Saudi Arabia Will Not Stop Pumping to Boost Oil Prices

Saudi Arabia is determined to stick to its policy of pumping enough oil to protect its global market share, despite the financial pain inflicted on the kingdom’s economy.
Officials have told the Financial Times that the world’s largest exporter will produce enough oil to meet customer demand, indicating that the kingdom is in no mood to change tack ahead of the December 4 meeting in Vienna of the producers’ cartel Opec.
‘The only thing to do now is to let the market do its job,’ said Khalid al-Falih, chairman of the state-owned Saudi Arabian Oil Company (Saudi Aramco). ‘There have been no conversations here that say we should cut production now that we’ve seen the pain.’
Saudi Arabia rocked oil markets last November when Opec decided against production cuts, making clear that the kingdom was abandoning its policy of reducing supplies to stabilize the price.
Since then, the oil price has collapsed from a high of $115 a barrel last year to $50 a barrel.
Global oil companies, which have put hundreds of billions of dollars of investment on hold as a result of low prices, will be disappointed by the Kingdom’s stance.

This post was published at David Stockmans Contra Corner on November 9, 2015.

The oil Cartel’s End Is Nigh – OPEC May Split At The December Meeting

As oil prices are now hovering around $45 per barrel, the entire oil and gas industry is looking forward to the next OPEC meeting, due to be held on December 4 this year in Vienna. On October 14, non- OPEC member Mexicoconfirmed its participation in a technical meeting organized by the cartel on October 21 in Vienna to which seven other non-OPEC members were also invited.
‘We are going with a technical delegation to receive information and exchange it with other producers. But Mexico will not take part in any reduction in production volume,’ said Mexico’s Energy Minister Pedro Joaquin Coldwell. The meeting was held last Wednesday and was attended by representatives of five countries: Russia, Brazil, Kazakhstan, Colombia and Mexico. The main agenda of the meeting was to exchange different market views and create a common strategy in response to the current market conditions and low oil prices.
What exactly happened at the meeting?
Venezuela has been the most vocal OPEC member when it comes to the issue of raising oil prices by altering the cartel’s production levels. During the technical meeting between OPEC and non-OPEC members, Venezuela proposed that OPEC must resume its policy adopted in 1980s of fixing the oil price. It suggested a possible ceiling price of $88 per barrel which would naturally require OPEC to reduce its current production levels. In addition, Venezuela also proposed another technical meeting of this kind to be held during the upcoming Dec 4 meeting.

This post was published at David Stockmans Contra Corner on October 29, 2015.

OPEC Just Kicked Oil Back Into The $30s Club

Increased pumping by OPEC as Chinese demand appears to be slackening could drive oil to the lowest prices since the peak of the financial crisis.
West Texas IntermediateCRUDE FUTURES skidded through the year’s lows and looked set to break into the $30s-per-barrel range after the Organization of the Petroleum Exporting Countries admitted to more pumping and China devalued its currency, sending ripples through global markets.
‘The familiar theme of oversupply and shaky demand is getting punctuated today,’ said Again Capital partner John Kilduff, who has expected WTI to aim for $30 per barrel. WTI futures for September fell more than 4 percent Tuesday and traded below $43.26 per barrel, the March 17 low.
Kilduff said, ‘$42.03 is going to be key. Then we’ll be back to extrapolating back down to the low 30s from the financial crisis.’ The intraday low in 2015 was $42.03, also reached in March. Brent futures, meanwhile, were just below $49 per barrel.
‘Overall, I think this devaluation by the Chinese suggests maybe the slowdown in economic growth is greater than people anticipate, and that’s where fear on the demand side is coming from and driving us lower,’ said Gene McGillian, analyst with Tradition Energy.

This post was published at David Stockmans Contra Corner on August 11, 2015.

OPEC is at risk of falling apart

OPEC has been the most talked about international organization among investors, analysts and international political lobbies in the last few months.
When OPEC speaks, the world listens in rapt attention as it accounts for nearly 40 % of the world’s total crude output.
With its headquarters in Vienna, Austria, one of the mandates of 12-member OPEC is to "ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry."

This post was published at Business Insider

Oil And Debt: The BIS Examines The Consequences Of Financialization

Posted By The Bank for International Settlements
Since mid-2014, after remaining relatively stable for four years at close to $100, the price of crude oil has dropped by roughly 50% in US dollar terms.1
Changes in production and consumption seem to fall short of a fully satisfactory explanation of the abrupt collapse in oil prices. The last two episodes of comparable oil price declines (1996 and 2008) were associated with sizeable reductions of oil consumption and, in 1996, with a significant expansion of production. This seems to be in stark contrast to developments since mid-2014, during which time oil production has been close to prior expectations and oil consumption has been only a little weaker than forecast (Graph 1, left-hand panel). Rather, the steepness of the price decline and very large day-to-day price changes are reminiscent of a financial asset. As with other financial assets, movements in the price of oil are driven by changes in expectations about future market conditions. In this respect, the recent OPEC decision not to cut production has been key to the fall in the oil price.
However, other factors could have exacerbated the fall in oil prices. One important new element is the substantial increase in debt borne by the oil sector in recent years. The greater willingness of investors to lend against oil reserves and revenue has enabled oil firms to borrow large amounts in a period when debt levels have increased more broadly. Issuance by energy firms of both investment grade and high-yield bonds has far outpaced the already substantial overall issuance of debt securities (Graph 1, right-hand panel).

This post was published at David Stockmans Contra Corner on February 7, 2015.

Global Cooling Watch: 33% Of North Sea Oil & Gas Drillers Face Bankruptcy

A third of Britain’s listed oil and gas companies are in danger of running out of working capital and even going bankrupt amid a slump in the value of crude, according to new research.
Financial risk management group Company Watch believes that 70pc of the UK’s publicly listed oil exploration and production companies are now unprofitable, racking up significant losses in the region of 1.8bn.
Such is the extent of the financial pressure now bearing down on highly leveraged drillers in the UK that Company Watch estimates that a third of the 126 quoted oil and gas companies on AIM and the London Stock Exchange are generating no revenues.
The findings are the latest warning to hit the oil and gas industry since a slump in the price of crude accelerated in November when the Organisation of Petroleum Exporting Countries (Opec) decided to keep its output levels unchanged. The decision has caused carnage in oil markets with a barrel of Brent crude falling 45pc since June to around $60 per barrel.
The low cost of crude has added to the financial pressure on many UK listed drillers which are operating in offshore areas such as the North Sea where oil is more expensive to produce and discover.

This post was published at David Stockmans Contra Corner on January 1, 2015.

Pepe Escobar: The Caliph fit to join OPEC

Islamic State leader Caliph Ibrahim – aka Abu Bakr al-Baghdadi – never ceases to amaze us – and most of all his powerful petrodollar-stuffed backers. The Caliph is for all practical purposes now an oil major worth of membership of the Organization of the Petroleum Exporting Countries (OPEC). His takfiri/mercenary goons – in theory – have for some time been extracting, refining, shipping and/or smuggling and clinching juicy deals involving vast quantities of oil, reaping profits of roughly US$2 million a day.
The Caliph's oil prices are to die (be beheaded?) for; after all, he's implementing the same low-price strategy concocted by the people he wants to dethrone in Mecca, the House of Saud. The caliphate's GDP across "Syraq" has only one way to go: up.
And oh, the irony Top customers for The Caliph's cheap oil happen to be "Sultan" Recep Tayyip Erdogan's Earthly paradise, aka Turkey – a North Atlantic Treaty Organization ally – and that King "Playstation" Abdullah II ibn al-Hussein's domain impersonating a country, aka Jordan.
Meanwhile, the awesome, immensely sophisticated military apparatus/intel agency acronym fest deployed by "free" U.S./NATO somehow is simply unable to register/intercept this racket.

This post was published at Asia Times