Showing posts with label Saudi-Russia oil pact. Show all posts
Showing posts with label Saudi-Russia oil pact. Show all posts

Friday, March 06, 2020

OPEC+ in waiting mode as Russia plays hardball

Overnight (March 5) OPEC ministers met and proposed a deepening of existing oil production cuts by 1.5 million barrels per day (bpd) to their Russia-led OPEC+ partners in an effort to calm the oil market following the coronavirus outbreak and its devastating impact on the global economy.

While the original 'deepening of cuts' proposal was set to last until end-June 2020, OPEC heavyweights met yet again late yesterday evening and announced the proposal would be extended to the end of 2020. 

The burden of 1.5 million bpd, would be shared as 1 million bpd and 0.5 million bpd between OPEC and non-OPEC players respectively. From a headline perspective, if approved the market would be looking at 3.2 million bpd of OPEC+ barrels being taken out of the global supply pool. 

With that the ball went into the Russian court, and that's where it has been since well into today (March 6). In that time, Russian Oil Minister Alexander Novak has gone and returned from Moscow, and an OPEC+ closed-door meeting scheduled to start at 9:30 CET, has yet to get going 14:20 CET!

And the Oilholic has putting his scenarios to colleagues in the broadcast media. 

In one scenario, Russia could say 'nyet' and you'd see bearish headwinds engulf oil futures and driving the price down to $30 per barrel. 

In another scenario, the mammoth cut would proceed providing only temporary relief to oil prices given the full extent of the coronavirus' demand destruction is yet to be clear. Although, Wall Street is belatedly, finally coming to terms with the magnitude of the destruction having ditched its complacency.

Finally, often the favourite colour at these OPEC meetings based on the Oilholic's past experience is grey. OPEC+ could emerge and offer a good old fashioned figures fudge involving OPEC cuts with the support of the Russians, and other non-OPEC players, with very few barrels to show for it. This too will either provide negligible or short-lived support. 

All of this bottles down to one thing - hardly anyone has an accurate handle on where oil demand is going, and the Oilholic believes there will be shrinkage on an annualised basis. Were that to be the case, a 'crude' logic applies - oil supply cuts never really solve a crisis of demand. It's where crude market presently is. OPEC can improve its odds via a cut but can do little more!

And on that note its time to leave Vienna for London, and then on to Houston, all the while keeping an eye on events here. But that's all for the moment folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2020.

Wednesday, March 04, 2020

Crude arrival in Vienna in the age of Coronavirus

The Oilholic has arrived in Vienna for the 178th 'Extraordinary' meeting of OPEC Ministers, only to be told that analysts and journalists will not be allowed into the Secretariat to mitigate chances of the spread of the coronavirus.

It seems the conference and its goings-on would be 'live streamed', and all of us would be moved to the confines of a meeting room at the Palais Hansen Kempinski with no media briefings and contact with oil ministers. Still old friends and diehards have turned for some outdoor coffee and cookies outside OPEC HQ.
 And here's the agenda for the next few days:
That's all for the moment folks! More from Vienna soon; but in the interim, keep reading, keep it 'crude'!

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To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2020. 

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'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