in September owing to planned maintenance issues, the nagging question of Iran versus Israel and Syrian conflict continue to prop-up the so called ‘risk premium’; a sentiment always difficult to quantify but omnipresent in a volatile geopolitically sensitive climate.
 
However, prior to the announcement of the US Federal Reserve’s economic stimulus measures, contacts at BofAML, Lloyds, Sucden Financial, Société Générale and Barclays seemed to opine that the current Brent prices are nearing the top of their projected trading range. Then of course last Thursday, following the actual announcement of the Fed’s plan – to buy and keep buying US$40 billion in mortgage-backed securities every month until the US job market improves – Brent settled 0.7% higher or 78 cents more at US$116.66 per barrel.
 
Unsurprisingly, the move did briefly send the WTI forward month futures contract above the US$100 per barrel mark before settling around US$99 on the NYMEX; its highest close since May 4. But reverting back to Brent, as North Sea supply increases after September maintenance and refinery crude demand witnesses a seasonal drop, the benchmark is likely to slide back downwards. So for Q4 2012 and for 2013 as a whole, Société Générale forecasts prices at US$103. Compared to previous projections, the outlook has been revised up by US$6 for Q4 2012 and by US$3 for 2013 by the French investment back.
 
Since geopolitical concerns in the Middle East are not going to die down anytime soon, many traders regard the risk premium to be neutral through 2013. That seems fair, but what of OPEC production and what soundbites are we likely to get in Vienna in December? Following on from the Oilholic’s visit to the UAE, there is more than just anecdotal evidence that OPEC doves have begun to cut production (See chart above left, click to enlarge).
 
Société Générale analyst Mike Wittner believes OPEC production cuts will continue with the Saudis joining in as well. This would result in a more balanced market, especially for OECD inventories. “Furthermore, moderate demand growth, led – as usual – by emerging markets, should be roughly matched by non-OPEC supply growth, driven by the US and Canada,” Wittner added.
 
Of course, the soundbite of last week on a supply and demand discussion came from none other than the inimitable T. Boone Pickens; albeit in an American context. The veteran oilman and founder of investment firm BP Capital told CNBC that the US has the natural resources to stop importing OPEC crude oil one fine day.
 
Pickens noted that there were 30 US states producing oil and gas; the highest country has ever had. In a Presidential election year, he also took a swipe at politicians saying neither Democrats nor Republicans had shown “leadership” on the issue of energy independence.
 
At the Democratic convention the week before, President Obama boasted that the US had already cut imported oil by one million barrels per day (bpd). However, Pickens said this had little to do with any specific Obama policy and the Oilholic concurs. As Pickens explained, “The economy is poorer and that will get you less imports. You can cut imports further if the economy gets worse.”
 
He also said the US should build the Keystone XL oil pipeline, currently blocked by the Obama administration, to help bring more oil in to the country from Canada. Meanwhile, US Defense Secretary Leon Panetta is in Japan and China to calm tempers on both sides following a face-off in the East China Sea. On Friday, six Chinese surveillance ships briefly entered waters around the Senkaku Islands claimed by Japan, China and Taiwan.
 
After a stand-off with the Japanese Coastguard, the Chinese vessels left but not before the tension level escalated a step or two. The Chinese reacted after Japan sealed a deal to buy three of the islands with resource-rich waters in proximity of the Chunxiao offshore gas field. Broadcaster NHK said the stand-off lasted 90 minutes, something which was confirmed over the weekend by Beijing.
 
With more than just fish at stake and China’s aggressive stance in other maritime disputes over resource-rich waters of the East and South China Sea(s), Panetta has called for “cooler heads to prevail.”
 
Meanwhile some cooler heads in Chinese boardrooms signalled their intent as proactive players in the M&A market by spending close to US$63.1 billion in transactions last year according a new report published by international law firm Squire Sanders. It notes that among the various target sectors for the Chinese, energy & resources with 30% of deal volume and 70% of deal value and chemicals & industrials sectors with 21% of deal volume and 11% of deal value dominated the 2011 data (See pie-chart - courtesy Squire Sanders - above, click to enlarge). In deal value terms, the law firm found that North America dominates as a target market (with a share of 35%) for the Chinese, with oil & gas companies the biggest attraction. However, in volume terms, Western Europe was the top target market with almost a third (29%) of all deals in 2011, and with industrials & chemicals companies being the biggest focus for number of deals (29%) but second to energy & resources in value (at 18% compared to 61%).
 
Big-ticket acquisitions by Chinese buyers were also overwhelmingly concentrated in the energy & resources industries where larger transactions tend to predominate. Sinopec, the country’s largest refiner, brokered a string of the largest transactions. These include the acquisition of a 30% stake in Petrogal Brasil for US$4.8 billion in November last year, a US$2.8 billion deal for Canada's Daylight Energy and the 33.3% stake in five oil & gas projects of Devon Energy for US$2.5 billion.
 
Squire Sanders notes that Sinopec, among other Chinese outbound buyers, often acquires minority stake purchases or assets, in a strategy that allows it to reduce risks and gain familiarity with a given market. This also reduces the likelihood of any political backlash which has been witnessed on some past deals such as CNOOC’s hostile bid for US-based oil & gas producer Unocal in 2005, which was subsequently withdrawn.
 
Since then, CNOOC has found many willing vendors elsewhere. For instance, in July this year, the company announced the US$17.7 billion acquisition of Canadian firm Nexen. To win the deal, which is still pending Ottawa’s approval, CNOOC courted Nexen, offering shareholders a 15.8% premium on the price shares had traded the previous month.
 
Squire Sanders’ Hong Kong-based partner Mao Tong believes clues about direction of Chinese investment may well be found in the Government’s 12th five-year plan (2011-2015).
 
“It lays emphasis on new energy resources, so the need for the technology and know-how to exploit China’s deep shale gas reserves will maintain the country’s interest in US and Canadian companies which are acknowledged leaders in this area,” Tong said at the launch of the report.
 
Away from Chinese moves, Petrobras announced last week that it had commenced production at the Chinook field in the Gulf of Mexico having drilled and completed a well nearly five miles deep. The Cascade-Chinook development is the first in the Gulf of Mexico to prospect for offshore oil using a floating, production, storage and offloading vessel instead of traditional oil platforms.
 
Finally, after the forced nationalisation of YPF in April, the Argentine government and Chevron inked a memorandum of understanding on Friday to explore unconventional energy opportunities. Local media reports also suggest that YPF has reached out to Russia's Gazprom as well since its nationalisation in a quest for new investors after having squeezed Spain’s Repsol out of its stake in YPF.
 
In response, the previous owner of YPF said it would take legal action against the move. A Repsol spokesperson said, “We do not plan to let third parties benefit from illegally confiscated assets. Our legal teams are already studying the agreement."
 
Neither Chevron nor YPF have commented on possible legal action from Repsol. That’s all for the moment folks. Keep reading, keep it ‘crude’!
 
© Gaurav Sharma 2012. Graph: OPEC Production 2010-2012 © Société Générale CIB 2012. Chart: Chinese M&A activity per sector by deal valuation and volumes © Squire Sanders.