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|OPEC Set to Talk Freeze Amid Expanding Supply Glut
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Kingdom proposed supply reduction in return for Iran freeze
Russia may only join talks after OPEC members reach deal
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OPEC members aren’t likely to reach a supply deal in Algiers next week, but an agreement to boost prices could be drawing closer after Saudi Arabia signaled for the first time in two years that it’s willing to cut production.
Saudi Arabia and Iran, whose rivalry thwarted a deal with other major producers in April, didn’t reach agreement after two days of preparatory talks in Vienna, including the Saudi offer to pump less if Iran caps output at current levels, according to two people familiar with the negotiations. While the kingdom doesn’t now anticipate any formal decision on supply will be taken in the Algerian capital, talks will continue and OPEC meets again in two months, said a delegate familiar with its policy.
The impasse between the Middle East neighbors dims the prospects that OPEC and Russia will cooperate to curb a global supply glut next week -- already seen as unlikely by market watchers. The delegation from Moscow only intends to join discussions after OPEC members reach a supply agreement between themselves and they could leave before the informal talks scheduled for Sept. 28, three people familiar with the matter said.
“It’s difficult to come to the conclusion that a freeze would be credible or doable,” said Ed Morse, head of commodities research at Citigroup Inc. in New York.
Saudi Arabia said it would be willing to reduce its output if Iran were to cap production at the current level of about 3.6 million, according to two people familiar with the matter.
The kingdom often does curb production at this time of year, as the surge in demand for air conditioning in the hot summer months begins to fade. The kingdom pumped a record 10.7 million barrels a day last month, an increase of 490,000 barrels a day from January, according to data compiled by Bloomberg.
The Saudis offer to Iran does signal that the kingdom is seeking some kind of deal to reduce the global oil glut after two years of leading OPEC’s strategy of unfettered production to squeeze out high-cost rivals. Oil prices remain below $50 a barrel -- less than half the level of 2014 -- and the International Energy Agency is predicting the surplus could persist for a fourth year into late 2017.
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The months leading up to the official OPEC ministerial meeting in Vienna on Nov. 30, will allow more time for discussions with other countries, said the person familiar with Saudi policy. The kingdom, the world’s largest crude exporter, wants to see higher prices to encourage essential investment in the energy industry, the person said. The IEA warned this month that oil and gas companies could be on track to cut spending for a third straight year.
The last attempt at a deal between OPEC and Russia collapsed in Doha on April 17 when Saudi Arabia’s influential Deputy Crown Prince Mohammed bin Salman insisted at the last minute that Iran had to participate in a freeze. Iran refused as it was just starting to revive exports following the end of international sanctions.
Now that Iran has returned to pre-sanctions production capacity, “the odds are in favor” of some basic agreement, said Helima Croft, chief commodities strategist at RBC Capital Markets LLC in New York.
Iran produced 3.62 million barrels a day on average in August, an increase of 820,000 since sanctions were lifted at the start of the year, according to data compiled by Bloomberg. The Persian Gulf nation has repeatedly said it’s entitled to recover its previous output level of about 4 million barrels a day.
Other OPEC members may also be reluctant to freeze at current levels. Iraq will seek to defend a production level of 4.75 million to 5 million barrels a day, Oil Minister Jabbar Al-Luaibi said by e-mail Thursday. That’s as much as 500,000 barrels a day above its output last month, according to data compiled by Bloomberg.
“I don’t think they have a consensus yet,” said Chakib Khelil, the former Algerian energy minister and OPEC president, who guided the group to a record output cut in 2008. Still, he’s optimistic the group can agree to at least freeze production “They’re already feeling pain. Why add to the pain when they can avoid it?”
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|targets pencilled in
in the meantime expect interesting entry points
due to disappointments and fear
Expect a minimum 1.5% rise tomorrow to a close of RDSB to around 19.45.
Brent is up by 2.7%, crude is up by 3.6%, LNG up to 3.07 (a significant year high) as I write @ 22:00 BST.
Then next week OPEC will determine our sector's immediate next direction.
End year my target remains 22.50, with end-2017 at 25.70.
|Royal Dutch Shell: Prepare For A Turnaround
Sep.20.16 | About: Royal Dutch (RDS.A)
Long/short equity, value, special situations, growth
Royal Dutch Shell’s upstream losses had almost tripled last quarter due to lower realizations, but this segment can make a comeback as the oil pricing scenario has improved.
Oil prices are averaging higher in the ongoing quarter as compared to the first half of 2016, driven by higher consumption and lower output, a trend that will continue.
Oil inventories will decline on account of lower capital investments in the space, leading to lower production, improving the demand-supply balance, and improving pricing, which is good news for Shell.
Shell is well-placed to tap an increase in oil prices as it is focused on lowering its development and production costs in the deepwater.
Shell, in fact, has achieved a break-even cost of only $45 per barrel at its new deepwater assets, which will allow it to generate stronger margins as prices improve.
The upstream business of oil major Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) has been in a soup this year, along with the weakness in the downstream. However, as I had discussed earlier this month, the downstream segment is on the path of a comeback on the back of higher refining margins. But, can investors expect a similar turnaround in the upstream segment? Let's take a look.
Why the upstream business will recover
As mentioned above, the upstream business of Shell has been in a soup this year. I'm saying this because its loss in this segment had almost tripled last quarter to $1.3 billion as compared to $500 million in the year-ago period. The primary reason behind the weakness in the upstream segment was the lower price realization achieved by Shell last quarter. In fact, the company's liquids realizations were down 29% on a year-over-year basis last quarter, while natural gas price realizations declined 28%.
As a result of this pricing weakness, Royal Dutch Shell's upstream business had taken a massive hit last quarter. However, the good part to note is that oil prices have started getting better of late and this should lead to an improvement in Shell's realizations going forward.|
the grumpy old men
the grumpy old men
the grumpy old men
|i guess one should presume that everything should be clearer by month end
then the third quarter beckons|
|still sitting in the 1875 TO 1975 box|
|Cheers it's good to hear the thoughts of others|
|IMO MIGHT WELL FALL THRU 1875 DOWN TOWARDS 1675
ALL DEPENDS ON ALL THE NEWS NEXT WEEK AND DIVI IMPACT
|Any thoughts on rdsb share price moving lower??? I sold half my holding near the highs and waiting for a good entry point. I think this is going down short term at least. 1900 area looks like falling|
WAITING FOR GODOT
or just divi pay day|
|Lively on here isn't it?|
|IEA sees oil oversupply persisting in 2017
By Grant Smith on 9/13/2016
PARIS (Bloomberg) -- The surplus in global oil markets will last for longer than previously thought, persisting into late 2017, as demand growth slumps and supply proves resilient, the International Energy Agency said.
World oil stockpiles will continue to accumulate through 2017, a fourth consecutive year of oversupply, according to the IEA. Consumption growth sagged to a two-year low in the third quarter as demand faltered in China and India, while record output from OPEC’s Gulf members is compounding the glut, said the agency, which just last month saw the market returning to equilibrium this year.
“Supply will continue to outpace demand at least through the first half of next year,” the Paris-based adviser said in its monthly report. “As for the market’s return to balance—it looks like we may have to wait a while longer.”
Almost two years after the Organization of Petroleum Exporting Countries set a strategy to eliminate the global oil glut by pressuring rivals with lower prices, markets continue to struggle with excess supply and crude remains capped near $50/bbl. The organization plans to hold informal talks with competitor Russia in Algiers later this month, fanning speculation the producers may agree on an output cap to shore up prices.
The IEA trimmed projections for global oil demand next year by 200,000 bpd to 97.3 MMbpd. It reduced growth estimates for this year by 100,000 bpd to 1.3 MMbpd, citing a “dramatic deceleration in China and India” this quarter coupled with “vanishing growth” in developed economies.
“Recent pillars of demand growth—China and India—are wobbling,” said the IEA, which counsels 29 nations on energy policy. “The stimulus from cheaper fuel is fading. Refiners are clearly losing their appetite for more crude oil.”
Supplies outside OPEC will rebound next year after this year’s sharp decline, rising by 380,000 bpd, according to the report. The estimate is “marginally221; higher than last month, driven by the stronger-than-expected performance of Norway and Russia. U.S. shale-oil production will begin to recover in the second half of 2017, it said.
Saudis on Top
Production from OPEC’s 14 members rose slightly last month as Gulf countries Saudi Arabia, Kuwait and the United Arab Emirates pumped at or near record levels and as Iraq pushed output higher, the IEA said. Saudi Arabia has overtaken the U.S. as the world’s largest liquids producer—a ranking America held since April 2014.
The combination of faltering demand and increased OPEC output pushed oil inventories in developed nations to a new record in July, at 3.1 Bbbl.
“Demand growth is slowing and supply is rising,” the agency said. “Consequently, stocks of oil in OECD countries are swelling to levels never seen before.”|