Monday, December 31, 2018

Year-end benchmark Friday closing levels chart

Here's how the 2018 oil market shaped up (click to enlarge chart below), and some thoughts on what OPEC's shale dilemma means for this crude world via Forbes (click here).


That's all for 2018 folks, lets see what 2019 brings. Keep reading, keep it 'crude'!

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Chart: 2018 Friday closing levels of oil benchmarks © Gaurav Sharma 2018. 

Wednesday, December 19, 2018

Moroccan promise: Emerging oil & gas market beckons

By any stretch of the imagination 2018 is coming to a very volatile end for the oil and gas markets. The month of November saw three declines of over 7% in a short space of 10 sessions, and the OPEC summit in December has (so far) failed to calm the market. Of course, oil and gas investment has never been about the here and now, but rather about the longer term. 

Wider market expectations are that oil, using Brent as benchmark, will continue to oscillate in the $50-70 per barrel range, while natural gas markets will benefit over the medium-term courtesy of the power sector's need for a bridging fuel in its inexorable march to a low-carbon future. Among investment hubs on the market's radar is Morocco. The country's Office of Hydrocarbons and Mining (ONHYM) is optimistic about oil and gas reserves both onshore and offshore. 

Furthermore, as a country of around 40 million people, Morocco is also a healthy energy consumption market that imports over 90% of its hydrocarbon needs. Align the two, and upstream and midstream opportunities become clearer. 

Unsurprisingly, as is often the case with nascent energy hubs, independent exploration and production (E&P) companies are leading the Upstream charge – including London-listed ones such as SDX Energy, Chariot Oil & Gas and Europa. That said majors such as Eni are also rubbing shoulders with the upstarts.   

With an aim of reconciling thoughts over global market permutations and ongoing developments in the Moroccan oil and gas sector, the Oilholic is delighted to be speaking at the 2nd Morocco Oil & Gas Summit in Marrakesh, February 6-7, 2019, being organised by IN-VR Oil & Gas

Holistically speaking, Rabat – given its eagerness to develop the domestic oil & gas industry – offers some some of the most cost competitive fiscal and commercial terms in the global market. ONHYM, which by Moroccan law is a partner in the licences usually via 25% general carried interest in phase one explorations, offers reliable partnerships and the operating climate is underpinned by a stable regulatory regime. 

During the exploration phase 100% of the costs are paid by the contractor without any reimbursement from ONHYM, while during the exploitation period the costs are shared between the parties in accordance with their participation interest in the production concession. There is no corporation tax for the first 10 years of production. Operators also benefit from solid infrastructure. 

Of particular significance is the ONHYM pipeline system with a total length of 213 km in the Gharb basin and 160 Km in the Essaouira Basin. Capacity increments have followed via a new pipeline project of 55 km in the region of Gharb. Overall, a destination to watch out for, and this blogger early awaits the summit. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2018. Photos: Royal Dutch Shell / IN-VR Oil & Gas

Tuesday, December 11, 2018

More composed 'crude' thoughts on Forbes

As promised post-OPEC, the Oilholic is putting forward some more composed crude thoughts, following the Non-OPEC and OPEC declaration of a 1.2 million barrels per day (bpd) oil production cut last week. 

Here they are via a Forbes piece. One's verdict - it won't be enough, even if further Iranian declines increase the cuts to 1.5 million bpd. There's always the issue of compliance and demand side pressures too. Crude oil benchmarks are not spiking anytime soon.

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© Gaurav Sharma 2018. 

Friday, December 07, 2018

OPEC/Non-OPEC cut at 1.2m bpd; Iran's smiling

In case you haven't heard dear readers, which the Oilholic doubts or you wouldn't be reading an oil market blog - OPEC has calmed the crude market with a 1.2 million barrels per day cut, in concert with 10 non-OPEC producers led by Russia.

Both Brent and WTI are up by over 4% at the time of writing, and Iran is smiling all the way to the bank having secured an "exemption" before US sanctions start biting more meaningfully. 

Will provide some more composed thoughts upon return to London from Vienna, as one has to scoot to the airport. That's all from Vienna folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018.  

OPEC's Friday numbers game

So here we are back again at Helferstorferstrasse 17 on Friday (December 7), for another packed room at the "5th OPEC and non-OPEC Ministerial Meeting." That's after having received no formal announcement on the level of OPEC cuts overnight at the "conclusion" of the 175th OPEC Ministers Meeting, and Saudi Oil Minister Khalid Al-Falih having told CNN a deal on a production cut may not materialise. 

The morning after extreme volatility in the oil markets, OPEC's numbers game continues. The latest that multiple sources seem to suggest is that OPEC is inclined to cut 650,000 barrels per day (bpd), and non-OPEC countries another 350,000 barrels per day, all tallying up to a possible 1 million bpd cut proposed overnight. 

Question is - will the market be convinced, especially if Iran and a few smaller members decline to participate? The Oilholic doesn't think so (and Iran continues to play hardball and the formal OPEC /non-OPEC meeting has not even begun yet @12:46 GMT). 

To support a $70 oil price, a 1 million bpd cut won't do, but may serve to de-risk a huge decline. Anything above that appears unlikely. We wait and see! More from Vienna soon. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: OPEC Media Briefing room, Vienna, Austria, December 2018 © Gaurav Sharma 2018

Thursday, December 06, 2018

No Show: OPEC press conference cancelled

In a rather unprecedented development of sorts, the 175th OPEC Summit's concluding press conference was cancelled, as member nations could not agree to er...a..concluding statement. 

Sources say Iran, and other members exempt from oil production cuts, were asked to participate in a proposed cut and declined to do so. 

Hence, the can got kicked down the road, and proceedings will resume on Friday (December 7). There is expected to be some sort of announcement after discussions with the Russians and 9 other non-OPEC producers. Things do remain on track for a 1 million barrels per day (bpd) cut, but its doubtful that would push the bears that far. 

The event is unprecedented in recent times, and only once in the past has OPEC failed to hold a concluding press conference. We've had one even at times of acrimony and differing positions between its members over the years. 

As for the market, WTI is down 4.86% to $50.32 per barrel, while Brent is at $58.88, down 4.35% following the development. Bit of a farce this is, but that's all from OPEC this evening. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: Empty podium at the 175th OPEC Meeting Press Conference, Vienna, Austria © Gaurav Sharma 2018.

OPEC's 'Crude' Basket & Last Friday's close

Two charts real quick while waiting for OPEC to make an announcement - (1) Direction of the OPEC price basket (including Qatar) and (2) Where the oil benchmarks ended last week (Friday, 30 November)! Let's see what the movement is like by the time this week is done! (Click to enlarge both charts)!




















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© Gaurav Sharma 2018. Graph 1: OPEC Crude Oil Price Basket (YTD December 2018), Graph 2: Friday benchmark closes to November 30, 2018 © Gaurav Sharma 2018.

First quips & intraday soundbites from OPEC 175


It's the usual manic start to the 175th OPEC Ministers' Meeting here in Vienna, Austria. For those unfamiliar with the drill, here we go - a long queue of analysts and journalists, the Oilholic included, waiting to get in, followed a long queue to go up to see the ministers in the summit's conference room, followed by a mad dash to see them, followed by a media gang b..., I, er media scrum, and the security chucking everyone out! True to form manic wires and tweets follow, and Thursday (6 December) was no different.

Here are some highlights from the Oilholic's attendance and questioning of ministers in two media scrums - that of Saudi Oil Minister Khalid Al-Falih and UAE Oil Minister and current OPEC President Suhail Al Mazrouei - embedded below via his twitter account:


Putting it altogether, some summary points:

1) The Saudis are still denying any discussions were held with the Americans with regard to oil production levels. 
2) Data suggests Riyadh is pumping in excess of 11 million barrels per day (bpd).
3) An OPEC cut of 1 million bpd is likely (which would be below market expectations). 
4) All rather mum and diplomatic about Qatar's decision to quit OPEC
5) Saudi Arabia wants "all" participants to contribute to cut, Iran is against it, while Libya and Nigeria are exempt from it (as things stand). 

More from Vienna soon! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: Start of the 175th OPEC Ministers' Meeting in Vienna, Austria on December 6, 2018 © Gaurav Sharma 2018. 

Wednesday, December 05, 2018

A ‘Qatarstrophe’, Saudi-Russian bromance & Tariff Man

The Oilholic arrived for visit number 25 to Vienna, Austria, for the 175th Meeting of OPEC Ministers on Wednesday (December 5) with a 'Qatarstrophe' in the background, rumblings over the Saudi-Russian oil market bromance, and of course US President Donald Trump declaring himself to be a ‘Tariff man’ after declaring a temporary truce with China.

The view in (see above left, click to enlarge) – of wind farms in the foreground and mountains in the background – on a clear Austrian day was quite a sight, and on the ground, yours truly's early morning flight from Heathrow (BA696) pulled up right next to Russian Oil Minister Alexander Novak's plane. Surely that's a 'crude' sign of things to come over the next few days.

Right, first to the Qatarstrophe, in case you haven’t heard – Qatar, which has been a member of OPEC since 1961, has decided to quit the cartel to "renew and redouble" its national focus on natural gas. Away from the official version, Doha feels cornered in a cartel that no longer serves its interests and is dominated by Saudi Arabia, a country that has slapped economic and diplomatic sanctions on it.

While Qatar's announcement created an intraday kerfuffle and a mini shock, it should hardly come as a surprise. Here is the Oilholic's detailed take on the development for Forbes. Unlike others, this blogger believes the development is not a fatal blow for OPEC, since members come and go, quit and rejoin. However, it is worth noting that Qatar is the first Middle Eastern member to quit, and Saudi Arabia and United Arab Emirates must shoulder much of the blame.

And there are other rumblings – many other OPEC member delegations are briefing in Vienna that they are not particularly impressed by the bonhomie (or more appropriately a crude bromance) between Saudi Arabia's oil minister Khalid Al-Falih and his Russian counterpart Alexander Novak; the two architects of the OPEC/non-OPEC production cut agreement, first inked in 2016. While others are voicing their concerns guardedly, Iran is doing so quite vocally. 

Finally, there's Tariff Man – a.k.a. US President Donald Trump, who has, well, made some peace with the Chinese, leading to a temporary suspension of trade hostilities. Parking trade wars to the side, he's been firing tweets at OPEC. Bring in the noise! More from Vienna soon, but that's all for the moment folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: View of Austrian landscape from BA696 to Vienna on December 5, 2018 © Gaurav Sharma 2018.