ADIPEC Day II: Oil & Gas 4.0 sessions & more

Day two of ADIPEC 2019 has just concluded in Abu Dhabi, UAE and as expected it was another action packed one with half a dozen CEOs, dignitaries and ministers in town. As part of the proceedings, the Oilholic moderated a downstream panel under the event's Oil and Gas 4.0 strategic dialogues programme.

The subject under discussion - Sustaining industry momentum in downstream: how will companies build an agile and resilient business model capable of withstanding the inevitable cyclical highs and lows in the years ahead? 

The panel included Abdulaziz Alhajri, Executive Director Downstream Directorate at ADNOC, Thomas Gangl, Chief Downstream Operations Officer at OMV, Philippe Boisseau, CEO of CEPSA, François Good, Senior Vice President Refining & Petrochemicals Orient at Total and Catherine MacGregor, CEO-elect at TechnipFMC. 

The panelists touched on a host of slants under the topic including the crucial issue of long-term objectives underpinned by technology, corporate patience on the return on investment front, tech-enabled throughput improvements and the need to invest in talent, not just hardware and software. 

Of course, lurking around ADIPEC corridors is the subject of the oil price direction and what OPEC will or won't do when it meets in Vienna, Austria on December 5-6, 2019. Here is one's take via Forbes, with soundbites and analysis aplenty, and the central conclusion that OPEC is damned if it cuts production or rolls existing cuts over further, and damned if it opens the taps. 

Away from the oil price and to the exhibition floor where industry vendors made deal announcements with customary aplomb. ABB announced it had won a project to install its extended automation system at a greenfield pilot plant for SABIC in Jubail, Saudi Arabia, supporting the Saudi company's broader vision to digitalise its operations. 

Under the contract, ABB's Ability System will apply integrated automation, control and safety solutions to the company's Utilities Park and Pilot project. The park is part of the SABIC Technology Centre (STC), which marks the company’s biggest global investment in innovation, and the largest of its 21 technology centers worldwide.

Not to be outdone, Honeywell Process Solutions (HPS), the global software industrials' automation unit, announced that Kuwait Integrated Petroleum Industries Company (KIPIC) has selected it as the main automation contractor for its new Petrochemicals and Refinery Integration Al Zour Project (PRIZe). 

Under the agreement, HPS will provide KIPIC with front-end engineering design and advanced process control technology for the complex, which will help KIPIC expedite production start-up and assist with reaching production targets faster and more efficiently. 

The PRIZe project will become the first integrated refining and petrochemicals complex in Kuwait.

The new facility – developed as part of the Al-Zour Complex – will significantly enhance Kuwait’s domestic petrochemicals, aromatics and gasoline manufacturing capabilities.

Customarily, neither ABB nor Honeywell provided any details on financials of the contract in a fiercely competitive industry in which demand for Industry 4.0 solutions is growing by the minute. Finally, out on the exhibition floor, this blogger spotted another hydrogen powered

Toyota Mirai, this time at Saudi Aramco's stand, following one yesterday at Shell's stand.

What do you know - an IOC and a NOC flagging an alternative fuel - now the Oilholic has really seen it all. 

That's all for the moment folks, more from here over the coming days  as the event gathers further momentum. Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2019. Photo I: Gaurav Sharma (left) at ADIPEC 2019 Oil and Gas 4.0 strategic dialogue in Abu Dhabi, UAE © DMG Events. Photo II &III: Toyota Mirai cars at ADIPEC 2019 exhibition © Gaurav Sharma 2019. 

ADIPEC Day I: Oil & Gas 4.0, efficiencies & VIPs

The Oilholic finds himself in the UAE for the 2019 Abu Dhabi International Petroleum Exhibition & Conference (ADIPEC), rounding up day one of the global event with more than a packed agenda to report back.

Dr Sultan Ahmed Al Jaber, CEO of the Abu Dhabi National Oil Company (ANDOC) got things going on Monday noting how Industry 4.0 is creating a "paradigm shift in global growth and energy demand."

"Oil and gas will play, as an essential part of the broader energy mix, in enabling tomorrow’s global economy. We have to admit some realities - our industry is being disrupted by new technologies, new forms of energy, a new geopolitical order. This disruption is only beginning and will gather pace," he added. 

Rubbing shoulders with attendees, expected to number 150,000 over the next few days, were several VIPs both foreign and domestic, and day one included sessions with the OPEC Secretary General Mohammed Barkindo, Indian oil minister Dharmendra Pradhan, BP Boss Bob Dudley, Eni’s Claudio Descalzi, and Total’s Patrick Pouyanné to name a few.

And former US Secretary of State Condoleezza Rice told ADIPEC attendees the post World War II "established" economic model "is under strain [and] threat" from terrorism, cyber threats & global power rivalries. 

My takeaway from @CondoleezzaRice's #ADIPEC2019 keynote: Post World War II's "established" economic model “is under strain [and] threat” from terrorism, cyber threats & global power rivalries. Put that into perspective #oilandgas market participants! #OOTT @ADIPECOfficial pic.twitter.com/xMRTS13Xjd

— Gaurav Sharma (@The_Oilholic) November 11, 2019

Away from the VIPs, quite a bit of "Oil and Gas 4.0" kit was on display alongside hydrogen cars, automation equipment and analytics platforms for integrated asset management, interspersed with nuts, bolts and pipeline joints.

Finally, day one was also timed to coincide with the official launch of the Abu Dhabi oil futures, that sees ADNOC partner with exchange group ICE, major oil companies, refiners and trading house Vitol.

The idea is an ambitious one of establishing Murban – Abu Dhabi's signature crude – as a potential oil benchmark. Here is some background to the development from the Oxford Institute for Energy Studies. (MS Word Download here)

Elsewhere, at the ADIPEC Awards, BP's Dudley, who is due to retire as the oil and gas major's CEO next year, was awarded a lifetime achievement award for his commitment to the energy industry.

That's all for the moment folks, more from here over the coming days. The Oilholic will be moderating and speaking on days two and three as the event gathers further momentum. Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2019. Photo I: Exhibition Hall at ADIPEC 2019. Photo II: Drone on display at ADIPEC exhibition © Gaurav Sharma 2019. 

On Aramco IPO, OPEC & a Honeywell Interview

The last few weeks in the oil market have been dominated by two key topics. First off, the Saudi Aramco IPO that is finally happening, albeit not in the way and to the international scale it and much of the market wanted. Second development has been OPEC's keen awaited global oil outlook. 

Starting with Aramco, here is the Oilholic's take via Forbes, on what the likely valuation could be. That might well be substantially below the $2 trillion level Saudi Arabia's Crown Prince Mohammed Bin Salman craves. 

As for the OPEC report, the producers' group expects a flood of US shale barrels, with American production tipped to rise to 17 million barrels per day (bpd) by 2024. Here is one's report via Forbes. That'll make for an interesting OPEC ministers meeting on December 5/6 in Vienna. Will OPEC+ keep its 1.2 million bpd of production cuts going as its price support is nothing of the magnitude it hoped for, and shale players keep plugging on. 

Finally, here's The Oilholic's interview with Jason Urso, Chief Technology Officer at Honeywell Process Solutions, the global software industrials company's automation unit, for Rigzone. In it Urso says:"Our ideal recruits would be either sector specialists deeply familiar with software based technologies or software specialists with a deep interest in the energy sector." Well worth a read here. 

That's all for the moment folks. Next stop ADIPEC 2019, Nov 11-14 in Abu Dhabi, UAE. More from there soon. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019.

Two crude charts that say it all

We are nearly at the end of the third quarter of the current oil trading year and the Oilholic has two relevant charts for you. The first figure below (click images to enlarge), offers a glimpse into the OPEC Crude Basket of its member exporters' prices, and it is currently averaging just shy of $65 per barrel. 

The second figure tracks the Friday closing prices of oil benchmarks year to date, which points to the fact that oil futures, while volatile, are still oscillating in a fairly predictable range, unable to breach a $50 per barrel floor or meaningfully escape a $70 per barrel ceiling.

Figure I

Figure II

As this blogger has said before; oil prices remain range-bound and are going nowhere fast. Keep reading, keep it 'crude' folks!

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© Gaurav Sharma 2019. Charts: Figure I - Direction of OPEC's crude basket. Figure II - Friday closes of oil benchmark prices, year till Friday, 23 August, 2019  © Gaurav Sharma, August 2019

Various media missives on energy market

The last fortnight has just zipped by with so much going on in the energy market that the Oilholic did not get time to pen his thoughts here (apologies!). However, here are a plethora of thoughts for various publishing outfits on various energy related subjects. 

First off, despite all the geopolitical pressures, worries of an escalating trade war continues to be the dominant bearish sentiment in the market and could turn mildly bullish if resolved. So here are some thoughts on Forbes in defence of those with bearish oil price forecasts who some say are being complacent, alongside a note on the prospects of US Midstream stocks. 

And a take on why Formula E versus Formula 1 motorsports offer a microcosm of the tussle for human mobility. Away from Forbes here is yours truly's article on the Big Data tsunami that is heading the oil and gas industry's way via Rigzone.

Finally, here's a take on the cybersecurity challenge the energy industry faces on Energy Post (behind paywall). More on this mad, mad crude market soon. Keep reading, keep it 'crude'!

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© Gaurav Sharma 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.

Webcasting for ReachX & Trump's OPEC call

It's been quite a week in the oil market with Brent touching $75 per barrel for the first time in 2019, amid exaggerated long calls reminiscent of Q4 2018, and we all know how that ended. In this backdrop, the Oilholic did his first oil market webcast for independent financial platform ReachX.

The company is working to shake-up traditional financial market research and investment banking services via its technology platform. The idea was born out of creating an unbiased research, information and services hub fit for a post-MiFID II investment and operating environment, and the Oilholic has been involved in its progress since the summer of last year with co-founders Rafael S. Lajeunesse and Olivier Beau de Loménie.

The topic of the webcast was what's in store for the oil market in H2 2019, especially as the Oilholic believes the current set of market fundamentals suggest there's not much further for Brent to go than beyond $75 per barrel, and in fact it is likely to average towards the lower range of $70-75 per barrel this year.

Here's a recording of the webcast on YouTube, which has been converted into a podcast by the good folks at ReachX:

And should you wish to listen to it on SoundCloud; here's a link to that as well.

Away from the webcast, just as Brent hit $75, US President Donald Trump hit it. Ahead of a political rally, the President said he'd "called OPEC" and that oil prices were coming down. Cue a slide on that pretext in this Goldilocks Economy, where crude has little room to go further up. Here are the Oilholic's thoughts in more detail via a Forbes post. That's all for the moment folks, keep reading, keep it 'crude'!

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© Gaurav Sharma 2019.

Discussing Algeria’s 2019 oil & gas potential

In the wider context of the global oil and gas industry and that of the continent of Africa, OPEC member Algeria is right up there. In volume terms, it is the number one producer of natural gas in Africa, and among the top three when it comes to crude oil.

The oil and gas sector accounts for 20% of the country's GDP and bulk of its exports. But of late Algeria has faced production challenges, including a double-digit decline in oil production last year; something the government is looking to change. 

The need for investment is pressing, and courting foreign direct investment (FDI) in the current climate of a fairly high oil price range [~$65-75 per barrel] could be timely. To further FDI, the government is drafting a new hydrocarbon exploration law that is expected to be released in July 2019.

The idea is a simple one - make Algeria more competitive in terms of royalties and taxation, simplify licensing and bidding procedures, and most importantly reduce red-tape. How this all pans out would matter because from an outside-in perspective the country is still relatively underexplored with less than 25 wells per 10.000 square metres. 

This for a nation which has the tenth-largest proven reserves of natural gas and the third largest proven reserves of shale gas in the world. Not to mention the fact that it is also the sixth-largest natural gas exporter in the world.

With an objective of reconciling thoughts over global market permutations and ongoing developments in the Algerian oil and gas sector, the Oilholic is delighted to be speaking at the Algeria Oil & Gas Summit in Algiers, November 19-21, 2019, being organised by IN-VR Oil & Gas. 

Arbiters of the country’s potential are the National Agency for Hydrocarbon Resources Valorization (ALNAFT) and Hydrocarbons Regulatory Authority (ARH). The domestic exploration project partner, as mandated by law, is state-owned national oil company Sonatrach, which holds around 80% of total hydrocarbon production in Algeria, with International Oil Companies (IOCs) tapping the remainder. 

BP, Equinor, Eni and Total, are among the many IOCs looking to expand within Algeria. So at this fitting time there should be no shortage of talking points, and this blogger keenly awaits the summit. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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Being careful of what Hedge Funds wish for

So it is that OPEC has moved its ministers meeting, and the OPEC/non-OPEC from April 17/18 to June 25/26, but the Oilholic decided to come to the Austrian capital anyway given that other 'crude' meetings could not be moved, and because Vienna is lovely in the spring anyway!

While spring might be in the air in Vienna, a bit of craziness has surfaced in the Oil market trading sphere. Yet again, no sooner has Brent crossed $70, chatter of three-figure crude prices is again rearing its head. Here's the Oilholic warning from very recent history (via Forbes); and why caution is merited.

There is nothing on the horizon to be overtly bullish about the oil market – bearish variables (i.e. China, President Donald Trump's trade salvos, Brexit, German slowdown and changing consumption patterns haven't materially moved yet) and bullish quips based on geopolitics (i.e. Libya, Venezuela and Nigeria) matter but are being countered partially, if not wholly, with sentiment around rising US production.

Replicating a favourite pastime of the inimitable former Saudi Oil Minister Ali Al-Naimi, on this sunny day in Vienna - I could think of nothing better than a brisk walk down the city's Ring Road from the Intercontinental to Rathaus, before the flight home : ) pic.twitter.com/xyEn9IQd9F

— Gaurav Sharma (@The_Oilholic) April 19, 2019

Few in Vienna, think an oil price spike is on the cards, having had three days of deliberations over, let's face it more than three friendly beers. That sentiment is echoed by both heavy sour and light sweet physical traders the Oilholic has spoken to in Shanghai and Rotterdam. 

Not many believe OPEC wants three-figure prices; and even if they do, more light sweet American crude is hitting the market heading to Asia. Yours truly has long maintained that we are stuck in a boring oscillation between $60-80 per barrel prices; a predictability that hedge funds find boring for very different monetary reasons. Let's leave it at that!

As for OPEC, it is not going to move until Trump decides on if and what kind/level of waivers he is going to grant importers of Iranian crude or not. That and balancing Russia’s concerns are probably the primary reasons behind postponing its ministers' meeting. That's that from Vienna until June.

Interspersed between crude meetings, the Oilholic also found time for a mooch about Vienna's Ring Road on a sunny afternoon, starting from the Intercontinental Hotel to the Rathaus up to Karlskirche; partially replicating the past-time of Ali Al-Naimi, the inimitable former Saudi Oil Minister. Keep reading, keep it ‘crude’! 

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© Gaurav Sharma 2019. Photo © Gaurav Sharma, 2019

Another two 'crude' days at CERAWeek '19

Day II or Tuesday (March 12) of CERAWeek zipped by, Wednesday is about to come to a close here in Houston and there have been several discussion points. Where to start when penning thoughts on the last 48 hours - a lot of plaudits were won by BP boss Bob Dudley's dinner speech overnight on the evolving oil landscape. 

"Oil and gas majors need to recognise the world's low carbon future. They need to be progressive for society and pragmatic for investors," he noted to considerable applause.

Earlier on Tuesday, OPEC Secretary General Mohammed Barkindo took to briefing journalists and analysts. Key points made included being 'apolitical' on the Venezuelan situation and launching a polite but firm attack on efforts by US lawmakers to hit OPEC with antitrust action - dubbed the No Oil Producing and Exporting Cartels (NOPEC) Act. Here's yours truly's full report for Forbes. 

The UAE government envoys were also in town promoting their catchy 'Oil and Gas 4.0' drive ranging from investing in digital assets to upskilling and hiring, from AI to robotics. William Clay Ford Jr was around too telling CERAWeek when Ford's F-150 truck's electric version is available it'll be a "completely different animal" and also admitted he had a soft sport for the Mustang. 

On Wednesday (March 13), Centrica Group CEO Iain Conn said societal pressures, e.g. UK government's energy price cap, are eating into utilities sector's operating margins, and that (yes) natural gas will serve as a bridging fuel for decades. 

Away from Brexit chaos back home, he also noted: "While the energy market will not be materially disrupted by Brexit; UK energy consumers would be left worse off if a declining GBP contributes to higher domestic energy bills linked to global markets."

US Energy Secretary Rick Perry also turned up for his second successive CERAWeek making a wide range of points from sanctions on Venezuela to President Donald Trump's opposition to NordStream 2. 

.@SecretaryPerry at #CERAWeek: What is afoot in #Venezuela is 'inhumane' & 'unconscionable' and the US will use every economic tool available against the Maduro regime in support of the Venezuelan people #OOTT #oilandgas #CERAWeek2019 pic.twitter.com/g2bKzUBv5t

— Gaurav Sharma (@The_Oilholic) March 13, 2019

Finally, here is the Oilholic's take on what ExxonMobil's Marine Fuels business makes of the approaching IMO 2020 rule. Well that's all for the moment, more from Houston soon. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: BP CEO Bob Dudley addresses CERAWeek 2019 © Gaurav Sharma 2019.

IEA's take sets tone for CERAWeek 2019

The Oilholic is back in Houston Town for CERAWeek 2019 with talk of Saudi Arabia extending its oil export cuts to April, an OPEC summit due on April 17, and of course oil benchmarks still remaining largely range-bound.

The tone of the first day for IHS Markit's industry jamboree was set by the International Energy Agency's annual five-year market assessment. The agency's Executive Director Dr Fatih Birol, said here in Houston that there should be no doubt that a second wave of the US shale revolution was coming, with American production tipped to cap that of the Russians and the Saudis by 2024.

Later, speaking to the Oilholic, Birol said the agency's take does factor in rates of decline. Here's a full report for Forbes. There were loads of other catchy soundbites yours truly tweeted regularly from Day I of CERAWeek (welcome to follow here), but really Birol's words set the tone.

As for oil benchmarks; both Brent and WTI were down last week, and are up this week but haven't spiked in the strictest sense. For the Oilholic, Brent futures sentiment still isn't decisively bullish.

One reckons $64.50 per barrel support level is key over the coming weeks. If breached meaningfully, a drop to $60-62 likely; if held decisively an uptick to $70 might be on the horizon. But for all the kerfuffle oil futures are largely where they were 12 months ago stuck in a range-bound market. Here is one's pre-CERAWeek analysis in an interview with Victoria Scholar of IG Markets TV:

More from Houston soon! Keep reading, keep it crude!

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© Gaurav Sharma 2019. Photo: Dr Fatih Birol, Executive Director of International Energy Agency speaks at IHS Markit's CERAWeek 2019 conference.© Gaurav Sharma 2019. 

New avenues for 'crude' analysis

The Oilholic has had a hectic start to 2019 for sure, even though the crude market has behaved pretty predictably in January, having recovered ground it lost towards the end of 2019.

That's because yours truly has started providing insight on a regular basis to three more avenues alongside Forbes. These include The Energy Post and Energy Post Weekly, industry recruitment and insight portal Rigzone, and London-based financial start-up ReachX.

Here are a few snippets:

• Energy Post: Commentary on energy sector investment in blockchain - January 23, 2019 (Behind Paywall / Subscribers' login)
• Rigzone: Commentary on direction of the oil price in 2019 - January 28, 2019
• ReachX: Podcast with Paul Welch, CEO of North Africa focussed independent upstart SDX Energy - January 22, 2019

Plenty more to follow. But that's all for the moment folks! Keep reading, keep it crude!

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© Gaurav Sharma 2019. 

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. 

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. 

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

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.

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.

Three -7% crude slumps & a WEC engagement

As the Oilholic headed for a splash and dash visit to the familiar surroundings of Vienna on another early morning British Airways flight to the Austrian capital on Friday (November 23), one couldn't but help notice that yet another oil futures selloff was underway in Asia, with regional closing trends indicative of 2% declines. 

By the time this blogger landed at Vienna International Airport at half past noon, the decline had become more pronounced in European trading hours. And a few hours later in the US, the intraday rout was complete with both WTI and Brent front-month contracts registering declines of  tad over 7%. 

What is worth noting here is that the latest drop is the third such decline - not just in the quarter, or on the month, but in the short space of a mere 10 trading sessions. Overall, crude prices have slumped by 30% over the last 7 weeks; quite something given the amount of bullish nonsense that was on the airwaves prior to the slide. 

If this isn't a slump, what is? Especially, as Brent also slid below $60 per barrel. Not so long ago, the global proxy benchmark was approaching $85, leading to typical exaggerated market forecasts in some quarters that the benchmark would hit $100 over Q1 2019.

Those who never believed such predictions, including this blogger, and expressed a net-short position ought to feel vindicated. The froth has gone out of the market, and sentiment remains largely bearish. However, there is such a thing as an 'over-correction'. The Oilholic thinks the slide has been too steep, too fast because the macroeconomic dynamic on the supply side has not undergone a similar sentimental slump. 

The Trump-China face-off, global growth rate (which is steady but not quite firing up), possibility of European upheavals (Brexit, Italy, Greece, Spain, etc), and an unimpressive oil demand growth range of 1.1 to 1.4 million barrels per day (bpd), were all priced in when the WTI was lurking in the $60s and Brent in $70s.

That for the Oilholic was the optimal range/level for both contracts, before the so-called false prophets exaggerated the impact of Iranian sanctions slapped unilaterally by the US on Tehran. Hedge Funds and money managers then piled in, as they tend to with jumped up net-long calls, in the hope of extending the rally and Brent hit thoroughly unmerited $80+ intraday levels.

Therefore, when the initial correction hit, dragging Brent first down to $70, and subsequently below, it was merited. However, the Oilholic believes we are in an over-correction patch now. The market is in a real danger of swapping one extreme for another, and as usual the false prophets are it again, with some predicting a slump to $40 and below. The volatility of the last few weeks has delivered a classic lesson on why not to trust them.

Moving on from 'crude' rants, the Oilholic was delighted to speak at the World Energy Council's (WEC) Vienna Energy Summit, which is what the early morning departure from Heathrow and earlier than usual scrutiny of oil prices in East Asia - should you follow one on Twitter - was all about.

The summit addressed a number of crucial subjects, and gave due weight to the macroeconomic and sociopolitical climate beyond current and future permutations in the energy markets.

Fellow panellists and yours truly deliberated, Saudi Arabia's transformation (at least on paper) to renewable energy, impact of regulations on the oil price and world order, petro-yuan hypothesis, those inimitable Donald Trump tweets and diplomacy by social media, Iran sanctions and much more.

It was a great industry dialogue, and a pleasure finally connecting with Dr Robert Kobau, Secretary General of WEC Austria (above right). With so much ground to cover, the session just flew by and animated, good spirited discussions spilled over to the after event reception, as how industry dialogues should be. All the remains, is to say it's time for the big flying bus home! Keeping reading, keep it ‘crude’!

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© Gaurav Sharma 2018. Photo: Gaurav Sharma with Dr Robert Kobau, © Gaurav Sharma 2018.

The prospect of ‘OPEC-plus’ or ‘Super-OPEC’?

With the OPEC International seminar done, half of the world's scribes and analysts, including yours truly, have now descended on OPEC HQ for the 174th Oil Ministers Summit, and the chatter about altering the global crude market order is all the rage here.

Its been helped in no small part by UAE Oil Minister and current OPEC President Suhail Al Mazroui. Following hints from various OPEC member delegates at the seminar, in his opening remarks to the ministers summit, Al Mazroui said he wanted to "institutionalise" the alliance between 14 OPEC oil producers and 10 non-OPEC producers leading to the creation of a much bigger crude cabal. Full report on Forbes here. 

Well we had what's dubbed as 'R-OPEC' dominating discourse back in November when the Russians last arrived to shake hands with OPEC, and brought other non-OPEC producers along for the ride. So, what would this new creation be called? The Oilholic's preference is for 'OPEC-plus'; afterall the johnny-come-lately(s) can only be described as additions to a decades old organisation. 

Of course, for dramatic effect, some have suggested 'Super-OPEC'. Chances are – should it happen – that neither of the two would be adopted, and that a designated policy wonk would come up with some bland name with a catchy acronym. That's all from OPEC for the moment folks. More later in the day. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Graph: UAE Oil Minister and OPEC President Suhail Al Mazroui (third from left) speaks at 174th OPEC Ministers Meeting in Vienna, Austria © Gaurav Sharma 2018.