Showing posts with label Rafael Ramirez. Show all posts
Showing posts with label Rafael Ramirez. Show all posts

Wednesday, November 26, 2014

OPEC grapples with a buyers’ market

It’s been a long six months between OPEC meetings with the oil price slipping almost 35% since June and the organisation's own average monthly basket price of 12 crude oils dropping 29%

Returning to Vienna for the 166th OPEC Meeting of ministers, the Oilholic finds his hosts in a confused state. It’s not only a case of “will or won’t” OPEC cut production, but also one of “should or shouldn’t” it cut.

As yours truly wrote in his regular quip for Forbes – the buyers’ market that we are seeing is all about market share. That matters way more than anything else at the moment. Of course, not all of OPEC’s 12 member nations are thinking that way at a time of reduced clout in wake of rising non-OPEC production and the US importing less courtesy of its shale bonanza. For some, namely Iran, Venezuela and Nigeria – the recent dip is wreaking havoc in terms of fiscal breakevens.

For them, something needs to be done here and now to prop up the price with a lot of hush-hush around the place about why a cut of 1 million barrels per day (bpd) would be just the ticket. Yet there are others, including Kuwait, UAE and Saudi Arabia who realise the importance of maintaining market share as they can afford to.

Just listen to the soundbites provided by Saudi oil minister Ali Al-Naimi. The current problem of “oversupply is not unique” as the market has the capacity to stabilise “eventually”, he’s said again and again in Vienna, ahead of the meeting over umpteen briefings since Monday. And if the Saudis don’t want a cut, it’s not going to happen.

Secondly, as this blogger has said time and again from OPEC – in the absence of publication of individual quotas, even if a cut materialises how will we know it’ll not be flouted as has often been the case in the past? In fact, it’ll be pretty obvious within a month who is or isn’t sticking to it and then the whole thing unravels. Perhaps enforcing stricter adherence would be a good starting point!

Finally, only for the second time in all of one’s years of coming to OPEC have there been so many external briefings by all parties concerned and that number of journalists attending the ministers' summit.

To put things into perspective, while the Oilholic has been here for every OPEC meeting since 2007, more than twice the usual number of analysts and journalists have turned up today indicative of the level of interest. I think the extraordinary meeting in 2008 was the last time such a number popped into town.

All were duly provided with plenty of fodder to begin with as Saudi Arabia met with Russia, Venezuela, and Mexico to “discuss the oil market” and establish a “mechanism for cooperation” to cite Venezuelan oil minister Rafael Ramirez.

While everyone talked the talk, no one walked the walk with the mini meeting ending in zero agreement. It’d be fair to say the Saudis have kept everyone guessing since but Russian Energy Minister Alexander Novak expressed scepticism whether OPEC would cut production from its stated 30 million bpd level. 

On the sidelines are plenty of interesting headlines and thoughts away from the usual “oil price falls to” this or that level “since 2010”. Some interesting ones include – French investigation of Total’s dealings in Iran is still on says the FT, Reuters carries an exclusive on the chaos over who’ll represent Libya at OPEC, why Transportation ETFs are loving cheap oil explains ETF Trends, Bloomberg BusinessWeek says Iran is still pitching the 1 million bpd cut idea around and after ages (ok a good few years) the BBC is interested in OPEC again.

Additionally, IHS says US production remains healthy while Alberta's Premier says falling oil prices won't cause oil sands shutdowns. That’s all from Vienna for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2014. Photo: OPEC signage at headquarters in Vienna, Austria © Gaurav Sharma

Wednesday, December 12, 2012

Initial soundbites before things kick-off at OPEC

The delegates and ministers have walked in, the press scrum (or should you choose the term g*ng b*ng) is over and the closed door meeting has begun – all ahead of a decision on production quotas and the possible appointment of a new secretary general.

Smart money is on OPEC maintaining output at its current level of 30 million barrels per day (bpd), with the Saudis curbing their breaches of set quotas and the cartel reporting a real terms cut in November. No one smart would put money on who the new OPEC Secretary General might be.

But before that, there are as usual some leaks here and some soundbites there to contend with. These generally nudge analysts and journalists alike in the general direction of what the decision might be. Arriving in Vienna ahead of the meeting, Saudi Arabia’s oil minister Ali al-Naimi, the key man at the table, shunned the international media to begin with and chose to issue a statement via his country’s national press agency.

In his statement, Naimi said the main aim of the December 12 meeting is to keep the balance of the global crude markets in order to serve the interests of producers and consumers. He added that balancing the market will help the growth of the global economy. Since then, he has maintained the same line in exchanges with journalists.

As expected, the Iranians feel a cut in production was needed, saying their fellow members are producing 1 million bpd more than they ought to be. Iran said OPEC’s statement last month, that economic weakness in some major consuming countries could shave off 20% from its global demand growth outlook for 2013, lends credence to their claim. However, a delegate admitted there was "little need to change anything" and that the current US$100-plus OPEC basket price was "ok."

Walking in to OPEC HQ, UAE Energy Minister Mohammad bin Dhaen al-Hamli told the Oilholic that he "hopes to solve" the issue of who will be the next Secretary General. Libya's new oil minister Abdelbari al-Arusi, said he was "happy with OPEC production levels.”

Meanwhile, two key men are not in Vienna – namely Kuwait’s oil minister Hani Abdulaziz Hussein and Venezuela’s Rafael Ramirez. According to a Venezuelan scribe, the latter has sent Bernard Mommer, the OPEC representative for Venezuela’s oil ministry, in his place so he could support President Hugo Chavez, who is undergoing cancer surgery in Cuba. Ramirez added that Venezuela did not believe it was necessary for OPEC to increase production quotas and that the market was “sufficiently” supplied.

Finally, in his opening address, Iraqi oil minister and president of the conference Abdul-Kareem Luaibi Bahedh said OPEC faces a period of continuing uncertainty about the oil market outlook. "To a great extent, this reflects the lack of a clear vision on the economic front. The global economy has experienced a persistent deceleration since the beginning of the year...In the light of this, world oil demand growth forecasts for this year have been revised down frequently," he added.

Turning to the oil price, he said it had strengthened in the six months since June. "For its part, OPEC continues to do what it can to achieve and maintain a stable oil market...However, this is not the responsibility of OPEC alone. If we all wish to benefit from a more orderly oil market, then we should all be prepared to contribute to it. This includes consumers, non-OPEC producers, oil companies and investors, in the true spirit of dialogue and cooperation," said the Iraqi oil minister.

Meanwhile, as a footnote, the IEA raised its projections for non-OPEC supply in 2013 in its Monthly Oil Market Report published on December 12. The agency said global oil production increased by 730,000 bpd to 91.6 million bpd in November. With non-OPEC production rebounding "strongly" in November to 54.0 million bpd, the IEA revised up its forecasts for non-OPEC fourth quarter supply by 30,000 bpd to 53.8 million bpd. For next year, IEA expects non-OPEC production to rise to 54.2 million bpd; the fastest pace since 2010.

It also added that OPEC supply rose by "a marginal" 75,000 bpd to "31.22 million bpd". IEA said the OPEC crude supply increases were led by Saudi Arabia, Angola, Algeria and Libya but offset by recent production problems in Nigeria. Keep reading, keep it 'crude'!

© Gaurav Sharma 2012. Photo:  OPEC briefing room at 162nd meeting of OPEC, Vienna, Austria © Gaurav Sharma, December 2012.

Wednesday, June 13, 2012

OPEC hawks are back in town (too)!

So the crude games have begun, the camera crews have begun arriving and the Saudis have begun throwing down the gauntlet by first suggesting that OPEC actually raise its output and then indicating that they might well be happy with the current production cap at 30 million bpd. However, hawks demanding a cut in production are also in Vienna in full flow.

With benchmark crude futures dipping below US$100, the Venezuelans say they are “concerned” about fellow members violating the agreed production ceiling. In fact, Venezuelan President Hugo Chavez expressed his sentiments directly over the air-waves rather than leave it to his trusted minister at the OPEC table - Rafael Ramirez.

For his part, on arrival in Vienna, Ramirez said, “We are going to make a very strong call in the meeting that the countries that are over-producing cut. We think we need to keep the ceiling on production of 30 million that was agreed at our last meeting in December."

Iraq's Abdul Kareem Luaibi, told a media scrum that a “surplus in OPEC supplies” exists which has led to “this severe decline in prices in a very short time span.” Grumblings also appear to be coming from the Algerian camp, while the Kuwaitis described the market conditions as “strange.”

Speaking to reporters on Monday, Kuwait’s Oil Minister Hani Hussein said, “Some of OPEC members are concerned about the prices and what’s happening…about what direction prices are taking and production.”

However, Hussein refused to be drawn into a discussion over a proposed OPEC production cut by the hawks.

Meanwhile, one cartel member with most to fear from a dip in the crude price – Iran – has also unsurprisingly called for an adherence to the OPEC production quota. Stunted by US and EU sanctions, it has seen its production drop to 3 million bpd - the lowest in eight quarters. Much to its chagrin, regional geopolitical rival Saudi Arabia has lifted its global supply to make-up the absence of Iranian crude in certain global markets.

At the cartel’s last meeting in December, OPEC members agreed to hold ‘official’ output at 30 million bpd. Yet, extra unofficial production came from Saudi Arabia, Iraq and Kuwait. Say what you will, the Oilholic is firmly in the camp that a reintroduction of individual OPEC quotas to help the cartel control its members’ production is highly unlikely. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo: Broadcast media assembly point outside OPEC HQ, Vienna, Austria © Gaurav Sharma 2011.

Thursday, October 14, 2010

OPEC’s Own Version of He Said, She Said…

Over each of last three years, in the run-up to the cartel's meeting, OPEC Secretary Secretary General Abdalla Salem El-Badri has tended not to give very much away. However, the 157th summit seems to be different; for over the last 6-12 months El-Badri has often stated that OPEC is comfortable with the crude oil price. In fact, he gave quite candid comments in June.

That said the price has remained in the circa of US$75 to US$85 per barrel and is heading higher as the US dollar has weakened in recent weeks. So El-Badri should indeed be comfortable with it.

But of course, no OPEC summit is complete with a bit of the old 'he said, she said'. The most important “he” in question is the Saudi oil minister Ali Al-Naimi who plainly told a media scrum here in Vienna on Wednesday that, and I quote, "Everyone" is happy with the market. To the market that reads like a coded signal he is against increasing output.

The only "she" on the table is of course Nigeria's petroleum minister - Diezani Kogbeni Alison-Madueke – who said OPEC (as always) will be looking at overproduction and non-adherence to quotas, at "this particular conference."

Sheikh Ahmed al-Abdullah al-Sabah of Kuwait when asked how the price of crude was at the moment, gave a short and sweet reply. Quite simply, he noted that, “It’s good.” Concurrently, Venezuelan Energy and Oil Minister Rafael Ramirez told a local TV network that "all" his colleagues agree they should leave the level of production stable.

Since arriving in Vienna, based on the 'he said, she said' rounds, I have had a jolly good natter with eight analysts here and a further three in London. All 11, as well as those at Société Générale expect a rollover in OPEC quotas and no change to actual output.

Finally as the forward month ICE Brent crude contract bounced to the stop-loss at US$84.55, analysts at Société Générale also believe a further range bound market is possible. "According to OPEC, the recent price rally does not reflect oil fundamentals (and we agree)," they wrote in an investment note.

© Gaurav Sharma 2010. Photo: © Shell