Showing posts with label Opec-Russia deal. Show all posts
Showing posts with label Opec-Russia deal. Show all posts

Friday, July 07, 2023

On crude demand & the OPEC seminar’s conclusion

On a calmer second and concluding day of the OPEC Seminar, participants and deliberators' thoughts moved away from obsessing about the oil price and market stability, to pragmatic discussions on a more just and equitable energy transition. And, of course, to the energy sustainability trilemma (sustainability, security and affordability) - i.e., how focusing on one aspect at the cost of the other could have - in the words of many participants - "disastrous" consequences.

Of course, many spokespersons representing developing world producers at the gathering felt they need no lectures from the developed nations; and had every right to tap into the wealth of their hydrocarbons to improve their economic fortunes. No doubt an emotive subject for many, especially since no one can convincingly call time on hydrocarbons anytime soon.

The way the Oilholic views it – human mobility, mainly ground transportation, is unquestionably and increasingly heading in the direction of electric mobility. However, there are no obvious solutions or substitutes for petrochemicals, for aviation, for heavy mining and industry, for the cosmetics value chain, and many other facets of the global economy. So renewable energy, and electric mobility are the low hanging fruits, but what and where next, and how fast? 

BP’s Boss Bernard Looney told the seminar: “Oil and natural gas will continue be a part of the world’s energy mix for several decades to come.” How then do you balance investments in hydrocarbons versus the capex involved in moving away from them, at what pace, and using what proportionalities?

For instance, as the United Arab Emirates' Energy Minister Suhail Al Mazrouei pointed out – current
global oil demand is north of 100 million barrels per day (bpd), and every year the energy industry needs to invest to prevent the depletion of around 8 million bpd.

OPEC puts the figure at $12.1 trillion to 2045 or $500 billion per year. Projection figures can vary from forecaster to forecaster. It's not the amount of money that’s the subject of the most heated debates both in Vienna and beyond, it’s what approach to take over the coming decades. For that there is neither a unified approach nor any sort of magic wand solution. And so the debate rages on, as it did at the OPEC Seminar, and as COP28 approaches with United Arab Emirates, a major hydrocarbon producer being the host nation (as were coincidentally the last two – Egypt and Scotland). So plenty to ponder over. 

And on that note, it’s time to bid goodbye to Vienna. Just before one takes your leave, here’s the Oilholic’s latest Forbes missive on how/why Saudi Arabia remains committed to unilateral cuts, and why the oil price isn’t quite firing up. More analysis to follow over the airwaves in the coming days on what was discussed here, but that’s all for now. Keep reading, keep it crude! 

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© Gaurav Sharma 2023. Photo © Gaurav Sharma, July 7, 2023.

Sunday, June 10, 2018

The oil price rally that wasn’t

We were led to believe that a $100 per barrel oil price was not a case of "if" but "when." Over April, and early on in May both Brent and WTI futures continued their upticks, primarily driven by hedge funds piling into the front end of the futures curve, and OPEC hinting at extending its production cut agreement.

Even six-month dated Brent contract's backwardation streak started to narrow, though it ultimately stayed in backwardation mode, as the Oilholic noted in a recent broadcast. And then it happened – information came out that the Saudis and Russians were no longer keen on extending the existing OPEC/non-OPEC production cut agreement, that has seen 1.8 million barrels per day (bpd) taken out of the global supply pool by 14 OPEC and 10 non-OPEC producers. 

Furthermore, if a Reuters exclusive is to be believed, the US demanded that OPEC production be raised by 1 million bpd. The same story also claimed that President Donald Trump's unilateral slapping of sanctions on Iran only came after the Saudis allegedly promised to raise their output. 

Sidestepping all of this, the Oilholic has always maintained that the barrels OPEC and non-OPEC producers took out of the market to – in their words "balance the market" – had to return to the global supply pool at some point. That was the real "when not if" situation for the market.  

As market sentiment on that happening has gained traction, the predictable result is a visible correction in the futures market with OPEC set to meet on 22 June. Meanwhile, the $100 price remains a pipedream, with both benchmarks still oscillating in a very predictable $60-80 range, only occasionally flattering to deceive with bullish overtones only to slide backwards (see graph above, click to enlarge). 

Away from the crude price, here are one's Forbes posts on US oil producers maintaining their efficiencies drive despite relatively higher oil prices and the UK-France Channel Tunnel operator's latest sustainability initiative of using ozone friendly refrigerants for cooling it landmark tunnel. 

Finally, it's a pleasure to have the Oilholic mentioned and recognised by third parties. These include Feedspot who recently featured this blog in their ‘Top 60 oil and gas blogs to follow’ section. It comes after industry data provider Drillinginfo flagged this blog in its roundup of '10 great oil & gas blogs to follow', as did penny stocks expert Peter Leeds, and US-based Delphian Ballistics. A big thank you to all of the aforementioned. That's all for the moment folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Graph: Friday closes of oil prices year to 8 June 2018 © Gaurav Sharma 2018.

Monday, March 05, 2018

The Fatih & Mohammed show enlivens CERA Week 2018

The Oilholic is back in Houston town, for IHS CERA Week, one of the oil and gas industry’s premier event, and so far its all about the tussle between US shale producers and OPEC/non-OPEC ‘supergroup’. 

Before the things gained traction on the first day of the week-long event, the International Energy Agency (IEA) emphatically declared the US would dominate oil production over the next five years, and is well on its way to becoming the world’s number one oil producer ahead of Russia and Saudi Arabia. (Here’s the Oilholic’s Forbes report). 

The IEA’s inimitable Executive Director Dr Fatih Birol also pointed out that describing the think-tank as an ‘oil consumers’ club’ is becoming clich√©d these days as four of its members – the US, Canada, Brazil and Norway, were accounting for much of the world’s oil production growth.

Meanwhile, OPEC Secretary Mohammed Sanusi Barkindo, who is also in town, made it known that the OPEC/non-OPEC production cut underpinned by Saudi Arabia and Russia has been a success, and making a tangible impact in rebalancing the market.

So post-luncheon, both men took to the stage with Daniel Yergin, Vice Chairman of IHS Markit, for  a delightful, somewhat testy but good natured, exchange. 

Barkindo declared the OPEC and non-OPEC production cut has been “efficient”, “surpassed expectations” and “brought optimism to the market.”

Birol said that optimism was most apparent in the US, with shale producers, well...producing at a canter, and positioning themselves to cater to robust oil demand from India and China. Providing an undercurrent to his stance, was the news that India was taking it first US natural gas consignment, a mere nine months after inking an agreement to import American crude. 

Of course, Birol warned that oil and gas investment was lagging, with 2018 investment valuation projected to rise by only 6% on an annualised basis. 

Barkindo declared that was “not in the interest of the global economy.”

Via production cuts, the 24 OPEC and non-OPEC producers were providing “insurance and stability” to the global market; a move that was open to “all producers,” he added. 

Of course, US producers driven by the spirit of private enterprise, are not really queuing up to join anytime soon. So what should they do? “Enjoy”, quipped Birol, to peals of laughter in the room. 

And so it went, but the Oilholic suspects you get the gist. Elsewhere on day one, Total CEO Patrick Pouyann√© said in the crude industry size does matter, and that a lower price environment gives bigger players opportunities to make strategic acquisitions. 

“It’s good to be a large integrated oil and gas company. Key to success is stable investment, regardless of oil price,” he added. 

Plenty more to come from CERA Week, but that’s all from Houston for the moment folk. Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2018. Photo: (Left to right) IEA Executive Director Fatih Birol, OPEC Secretary General Mohammed Sanusi Barkindo and IHS Markit Vice Chairman Daniel Yergin speak at CERA Week 2018 © Gaurav Sharma 2018. 

Friday, January 13, 2017

‘Crude’ recollections of a former OPEC bigwig

For over two decades, every word Ali Al-Naimi uttered was lapped up by the oil market. It wouldn’t be otherwise, if you were the oil minister, as he once was, of OPEC heavyweight Saudi Arabia between August 1995 and May 2016.

So when Al-Naimi’s memoir – Out of the Desert: My Journey from Nomadic Bedouin to the Heart of Global Oil – appeared on the horizon barely a few months into his retirement, global headlines were all but guaranteed, especially at a time of extreme volatility and a once in a generation market dynamic shift in the global crude world.

Yet, before the world got to know Al-Naimi as the oil market heavyweight, there was the nomadic shepherd boy born of humble beginnings in Eastern Arabia who dreamt of making it big.

In a memoir of over 300 pages, split by 19 chapters, Al-Naimi recounts his extraordinary journey, from an office boy in 1947 at oil company Aramco, to the CEO’s chair in 1988 of the then state-owned Saudi Aramco.

Al-Naimi’s recollections send the reader alternating from human interest sentiment to hard core global geopolitics, inner workings of the oil industry to the deals in the corridors of power, corporate decisions to political manipulation. There’s a bit of everything, and more of what you would come to expect of a global political figure. Afterall, power, politics and that precious natural resource called oil go hand in glove.

Having interacted in a journalistic capacity with Al-Naimi at several OPEC meets prior to his retirement, I often heard the industry veteran quip that in his career he had seen the oil price drop to as low as $2 and climb as high as $140 a per barrel. This book will help you get some perspective.

Even before it hit the shelves, media outlets as diverse Forbes, Bloomberg and the International Business Times, were writing news stories based on excerpts from it in a bid to take Al-Naimi’s thoughts and help them decode, how for instance talks between OPEC and non-OPEC oil producers would pan out.

From OPEC’s traditional mistrust of Russia, to everyone in the oil business looking at the Saudis to cut, Arab oil embargo to the collapse of Lehman Brothers, Al-Naimi has catalogued implications of such events for the oil market. For instance, Al-Naimi claims that in a situation akin to the crisis of demand seen in 2008-09, when the 2014 supply glut crisis hit, everyone expected the Saudis to act but offered no help with sharing the burden.

An already brilliant narrative is enhanced by a peppering of market anecdotes previous unheard of which the Oilholic enjoyed reading. The book’s appeal is universal. That said students of history, oil industry observers, industry analysts and geopolitics enthusiasts ought to regard it as a must read.

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© Gaurav Sharma 2017. Photo: Front Cover – Out of the Desert: My Journey from Nomadic Bedouin to the Heart of Global Oil By Ali Al-Naimi © Penguin Publishers, 2016.