Crude oil market

[waltky]

Waitin' for the day when Dubai reverts to a Bedouin ghost town...

Kuwaitis face cuts in lavish benefits as oil prices drop
24 March 2016 - Sitting on the world's sixth largest proven oil reserves, Kuwait's 1.3m citizens are accustomed to lavish benefits, such as interest-free housing loans, free education and healthcare, and food and fuel subsidies.

But like other Gulf states, the sharp fall in global oil prices has forced the country to consider whether these benefits are luxuries it can no longer afford. Last month, Parliament Speaker Marzouq al-Ghanim warned that continuing to spend in the same way would be "economic suicide". "We cannot lie to the Kuwaiti people, we cannot come here and say we will protect your pockets and the citizen will not be affected," he said. "Everyone's pockets will be affected... This is the reality."

In January, the Emir Sheikh Sabah al-Sabah spoke of the need for better management of spending and for budget cuts to cope with declining revenues. However, an attempt by the government to remove subsidies on diesel and kerosene last year was heavily criticised by MPs. The pressure led to the subsidies being restored, although it was decided that they would be reviewed monthly in accordance with global price fluctuations.

The acting Finance Minister, Anas al-Saleh, also announced this month that the cabinet had approved a plan to impose a 10% tax on corporate profits, as one of a number of measures aimed at reducing Kuwait's budget deficit, projected to be 8.18bn dinars ($27.1bn; £19.2bn) for this financial year. In addition, some state-owned projects, including airports, ports and some facilities of the Kuwait Petroleum Corporation (KPC), would be privatised, Mr Saleh said.

Kuwaiti lawyer Mishari al-Sawwagh feels that the government's priorities in implementing such measures are misplaced. "Our problem in Kuwait is not about money... it's about leadership and management," he told the BBC. Mr Sawwagh believes cutting subsidies will not only hit Kuwaiti citizens but also the 2.9 million-strong foreign workforce on which they depend. "Lifting petrol subsidies, for example, will affect foreign workers who may consider leaving as they can no longer afford the living costs here, and this will also affect our economy," he said.

'Medical tourism'

See also:

Oil Recovery Hits Saudi Devaluation Bet
Investors would have lost 1.8% since forwards' January peak; GCC pegs have survived 30 yrs of oil-price fluctuations: HSBC

Oil’s rebound to about $40 a barrel means some investors are nursing losses after betting that Saudi Arabia would abandon its three-decade-old currency peg. Contracts used to speculate on the kingdom’s exchange rate in the next 12 months have fallen to about the lowest since November. A $1 million wager on the contracts at their peak in January would have lost 68,900 riyals ($18,370), or about 1.8 percent, according to Bloomberg calculations. Several U.S.-based hedge funds were said in February to be among investors that have bet Saudi Arabia would devalue the riyal.

The decreased speculation that Gulf nations will abandon their dollar pegs underscores how crude prices have recovered this year. Oil, Saudi Arabia’s main source of revenue, is headed for a second straight monthly gain. The Saudi riyal has been trading at a rate of 3.75 per dollar since 1986, and the kingdom has taken steps to make speculating against the currency harder. “We have argued that those positioning for a devaluation were going to be disappointed,” said Simon Williams, the London-based chief economist for central and eastern Europe, the Middle East and North Africa at HSBC Holdings Plc. “The pegs have been in place for 30 years in times of high oil prices and low oil prices. I have no sense” that recent losses in crude are “going to change policy makers’ minds or force their hand,” he said.
Gulf Peers

The percentage loss on the riyal forwards may actually be greater than 1.8 percent because derivatives trades tend to be leveraged, meaning that more is at stake than is actually wagered. Still, the cost of a bet on any devaluation is small relative to the windfall investors would stand to receive should it happen. Twelve-month currency forward agreements have declined for other members of the Gulf Cooperation Council. Contracts for the United Arab Emirates’ dirham have dropped 65 percent since hitting a seven-year high in January, while those for the Omani rial have almost halved from a recent peak. Bahraini dinar and Qatari riyal forwards have also tumbled.

Saudi Arabia has dipped into its reserves and sold debt as oil revenue dropped. Foreign-currency holdings have tumbled every month but one since August 2014 to less than $600 billion in January, from about $737 billion. The reserves of GCC members provide ample room to maintain pegged exchange rates for several years, even in an adverse scenario for oil prices, Moody’s Investors Service senior analyst Mathias Angonin said in Dubai last week. Changes to the current exchange-rate systems are unlikely because the costs associated with one-off devaluations would outweigh the benefits, he said.

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[william the wie]

This is getting strange. KSA, Russia, Iran or somebody else talks Brent up above $40/bbl and away goes WTI covered by futures contracts to some refinery in Europe. Then OPEC complains that US inventories and rig count are going back up. Why can't they appreciate that Iran can't ship squat. No sense of gratitude.

 

[waltky]

Crude prices roller coaster ride...

Oil prices rebound on less than expected build in stocks
Tue Mar 29, 2016 - Oil futures rebounded in Asian trade on Wednesday, buoyed by a forecast for a less than expected build in crude oil stockpiles last week.

A weakening dollar also lent some support but concern that a two-month rally was fading in an oversupplied market put a ceiling on gains. Brent futures LCOc1 climbed 40 cents to $39.54 a barrel as of 0104 GMT (09:04 a.m. EDT) after settling down $1.13 in the previous session. U.S. crude CLc1 rose 45 cents to $38.73 a barrel after ending the previous session down $1.11.

Oil prices fell about 3 percent in the previous session after Kuwait and Saudi Arabia said they would resume production at the jointly operated 300,000-barrel-per-day Khafji field even as oil output is supposed to be capped. "There's a little bit of steadying in oil prices in the Asian time zone. The predominant attitude is one of wait-and-see until the Energy Information Administration (inventory) figures come out," said Ric Spooner, chief market analyst at Sydney's CMC Markets. The EIA is due to release official crude inventory data later on Wednesday. U.S. crude stocks rose last week by 2.6 million barrels to 534.4 million barrels data from industry group, the American Petroleum Institute, showed on Tuesday.

That was less than analysts' expectations of a 3.3 million barrel build, but still a record high for a seventh straight week. "The market is seeing how currencies go as well. It was slightly disconcerting for the market (on Tuesday) to see oil prices falling at the same time as the dollar was falling," Spooner said. The dollar index .DXY nudged lower on Wednesday after slipping to an eight-day low in the previous session. A weaker dollar makes greenback-denominated commodities cheaper for holders of other currencies.

Rosneft, Russia's top oil producer, is set to lower oil output, Russian Natural Resources Minister Sergei Donskoi said on Tuesday, although he gave no time frame. The plan could be lending support to oil prices, Spooner said, although the impact would be muted because the market is already pricing in possible output curbs. OPEC member Iran is expected to attend an oil producers meeting in Doha on April 17 to discuss a cap on global oil production, although it may not take part in the discussions, a source familiar with Iranian thinking said on Tuesday.

Oil prices rebound on less than expected build in stocks

 

[waltky]

Oil prices fall on expected oversupply...

Oil prices fall on dimming prospect of output restraint
Mon Apr 4, 2016 - Oil prices fell on Monday as the chances of Middle East producers agreeing to curb overproduction appeared to fade, while stubbornly high U.S. output and worries about Asia's economic outlook also dragged on prices.

Iran, returning to global oil markets after sanctions against it were lifted in January, said it would continue increasing its oil production and exports until it reaches the market position it enjoyed before the imposition of sanctions, according to a media report. This makes a proposed deal by major producers to restrict ballooning output unlikely as top exporter Saudi Arabia said last week it would only participate if its rival Iran also took part.

U.S. crude futures CLc1 were at $36.39 per barrel at 0554 GMT, down 1.06 percent or 40 cents from their last settlement, while Brent crude LCOc1 was down 0.9 percent or 34 cents at $38.33. A global glut has pulled down oil prices by as much as 70 percent since 2014. "Macroeconomic concerns and high petroleum inventories are the oil market's ball and chain and are likely to keep the oil price between the mid-$30s and low $40s in Q2," Barclays said. While some analysts expect a recent weakening of the U.S. dollar .DXY to spur demand for oil from importers holding other currencies, Morgan Stanley said "negative oil headlines, producer hedging at higher prices and bloated inventories" indicate any upside in prices will be limited.

Adding to concerns of a global glut is U.S. production remains high despite steep cuts in drilling for new reserves as well as a jump in bankruptcies. "The U.S. oil rig count dropped further this week, with a total 10 rigs idled," Goldman Sachs said. "The current rig count implies U.S. production ... would decrease by 705,000 barrels per day yoy (year-on-year) on average in 2016, and by 375,000 barrels per day yoy in 2017," it added. So far, U.S. production remains stubbornly high, at over 9 million barrels per day.

Despite a pick-up in recent economic data, including from India and China, analysts also poured cold water on hopes that Asia's economic prospects were improving. "Asia continues to face a structural growth problem – one that will not be cured in the space of a few, short months," said HSBC's Frederic Neumann. Given a growing belief that prices might not recover by much any time soon, hedge funds have cut their net long positions in U.S. crude for the first time in six weeks. The chief executive of the Abu Dhabi National Oil Company said oil markets would only start to rebalance in 2016 and 2017.

Oil prices fall on dimming prospect of output restraint

 

[waltky]

Iran doesn't get it's way...

The OPEC-Russia Freeze Is Already Dead
Apr. 4, 2016 - Summary

OPEC - Russia deal was already poised to fail.

The deal saw all parties freeze production at (or near) record levels -- not closing the supply - demand gap.

Saudi Arabia announced they will not freeze if Iran does not freeze production (which is very unlikely).

Russia keeps increasing production levels (and exports) as well.

Oil prices formed a low and rallied when a plan between Russia and several OPEC members was announced, which saw each country limit its production levels to the output seen this January. I believe this deal wasn't very effectual in the first place, but with the most recent data we see that it will likely not propel oil prices higher unless major changes are made to this plan. The plan originally saw OPEC members as well as Russia freeze their output at the production levels they reported for January 2016 -- this would have been not very efficient in propping oil prices up, as OPEC as well as Russia produced oil at a very high rate in January. Freezing production at (or near) record levels is not a great idea if your goal is reducing production to balance the supply and demand gap.

In this chart we see that OPEC production was very close to its record high in January 2016, up 130,000 barrels a day from the December level, up 500,000 barrels a day from the 2015 average and up 1.5 million barrels a day from the 2014 average. Since the global supply and demand imbalance stands at 1.5 million to 2.0 million barrels of oil each day, freezing production just 80,000 barrels below last year's peak production number (reported for November) is not the appropriate way to balance this gap. On the other side of the deal we had Russia, which reported record production in January as well: The country produced 10.88 million barrels a day in January, which was a post Soviet record for the country, thus positioning the country to freeze production at record levels (once again, not the right move if your goal is to balance a huge overproduction issue).

The deal was already proposed to fail, but recent news will mean the chance of a beneficial impact on the global supply - demand gap will be even lower: On Friday Saudi Arabian official (and deputy crown prince) Mohammed bin Salman announced that Saudi Arabia would only participate in a production freeze if all other OPEC countries, including Iran, as well as non-OPEC members such as Russia would freeze production as well. As we know Iran is not looking towards freezing production any time soon, as the country desperately seeks to expand oil production after sanctions have been lifted a couple of months ago. The EIA forecasts that Iranian oil production will average 3.1 million barrels of oil in 2016, and 3.6 million barrels of oil in 2017.

This would represent a huge increase of almost thirty percent over 2015's production level of 2.8 million barrels a day. Iran thus does want to freeze production at the current level at all, which ultimately means that Saudi Arabia will not want to freeze production either (according to the Prince's words). As if this wasn't already bad enough, Russia -- the other major country in the deal -- does not seem to be willing to freeze production either. In March the country's production hit 10.912 million barrels a day, which was an increase of two percent in comparison to the prior year. This production level also was higher than the one in January, which (according to the production freeze deal) should have been the absolute limit. Apparently Russia is not seeing any benefit in following the plan which was already poised to fail (as, even when every country agreed to freeze production at the January level, the supply - demand gap would not have closed), and with Saudi Arabia's announcement that they will not participate if Iran does not freeze its production (which is very unlikely), it seems the two biggest producers of the proposed production freeze are both not willing to actually act on it.

Due to lower consumption in the country, Russian oil exports rose by ten percent yoy (to 5.6 million barrels a day) in March, which means pressure on global oil prices will be even higher, as the country is selling a growing amount of its production on the global market (instead of consuming oil in the country). In April OPEC members and Russia will once again come together to discuss coordinated moves towards production freezes (or production cuts), but if we use past meetings and agreements as a guideline, we can assume that the efforts will not be very fruitful. If those countries would agree on a production cut by five percent, and every member would actually do so, the global supply - demand gap would be closed and oil prices could rally substantially, but I believe such an agreement is rather unlikely.

Takeaway

See also:

Asian shares slide; frazzled by Fed, falling oil prices
Tue Apr 5, 2016 - Asian shares and other riskier assets skidded on Tuesday, pressured by slumping crude oil prices and mixed messages from Federal Reserve policymakers on the outlook for U.S. interest rate rises.

Oil prices continued to drop after shedding more than 2 percent overnight, as investors doubted that oil producing countries would freeze output to address a global glut. Brent lost 0.4 percent to $37.54 a barrel after losing 2.5 percent on Monday. U.S. crude lost nearly 3 percent overnight, and on Tuesday was down about 0.5 percent at $35.53. European shares are seen falling, with spread-betters expecting Germany's DAX to fall as much as 1.0 percent and Britain's FTSE 0.5 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.3 percent. Japan's Nikkei stock index dropped 2.4 percent to an eight-week closing low, as the perceived safe-haven yen rallied. "Investors are concerned that Japanese companies are losing their 'weak-yen appeal'," said Kazuhiro Takahashi, equity strategist at Daiwa Securities. "Many people are thinking it would be difficult for exporters to forecast on-year gains in their earnings for this fiscal year."

Commodity-related and industrial shares helped drag down U.S. stock indexes overnight, and U.S. economic data suggested that economic growth remained sluggish in the first quarter. New orders for manufactured goods dropped in February, as they have in 14 of the past 19 months, while business spending on capital goods was much weaker than initially believed. That gave investors no reason to believe the U.S. Federal Reserve would raise interest rates anytime soon, in line with the cautious tone Fed chair Janet Yellen sounded last week that contrasted with more hawkish remarks from other Fed policymakers.

Boston Federal Reserve President Eric Rosengren was the latest to fly into the hawkish zone on Monday, calling it "surprising" that futures markets currently price in just one or even no rate hikes this year, which he said could prove "too pessimistic." "Rosengren is usually on the dovish side of the spectrum, highlighting how out of line Fed chair Yellen sounded last week compared to her colleagues," Sean Callow, senior currency strategist at Westpac, said in a note.

MORE

 

[waltky]

Oil prices rises in spite of oversupply...

Oil rises on firm U.S., German growth but traders warn of ongoing glut
Fri Apr 8, 2016 - Oil prices rose on Friday, lifted by firm economic indicators from the United States and Germany which could support fuel demand, but analysts warned that crude markets were threatened by another downturn because of ongoing oversupply.

Front month U.S. West Texas Intermediate (WTI) crude futures were trading at $38.02 per barrel at 0653 GMT, up 76 cents, or 2 percent, from their last close. International Brent futures were up 60 cents at $40.03 a barrel. "We believe the current oil price is unsustainable and expect a fundamental price recovery when markets move into better balance in mid- to late-2H16," investment bank Jefferies said on Friday, although it added that "the recovery could be protracted." Traders said there was some bullish sentiment in oil markets early on Friday following statements by the U.S. Federal Reserve that the world's biggest economy was on the path of more economic growth.

In Europe, rating agency Moody's said that Germany - the continent's biggest economy - expected a slight acceleration of its growth to 1.8 percent, benefiting from robust domestic demand. Despite encouraging reports from two of the world's biggest economies, analysts warned that oil prices could fall again soon as there were few signs that a global overhang in production of at least 1 million barrels per day (bpd) would be addressed soon. "Investors are lacking confidence about improved U.S. seasonal demand, as a decline in U.S. crude stockpiles (reported earlier this week) was mainly attributable to weaker imports and improved refinery utilisation," ANZ bank said.

Outside the United States and especially in parts of the Middle East, production is still soaring. Iraq said on Thursday that exports from its southern ports had hit almost 3.5 million bpd by April, up from an average of 3.29 million bpd in March, putting doubts on the feasibility of a planned meeting by major producers on April 17 to freeze output levels.

Iran, which was relieved from crippling international sanctions in January which had cut its crude exports to little more than 1 million bpd, has said it would only participate in a production freeze once it had regained its pre-sanctions levels of 4 million bpd, pouring cold water on any hopes that ballooning oversupply can be reined in soon. ANZ bank said that there were signs that a renewed downtrend could be imminent for crude oil prices.

Oil rises on firm U.S., German growth but traders warn of ongoing glut

 

[william the wie]

What is strange is that the range of break even points for fracking is much wider than was thought. It also look like economies of scope from Well logs are much higher than expected.

 

[longknife]

Saw a story this morning where a huge amount of massive oil tankers are moored off the port of Basra, Iraq. It's pumping oil and shipping it out as fast as it can.

Why?

 

[william the wie]

Yep and oil fields will sell for effectively nothing.

 

[waltky]

longknife wrote:
Saw a story this morning where a huge amount of massive oil tankers are moored off the port of Basra, Iraq. It's pumping oil and shipping it out as fast as it can.

Why?

To pay for the war with ISIS.

 

[longknife]

longknife wrote:
Saw a story this morning where a huge amount of massive oil tankers are moored off the port of Basra, Iraq. It's pumping oil and shipping it out as fast as it can.

Why?

To pay for the war with ISIS.

But, from what I read, they're just parked there.

With story -
Shocking Photo: Nearly 30 Oil Tankers in Traffic Jam Off Iraqi Coast @ Shocking Photo: Nearly 30 Oil Tankers in Traffic Jam Off Iraqi Coast | Zero Hedge

 

[william the wie]

longknife wrote:
Saw a story this morning where a huge amount of massive oil tankers are moored off the port of Basra, Iraq. It's pumping oil and shipping it out as fast as it can.

Why?

To pay for the war with ISIS.

Also to rebuild infrastructure. $100B in Iran and Iraq is making payment on similar work in their own country.

 

[waltky]

Africa's largest oil producer is short of petrol...

Nigeria fuel crisis: Why is Africa's largest oil producer short of petrol?
Thu, 07 Apr 2016 - Despite being one of the world's biggest oil producers, the BBC's Martin Patience explains why Nigeria is currently facing a severe shortage of fuel.

It does not have enough oil refineries and even if the four it has were running at full capacity, they would only supply a quarter of the country's needs, says John Ashbourne, an economist at the financial research firm Capital Economics. To meet demands, the national oil company imports around 50% of its fuel needs. The remainder is then supposed to be imported by private fuel distributors. But for months these companies have been reducing their imports leading to the current fuel shortages. The BBC's Nigeria correspondent Martin Patience looks at three reasons why:

1) Outstanding debts

For years, the Nigerian government paid a fuel subsidy to make it cheaper at the pump. But it was hugely expensive when the price of oil was high. The current government, which came to power last May, said it inherited massive debts from the previous administration. Fuel distributors were initially left out of pocket. Finally, the government paid the bill in November. But by that time, companies had already started slowing fuel imports.

2) Currency crisis

The slump in global oil prices is hammering the Nigerian economy. It has led to a shortage of the US dollars needed to pay for imports. With the country facing a currency crisis, the distributors are struggling to get their hands on dollars to pay for fuel imports. They say they are being forced to use the black market where they pay a far higher rate.

3) Fuel subsidy dispute

In January, the government ended official fuel subsides saying the cost of oil had fallen so much that they were no longer required. But the fuel distributors disagree. In protest, some companies stopped selling fuel during this dispute. As the shortages increased, others hiked their prices above the official government rate - leading to accusations of profiteering. Some analysts predict that until the fuel subsidy is reintroduced or official retail rates are allowed to rise, distributors will continue to limit the supply. And for Nigerian motorists that could mean the long wait at the pumps will go on.

Nigeria fuel crisis: Why is Africa's largest oil producer short of petrol? - BBC News

 

[william the wie]

Refinery capacity is low worldwide. Construction and maintenance budgets are based on $80-100/BBL

 

[waltky]

Oil falls ahead of producer meeting...

Oil falls as dark clouds appear ahead of producer meeting
Wed Apr 13, 2016 - Oil prices fell on Thursday as OPEC warned of slowing demand and Russia hinted that there would only be a loose agreement with little commitments at the upcoming exporter meeting to rein in ballooning oversupply.

Meanwhile, Goldman Sachs said that productivity gains by U.S. shale producers were keeping alive its "deflationary outlook" for oil prices as drillers manage to adjust to lower prices instead of going out of business. Brent crude futures LCOc1 were at $43.66 a barrel at 0123 GMT, half a dollar, or 1 percent, below their last close. U.S. West Texas Intermediate (WTI) futures CLc1 were also down 1 percent at $41.60.

Russian oil minister Alexander Novak told a briefing that a deal on an output freeze scheduled this weekend will be loosely-framed with few detailed commitments. "The agreement will not be very rigidly formulated, it is more of a gentlemen's agreement," one of those present said, paraphrasing Novak's words at the gathering. A second person present said: "there is no plan to sign binding documents." This would make it unlikely that the meeting by top exporters in Qatar on Sunday will successfully rein in production of around 2 million barrels per day (bpd) of crude in excess of demand.

Morgan Stanley said in a note that "we think any agreement actually sets up bearish catalysts for the months ahead." With the likelihood of a binding freeze by the Organization of the Petroleum Exporting Countries (OPEC) and Russia fading, analysts will look to the U.S. oil industry to see if lower drilling will result in falling production. Here too, the outlook is for production to remain higher than many expected. "Shale productivity gains remain a key driver of our long-term deflationary outlook for oil prices," said Goldman Sachs.[ "Our analysis of shale productivity... (is) broadly in line with our expectations for 3 percent to 10 percent yoy (year-on-year) increases," it added. With no end in sight to the supply glut, much will depend on demand to determine the size of the market's oversupply.

While demand has been strong, supported largely from Asia, OPEC on Wednesday cut its 2016 forecast for global demand growth and warned of further reductions. World demand will grow by 1.20 million bpd in 2016, OPEC said in its monthly report, 50,000 bpd less than expected previously. "Economic developments in Latin America and China are of concern... Current negative factors seem to outweigh positive ones and possibly imply downward revisions in oil demand growth." Morgan Stanley pointed to several bearish risks for oil, including "significant selling pressure from producer hedging if prices rise... (and) reemerging macro headwinds." The bank said it was "bearish oil prices into 2H16" and that "sustaining a price above $45 WTI in the front will be difficult... into 2017."

Oil falls as dark clouds appear ahead of producer meeting

 

[waltky]

Oil futures up ahead of OPEC meeting...

Crude prices edge up in thin trading ahead of producer meeting
Thu Apr 14, 2016 - Crude futures edged up on Friday in thin business as traders were reluctant to take on new positions ahead of a planned meeting at the weekend of major oil exporters who want to rein in ballooning global over-production.

A group of oil producers, lead by top exporters Saudi Arabia and Russia, plan to meet in Qatar's capital Doha on Sunday to discuss measures to freeze output around current levels in an effort to contain a global supply glut that is seeing some 2 million barrels of crude produced every day in excess of demand. Traders said they were reluctant to take on new positions ahead of the meeting, which takes place outside of market hours, and that as a result of low volumes, prices were little moved. "The crude oil market is awaiting the outcome from a key meeting of oil producers in the coming days," ANZ bank said.

Brent crude futures LCOc1 were at $44 a barrel at 0154 GMT, 16 cents, or 0.4 percent above their last close. U.S. West Texas Intermediate (WTI) futures CLc1 were up 17 cents at $41.67. With discussions focussing around freezing output at or near current record levels, most analysts said they have little hope that a potential Doha deal will reduce the glut that has pulled down crude prices by as much as 70 percent since 2014. "The Doha meeting does not materially change the oil market balances," Barclays bank said.

Instead of pushing prices up by much, Barclays said an agreement could prevent prices from otherwise falling further. "If recent supply-side fundamental support holds and the market's expectations for a credible statement and commitment are met, the meeting could help prevent prices from falling back to the low $30 range." Energy consultancy Wood Mackenzie said that "even if an output freeze is announced, we do not expect a genuine one to occur during the remainder of 2016." Instead, Wood Mackenzie said it expected "OPEC output to rise 0.5 million barrels per day year-on-year in 2016, with most of that growth coming from Iran and Iraq, both of whom have indicated plans to grow output in 2016."

Crude prices edge up in thin trading ahead of producer meeting

 

[waltky]

Output freeze to push up oil prices...

Oil exporters to discuss output freeze
Fri, 15 Apr 2016 - Opec members, together with a few other oil producers, are meeting in Qatar on Sunday to discuss freezing output in an attempt to push up oil prices.

The world's leading oil exporters could be finally about to take action following the fall in prices. Members of the exporters' group Opec, together with some other oil producers, are meeting in Qatar on Sunday to discuss freezing output. They want to push up the price of crude oil, which is less than half what it was in June 2014. In previous episodes of falling prices, Opec has been much quicker to respond, often cutting output. The agenda for the meeting in Doha, the capital of Qatar, is a freeze in production. No cuts in other words, just a commitment to no more increases. But even that possibility has given some support in recent weeks to the price of oil. The low it reached earlier this year was about $27 a barrel for Brent crude oil, one of the leading international market prices. This week it has been very close to $45. That is to a large extent due to traders considering the possibility that some oil producers are close to taking some sort of action to push prices higher.

It's worth emphasising that even at current levels the price of oil is far below where it was as recently as June 2014 - when it reached $115. The fall has hurt many oil producing countries. Earlier this week, the International Monetary Fund said it had damaged financial stability and the government finances in many of them. The meeting is not formally an Opec event, though all or very nearly all the group's members will be represented. There will also be some non-members, notably Russia. The decision to hold this meeting, with a rather unusual group of attendees, reflects the oil exporters' persistent concerns about the level of prices and a feeling that any action needs to involve more than just the members of Opec.

Two of the world's leading producers are not going to be there: the US and China. Both countries have large oil production industries, but they use nearly all of it themselves, and have to import extra to meet their own needs. Their economies overall tend to benefit from cheaper oil so they don't have a shared interest with those who will be turning up in Doha. Still, there is more than enough oil production that will be represented there to make a substantial difference to the global market if the participants chose to take strong action. What many oil analysts say, however, is that they aren't talking about action that is going to achieve much. In the past, Opec has often managed to agree and deliver cuts in production. This time all that's on the table is a potential agreement to refrain from further increases.

Among the countries attending there is certainly a good deal of support for the idea. But one important player, an Opec member, is determined to increase its production: Iran. As the country emerges from western sanctions, the Iranian government wants to regain the share of the market that it lost as a result of those restrictions on its international sales. Iran is not even sending its oil minister Bijan Zanganeh to the meeting, although another senior official is expected to attend. Saudi Arabia's Deputy Crown Prince has said that a freeze could only happen if Iran takes part. But there are doubts about whether this really is the Kingdom's last word.

No 'game changer'

See also:

Oil down ahead of producer meeting; dollar slips
April 15, 2016 - Crude oil prices fell on Friday ahead of a weekend meeting that could yield an output freeze by major producers, while the U.S. dollar and stocks across the globe edged lower but posted weekly gains.

On Wall Street, energy stocks led the market slightly lower as oil fell, and Apple <AAPL.O> shares also weighed after Nikkei business daily reported Apple will continue its reduced production of iPhones in light of sluggish sales. The S&P 500, however, posted its seventh positive week in the last nine. The MSCI index of stocks across the globe <.MIWD00000PUS> hit its highest point of the year on Thursday and emerging market stocks <.MSCIEF> racked up their best weekly gain in six. European shares <.FTEU3> fell 0.3 percent but posted their largest weekly gain in two months.

On Friday, the Dow Jones industrial average <.DJI> fell 28.97 points, or 0.16 percent, to 17,897.46, the S&P 500 <.SPX> lost 2.05 points, or 0.1 percent, to 2,080.73 and the Nasdaq Composite <.IXIC> dropped 7.67 points, or 0.16 percent, to 4,938.22. Japan's Nikkei <.N225> closed 6.5 percent higher for the week. China's economy grew 6.7 percent in the first quarter from a year earlier, meeting expectations and providing additional evidence that a slowdown in the world's second largest economy may be bottoming out.

The dollar index <.DXY> slipped 0.2 percent after the U.S. currency had gained more than 1 percent against both the yen <JPY=> and the euro <EUR=> earlier this week. Speculation was still rife about whether top oil producers led by Saudi Arabia and Russia will be able to reach a deal in Qatar on Sunday to curb output. "I think the fact that oil producers are talking suggests that the psychology of the market has changed a little bit and probably the worst of the oil price declines is behind us. This would be good for risk sentiment going forward," said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.

MORE

 

[william the wie]

No agreement will be reached.

 

[waltky]

Granny says, "Dat's right - purt soon we all gonna be standin' in line buyin' $3/gal. gas again...

Doha oil producers close to agreeing output freeze: sources
Sun Apr 17, 2016 - Oil producing countries meeting in Doha on Sunday appeared close to agreeing on an output freeze to prop up crude prices, the first such deal in 15 years, official sources told Reuters. A draft agreement circulating in Doha and seen by Reuters says countries' average daily crude oil production in each month would not exceed the level recorded in January this year.

The freeze would last until Oct. 1 this year, and producers would meet again in October in Russia to review their progress in engineering "a progressive recovery of the oil market", the draft reads. Final agreement has not been reached on the draft, but several senior sources in national oil ministries said they believed a deal could be achieved. "I am optimistic," acting Kuwaiti oil minister Anas Khalid al-Saleh said on Saturday of prospects for a deal. "‎There is only one proposal. Freeze at the January level till October," another delegate said, declining to be named because of political sensitivities. "There is a proposal to meet in October and to look forward." "We have a deal," a third senior oil source told Reuters.

Over a dozen oil-producing countries inside and outside OPEC have officially confirmed they would attend the meeting in Doha - although major producer Iran has said it would not participate as it could not accept proposals to freeze its production. During the freeze, producers would continue to consult on the best ways to bolster the oil market, and the deal would be open for other states to join, the draft agreement says. The draft provides for the creation of a "high level monitoring committee" of two oil ministers from OPEC countries and two from non-OPEC countries; they would be assisted by a working group of experts.

Although a freeze would be a significant step for oil producers, it would have only a limited impact on global supply and the market is unlikely to rebalance before 2017, the International Energy Agency said on Thursday. The role of Iran, which wants to ramp up production after the lifting of economic sanctions on it in January this year, is a key issue overhanging the Doha talks. "We have told some OPEC and non-OPEC members like Russia that they should accept the reality of Iran's return to the oil market," Tehran's oil minister Bijan Namdar Zanganeh was quoted as saying by his ministry's news agency SHANA on Saturday. "If Iran freezes its oil production at the February level, it means it cannot benefit from the lifting of sanctions."

Publicly, Saudi Arabia has taken a tough stance on Iran. Deputy Crown Prince Mohammed bin Salman told Bloomberg in recent days that the kingdom would only restrain its output if all other major producers, including Iran, agreed to freeze their production. It was not clear if Saudi Arabia would stick to this position at the talks.

Doha oil producers close to agreeing on output freeze: sources

 

[william the wie]

Doha collapsed. Crude has dropped and is dropping further in Asia.