Oil market's OPEC meeting tantrum & global LNG

On June 2nd, OPEC+ decided to adopt a pensive position rather than a defensive or offensive one and it promptly sent the oil market into a tizz. Quite frankly, it needn't have. According to data aggregators, OPEC+ members are currently cutting production by 5.86 million barrels per day (bpd). 

The figure includes 3.66 million bpd of group-wide cuts and "voluntary cuts" by eight members of 2.2 million bpd. They include Saudi Arabia, Russia and six others - Algeria, Iraq, Kazakhstan, Kuwait, Oman and the United Arab Emirates.

The latter cuts were due to expire at the end of June 2024 while the group-wide ones were due to end in December 2024. Following a part-online, part-physical meeting, OPEC+ extended the cuts of 3.66 million bpd until the end of 2025. But it only prolonged the cuts of 2.2 million bpd by three months until the end of September 2024. After which these voluntary cuts will be gradually phased out over the course of a year from October 2024 to September 2025.

As the markets opened for trading the following, a crude carnage ensued with Brent shattering its $80 per barrel floor and heading lower to $77. While the OPEC+ decision can be construed as bearish, it wasn't the only reason for the slide in prices. As this blogger told Reuters, a number of factors came into play and OPEC's mild surprise merely served as a catalyst. Economic uncertainties persist both in US and China - the world's two leading crude consumers. Neither country offered consistently positive data the month before. 

Both the IEA and OPEC have now revised their demand growth forecasts lower, albeit to varying degrees. The IEA's (at 1.1 million bpd) is half of what OPEC now predicts (2.2 million bpd). Traders looked at all that and went net short for the week.   

However, all things being equal, Brent under $80 did appear to be oversold, as yours truly wrote on Forbes. That's why merely a calendar week later, prices are back above $80 and about right too. What OPEC did (or didn't) matters, but only to a point.

And now from oil to LNG, where yours truly has been doing a deep dive into the state of affairs and the general direction of the global market. 

That's after the latest outages in Norway and Australia triggered yet another spike in prices. As the Oilholic said in a recent CGTN interview, only high levels of storage in Europe have stopped prices from overshooting. It all bottles down to Asia (the world's largest LNG importing region) regularly competing with Europe (the second-largest) for cargoes. This year, Dutch TTF gas prices have risen by 40% over the past three months to trade at around $11 per million British thermal units (mmbtu) levels. 

However, here's the Oilholic's latest market analysis via Forbes on why a change may be on the horizon. Overall, future Asian demand, pace of the energy transition and new supply coming onstream (in the US and Qatar) will likely influence a calmer direction of near-term travel as the end of the current decade approaches. (Full report here). 

That's a wrap for now. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

To follow The Oilholic on Twitter click here.

To follow The Oilholic on Forbes click here.

To follow The Oilholic on Motley Fool click here.

To email: journalist_gsharma@yahoo.co.uk  

© Gaurav Sharma 2024. Photo I: OPEC logo at its Secretariat in Vienna, Austria. © Gaurav Sharma 2018. Photo II: Gaurav Sharma on CGTN Europe for commentary on the natural gas market. © CGTN, June 2024. 

'e-OPEC' agrees 9.7mbpd cut extension by a month

We here again, albeit via webcam! As widely anticipated, oil producers' group OPEC has agreed to recommend a roll over its existing 9.7 million barrels per day (bpd) production cut at its latest meeting. Here's a glimpse of the new e-OPEC (click to enlarge). 

Two sources said all members were onboard, with one respondent emphatically declaring there "will be a 9.7 million bpd not ifs or buts." However, the was precious little word on the so-called cheaters. Within OPEC that would be Iraq and Nigeria, and beyond it Kazakhstan. There's plenty of doubt over what to do with Mexico's insistence that it cannot reduce its production level. 

However, Russia and Saudi Arabia, who want non-OPEC and OPEC cheaters brought to heel are so far said to be in agreement with a move to extend the cuts - instituted in April in the wake of the coronavirus pandemic - by a month. Non-OPEC countries are only just joining the meeting, so the market will have further word on that at time of stunted demand and expectations of a dire 2020. 

Monitoring is expected to be stepped up with OPEC's monitoring committee or the Joint Ministerial Monitoring Committee (JMMC) opting to meet every month from June 18 onwards. The next OPEC meeting has been scheduled for Nov 30, followed by an OPEC+ meeting on Dec 1. Ultimately, an exit strategy remains missing and that problem will resurface soon rather than later. 

Ahead of the weekend's OPEC+ meeting, oil futures jumped significantly, with the Brent August contract rising well above $40 per barrel, and WTI July contract coming within tantalizing distance of the said level. There's something incredibly premature about this and the said levels - at least in this blogger's opinion - have arrived at least a month early as one noted in recent opinion column. 

Away from the goings-on at OPEC, here are few of the Oilholic's recent Forbes missives on the world of oil and gas equities:

• 3 Oil Stocks That Might Go Bankrupt In 2020, May 15, 2020
• 5 Top Canadian Oil Stocks To Buy In 2020
• How To Interpret Saudi Wealth Fund’s $2 Billion Splurge On Big Oil Stocks

And that's all for the moment folks! Keep reading, keep it 'crude'!

To follow The Oilholic on Twitter click here.

To follow on Forbes click here.

To follow on Rigzone click here. 

To email: gaurav.sharma@oilholicssynonymous.com

The crude question of post-OPEC compliance

The ministers have left town having announced OPEC’s first real-terms headline oil production cut in eight years, sending oil futures rocketing intraday by over 8%. Now that the Oilholic has gathered his thoughts, one feels the significance of such a move cannot be understated, but overstating carries perils too.

Starting with former point first; describing the announced cut of 1.2 million barrels per day to 32.5 million bpd as ‘historic’ is about right. For starters, after many years, OPEC proved that it can get its act together, set aside political differences and come up with a cut. Admittedly, bulk of the production cut would come from Saudi Arabia, which would shoulder 486,000 bpd in cuts. 

However, willingness to participate came from across the OPEC board, with Iran also promising to temper its expectations rather than keep banging on about its stated ambition of hitting a production level of 4 million bpd. Furthermore, Indonesia, a net oil importer, unable to partake in the cut, suspended its membership, although truth be told it was farcical for it to have come back to OPEC last year. 

Additionally, at least on paper, OPEC has managed to extract concessions from non-OPEC producers as well, chiefly Russia. It seems we will see around 600,000 bpd of non-OPEC cuts, of which Russia would account for 300,000 bpd. The market awaits further details after an imminent meeting between the Russians and OPEC takes place, but it all seems positive for now. 

That said the crude world should temper its expectations. Announcing a production cut is one thing, getting OPEC and non-OPEC participants to carry it out is a different thing altogether. If one or more members fail to comply, the domino effect could be others going down the non-compliance path too. In a first of its kind, OPEC has set up a monitoring committee comprising of Algeria, Kuwait and Venezuela to keep tabs on the situation – and it has its work cut out. 

Of course, OPEC has no way of policing non-OPEC compliance and past experiences of extracting concessions from Russia haven’t really worked. We’ll know soon enough when data aggregators such as S&P Global Platts and Argus report back on cargo loadings in January and February. The events in Vienna will support the price for sure over the medium term – lifting it to the $55-60 range. However, what that does is support the US shale industry too. 

Of course, the projected price uptick is unlikely to drag US production levels to the dizzy heights of 2014, but the market should now brace itself for additional barrels from North American producers. Finally, before one takes your leave, here is some additional analysis in the Oilholic's latest Forbes post. With those crude thoughts, that’s all from Vienna folks. Keep reading, keep it ‘crude’!

To follow The Oilholic on Twitter click here.
To follow The Oilholic on Google+ click here.
To follow The Oilholic on IBTimes UK click here.
To follow The Oilholic on Forbes click here.
To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2016. Photo: OPEC building exterior, Vienna, Austria © Gaurav Sharma, November 2016.