Category Archives: Iraqi oil

Putin’s OPEC tactics: Iran sanctions and the Saudis [IBD cites me]

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June 2018 OPEC meeting’s key players (AP)

Last week, Gillian Rich at Investor’s Business Daily (Washington), asked me (Berlin) and others about the OPEC’s 20-21 June meeting. Below here, I give my views in more detail, including the tie-in to the Trump project to isolate Iran and my comment about Putin likely betraying the Iranians again.  The IBD piece is here: Trump Could Make OPEC’s Next Meeting As Dysfunctional As G-7 Summit. 15 June ’18.

We spoke about market and geopolitical aspects. On the latter, I emphasized both the Trump Administration’s evolving plan to sanction and isolate Iran, and Russia’s new role as a central player with OPEC ever since the 2016 joint Russian-OPEC decision to raise production.

That’s when Putin played a new role for any Russian leader. Not only did he coordinate Russian oil policy with OPEC’s, he got personally involved in heated discussions, getting on the phone late in the last night with Iranian and Saudi leaders to get the deal sealed. Continue reading

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Putin’s new OPEC role reflects the toll of low oil prices on Russia [IBD quotes me]

I was interviewed by Gillian Rich at Investors Business Daily (Washington, DC) on non-OPEC Russia’s role in the production cut.  The article of December 9, is below. A few points first:

1: President Putin and his minister of energy Alexander Novak‘s participation in the OPEC decision – actually making middle-of-the-night phone calls to mediate between Iran and Saudi Arabia, plus publicly promising to cut Russian production – is totally unprecedented. Never did the Soviets, nor  post-Soviet Russia  ever do any such thing previously. Why now?

2: As Rich quotes me as saying, oil prices below $60/barrel impose severe constraints on the Russian state’s income. Indeed, the federal budget has actually been based on $50/barrel, and yet the difficulties are apparent. Although Russian oil production is now at a post-Soviet all-time high, low prices have caused the state’s oil and gas income to severely drop. Here is the EIA’s assessment as of October 2016, showing the correlation of Brent price fall (in both dollars and Rubles) on the left, and the decline in oil and gas federal budget revenue on the right:eia_russia_oil_20oct16

But, how much of Russian national export revenue is derived from oil and gas revenue? The EIA (in 2014) puts this at 68%. Here’s the breakdown:  eia_russian_oil_gas_exprot_revenue201300

Continue reading

An Oil-Price War´s Surprise Ending -My BPJ article on OPEC, Shale, Trump, Market & Geopolitics

bpj-oil-price-war-end-29nov16Here`s my latest at Berlin Policy Journal:  about  OPEC`s 30 Novermber meeting, US shale and the geopolitics from the  Trump Administration towards Iran and the Saudis. – Tom O`D.

An Oil-Price War’s Surprise Ending

No one expected shale producers to survive extended low oil prices.
, NOVEMBER 29, 2016 
The oil market’s oversupply – and the low prices that followed – was supposed to drive shale producers out of business. Instead, the economies of several large national producers have been upended, and the next act could prove even more destabilizing.

OPEC’s 171st meeting in Vienna on November 30 reflects the new paradigm of the global oil market. After two years, the Saudi-led price war to drive American shale and other “high cost” producers from the market has ended. However, to the surprise of many – not least the Saudis – shale has survived. What now?

The United States Energy Information Agency (EIA) expects persistent market oversupply to have been quenched by the second half of 2017. The Saudis view the diminishing oversupply as an opportunity to cut production by 600,000 or more barrels per day – although about twice this amount would be optimal – boosting prices from under $50 per barrel to $60 or more. The Saudis have worked intensely to reach an agreement at the OPEC summit to coordinate this production cut with Russia; any failure to achieve this highly anticipated deal would sink market confidence, pushing prices into the $30s.

The key obstacle to the Saudi plan is that Iran has refused to participate in any cut, insisting it should first be allowed to re-establish production it lost under years of sanctions. In response, the Saudis have threatened to boost their own production, punishing Iran by collapsing prices and by denying them market share. The Financial Times’ Nick Butler correctly characterizes this as “playing with fire,” and not only because of the severe pain this would impose on weaker OPEC states, but also for the geopolitical retaliation it might provoke from the new US administration as the Saudis would also bankrupt numerous shale producers in the US.

However, even if Russia, Iran, and the rest of OPEC agree to the Saudis’ cuts, US shale is widely expected to expand into the void, re-depressing prices by later next year. In all these scenarios, the future remains extremely difficult for OPEC, for Russia, and for other oil-dependent states.

A Price War Backfires

The prolonged high price of oil, starting to rise in 2002 and then dipping during the financial crisis before rising again till mid-2014, encouraged the emergence of new unconventional shale production. Driven by technical innovations in hydraulic fracturing plus abundant venture capital, by 2014 the US had added more new oil to the global market than what was lost in the Arab Spring and subsequent wars in Libya, Iraq, and Syria. By mid-2014, some two million excess barrels-per-day (bpd) were flowing into storage, and the price collapsed. Continue reading

Saudi & Russia seek oil deal as OPEC fight v US shale fails [My RTRadio Interview]

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RT Radio-Edinburgh’s Jack Foster interviewed me on the upcoming 30 November OPEC summit where the Saudis hope to set a cap on OPEC and Russian production. Here’s the interview:   Listen from time-stamp 9:00-to-17:30 (Streaming MP3) 

This would  mark the first-ever Russian cooperation with OPEC. However, market realities look bleak for OPEC and Russia whether they reach an agreement or not. The reason is the unprecedented continuing challenge from US shale, which has dramatically cut its costs via tech and operational innovations to stay profitable at low prices. Continue reading

“Energy independence” won’t free the USA from global oil market & geopolitics [I’m cited: CNNMoney]

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Credit: CNNMoney, 9 August 2016

Mr. Trump promises he’d use the USA’s shale-oil revolution to deliver “complete” independence from foreign oil, telling voters in May: “Imagine a world in which our foes and the oil cartels (sic) can no longer use energy as a weapon. Wouldn’t that be nice?” But, he is confusing two quite distinct things:

“Energy independence” – in the sense of the USA producing more oil than the country consumes – is indeed possible, even “tantalizingly close” as this CNNMoney article (Aug. 9, 2016, by Matt Egan) makes clear, citing myself and other experts.  For clarity, I’ll call this “net oil-exporter status.”

However, Donald Trump asks us to “imagine” he can use this net oil exporter status, to make the US independent of the global oil market and oil in geopolitics where our “foes” and “cartels” have leverage. Continue reading

Aside

Last night Investor’s Business Daily NEWS’ Gillin Rich interviewed me. The title reflects some rumors, but my point of view, as she reports, emphasizes market realities that bode against any output limit – esp. if the Iranians are still intransigent … and … Continue reading

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Wikistrat Report “Saudi Arabia & the Future of Oil” cites my views

Wikistrat - my quote on US continued interestThis Wikistrat Report on the Saudi kingdom’s “reform” plans and the future of oil is from a press webinar I did on 17 May together with Dr. Ariel Cohen (Atlantic Council, Washington) and Prof. Shaul Mishal (Middle East Division, IDC Herzliya & Tel Aviv U.).  A nicely done report on oil market and geopolitical hot topics.

30May16 note: A couple typos I had found have been fixed by Wikistrat since I initially posted this Report.  The latest version is now linked here. – T.O’D.