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Tag Archives: OPEC
Oil falls ahead of OPEC+, U.S. Federal Reserve meetings
SINGAPORE, Jan 30 (Reuters) – Oil prices fell on Monday, giving up earlier gains, as global producers this week will likely keep output unchanged during a meeting this week and investors are cautious ahead of a U.S. Federal Reserve meeting that may spur market volatility.
Brent crude futures fell 20 cents, or 0.2%, to $86.46 a barrel by 0435 GMT while U.S. West Texas Intermediate crude was at $79.57 a barrel, down 11 cents, or 0.1%.
Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, are unlikely to tweak their current oil output policy when they meet virtually on Feb. 1.
Still, an indication of a rise in crude exports from Russia’s Baltic ports in early February caused Brent and WTI to post their first weekly loss in three last week.
“No change to the OPEC+ output is expected to be announced at this week’s meeting and we expect outlook commentary from the U.S. Fed to be the key driver of the outlook in the near term,” said National Australia Bank analysts in a research note.
Ahead of the Federal Reserve’s policy meeting scheduled on Jan. 31-Feb. 1, the market broadly expects the U.S. central bank to scale back rate hikes to 25 basis points (bps) from 50 bps announced in December, which may ease concerns of an economic slowdown that would curb fuel demand in the world’s biggest oil consumer.
Oil prices earlier gained amid tensions in the Middle East following a drone attack in oil producer Iran and as China, the world’s biggest crude importer, pledged over the weekend to promote a consumption recovery which would support fuel demand.
“It is not really clear yet what’s happening in Iran, but any escalation there has the potential to disrupt crude flow,” said Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore.
“We have Russia on the supply side and China on the demand side. Both can swing by more than 1 million barrels per day above or below expectation,” said Grasso, formerly an oil trader with Italy’s Eni.
“China seems to have surprised the market in terms of how fast they are coming out of zero COVID while Russia has surprised in terms of resilience of export volume despite the sanctions.”
China resumes business this week after its Lunar New Year holidays. The number of passengers travelling prior to the holidays rose above levels in the past two years but is still below 2019, Citi analysts said in a note, citing data from the Ministry of Transport.
“Overall international traffic recovery remains gradual, with high-single to low-teens digits to 2019 level, and we expect further recovery when outbound tour group travel resumes on Feb. 6,” the Citi note said.
Reporting by Florence Tan and Emily Chow; Editing by Muralikumar Anantharaman and Christian Schmollinger
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OPEC Misses Production Quota By 310,000 Bpd
A new survey from Argus showed on Friday that OPEC+ production fell to 38.29 million bpd last month—1.81 million barrels per day short of its reduced quota.
The 19 OPEC+ members subject to the quota produced 310,000 bpd fewer barrels in November when compared to the month prior. But that’s still 1.81 million barrels per day short of its quota for November. November’s quota was a reduction of 2 million barrels per day off October levels, although it was understood at the time that the group might not be able to reach even that reduced target.
Non-OPEC members of the OPEC+ group faired better than the traditional OPEC members, raising the combined output by 460,000 bpd—an eight-month high, according to Argus. Most of those increases came from Kazakstan, which saw a 330,000 bpd production increase, and Russia’s production, which saw an increase of 190,000 bpd after restarting Sakhalin 1.
OPEC’s crude production was down 770,000 bpd for November, a six-month low. The production declines were led by Saudi Arabia, which saw its output reduced by 440,000 bpd.
The biggest laggards among the broader OPEC+ group now, according to Argus, are Russia, producing 670,000 bpd under target; Nigeria, producing 530,000 bpd under target, Angola, producing 350,000 bpd under target, and Malaysia, producing 170,000 under target.
The members of the group that met or exceeded their production target are Oman, Kazakhstan, Bahrain, Iraq, Kuwait, UAE, Algeria, and Gabon.
Overall, Non-OPEC members under produced by 92,000 bpd, while OPEC members part of the quotas under produced by 90,000 bpd.
Crude oil prices have fallen substantially this week, prompting some to forecast that the OPEC+ group could cut oil production to prop up crude prices. Brent crude was set to finish out the week more than $10 under this time last week—well below what most analysts suspect is OPEC’s price defense trigger.
By Julianne Geiger
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Oil prices climb after OPEC+ keeps output cut targets, China eases COVID curbs
MELBOURNE, Dec 5 (Reuters) – Oil prices rose as much as 2% on Monday after OPEC+ nations held their output targets steady ahead of a European Union ban and a price cap kicking in on Russian crude.
At the same time, in a positive sign for fuel demand, more Chinese cities eased COVID-19 curbs over the weekend, though a patchwork easing in policies sowed confusion across the country on Monday.
Brent crude futures were last up 72 cents, or 0.8%, to $86.29 a barrel at 0430 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 70 cents, or 0.9%, to $80.68 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together called OPEC+, agreed on Sunday to stick to their October plan to cut output by 2 million barrels per day (bpd) from November through 2023.
Analysts said the OPEC+ decision was expected as major producers wait to see the impact of the EU import ban and Group of Seven (G7) $60-a-barrel price cap on seaborne Russian oil, with Russia threatening to cut supply to any country adhering to the cap.
“While OPEC remained steady on output over the weekend, I expect they will continue to balance the market,” said Baden Moore, head of commodity research at National Australia Bank.
“(A) Roll-off of the SPR releases, and implementation of the EU sanctions and price cap act to tighten the market, although we’d expect the market has already positioned for this outlook,” he said, referring to the U.S. strategic petroleum reserve.
The European Union will need to replace Russian crude with oil from the Middle East, West Africa and the United States, which should put a floor under oil prices at least in the near term, Wood Mackenzie vice president Ann-Louise Hittle said in a note.
“Prices are currently weighed down by expectations of slow demand growth, despite the EU oil import ban on Russian crude and the G7 price cap. The adjustment to the EU ban and price cap is likely to support prices temporarily,” Hittle said.
A key factor that has weighed on demand is China’s zero-COVID policy, but that appears to be easing now after protests were followed by several cities, including Beijing and Shanghai, relaxing restrictions to varying degrees.
Hittle added that the EU’s looming embargo on Russian oil products, in addition to crude oil, from Feb. 5 should support crude demand in the first quarter of 2023, as the market is short of diesel and heating oil.
Reporting by Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Cynthia Osterman and Kenneth Maxwell
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OPEC+ keeps steady policy amid weakening economy, Russian oil cap
LONDON/DUBAI, Dec 4 (Reuters) – OPEC+ agreed to stick to its oil output targets at a meeting on Sunday as the oil markets struggle to assess the impact of a slowing Chinese economy on demand and a G7 price cap on Russian oil on supply.
The decision comes two days after the Group of Seven (G7) nations agreed a price cap on Russian oil.
OPEC+, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, angered the United States and other Western nations in October when it agreed to cut output by 2 million barrels per day (bpd), about 2% of world demand, from November until the end of 2023.
Washington accused the group and one of its leaders, Saudi Arabia, of siding with Russia despite Moscow’s war in Ukraine.
OPEC+ argued it had cut output because of a weaker economic outlook. Oil prices have declined since October due to slower Chinese and global growth and higher interest rates, prompting market speculation the group could cut output again.
But on Sunday the group of oil producers decided to keep the policy unchanged. Its key ministers will next meet on Feb. 1 for a monitoring committee while a full meeting is scheduled for June 3-4.
On Friday, G7 nations and Australia agreed a $60 per barrel price cap on Russian seaborne crude oil in a move to deprive President Vladimir Putin of revenue while keeping Russian oil flowing to global markets.
Moscow said it would not sell its oil under the cap and was analysing how to respond.
Many analysts and OPEC ministers have said the price cap is confusing and probably inefficient as Moscow has been selling most of its oil to countries like China and India, which have refused to condemn the war in Ukraine.
Neither an OPEC meeting on Saturday nor the OPEC+ meeting on Sunday discussed the Russian price cap, sources said.
Russia’s Deputy Prime Minister Alexander Novak said on Sunday Russia would rather cut production than supply oil under the price cap and said the cap may affect other producers.
Sources have told Reuters several OPEC+ members have expressed frustration at the cap saying the anti-market measure could ultimately be used by the West against any producer.
The United States said the measure was not aimed at OPEC.
JP Morgan said on Friday that OPEC+ could review production in the new year based on fresh data on Chinese demand trends and consumer compliance with price caps on Russia crude output and tanker flow.
Reporting by Maha el Dahan and Rowena Edwards, Editing by Kirsten Donovan
Our Standards: The Thomson Reuters Trust Principles.
Oil output cuts on the table ahead of Russia sanctions
OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.
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OPEC and non-OPEC oil producers could impose deeper oil output cuts on Sunday, energy analysts said, as the influential energy alliance weighs the impact of a pending ban on Russia’s crude exports and a possible price cap on Russian oil.
OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.
The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.
Claudio Galimberti, senior vice president of analysis at energy consultancy Rystad, told CNBC from OPEC’s headquarters in Vienna, Austria, that he believes the group “would be better off to stay the course” and roll over existing production policy.
“OPEC+ has been rumored to consider a cut on the basis of demand weakness, specifically in China, over the past few days. Yet, China’s traffic nationwide is not down dramatically,” Galimberti said.
Energy market participants remain wary about the European Union’s sanctions on the purchases of the Kremlin’s seaborne crude exports on Dec. 5, while the prospect of a G-7 price cap on Russian oil is another source of uncertainty.
The 27-nation EU bloc agreed in June to ban the purchase of Russian seaborne crude from Dec. 5 as part of a concerted effort to curtail the Kremlin’s war chest following Moscow’s invasion of Ukraine.
Concern that an outright ban on Russian crude imports could send oil prices soaring, however, prompted the G-7 to consider a price cap on the amount it will pay for Russian oil.
No formal agreement has yet been reached, although Reuters reported Thursday that EU governments had tentatively agreed to a $60 barrel price cap on Russian seaborne oil.
“The other factor OPEC will need to consider is indeed the price cap,” Galimberti said. “It’s still up in the air, and this adds to the uncertainty.”
The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.
‘So much uncertainty’
OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the U.S. for OPEC+ to pump more to lower fuel prices and help the global economy.
The energy alliance recently hinted it could impose deeper output cuts to spur a recovery in crude prices. This signal came despite a report from The Wall Street Journal suggesting an output increase of 500,000 barrels per day was under discussion for Sunday.
OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the U.S. for OPEC+ to pump more to lower fuel prices and help the global economy.
Bloomberg | Bloomberg | Getty Images
Speaking earlier this week, RBC Capital Markets’ Helima Croft said there was no expectation of a production increase from the upcoming OPEC+ meeting and a “significant chance” of a deeper output cut.
“There is so much uncertainty,” Croft told CNBC’s “Squawk Box” on Tuesday. OPEC delegates “have to factor in what happens with China but also what happens with Russian production.”
“My expectation right now is, if prices are flirting with Brent breaking into the 70s, certainly OPEC will do a deeper cut, but the question is, how do they factor in what is going to come the next day?” Croft said. “So, I still think it is up for grabs.”
Oil prices, which have fallen sharply in recent months, were trading slightly lower ahead of the meeting.
International Brent crude futures traded 0.2% lower at $87.78 a barrel on Friday morning in London, down from over $123 in early June. U.S. West Texas Intermediate futures, meanwhile, dipped 0.3% to trade at $80.95, compared to a level of $122 six months ago.
“Barring any negative surprise during Sunday’s virtual OPEC+ talks and assuming a healthy compromise on Russian oil price cap before the EU sanctions kick in on Monday it is tempting to audaciously conclude that the bottom has been found,” Tamas Varga, analyst at broker PVM Oil Associates, said in a note Thursday.
Varga said oil prices trading below $90 a barrel was “not acceptable” for OPEC and Russia was widely expected to introduce retaliatory measures against those signing up for the G-7 deal.
“Choppy and nervous market conditions will prevail, but the new month should bring more joy than November,” he added.
‘High probability’ of an output cut
Jeff Currie, global head of commodities at Goldman Sachs, said OPEC ministers would need to discuss whether to accommodate further weakness in demand in China.
“They got to deal with the fact that, hey, demand is down in China, prices are reflecting it, and do they accommodate that weakness in demand?” Currie told CNBC’s Steve Sedgwick on Tuesday.
“I think there is a high probability that we do see a cut,” he added.
Analysts at political risk consultancy Eurasia Group said that lower oil prices “heighten the risk” of a new OPEC+ output cut.
“Ultimately, the decision will depend on the trajectory of the oil price when OPEC+ meets and how much disruption is evident in markets because of the EU sanctions,” Eurasia Group analysts led by Raad Alkadiri said Monday in a research note.
If Brent crude futures dip below $80 a barrel for a sustained period ahead of the meeting, Eurasia Group said OPEC+ leaders could push for another production cut to shore up prices and bring Brent futures back up to around $90 — a level “that they appear to favor.”
Oil Rises With OPEC+ Seen Considering Cuts Amid Faltering Market
(Bloomberg) — Oil rose as OPEC+ delegates said deeper production cuts could be an option when they meet this weekend.
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West Texas Intermediate rose 1.3% to settle above $77 a barrel. Earlier in the session, oil prices slumped below $74 to the lowest since December as protests over harsh anti-Covid measures erupted across China triggered a broad selloff in commodities and equity markets. With the oil market’s structure looking increasingly weak, delegates from the group say additional reductions could be an option.
The nearest portion of the Brent and WTI futures curves flipped into contango — a bearish structure indicating oversupply — with physical markets also under pressure. Speculators markedly reduced bullish bets, posting the sixth-largest reduction in net-long positions on record for Brent last week. Underscoring the market’s shaky fundamentals, JPMorgan Chase & Co. reduced its Brent crude forecast by $8 to $90 as it expects Russian production to hit prewar levels by mid-2023.
OPEC+ will meet Sunday to decide on its next output level, while European Union nations debate whether to set a price cap as low as $62 a barrel on exports of Russian crude oil. Several countries demanded a level that could put more pressure on Moscow, but the talks remain stuck, diplomats said.
Over the weekend, the US moved to grant supermajor Chevron Corp. a license to resume oil production in Venezuela after sanctions halted all drilling activities almost three years ago. The sanctions relief comes after Norwegian mediators announced the restart of political talks between President Nicolas Maduro and the opposition. Yet Chevron’s CEO Mike Wirth said it might take years to begin to refurbish those oil fields, meaning additional output won’t be immediate.
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Live news updates: Oil prices edge higher after volatile trading over reports of Opec production boost
Ukraine’s state energy firm said rolling power blackouts would continue across the country on Tuesday, with president Volodymyr Zelenskyy telling Ukrainians that they are consuming more energy than is available and the director of one power company warning that the outages will probably last until March.
“Ukraine’s power system still has not fully recovered from the six waves of [Russian] missile strikes and cannot operate at full capacity,” electricity group Ukrenergo wrote on Telegram late on Monday.
In his regular night-time address, Zelenskyy appealed to regional authorities and local communities to repeat pleas for residents to reduce their energy use.
Serhiy Kovalenko, chief executive at Ukrainian power provider Yasno, said that “Ukrainians will most likely have to live with blackouts until at least the end of March.”
The best-case scenario, Kovalenko said, was there were no new Russian attacks on Ukraine’s energy infrastructure and “the power deficit can be evenly distributed throughout the country”.
However, if Russia continued its missile and drone barrages on the power grid, he warned, Ukraine “will have to use not only hourly stabilisation shutdowns, but also emergency shutdowns, during which there may be no light for a very long time”.
State authorities said last week that more than 10mn people, or about a quarter of Ukraine’s population, were without power following weeks of Russian attacks.
The number and length of power outages across the country, including in the capital, Kyiv, have increased in recent days, as temperatures plunged below zero and the first snow fell in several regions this week.
OPEC+ Eyes Output Increase Ahead of Restrictions on Russian Oil
Saudi Arabia and other OPEC oil producers are discussing an output increase, the group’s delegates said, a move that could help heal a rift with the Biden administration and keep energy flowing amid new attempts to blunt Russia’s oil industry over the Ukraine war.
A production increase of up to 500,000 barrels a day is now under discussion for OPEC+’s Dec. 4 meeting, delegates said. The move would come a day before the European Union is set to impose an embargo on Russian oil and the Group of Seven wealthy nations’ plans to launch a price cap on Russian crude sales, potentially taking Moscow’s petroleum supplies off the market.
After The Wall Street Journal and other news organizations reported on the discussions Monday, Saudi energy minister Prince
Abdulaziz bin Salman
denied the reports and said a production cut was possible instead.
Any output increase would mark a partial reversal of a controversial decision last month to cut production by 2 million barrels a day at the most recent meeting of the Organization of the Petroleum Exporting Countries and their Russia-led allies, a group known collectively as OPEC+.
The White House said the production cut undermined global efforts to blunt Russia’s war in Ukraine. It was also viewed as a political slap in the face to President Biden, coming before the congressional midterm elections at a time of high inflation. Saudi-U.S. relations have hit a low point over oil-production disagreements this year, though U.S. officials had said they were looking to the Dec. 4 OPEC+ meeting with some hope.
Talk of a production increase has emerged after the Biden administration told a federal court judge that Saudi Crown
Prince Mohammed
bin Salman should have sovereign immunity from a U.S. federal lawsuit related to the brutal killing of Saudi journalist Jamal Khashoggi. The immunity decision amounted to a concession to Prince Mohammed, bolstering his standing as the kingdom’s de facto ruler after the Biden administration tried for months to isolate him.
It is an unusual time for OPEC+ to consider a production increase, with global oil prices falling more than 10% since the first week of November. Oil prices fell 5% after reports of the increase and then pared those losses after
Prince Abdulaziz
‘s comments. Brent crude traded at $86.25 on Monday afternoon, down more than 1%.
Ostensibly, delegates said, a production increase would be in response to expectations that oil consumption will rise in the winter, as it normally does. Oil demand is expected to increase by 1.69 million barrels a day to 101.3 million barrels a day in the first quarter next year, compared with the average level in 2022.
Saudi energy minister Abdulaziz bin Salman has said the kingdom would supply oil to ‘all who need it.’
Photo:
AHMED YOSRI/REUTERS
OPEC and its allies say they have been carefully studying the G-7 plans to impose a price cap on Russian oil, conceding privately that they see any such move by crude consumers to control the market as a threat. Russia has said it wouldn’t sell oil to any country participating in the price cap, potentially resulting in another effective production cut from Moscow—one of the world’s top three oil producers.
Prince Abdulaziz said last month that the kingdom would “supply oil to all who need it from us,” speaking in response to a question about looming Russian oil shortages. OPEC members have signaled to Western countries that they would step up if Russian output fell.
Talk of a production increase sets up a potential fight between OPEC+’s two heavyweight producers, Saudi Arabia and Russia. The countries have an oil-production alliance that industry officials in both nations have described as a marriage of convenience, and they have clashed before.
Saudi officials have been adamant that their decision to cut production last month wasn’t designed to support Russia’s war in Ukraine. Instead, they say, the cut was intended to get ahead of flagging demand for oil caused by a global economy showing signs of slowing down.
Raising oil production ahead of the price cap and EU embargo could give the Saudis another argument that they are acting in their own interests, and not Russia’s.
Another factor driving discussion around raising output: Two big OPEC members, Iraq and the United Arab Emirates, want to pump more oil, OPEC delegates said. Both countries are pushing the oil-producing group to allow them a higher daily-production ceiling, delegates said, a change that, if granted, could account for more oil production.
Under OPEC’s complex quota system, the U.A.E. is obligated to hold its crude production to no more than 3.018 million barrels a day. State-owned Abu Dhabi National Oil Co., which produces most of the U.A.E.’s output, has an output capacity of 4.45 million barrels a day and plans to accelerate its goal of reaching 5 million barrels of daily capacity by 2025. Abu Dhabi has long pushed for a higher OPEC quota, only to be rebuffed by the Saudis, OPEC delegates have said.
Last year, the country was the lone holdout on a deal to boost crude output in OPEC+, saying it would agree only if allowed to boost its own production much more than other members. The public standoff inside OPEC was the first sign that the U.A.E. has adopted a new strategy: Sell as much crude as possible before demand dries up.
Earlier this month, Iraqi Prime Minister Mohammed Shia’ al-Sudani said that his country, which is the second-largest crude oil producer in OPEC, would discuss a new quota with other members at its next meeting.
A discussion of OPEC production quotas has been on hold for months. The idea faces opposition from some OPEC nations because many can’t meet their current targets and watching other countries run up their quotas could cause political problems domestically, delegates said.
—Michael Amon contributed to this article.
Write to Summer Said at summer.said@wsj.com and Benoit Faucon at benoit.faucon@wsj.com
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Oil dives, hits 10-month low on reports of OPEC+ output boost
NEW YORK, Nov 21 (Reuters) – Oil prices plunged on Monday to their lowest since early January, after the Wall Street Journal reported that Saudi Arabia and other OPEC oil producers are considering a half-million barrel daily output increase.
Brent crude futures for January tumbled $4.07, or 4.7%, to $82.93 a barrel by 11:43 a.m. EST (1643 GMT). U.S. West Texas Intermediate (WTI) crude futures for December were down $4.48, or 5.6%, at $75.60 ahead of the contract’s expiry later on Monday. The more active January contract was down $4.05, or 5%, at $76.04.
An increase of up to 500,000 barrels per day (bpd) will be discussed at the OPEC+ meeting on Dec. 4, The Wall Street Journal reported.
Reuters was not immediately able to verify the report.
“It’s hard to believe they’re going into a market that is basically trading in contango,” said Bob Yawger, director of energy futures at Mizuho in New York, referring the effect of current oil futures trading at a discount to later dated contracts. “That’s playing with fire.”
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, recently cut production targets and de facto leader Saudi Arabia’s energy minister was quoted this month as saying the group will remain cautious.
Releasing more oil at the same time as weak Chinese fuel demand and U.S. dollar strength could move the market deeper into contango, encouraging more oil to go into storage and pushing prices still lower, Yawger said.
Expectations of further increases to interest rates have buoyed the greenback, making dollar-denominated commodities like crude more expensive for investors.
The dollar rose 0.9% against the Japanese yen to 141.665 yen, on pace for its largest one-day gain since Oct. 14. read more
“Apart from the weakened demand outlook due to China’s COVID curbs, a rebound in the U.S. dollar today is also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng.
“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and euro zone,” she said, adding that hawkish comments from the U.S. Federal Reserve last week also sparked concerns over the U.S. economic outlook.
New COVID case numbers in China remained close to April peaks as the country battles outbreaks nationwide.
The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into contango, reflecting dwindling supply concerns.
Additional reporting by Noah Browning, Florence Tan and Emily Chow
Editing by Jason Neely, David Goodman and David Gregorio
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