CNN 20 July 2016
The oil market remains glutted, with price in the mid-$40’s. Despite furtive hopes over recent weeks by the business press about “imminent re-balancing” of global supply v. demand and about “draw downs” of record-high global storage inventories, data reveal only incremental re-balancing has occurred since fall of 2014 when this all began. (And, from November 2014, the Saudi’s responded by fighting for their market-share rather than for boosting price, which would have been impossible for OPEC to do on its own given the huge supply glut.)
Posted in Energy and Geopolitics, Gaddafi, Global Oil Market, Global Oil system, Libya, Oil prices, Oil supply, OPEC, Saudi Arabia, Uncategorized
Tagged Libya, Middle East, oil market, oil prices, oil sector, OPEC, Saudi Arabia
Gillian Rich at Investors’ Business Daily News (17 June 2016) writes a quite informative survey of the many new technological methods pushing the cost of US shale production ever downward. Here’s Gillian’s article. She asked me about the impact on OPEC producers and my central point (my quotes are below) was that it will be the high-tech, most-efficient producers (such as US shale) and NOT necessarily those with the largest and easiest-to-access proven reserves (e.g., countries such as Venezuela and much of OPEC, many corrupt Russian and Chinese state-dominated firms, etc.) that will set the pace in the new oil order
If the latter actors can’t find ways to innovate in technology and operational methods they will be at a disadvantage because shale production looks more like manufacturing than traditional oil extraction. Many OPEC and other state-owned firms never had to think like a combination of Henry Ford and Silicon Valley, but could instead count on huge, low-cost reserves, inefficient exploration and production and cheap local labor.
Eventually, the new shale methods will of course spread to promising shale fields in Argentina, China, Eastern/Central Europe and elsewhere; but this will require big advances in local infrastructure, training and government regulatory capacity. Again, things those countries must think about very seriously. Here are my quotes (from near the end of her long article).
New Oil Order
…. OPEC countries like Nigeria and Venezuela that haven’t invested in newer technology will be hurt by advances in the U.S., said Thomas O’Donnell, a senior energy analyst at the consulting firm Wikistrat. Russia also can’t exploit shale and Arctic assets because of economic sanctions that limit Westerners from helping develop the new fields.
Meanwhile, Saudi Arabia has low-cost production fields, and state-run oil company Saudi Aramco can bring in foreign experts knowledgeable about fracking and new technologies, he added.
Still, OPEC must now grapple with U.S. shale producers on the rebound, which could lead to volatility, O’Donnell said. “The oil order has changed. It’s conventional oil on one side, and new shale oil on the other.”
Posted in Energy and Geopolitics, Enhanced oil production, Global Oil Market, Global Oil system, High technology, Oil prices, OPEC, Saudi Arabia, shale gas, shale oil, The USA, Tight oil, Uncategorized, Venezuela oil
Tagged China, Energy, oil sector, OPEC, Saudi Arabia, United States, Venezuela
To put Iran’s recent production increases in perspective: On its own, for 37 years, Iran has struggled to produce two-thirds of its pre-revolutionary level of 6 million barrels/day. Now, domestic opposition is again limiting foreign oil companies’ participation to boost production.
Since the Obama-administration’s and Europe’s nuclear sanctions were lifted early this year (marked ‘e’ on the chart), Iran has been expanding its production and exports more rapidly than most experts had expected. Tehran has actually tripled exports since late-2015 (see point ‘f’). But, here’s the big question: Can Iran sustain this years’ production gains?
If to, this could seriously undermine Saudi Arabia’s global oil-market share, and boost Iran’s sanctions-damaged economy to a long-awaited recovery.
The short answer: Now that foreign sanctions are finally lifted, the battle to boost Iran’s oil exports has shifted to a domestic clash over whether to allow foreign oil companies to have significant upstream involvement. This is a domestic Iranian issue with a long history.
Let’s start with some historical perspective: The Iranian National Oil Company (NIOC) can only do so much on its own to boost production. After decades of sanctions, it lacks the needed technology and finance. I told CNNMoney
‘s Matt Egan, on Wednesday, that the faster Iran expands on its own,
the faster production will plateau. (His CNNMoney article
today quotes me .).
This was what happened after the 1980-1988 Iran-Iraq war.(‘b’ on the chart). By about 1992, production had plateaued at almost 4 million barrels/day, under 2/3 of the pre-revolutionary, late-1970’s level of roughly 6 million barrels per day. (‘a’ on chart). The Iranian president at the time, Rafsanjani, argued to religious conservative and nationalist members of the Majilis that only foreign oil companies’ technology and investments could expand production further. However, he only won grudging approval for an offshore project due to fears that foreigners would bring their irreligious ways ashore and/or undermine the hard-won nationalization of Iran’s oil sector.
Posted in Chavez, Chavez lagacy, Chavez legacy, Energy and Geopolitics, Faja of the Orinoco, Global Oil Market, heavy oil, Iran, Iran nuclear, Iran sanctions, Obama, oil, Oil prices, Oil supply, OPEC, Sanctions, Saudi Arabia, shale oil, The USA, U.S. oil, Uncategorized, Venezuela oil
Tagged geopolitics, Heavy crude oil, Hugo Chávez, Iran, Obama, OPEC, Saudi Arabia, United States, Venezuela
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
I was interviewed today by CNNMoney’s Matt Egan on what OPEC should expect from US shale as they hold their 169th “Ordinary Meeting” in Vienna tomorrow (2 June). Indeed, at some point oil production and demand will balance (likely in 2017), and then the Saudis and OPEC will have to cautiously test the presently unknown dynamics of high-tech US shale on the rebound. -Egan cites my point of view in his article. Read on … – Tom O’D.
Don’t bet against the resilience of U.S. oil companies
by Matt Egan @mattmegan5 CNNMoney (New York) June 1, 2016: 12:23 PM ET
Many expected U.S. oil output would collapse under the weight of a lengthy price war with the mighty OPEC, the fractured oil cartel that’s meeting in Vienna Thursday.
The U.S. oil boom, fueled by the shale revolution, has obviously taken a few punches from OPEC’s strategy of all-out pumping. But the latest numbers show that American production continues to remain stubbornly high in recent months despite the crash in crude to as low as $26 a barrel in February.
The U.S. pumped 9.13 million barrels per day in March, down by a miniscule 6,000 barrels from the prior month, according to stats released this week by the U.S. Energy Information Administration. That represents a deceleration from recent monthly declines. By comparison, daily U.S. output dropped by 58,000 barrels in February and by 83,000 barrels in December.
Posted in Energy and Geopolitics, Global Oil Market, Global Oil system, High technology, Oil prices, Oil supply, OPEC, Saudi Arabia, shale oil, The USA, Tight oil, U.S. oil, Uncategorized
Tagged Ali Al-Naimi, Heavy crude oil, oil market, oil price, OPEC, Petróleos de Venezuela, Saudi Arabia, shale oil, Technology, United States, us shale, USA
This 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.
Posted in AICGS, Energy and Geopolitics, Energy and Geostrategy, Enhanced oil production, Global Oil Market, Global Oil system, international relations, Iran nuclear, Iraqi oil, Obama, Oil prices, Oil supply, OPEC, Persian Gulf, Russia, Saudi Arabia, shale oil, The USA, Tight oil, U.S. oil, Uncategorized, Venezuela oil
Tagged Ali Al-Naimi, Energy, geopolitics, Iran, Iraq, Obama, oil sector, OPEC, Persian Gulf, Saudi Arabia, United States, Washington
Oil ministers of Venezuela, Saudi Arabia & Qatar had agreed in February to freeze output if others did too. AFP/Getty Images
After a Wikistrat Webinar I did, MarketWatch asked me about Saudi & OPEC policy, ond US Shale. Read on here, or at MarketWactch! – Tom O’D.
5 key issues OPEC must wrestle with at its June meeting
Oil output freeze is needed to ‘create a firm price floor’: analyst
The oil market has given members of the Organization of the Petroleum Exporting Countries a reason to crack a cautious smile when they meet June 2 in Vienna.
Signs of a more stable oil market have emerged since the cartel members last held a regularly-scheduled meeting. Oil prices CLN6, +0.04% LCON6, -0.38% have gained more than 30% so far this year. And both West Texas Intermediate, the U.S. benchmark, and Brent crude, the global benchmark, briefly traded above $50 on Thursday.
Global production is falling following a larger-than-expected weekly decline in crude supplies, according to a report from the American Petroleum Institute late Tuesday. The report comes as the number of active-drilling rigs have been in a steady state of decline and oil-company spending cuts, oil-and-gas sector bankruptcies, and recent outages in Africa and North America, have been supportive for crude prices.
“OPEC members are likely to be a little happier going into June’s meeting than they were in December,” Tom Pugh, commodities economist at Capital Economics, said in recent research note.
Oil prices have “surged by about a third since the start of the year,” he said. The “higher prices will have removed some of the pressure on [OPEC] to act to prop up prices.”
But that doesn’t mean major oil producers can sit back and relax when they get together. Oil market supply and demand haven’t fully stabilized and there a lot of factors than can, and probably will, rock OPEC’s boat.
Here’s a rundown of what analysts see as the key issues at hand and possible outcomes for the OPEC summit: Continue reading
Posted in AICGS, Energy and Geopolitics, Energy and Geostrategy, Global Oil Market, Global Oil system, international relations, Oil prices, Oil supply, OPEC, PDVSA, Saudi Arabia, shale oil, The USA, Tight oil, U.S. oil, Uncategorized, Venezuela oil
Tagged Energy, geopolitics, OPEC, PDVSA, Saudi Arabia, United States
Here’s my live interview recently on Sky News – the all-news UK channel. It just went up.
Here’s the gist: Years-long high prices brought the US shale revolution and other new higher-cost oil online like offshore of Brazil and Africa. This glut was already dropping prices when the Saudi’s decided in November 2014 that OPEC alone could not cut enough production to reverse the slide. So what to do if Russia and Mexico won’t join an OPEC cut? Continue reading
Posted in Energy and Geopolitics, Global Oil Market, Global Oil system, Mexico, Oil prices, Oil supply, OPEC, PDVSA, Russia, Saudi Arabia, The USA, Tight oil, Trade and Commerce, Uncategorized
Tagged oil prices, oil sector, OPEC, PDVSA, Saudi Arabia, United States
Presidents Rouhani of Iran and Putin of Russia holding discussions
(AICGS Analysis, by Tom O’Donnell) Since Russia’s president, Vladimir Putin, decided to annex Crimea and back east Ukrainian separatists with troops, many have worried he might use his “energy weapon” to counter U.S.-EU sanctions, as Russia supplies around a third of the EU’s natural gas imports. But what about Russian retaliation in the oil sector?
That’s hard to imagine. While gas is marketed in bi-lateral, pipeline-mediated relationships, oil is not. It’s liquid, fungible, and marketed in a unified open market—“the global barrel” [and name of this blog, T.O’D.]—which means there are no bi-lateral oil dependencies.
So, when EU leaders were cajoled by Germany’s Angela Merkel into joining the United States in applying sanctions, Russia could do little to retaliate from within the oil sector. In reality, it is the EU and the U.S., not Russia, that have an “oil weapon” in hand. And, the flurry of Russian oil diplomacy with OPEC, Iran and China over the past couple of weeks has a distinct whiff of desperation to it. Continue reading
Posted in AICGS, Aramco, China, Energy and Geopolitics, Energy and Geostrategy, Euroepen Union, Gas globalization, gas internationalization, Germany, Global Oil Market, Global Oil system, international relations, Iran nuclear, Iran sanctions, negotiations, Obama, Oil prices, OPEC, Putin, Rouhani, Russia, Sanctions, Saudi Arabia, shale oil, The USA, Ukraine, Venezuela oil
Tagged Ali Al-Naimi, Berlin, China, European Union, geopolitics, Germany, Iran, Middle East, natural gas, oil sector, OPEC, Putin, Sanctions against Iran, Saudi Arabia, United States, Venezuela, Vladimir Putin
Falling oil prices are not a US-EU-Saudi plot against Russia, Iran and Venezuela… though their effect is certainly not unwelcomed..Foto: REUTERS/Jim Bourg
[Printed in IP Journal, German Council on Foreign Affairs] Pin-pointing the reason for the dramatic – and continuing – fall in the price of oil is relatively easy: OPEC held its 166th conference in late-November 2014 to decide on a strategy to address oil prices, which had been falling at five to ten percent per month since July. Rather than pursue a production cut
Posted in Chavez, Energy and Geopolitics, Euroepen Union, Global Oil system, international relations, Iran nuclear, Oil prices, Oil supply, OPEC, PDVSA, Persian Gulf, Putin, Resource conflicts, Russia, Sanctions, Saudi Arabia, The USA
Tagged Ali Al-Naimi, Business and Economy, Chavez, Energy, geopolitics, Iran, Middle East, oil sector, OPEC, Petróleos de Venezuela, Rafael Ramírez, Saudi Arabia, United States, Venezuela, Washington