Category Archives: Oil

(CNBC) US crude falls for 11th straight session, its longest losing streak on record

(CNBC)

  • Oil prices turned negative amid a sell-off in the U.S stock market and renewed dollar strength, which makes crude more expensive in emerging markets.
  • U.S. crude fell for an 11th straight day, posting its longest longest losing streak on record.
  • Crude futures fell despite growing signs that OPEC and its allies are moving towards a fresh round of production cuts aimed at preventing oversupply.

Trump ‘keeping people guessing’ when it comes to oil, BP’s Dudley says

BP CEO: Looks like oil demand is starting to come off a bit  

Oil prices turned negative amid a sell-off in the U.S stock market on Monday, with U.S. crude posting an 11th straight day of losses, its longest longest losing streak on record.

Crude futures looked set to break the streak earlier on Monday after Saudi energy minister Khalid al Falih said OPEC and its allies may need to cut crude production by about 1 million barrels per day to prevent the market from swinging into oversupply. On Sunday, Falih said the kingdom’s shipments would fall by 500,000 bpd in December.

But the recent strong correlation between stocks and crude futures reasserted itself on Monday as the Dow Jones Industrial Average fell more than 500 points.

“The stock market was pulling at the oil complex all day. We should have gotten more of rally at that Saudi commentary over the weekend,” said John Kilduff, founding partner at energy hedge fund Again Capital.

U.S. West Texas Intermediate crude settled 26 cents lower at $59.93 on Monday, falling deeper into bear market territory. The contract has never fallen for 11 straight days since it began trading in New York more than three decades ago.

The losses continued after the settlement, with WTI falling more than 2 percent and dipping below $59 a barrel for the first time since February.

Brent crude was down $1.13, or 1.6 percent, to $69.05 a barrel by 3:37 p.m. ET on Monday. The international benchmark for oil prices settled at $70.18 on Friday, its weakest closing price in seven months.

Crude futures have pulled back sharply during the last five weeks, as oil got swept up in a broader market sell-off that saw investors shed risk assets in October. Rising oil supplies from the United States, OPEC and Russia and forecasts for weaker-than-expected demand growth have kept pressure on the market.

“It does look like demand is starting to come off a bit,” BP CEO Bob Dudley told CNBC at the ADIPEC oil and gas conference in Abu Dhabi on Monday.

The world’s appetite for oil now looks set to grow by about 1.3 million bpd, compared with BP’s earlier expectations for 1.4 million to 1.5 million bpd of growth, Dudley said.

Compounding concerns about demand, the U.S. dollar hit a 16-month peak on Monday. Currency weakness in emerging markets, including India, has significantly increased the cost of crude in those countries. A stronger greenback makes dollar-denominated oil more expensive to holders of other currencies.

Oil oversupply a ‘double-edged sword’ for OPEC, analyst says

Oil oversupply a ‘double-edged sword’ for OPEC, analyst says  

Those factors are now forcing OPEC, Russia and several other exporting nations to consider a fresh round of supply cuts.

The alliance of roughly two dozen producers has cut its output since January 2017 in order to drain a global crude glut. The group agreed in June to restore some of that production to rein in rising commodity prices.

However, a committee tasked with monitoring the group’s production agreement concluded on Sunday that oil supplies are growing faster than demand requires, threatening to leave the market oversupplied.The Joint Ministerial Monitoring Committee said the current oil market situation “may require new strategies to balance the market,” after warning last month that the group may have to reverse course and begin cutting output once again.

Falih put a number to the potential scale of cuts on Monday.

“If all things remain equal, and they almost certainly will not as things will change — it is a dynamic market — then the technical analysis we saw yesterday … tells us that there will need to be a reduction of supply from October levels approaching a million barrels,” Falih told the crowd at ADIPEC on Monday.

President Donald Trump on Monday afternoon sought to dissuade OPEC from taking supply off the market in his latest tweet at the cartel.

Donald J. Trump

@realDonaldTrump

Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!

16.4K people are talking about this

“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!” he wrote on Twitter.

But Russia, the world’s second biggest producer and an influential voice inside the alliance, is signaling some opposition to supply cuts. Russian Energy Minister Alexander Novak said Sunday he wasn’t sure the oil market would be oversupplied next year. He told CNBC crude prices remains volatile.

“Therefore, right now we shouldn’t be making any hasty decisions,” Novak said. “We need to look at the situation very carefully to see how it will develop so that we don’t end up changing our course by 180 degrees every month.”

OPEC is scheduled to release its monthly production report on Tuesday, which will detail the group’s October output. In September, the 15-member cartel pumped nearly 32.8 million barrels per day.

Russian energy min: Early to talk about oil supply cuts

Russian energy min: Early to talk about oil supply cuts  

The oil market does not appear to be headed for another bull run, said Daniel Lacalle, chief economist at wealth management firm Tressis Gestion. Lacalle notes that indicators of global economic growth are softening as U.S. production growth ramps up faster than previously anticipated.

“The forces behind the slowdown in demand are stronger than what we are already discounting in the price, which is that OPEC will do whatever they can do in order to reduce the oversupply,” he told CNBC on Monday.

The United States recently topped Russia as the world’s biggest oil producer. The country is now producing about 11.6 million barrels per day, more than 10 percent of global demand, according to the latest preliminary weekly figures.

(ZH) Why Oil Prices Will Fall In 2019 And Beyond

(ZH) The decision by the U.S. to grant waivers to eight countries, allowing them to continue to import oil from Iran, has helped ease the tension in the oil market. No longer are oil traders talking about $100 oil.

Iran’s oil exports stood at 1.7 million barrels per day in October and won’t fall to zero anytime soon. But that may not be the end of the story. “While consistent with our expectations, the granting of waivers does not imply that Iran exports will stabilize near current levels,” Goldman Sachs said in a research note on November 1. As more Iranian supply goes offline, the market will continue to tighten. Iran could lose nearly 600,000 bpd of exports by the end of the year, relative to October levels, the bank predicts.

“As a result, we still expect that the global oil market will be in deficit in 4Q18, leading to a strengthening in Brent timespreads,” Goldman said.

In fact, while everyone focuses on the short-term movements in oil prices, Goldman says it’s important to look at the futures curve.

“In our view, the most interesting takeaway from today’s oil price sell-off is the parallel shift in the crude forward curve. This is consistent with a move down on the oil cost curve as recent supply news (less Iran losses, more US and Saudi production) point to fewer high-cost marginal barrels needed in 2019,” the bank said.

That’s a bit of financial jargon, but the gist is that traders are suddenly less concerned that high-cost producers will be needed to supply the marginal barrel. Earlier this year, when Iran sanctions were announced and fears about Permian bottlenecks permeated into the market, oil futures prices rose sharply, with Brent five-year prices rising from $57 per barrel in May to $68 per barrel in September. This can be boiled down to investors believing that the oil market will need high-cost production in the years ahead to supply the marginal barrel, as low-cost producers are at their maximum levels.

However, over the last few weeks, the five-year Brent price fell back.

“The retracing of this last move higher reflects the realization that such high cost marginal barrels may no longer be needed,” Goldman Sachs analysts wrote.

That was due to several reasons. The EIA revealedthat U.S. shale production surged in August, rising by an astounding 400,000 bpd compared to a month earlier. That’s obviously important to the immediate present, since it means a lot more supply has been brought online than previously thought, just as Iranian exports go offline.

But it also suggests that U.S. shale can grow more at a given price level than many analysts had thought. It shows that “US shale is able to deliver more production at the lower 1H18 incentive price than previously expected and that Permian constraints are not as binding as initially feared.” WTI averaged just $65 per barrel in the first half of the year, with some producers in the Permian likely fetching less than that because of discounts related to pipeline bottlenecks. Goldman’s logic is that if U.S. shale can grow as quickly as it did this year, with WTI in the $60s per barrel, then that means it can continue to grow briskly, which means that oil prices in the years ahead will be lower than previously thought.

Another reason longer-dated futures prices fell back was because Saudi Arabia and Libya added new supplies. Low-cost production from these two countries could lower the price of the marginal barrel in the years ahead. The same is true for Iran – the losses from Iran are going to be more gradual than previously thought.

The result is a steeper backwardation in the futures curve, Goldman argues. A long bet on oil is more profitable, which could induce investors to jump in. That, in turn, could help edge up spot prices and near-term futures. Goldman sees Brent rebounding to $80 per barrel by the end of the year.

However, the longer-dated price is still lower. The investment bank sees Brent falling back to about $65 per barrel by the end of 2019 as midstream bottlenecks in the Permian clear up. That may allow OPEC to dial back on production and rebuild spare capacity. Goldman calls this a “re-anchoring of long-term oil prices.”

(Reuters) Rouhani says Iran to sell oil, defy U.S. sanctions: TV

(Reuters) Iran will sell its oil and break sanctions reimposed by the United States on its vital energy and banking sectors, Iranian President Hassan Rouhani said on Monday.

“America wanted to cut to zero Iran’s oil sales … but we will continue to sell our oil … to break sanctions,” Rouhani told economists at a meeting broadcast live on state television.

The United States said on Friday it will temporarily allow eight importers to keep buying Iranian oil when it re-imposes sanctions on Monday aimed at forcing Tehran to curb its nuclear, missile and regional activities.

China, India, South Korea, Japan and Turkey – all top importers of Iranian oil – are among eight countries expected to be given temporary exemptions from the sanctions to ensure crude oil prices are not destabilised.

The restoration of sanctions is part of a wider effort by U.S. President Donald Trump to force Iran to curb its nuclear and missile programs as well as its support for proxy forces in Yemen, Syria, Lebanon and other parts of the Middle East.

“Today the enemy (the United States) is targeting our economy … the main target of sanctions is our people,” Rouhani said.

In May, Trump exited Iran’s 2015 nuclear deal with six powers and Washington reimposed first round of sanctions on Iran in August.

The deal had seen most international financial and economic sanctions on Iran lifted in return for Tehran curbing its disputed nuclear activity under U.N. surveillance.

“ECONOMIC WAR”

U.S. Secretary of State Mike Pompeo said on Sunday the penalties set to return on Monday “are the toughest sanctions ever put in place on the Islamic Republic of Iran.”

However, Iran’s clerical rulers have dismissed concerns about the impact of sanctions on the country’s economy.

“This is an economic war against Iran but … America should learn that it can not use the language of force against Iran … We are prepared to resist any pressure,” Rouhani said.

To keep the deal alive, the remaining parties to the Iran nuclear deal are trying to maintain trade with Tehran despite scepticism this is possible despite U.S. sanctions to choke off Iranian oil sales.

Khashoggi probe will exonerate leader: Alwaleed

Diplomats told Reuters last month that the new EU mechanism to facilitate payments for Iranian oil exports should be legally in place by Nov. 4 but not operational until early next year.

They cautioned, however, that no country had volunteered to host the entity, which was delaying the process.

“We are in regular contact with other signatories of the nuclear deal … setting up (a) mechanism to continue trade with the European Union will take time,” Iran’s Foreign Ministry spokesman Bahram Qasemi told a weekly news conference on in Tehran.

He also said the reimposed U.S. sanctions were part of a psychological war launched by Washington against Tehran, adding that “America’s economic pressure on Iran is futile.”

(AP) US restores Iran sanctions lifted under Obama nuclear deal

(AP) 

Donald Trump, Hassan Rouhani

COMBO – This combination of two pictures shows U.S. President Donald Trump, left, on July 22, 2018, and Iranian President Hassan Rouhani on Feb. 6, 2018. The Trump administration is announcing the reimposition of all U.S. sanctions on Iran that had been lifted under the 2015 nuclear deal. The Trump administration is announcing the reimposition of all U.S. sanctions on Iran that had been lifted under the 2015 nuclear deal. (AP Photo)

WASHINGTON (AP) — The Trump administration on Friday restored U.S. sanctions on Iran that had been lifted under the 2015 nuclear deal, but carved out exemptions for eight countries that can still import oil from the Islamic Republic without penalty.

The sanctions take effect Monday and cover Iran’s shipping, financial and energy sectors. They are the second batch the administration has re-imposed since Trump withdrew from the landmark accord in May.

The 2015 deal, one of former President Barack Obama’s biggest diplomatic achievements, gave Iran billions of dollars in sanctions relief in exchange for curbs on its nuclear program, which many believed it was using to develop atomic weapons. Trump repeatedly denounced the agreement as the “worst ever” negotiated by the United States and said it gave Iran too much in return for too little.

But proponents as well as the other parties to the deal — Britain, China, France, Germany, Russia and the European Union — have vehemently defended it. The Europeans have mounted a drive to save the agreement without the U.S., fearing that the new sanctions will drive Iran to pull out and resume all of its nuclear work.

Friday’s announcement comes just days before congressional midterm elections in the U.S., allowing Trump to highlight his decision to withdraw from the deal — a move that was popular among Republicans.

Shortly after the announcement, Trump tweeted what looks like a movie poster image of himself that takes creative inspiration from the TV series “Game of Thrones” with the tagline “Sanctions are Coming, November 5.”

This image taken from the Twitter account of President Donald J. Trump @realDonaldTrump, shows a movie-style poster to announce the re-imposition of sanctions against Iran. (Donald J. Trump Twitter account via AP)

In a statement issued Friday night, Trump said, “Our objective is to force the regime into a clear choice: either abandon its destructive behavior or continue down the path toward economic disaster.”

Secretary of State Mike Pompeo said the sanctions are “aimed at fundamentally altering the behavior of the Islamic Republic of Iran.” He has issued a list of 12 demands that Iran must meet to get the sanctions lifted that include an end to its support for terrorism and military engagement in Syria and a halt to nuclear and ballistic missile development.

Pompeo said eight nations will receive temporary waivers allowing them to continue to import Iranian petroleum products as they move to end such imports entirely. He said those countries, which other officials said would include U.S. allies such as Turkey, Italy, India, Japan and South Korea, had made efforts to eliminate their imports but could not complete the task by Monday.

The waivers will be valid for six months, during which time the importing country can buy Iranian oil but must deposit Iran’s revenue in an escrow account. Iran can spend the money but only on a narrow range of humanitarian items.

Pompeo defended the oil waivers and noted that since May, when the U.S. began to press countries to stop buying Iranian oil, Iran’s exports had dropped by more than 1 million barrels per day.

He said the Iranian economy is already reeling from the earlier sanctions, with the currency losing half its value since April and the prices of fruit, poultry, eggs and milk skyrocketing.

Some Iran hawks in Congress and elsewhere said Friday’s move should have gone even further. They were hoping for Iran to be disconnected from the main international financial messaging network known as SWIFT.

With limited exceptions, the re-imposed U.S. sanctions will hit Iran as well as countries that do not stop importing Iranian oil and foreign firms that do business with blacklisted Iranian entities, including its central bank, a number of private financial institutions, and state-run port and shipping firms, as well as hundreds of individual Iranian officials.

“Our ultimate aim is to compel Iran to permanently abandon its well-documented outlaw activities and behave as a normal country,” Pompeo told reporters in a conference call with Treasury Secretary Steven Mnuchin.

Mnuchin said 700 more Iranian companies and people would be added to the sanctions rolls. Those, he said, would include more than 300 that had not been included under previous sanctions.

Israel, which considers Iran an existential threat and opposed the deal from the beginning, welcomed Friday’s announcement.

“Thank you, Mr. President, for restoring sanctions against an Iranian regime that vows and works to destroy the Jewish state,” Israeli Ambassador to the U.S. Ron Dermer said in a tweet.

Mnuchin defended the decision to allow some Iranian banks to remain connected to SWIFT, saying that the Belgium-based firm had been warned that it will face penalties if sanctioned institutions are permitted to use it. And, he said that U.S. regulators would be watching closely Iranian transactions that use SWIFT to ensure any that run afoul of U.S. sanctions would be punished.

(ECO) Processo de privatização parcial da Sonangol está em curso

(ECOO projeto de privatização parcial da petrolífera estatal Sonangol está a ser estudado pelo governo angolano, e insere-se no quadro do Programa de Regeneração da empresa.

O Governo de Angola está a analisar um projeto de privatização parcial da petrolífera estatal Sonangol, mas só depois de junho de 2019, indicou o ministro dos Recursos Minerais e Petróleo angolano, citado esta quinta-feira na imprensa local.

Segundo Diamantino Azevedo, o projeto em causa insere-se no quadro do Programa de Regeneração da empresa, em curso desde agosto e que já levou ao fim do monopólio no setor da Sonangol, com a criação, para já com uma Comissão Instaladora, da Agência Nacional de Petróleo e Gás (ANPG).

O ministro declarou que, enquanto se passa a função de concessionária da Sonangol para a ANPG, a petrolífera tem em curso o “Programa de Regeneração”, de forma a focar-se apenas nos “negócios nucleares”, constituídos pelos fluxos ascendente e descendente da cadeia produtiva de petróleo (pesquisa, exploração, produção, refinação e distribuição).

O processo, adiantou, vai levar à privatização de algumas empresas não nucleares do grupo e, no futuro, à privatização parcial da Sonangol por dispersão bolsista, um processo ligado às boas práticas dessa indústria. “É o que se passa hoje com as grandes companhias petrolíferas mundiais”, afirmou.

A apresentação do modelo de funcionamento foi feita pelo coordenador adjunto da Comissão Instaladora da ANPG, Jorge Abreu, que lembrou as três etapas pelas quais o processo decorre e que começam em janeiro de 2019, com a fase da transmissão da função de concessionária para a agência.

Nesta fase inicial, prosseguiu, a função de concessionária vai-se manter na Sonangol, concentrando-se na relação com os operadores e respondendo ao Conselho de Administração da Agência.

A segunda fase vai de janeiro a junho de 2019 e é designada por “Transição”, na qual o Conselho de Administração da ANPG vai dirigir o processo de autonomização e as entidades corporativas da Sonangol se obrigam a prestar serviços à Agência.

A terceira fase, a de “Otimização da Transição”, vai de junho de 2019 a janeiro de 2020 e abrange a migração dos ativos da função de concessionária para a ANPG.

Os funcionários da Sonangol que cuidam desta função transitam para a ANPG, sendo que “a questão remuneratória não será prejudicada”, uma referência à manutenção dos salários e eventuais privilégios.

Jorge Abreu declarou que o plano de reestruturação do setor petrolífero em curso “é irreversível” e não vai afetar a estabilidade dos negócios na indústria petrolífera angolana, algo que persegue a assinatura de novos contratos e a exploração de campos marginais.

(DW) Petrochemicals for plastics to drive global oil demand, IEA says

(DW) Petrochemicals, used in plastics, fertilizers and clothing, will account for more than one-third of the growth in world oil demand by 2030, according to a report. By 2050, they will be the biggest driver of oil demand.

  
Man picking up plastic rubbish on Mumbai beach (Getty Images/AFP/P. Pillai)

Plastics and other petrochemical products will be a major driver of global oil demand in coming decades, the International Energy Agency (IEA) said in a report.

Petrochemicals will account for more than one-third of the growth in world oil demand by 2030, and nearly half of growth by 2050, the IEA said. More natural gas will also be used.

Petrochemicals would therefore become the largest driver of global oil demand — ahead of cars, planes and trucks.

IEA head Fatih Birol said: “Petrochemicals are one of the key blind spots in the global energy debate, especially given the influence they will exert on future energy trends.”

Addressing the key challenge 

Demand for plastics has increased ten-fold since the early 1970s, and doubled since 2000.

The environmental impact has been polluted landscapes, country-size oceanic garbage patches,microplastics and dying marine life.

Nearly 27 percent of current global oil demand goes to vehicles, although that figure is expected to fall to 22 percent by 2050 due to a combination of improved vehicle efficiency, electrification, public transport use and alternative fuels.

The IEA projections suggest that global efforts to combat climate change and preserve the health of the world’s oceans are doomed unless drastic action on the use and reuse of petrochemical-derived products is addressed.

“The combination of a growing global economy, rising population, and technological development will translate into an increasing demand for petrochemical products,” IEA projected.

Advanced economies use up to 20 times more plastic than developing economies on a per capita basis.

While advanced economies slowly move to reduce and reuse plastics, much of that impact will be offset by plastic use in emerging economies such as India.

“While substantial increases in recycling and efforts to curb single-use plastics are underway, especially in Europe, Japan and Korea, the impact these efforts can have on demand for petrochemicals is far outweighed by sharply increasing plastic consumption in emerging economies,” IEA said.

(SPglobal)  US not considering Strategic Petroleum Reserve release ahead of Iran sanctions: energy secretary

(SPglobalWashington — The Trump administration is not considering a release from the Strategic Petroleum Reserve in order to blunt the impact of looming US sanctions on Iranian crude oil exports on the global oil market, US Energy Secretary Rick Perry said Wednesday.

Perry said that he believes that the world market has enough supply to compensate for the expected loss of Iranian crude oil exports when US sanctions are reimposed on November 5.

“I’m comfortable that the world supply can absorb the sanctions that are coming,” Perry told reporters Wednesday. “The people that will pay the price are the people in Iran, unfortunately.”

The looming sanctions have fueled speculation that the Trump administration was considering a release of crude oil from the SPR, the government oil stockpile which currently hold 660 million barrels of crude in four caverns along the US Gulf Coast.

But Perry denied that the administration was considering such a move and said even if SPR crude was released onto the market, it would have a “fairly minor and a short-term impact.”

Instead he said that any supply gap created by reimposition of the sanctions would be quickly filled. Perry cited additional US output if Permian pipeline capacity can be increased, the Neutral Zone between Saudi Arabia and Kuwait and contested fields in the Kurdistan Region of Iraq as examples of potential supply growth.

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“We’ve got some opportunities to fill the void as the sanctions go into effect in November,” Perry said. “My thought would be that the market has already adjusted to those [Iran sanctions].”

S&P Global Platts Analytics expects 1.7 million b/d of Iranian crude and condensate to leave the market by November, compared with April levels of 2.91 million b/d.

Perry indicated that releasing government-owned oil, or another action made in order to quell oil and gasoline prices from rising, was outside the administration’s role.

“What we want to do is to not be a hurdle to production, to infrastructure development,” Perry said. “We want to be a part of the solution, but it’s not our role to be a ‘Here’s what you’re going to do’ or ‘Here’s what we’re going to do’ in the advent of something happens halfway around the world that we don’t have any control over that would cause a short-term or a long-term spike in oil prices. That is not the Department of Energy’s role.”

This month, Perry traveled to Russia, Austria, and Romania for meetings with energy counterparts, including Russian Energy Minister Alexander Novak.

On Wednesday, Perry reiterated the Trump administration opposition to the Nord Stream 2 natural gas pipeline linking Germany and Russia.

“That project seeks to divide and control European nations and cement Russia’s hold over the region, using their energy as a form of coercion,” Perry said.

He said that the US could impose sanctions on the pipeline.

“While we have many tools available to us, neither Russia or the United States wants to reach that point,” he said.

(BBG) Trump Has a Weapon to Lower Oil Prices and It’s Not His Twitter

(BBG) Tweeting will only get you so far. After failing to cajole OPEC to pump more and lower oil prices, U.S. President Donald Trump could pursue a more direct route: tapping his nation’s Strategic Petroleum Reserve.

And just as with his tweets, that may not lead him to his goal.

With global benchmark Brent crude at a 4-year high above $80 a barrel less than two months before key mid-term elections in the U.S., the growing consensus in the industry is that it’s more a question of when, not if, Trump authorizes a release from the emergency stockpiles built after the 1973-74 oil crisis.

“There’s a strong possibility of another strategic reserve release,’’ said Antoine Halff, head of the global oil market program at Columbia University’s Center on Global Energy Policy. “It’s a wild card that justifies close attention for the next few weeks.”

There’s precedent: Bill Clinton tapped it two months before the 2000 presidential election in an effort to directly lower oil prices, rather than respond to a supply outage overseas, releasing 30 million barrels via a one-year loan. His administration defended the move over objections from Republicans, saying it wasn’t political and was needed to keep American families warm over the winter.

The White House, to be sure, hasn’t indicated it’s considering such a move, and some traders believe that using the SPR won’t have a meaningful impact on prices. Yet at the annual Asia Pacific Petroleum Conference (APPEC) in Singapore this week — one of the biggest gatherings of the oil-trading industry — executives openly speculated about when Trump might tap the reserve, how many barrels would be released, and the potential impact.

‘Horrible Prices’

Meanwhile, Trump is losing his patience. At the United Nations on Tuesday, he told heads of state that “OPEC nations are as usual ripping off the rest of the world. And I don’t like it and nobody should like it.” He added: “We are not going to put up with these horrible prices much longer.”

Brent crude was up 19 cents at $82.06 a barrel at 7:39 a.m. in London, after climbing almost 4 percent over the previous two sessions. Prices are up about 40 percent in the past 12 months.

“The U.S. may tap the SPR if oil prices continue to surge,” Ben Luckock, co-head of oil trading at major commodities merchant Trafigura Group, said in an interview. He sees little price impact from a potential sale beyond making oil in the U.S. even cheaper than it is in the rest of the world. That discount is now at about $9 a barrel.

Mike Muller, an executive at Vitol Group, the world’s top independent oil trader, said that tapping the reserve could even prove counter-productive. It could lead investors to say “that’s bullish because there’s less cover” for other potential outages, he said.

Little Impact

While Hess Corp. President Greg Hill said he didn’t want to speculate on what the president would do, he doubted there would be much impact regardless. “It won’t drop oil from $80 to $65, and any effect would be short-term.”

Trump has various avenues to get SPR supplies to market. One could be to speed up sales from the reserve that have been authorized by Congress as part of deals to finance federal spending. As much as 240 million barrels are approved to be offered, out of the 660 million pooled in underground caverns thousands of feet below coastal Texas and Louisiana.

The first of those deals will be a release of 11 million barrels in October and November. Most of the authorized sales are fixed for particular years, and it’s not clear if accelerating them is possible.

The second route is a direct order to draw down the reserve under the broad powers of the legislation used to create it, the Energy Policy and Conservation Act of 1975. As per that law, Trump could authorize consecutive releases of as much as 30 million barrels over 60-day periods, adding a whopping 500,000 barrels a day of extra supply — about what OPEC member Ecuador produces.

“I think that would knock a couple of bucks off the oil price,” said Ed Morse, the head of commodities research at Citigroup Inc.

Twitter Effect

So far Trump has been content to use social media to blame the Organization of Petroleum Exporting Countries for higher prices and push them to increase output to lower costs. The impact of his tweets has started to diminish, however.

OPEC and its allies, which include Russia, Mexico and Kazakhstan, stopped short of pledging immediate production increases on Sunday even after Trump lambasted the group Sept. 20, saying “The OPEC monopoly must get prices down now!”

Oil executives and traders gathered at the APPEC event speculated that tapping the SPR could be coordinated with Saudi Arabia to offset the impact of U.S. sanctions on Iran, which could knock out as much as 1.5 million barrels a day of supply from Tehran.

In theory, Riyadh can pump as much as 12.5 million barrels a day, compared to about 10.4 million last month, offsetting the loss of Iranian supply. Still, to reach that level, it needs time to drill more wells, and an SPR release could fill the gap until the Saudis are ready.

(AFP) ‘Crucial period’ for oil as Iran exports shrink: IEA

(AFP) Global oil output hit a record of 100 million barrels per day in August, but the market may tighten and prices rise as exports from Iran and Venezuela decline, the International Energy Agency said Thursday.

“We are entering a very crucial period for the oil market,” the IEA said in its latest monthly report. “Things are tightening up.”

The global record came as output from the Organization of the Petroleum Exporting Countries rose to a nine-month high of over 32 million barrels per day (mb/d).

The cartel had agreed in Vienna in June to push up production in order to put a cap on soaring prices.

In recent months, prices have wavered comfortably between the $70 and $80 per barrel on the Brent crude futures contract.

According to the IEA, a rebound in Libyan production, near-record Iraqi output and higher supply from Nigeria and OPEC kingpin Saudi Arabia have so far managed to offset the impact of shrinking production from crisis-hit Venezuela and Iran.

But with the crisis in Venezuela showing no sign of abating, and with new US sanctions on Iran’s oil industry set to come into force on November 4, other producers may have to ramp up production even further if they want to limit the impact on the market.

“It remains to be seen if other producers decide to increase their production. The price range for Brent of $70-$80/bbl in place since April could be tested,” the IEA said.

In May, US President Donald Trump pulled the US out of the 2015 nuclear deal with Iran and said other countries must stop buying oil from Tehran or face American sanctions.

And hundreds of thousands of Venezuelans have fled their country since the nation became engulfed in a political crisis that has sent the economy into free fall.

“The situation in Venezuela could deteriorate even faster, strife could return to Libya and the 53 days to 4 November will reveal more decisions taken by countries and companies with respect to Iranian oil purchases,” the IEA said.

– Iran sanctions loom –

Output from OPEC member Iran in August hit its lowest level since July 2016, the IEA said, “as more buyers distanced themselves from Tehran ahead of looming US sanctions”, the report said.

Top buyers China and India have already cut back purchases from Tehran, and other countries are likely to do the same between now and November.

“While Iranian exports have fallen by nearly 500,000 barrels per day since May, shipments from Iraq and Saudi Arabia have risen by 200,000 barrels per day and 60,000 barrels per day respectively,” the IEA added.

In Venezuela too, production dipped in August to 1.24 million barrels a day, and should it continue to decline, may hit 1 million barrels a day at the end of 2018.

OPEC, of which Venezuela is a member, had already warned that the country’s output was at a three-decade low.

“If Venezuelan and Iranian exports do continue to fall, markets could tighten and oil prices could rise without offsetting production increases from elsewhere,” the IEA warned.

(Reuters) Saudi Arabia aims to keep crude in $70 to $80 band: sources

(Reuters) Saudi Arabia wants oil to stay between $70 and $80 a barrel for now as the world’s biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until U.S. congressional elections, OPEC and industry sources said.

After announcing the flotation of Saudi Aramco in 2016, the kingdom began pushing for higher crude prices partly to help maximize the valuation of the state oil company ahead of an initial public offering (IPO), originally scheduled for 2018.

That changed in April when U.S. President Donald Trump put public pressure on Riyadh to keep crude prices in check, wanting to stop U.S. fuel costs rising ahead of the U.S. midterm elections in November.

Now, even though the IPO has been shelved, Saudi Arabia still wants to keep oil prices as high as possible without offending Washington, the sources said. Saudi needs cash to finance a series of economic development projects.

OPEC and Saudi Arabia do not have an official price target and are unlikely to adopt one formally.

“The Saudis need oil at about $80 and they don’t want prices to go below $70. They want to manage the market like this,” one of the sources told Reuters.

“They need cash. They have plans and reforms and now the IPO is delayed. But they don’t want anyone else talking about oil prices now. It’s all because of Trump,” the source said.

An informal target of $70 to $80 raises the prospect of Saudi Arabia making regular tweaks to its output to influence the cost of crude as the market responds to other factors affecting global supply and demand.

One industry source said it may have done precisely that last week.

With Brent heading toward $80 a barrel, Saudi Arabia told the market about an increase in its production last month sooner than it would have usually released such information, the source, who follows Saudi output policy, said.

“The Saudis will probably put a few more dampening signals out, given where prices have gone,” the industry source said.

OPEC U-TURN

The aspiration for $70 to $80 is similar to that of other producers within the Organization of the Petroleum Exporting Countries. Algeria, for example, says it sees $75 as fair.

“Everybody has been talking about these kinds of numbers,” said an OPEC delegate from outside the Gulf.

Brent crude has fluctuated between $70 and $80 since April 10. After hitting $70.30 on Aug. 15 the oil price has climbed steadily to touch $79.72 on Tuesday.

Earlier this year, Riyadh hoped to see oil prices above $80 and was ready to continue with a supply cut pact until the end of 2018, only to make a U-turn after Trump called on OPEC in April to boost supplies.

Riyadh has long been a close Washington ally. But ever since Trump became president in 2017, Saudi Arabia has become even more sensitive to U.S. requests and both countries have coordinated policy more closely than under Trump’s predecessor.

In June, for example, OPEC agreed with Russia and other oil-producing allies last month to raise output from July – with Saudi Arabia pledging a “measurable” supply boost.

Saudi industry sources briefed the market about record oil production in which Aramco was planning to pump 10.6-10.8 million barrels per day (bpd) in June and as much as 11 million bpd in July, the highest in its history.

In the end, Saudi Arabia’s production in June was 10.488 million bpd and in July it fell to 10.29 million.

‘DIFFICULT TASK’

The plan to boost output to record highs had been driven mainly by worries of a sudden supply shock after U.S. officials said Washington aimed to reduce Iran’s oil revenue to zero, the sources said.

But since then, Washington has said it would consider waivers on Iranian sanctions and worries about a trade war between Washington and Beijing have threatened to hit future demand for oil, the sources said.

One industry source said the kingdom’s crude production plans were made according to its customers’ needs and that oil demand has not materialized as forecast.

“We can raise production as high as 11 (mln bpd) or even 12 but then where will it go? We can’t push oil to the market,” that industry source said.

In an August report, the Oxford Institute for Energy Studies www.oxfordenergy.orgsaid Saudi Arabia was trying to manage the Brent price within a very narrow range of $70 to $80 – and it was not an easy task.

It said the strategy was mainly to put a ceiling on crude amid concerns about the impact of high prices on demand as the trade war between Washington and Beijing escalates – and to keep a floor under prices to maintain revenues and market stability.

This echoes Saudi price aspirations from a decade ago, when the kingdom identified $75 as a fair price. This held for a few years, only to be dropped as prices moved much higher.

“Striking a balance between the various objectives, and doing it within a narrow price range, is an extremely difficult task given the wide uncertainties and the different shocks hitting the oil market,” the Oxford Institute’s note said.

“Saudi Arabia is in need of flexibility in its output policy.”

(CNBC) Oil buyers must cut all Iranian crude imports by November, State Dept says

(CNBC)

  • Companies that buy Iranian crude oil must completely cut those exports by the start of November, a senior State Department official told CNBC.
  • That indicates the Trump administration will not allow countries to gradually phase out Iranian crude exports over many months, as the Obama White House allowed.
  • Oil prices spiked following the announcement, which comes at a time when oil markets are finely balanced and crude futures have recently hit 3½-year highs.

Oil buyers have to cut Iranian crude imports by November, a U.S. State official says  

Companies that buy Iranian crude oil must completely cut those exports by the start of November or else they will face powerful U.S. sanctions, a senior State Department official told reporters on Tuesday.

The State Department has conveyed that message to European diplomats in recent talks, the official said. The Trump administration has not yet held talks with China, India or Turkey about their purchases of Iranian crude, but it intends to pressure them to entirely cut their imports under threat of sanctions, the official added.

Oil prices spiked following the announcement, which indicates that President Donald Trump will not follow the Obama administration model of allowing countries to gradually phase out Iranian crude exports over many months. The hardline approach comes at a time when oil markets are finely balanced and crude prices have recently hit 3½-year highs.

Iran, OPEC’s third biggest oil producer, exports more than 2 million barrels a day. OPEC and other oil producers including Russia agreed last week to ease production caps that have been in place for 18 months in order to prevent prices from spiking as Venezuela’s output continues to sink and the U.S. sanctions on Iran’s exports loom.

President Donald Trump withdrew the United States from the Iran nuclear deal in May to pursue a maximum pressure campaign. At the time, his administration gave foreign companies either 90 or 180 days to wind down their business with Iranian counterparts, depending on the type of commercial activity.

A crucial question was whether the Trump administration would follow the model President Barack Obama put in place. His administration asked buyers to cut their imports of Iranian crude by 20 percent every 180 days when it ramped up its pressure campaign against Iran.

Oil hits 1-month high on Iran sanctions

Oil hits 1-month high on Iran sanctions  

If Trump followed the same model, that could have pushed the impact into the first half of 2019, according to RBC Capital Markets. But the State Department confirmed on Tuesday that Iranian crude buyers should be reducing purchases now, with the goal of zeroing out their purchases by Nov. 4, the 180-day mark from Trump’s nuclear deal pullout and the renewal of U.S. sanctions.

“That is why we’ve offered this window since May 8, as sort of a drawdown period,” the senior State Department official said.

The United States was able to quickly cut Iran’s shipments under Obama, largely because it had the support of its European allies. European countries imposed their own sanctions on Iranian crude exports, which wiped out the Continent’s purchases in about six months.

In contrast, Britain, France, Germany and the wider European Union have voiced strong opposition to Trump’s pullout and put in place measures designed to protect their companies from so-called secondary sanctions. Those secondary sanctions punish companies that engaged in sanctioned business with Iranian entities, threatening to lock them out of the massive U.S. market and isolate them from the international financial system.

The State Department official said diplomats have been in Europe garnering support for the U.S. position among the EU3, isolating streams of Iranian funding and highlighting “the totality of Iran’s malign behavior across the region.”

“On the diplomatic front, we have had secondary sanctions in place in Iran since 1996,” the official said. “These are discussions we are extremely used to having. We have a lot of diplomatic muscle memory” for urging partners to cut Iranian oil purchases.

To be sure, the United States has had secondary sanctions on the book for more than 20 years, but Presidents Bill Clinton and George W. Bush chose not to enforce them for fear of sparking a diplomatic crisis and trade war with Europe.

The 2015 Iran nuclear deal lifted sanctions on Iran in exchanged for its leaders in Tehran accepting limits on its nuclear program and allowing inspectors into its atomic facilities. The Trump administration left the deal after failing to reach an agreement with European partners over expanding the conditions to include limiting Iran’s ballistic missile program, addressing its role in Middle East conflicts and extending key parts of the accord that begin to expire in 2025.

The administration does not expect to grant any waivers to companies that purchase Iranian oil or invest in its energy industry, the official said.

(BBG) Oil-Sands Outage Upends Global Oil Market, Overshadowing OPEC

(BBG) The shutdown of a key oil-sands facility in Canada is flipping the global oil market on its head and slamming shares of producers that depend on the plant.

Just as OPEC and allied producers agreed to pour more oil into global markets, a transformer blast first reported by Bloomberg News last week cut power to Alberta’s giant Syncrude plant, which turns heavy crude into synthetic light oil for U.S. markets.

As less oil flows from up north, traders are paying a record premium for crude at America’s biggest distribution hub in Cushing, Oklahoma. Globally, the gap between Brent crude and West Texas Intermediate is narrowing rapidly after widening for months. Goldman Sachs Group Inc. called the shutdown the most dramatic event in the oil market last week, as opposed to OPEC’s meeting in Vienna. Shares of Suncor Energy Inc., which controls the plant, plunged the most in more than two years.

“Syncrude is very important. It’s one of the longest-standing and longest-lifespan systems going,” said Tim Pickering, founder and chief investment officer at Auspice Capital Advisors. “So having those barrels off, which are considered base barrels for the system, is fairly impactful.’’

The 350,000-barrel-a-day facility, one of the biggest of its kind in the world, is going to be out of commission until the end of July, the company said.

The expected shortfall in supplies follows five straight weeks of shrinking inventories at Cushing, the delivery point for WTI contracts. The price for the U.S. benchmark for immediate delivery at the hub, which is typically equal to futures on the New York Mercantile Exchange or just a few cents different, surged to an unprecedented $5.75 a barrel more on Monday.

The disruption is helping set the U.S. apart from the rest of the world and intensifying a U-turn in the dynamics of the global market.

While Saudi Arabia’s push to make sure OPEC boosts supplies by close to 1 million barrels a day is strongly weighing down on Brent crude futures in London, the shortage in Canada is supporting U.S. prices. That’s helping narrow the gap between the two benchmarks, reversing months of widening when the focus was on record production from shale fields. It has global implications because the premium helps buyers around the world decide whether to ship crude from the U.S. or elsewhere.

Brent traded at less than $8 dollars above WTI on Monday, compared with almost $12 just two weeks ago.

In Canada, the outage is pummeling shares of Suncor, which owns a 59 percent stake in the operation. Having the facility down through July could cut Suncor’s third-quarter production to about 770,000 barrels a day, short of the 812,000-barrel analyst consensus, Tudor Pickering Holt analysts said in a note.

Suncor slid as much as 4.6 percent to C$50.88 in Toronto, the biggest intraday decline since February 2016. Imperial Oil Ltd., which owns 25 percent of Syncrude, slid as much as 1.5 percent. The remainder of the operation is owned by China Petroleum & Chemical Corp., which holds 9 percent, and CNOOC Ltd.’s Nexen, which owns about 7 percent.

Last week’s outage is just the latest mishap at Canada’s second-oldest oil-sands mine, which started operation in the mid-1970s and has faced reliability issues in recent years. The plant last month underwent scheduled maintenance that took longer than expected.

“If you consider how vast these operations are, you’re going to have these things happen from time to time,” Pickering said. “It just shows you how on-the-margin the system is.’’

(BBG) Iran Can Block OPEC Agreement, Yet Saudi Arabia Can Bypass Veto

(BBG) Bloomberg’s Annemarie Hordern reports on OPEC’s upcoming meeting.

Even with Iran threatening to block an increase in OPEC’s oil production, Saudi Arabia still has options.

Tehran says it has Iraqi and Venezuelan support to veto any proposal for more output, a position taken by both Saudi Arabia and Russia. “If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity,” Hossein Kazempour Ardebili, Iran’s OPEC representative, said on Sunday, before the group meets in Vienna on Friday.

The statute of the Organization of Petroleum Exporting Countries does indeed give any member the right to block any deal, under Article 11 C:

“Each Full Member Country shall have one vote. All decisions of

the Conference, other than on procedural matters, shall require

the unanimous agreement of all Full Members.”

Yet Saudi Arabia can still bypass a veto. First, it can block any formal OPEC-wide communique. Then, it can gather a coalition of supporters within the group and publish its own statement, which could outline a new production policy.

That’s exactly what happened 18 years ago, when Iran rejected a Saudi-backed plan to boost output. Back then, eight countries joined the Saudis, resulting in an OPEC-9 communique that excluded Iran and Iraq.

Saudi Arabia may not choose that option this time. Unless it has backing from beyond its core supporters within OPEC, traditionally Kuwait and the United Arab Emirates, it risks appearing isolated.

That leaves the option of no communique at all. That happened in 2011 when then-Saudi Oil Minister Ali Al-Naimi walked out, saying the group had “one of the worst meetings we have ever had”. Within hours, the Saudis set their own policy unilaterally.

Another option for the Saudis is to accept defeat on a formal production increase, but start cheating on output quotas. While that would also be in line with OPEC tradition, it would be a first for Saudi Oil Minister Khalid Al-Falih, who has stuck scrupulously to the agreements.

Iran acknowledged that both Saudi Arabia and Russia, which is part of the wider OPEC+ agreement, can bypass a veto, but warned that any such move would lead to the disintegration of the 2016 deal that has helped oil prices to more than double.

“If the two want to act alone, that’s a breach of the cooperation agreement,” Kazempour Ardebili said. “The market is well-supplied, and OPEC should abide by its decision up to the end of the year.”

(CNBC) Oil prices are unlikely to increase as ‘sharply’ from now on, IEA says

(CNBC) The International Energy Agency (IEA) believes a recent spike in the oil price could soon start to ease, helping to alleviate concerns that surging prices could hurt demand and global economic growth.

“Prices are unlikely to increase as sharply as they did from mid-2017 onwards and thus the dampening effect on demand will be reduced,” the Paris–based organization said in its latest monthly report published Wednesday.

Rising oil prices have created question marks over the strength of demand, but the IEA left its oil demand growth forecast for 2019 largely unchanged, at 1.4 million barrels a day (mb/d), similar to this year’s level.

However, it cautioned that there are possible downside risks to the demand outlook, including “the possibility of higher prices, a weakening of economic confidence, trade protectionism and a potential further strengthening of the U.S. dollar.”

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Getty Images

In terms of supply, the IEA revised upwards its estimate for 2018 non-OPEC production growth to 2 mb/d and said 2019 would also see what it called “bumper growth” of 1.7 mb/d. Most of that non-OPEC supply growth would come from the U.S., it said.

The IEA’s latest report comes amid uncertainty over the amount of oil production we can expect to see from major producers in coming months.

OPEC and non-OPEC producers including Russia are continuing with a deal to curb their supply, but the strategy is seen to have been effective with Brent and West Texas Intermediate (WTI) now trading around $75 and $66, respectively.

The OPEC and non-OPEC producers agreed back in November 2016 to curb supply in order to boost then-low oil prices. There are now fears that prices could rise steeply if supplies are disrupted from OPEC members Venezuela and Iran. The former is experiencing economic turmoil and the latter is facing a re-imposition of sanctions after the U.S. withdrawal from Iran’s nuclear deal.

What’s next for oil?

What’s next for oil?  

OPEC and non-OPEC producers are meeting in Vienna on June 22 to discuss the supply situation. The encounter could be fractious with arguments expected between producers over whether to increase production or maintain supply as it is — given rising prices and potential supply disruptions. There is also the specter of competition from U.S. shale oil producers and a reluctance to cede more market share to them.

Saudi Arabia and Russia are reportedly ready to increase oil output, while others like Iran and Iraq are against such a move.

The IEA said that, for its part, it had looked at a scenario (not a forecast, it emphasized) that by the end of next year output from these two countries could be 1.5 mb/d lower than it is today.

It said Middle East OPEC producers could make up for the loss and increase production by about 1.1 mb/d. “And there could be more output from Russia on top of the increase already built into our 2019 non-OPEC supply numbers,” it added.

(Reuters) Portugal environment body OKs oil well off Alentejo coast

(Reuters) Portugal’s Environmental Agency gave its tacit approval on Wednesday to a consortium of Galp Energia and Italy’s ENI to drill an oil exploration well off the Alentejo region’s coast, a project that environmental activists are trying to block.

It would mark the resumption of drilling in Portugal after a long hiatus, with opponents arguing the risks outweigh the chances of finding any significant quantities of oil.

The agency said it had not identified any potentially significant negative effects on the environment from the planned deep-sea well, and would not order a specific study, which opponents of the project have been demanding.

Various local municipalities, politicians and activists have filed lawsuits and petitions to try and block oil exploration off the so-called Vicentine coast in Alentejo, which boasts beautiful beaches and a large natural park.

Several oil companies spudded a few dozen exploration wells in Portugal in the 20th century, but all were either dry or showed just traces of hydrocarbons. Drilling activity petered out in the early 2000s, although seismic studies have continued.

Portugal’s Galp and its partner at the time, Brazil’s Petrobras, won an exploration licence in 2007 for three blocks in the Alentejo basin. ENI bought Petrobras’ share in the blocks in 2014.

The consortium hopes to drill the well in the last quarter of 2018 after the government last January extended the exploration period for a year.

The Expresso newspaper said last month an internal study by the consortium pointed to potential oil reserves of up to 1.5 billion barrels in the area, but the companies would not publicly confirm such estimates, saying only they expected to find hydrocarbons based on seismic studies.

Climate Action Network (CAN) Europe last month named Portugal the winner of its 2018 European Fossil Fuel Subsidies anti-award for handing out the drilling licence near its protected biodiversity area and a tourism hotspot and wasting taxpayers’ money on supporting dirty energy.

P.O. (BBG) Japan Ship Takes ‘P.O. First of Many’ U.S. Gas Loads in Nod to Trump

P.O.
The US is now a net exporter of fossil fuels…
I forecasted this 4 years ago, and had a major argument with the Research Department of a Global Bank.
They would not agree with me.
I simply ignored them…
I was told a few months ago that none of them works in that bank anymore, nor in the industry for that matter…

FCMP

(BBG) The giant Japanese gas tanker LNG Sakura is doing its share to appease President Donald Trump’s frustration over trade with Asia.

The vessel with the largest spherical tanks in the liquefied natural gas industry is taking the first shipment from Dominion Energy Inc.’s Cove Point terminal in Maryland to the Asian nation. With a name that means cherry blossom, the ship can serve “as a symbol of friendship and goodwill between Japan and the United States,” according to co-owner Nippon Yusen KK.

The shipment is the “the first of many” as “US LNG will power millions of Japanese homes and businesses,” according to a post on Twitter from the U.S. embassy in Tokyo.

It’s an easy win for both countries.

For the Trump administration, which has been pushing for Asian purchases of America’s abundant shale gas supplies to reduce a trade imbalance, it suggests the pressure may be working. Japan, the largest buyer of LNG in the world, needs the fuel to meet power demand at its highest level since the 2011 Fukushima nuclear disaster. Most importantly, keeping good relations with the U.S., the largest buyer of its exports after China, is vital for Japan’s economy.

“There’s definitely been concern in the Japanese government about the Trump administration’s focus on trade deficits, so this may be a effort to demonstrate that Japan is working that issue,” said Jason Feer, global head of business intelligence at Poten & Partners. “It’s interesting the first Japanese-owned cargo from that facility is actually going to” that country.

Just a few weeks after the second U.S. gas export terminal started commercial service, LNG Sakura left the facility on April 22 and is headed for Japan, Hiromi Sato, a spokeswoman at the U.S. embassy in Tokyo, said in an email late on Tuesday.

Although Asian nations are signing multiple long-term contracts with U.S. LNG exporters, there is uncertainty over how much they would actually import themselves rather than sell to the global market’s highest bidder. The latter case wouldn’t help reduce deficits with the U.S., so confirmation that LNG Sakura’s load is a Japanese import comes as a good sign of cooperation to avoid a pending trade war.

During Japanese Prime Minister Shinzo Abe’s visit to the White House this month, he and Trump announced a new trade dialogue.

Shale gas sent from U.S. fields is expected to rival Australia and Qatar for worldwide dominance in the next five years as three more export terminals may open on the Gulf Coast by 2019.

Japan is already the fifth largest importer of U.S. LNG, having bought 20 cargoes as of April 18 from Cheniere’s Sabine Pass since it started liquefying the fuel in 2016. Dominion’s Cove Point has agreements to sell gas to a joint venture of Sumitomo Corp. and Tokyo Gas Co., but those cargoes could be resold in transit.

Kansai Electric Power Co. is the beneficial owner of Sakura, with 70 percent. NYK owns the remaining stake in the vessel.

+++ V.I. (BBG) OPEC Can Live With Tweets So Long as Venezuela Worsens: Gadfly

(BBG) Pushing oil prices higher is risky when the cartel no longer holds all the cards.

Mine, for what it’s worth, would have something to do with the fact that gasoline is already north of $3 a gallon in Washington, D.C., and the sun only just came out on the East Coast after a winter worthy of Game of Thrones. The prospect of an even more expensive summer driving season, leading into mid-term elections Republicans dread already, merits one or two angry tweets at least.

And while there are, of course, hundreds of thousands of Americans employed in producing oil and gas, their ranks pale somewhat against more than 212 million licensed drivers, most of whom can also vote.

In any case, the president is right in one respect: Oil prices are artificially high. That’s what restrictive commodity agreements are for. Indeed, one almost has to admire the chutzpah of OPEC ministers pushing back on the president’s assertion on Friday … on the sidelines of a meeting where they decided to continue holding barrels off the market to support prices.

OPEC, and in particular its de facto leader Saudi Arabia, is playing a risky game here by pushing for even higher oil prices (see this). And that’s partly because the Middle East no longer holds all of the wild cards in the global oil game. Washington’s unpredictability is a bigger factor than it used to be.

The president isn’t likely to tweet about this, of course, but uncertainty about what will happen with the Iran nuclear agreement, for example, is one factor pushing up prices. Another is Venezuela.

It is shocking how much of OPEC’s success in clearing the glut of oil inventories is owed to the misery of one of its founding members. In March, compliance among the original 11 members who signed up for cuts in November 2016 was very high, at 170 percent. Within that, though, Venezuela’s was more than 600 percent.

The real story lies in the cumulative numbers.

In theory, these 11 countries should have collectively withheld about 530 million barrels from the market from January 2017 through the end of last month, of which Venezuela should have accounted for about 8 percent. According to OPEC’s figures, however, they actually withheld 599 million barrels; and Venezuela was responsible for more than 17 percent of that bigger amount.

The past six months or so clearly marked a tipping point, coinciding with the rally in oil prices.

In absolute terms, Saudi Arabia has cut more barrels than any other member versus its baseline output — as you would expect of the largest producer by far. What is really striking, however, is the comparison of absolute outperformance; that is, how many extra barrels OPEC members have withheld over and above their targets. On that measure, Venezuela has actually moved into the, er, number one slot:

Despite Venezuela’s production having dropped by almost 550,000 barrels a day since the end of 2016, it could easily keep going down.

And one big catalyst for that could be, you guessed it, tougher sanctions from Washington. These look likely given the extreme unlikelihood of fair elections in Venezuela next month. It’s not clear what form sanctions might take. But the elevation of hawks such as John Bolton and Mike Pompeo in the Trump administration suggests harsher options, such as banning U.S. imports of Venezuelan crude oil altogether, could be on the table.

As ClearView Energy Partners rightly pointed out in a recent report, such a ban might simply shift those barrels elsewhere rather than take them off the market completely — albeit likely at a discount. Still, further revenue reductions would exacerbate Venezuela’s economic pain, serving to undermine the prospects for oil production, too.

As for the president’s tweet, there’s no telling how that factors into what happens. It might betray discomfort with the idea of doing anything to push pump prices even higher over the summer. Equally, it could just be preemptive finger-pointing to direct drivers’ anger elsewhere. And, equally, it may not add up to anything substantive at all.

What is clear is that supply squeezes, both planned and unplanned, are now an essential element of the oil rally. That’s why OPEC can’t bring itself to end its cuts, and also why it risks alienating consumers everywhere, not just on Pennsylvania Avenue.

+++ (BBG) Bahrain Shale Find Should Put Oil Market on Notice: Robin Mills

(BBG) Bahrain discovered the first oil on the Arab side of the Gulf in 1932. It took a long time for the small island to find anything of similar significance, but its recent announcement of an enormous shale oil resource under its shallow waters should not be underestimated: Commercial offshore shale oil production would be a first for the worldwide industry.

Perhaps more significant is that this discovery has the potential to boost Middle East output, while raising the odds that shale oil production outside the U.S. and Canada finally takes off. The Middle East has the advantages of good geology, existing petroleum infrastructure, and a lack of environmental or community opposition. To be sure, local producers will have to offer attractive terms to international investors to compensate for the higher costs and technical risks than their conventional fields, source fresh-water or use other hydraulic fracturing technologies, and develop or bring in service companies skilled in unconventional resources. But given that U.S. shale specialists have tended to stay at home, the Bahrain find offers interesting possibilities for large international oil companies as partners.

Given their proximity, the newfound resources probably stretch into Saudi and perhaps Qatari waters. Saudi Arabia, with its own first find the Dammam field, lies just 25 kilometers (15.5 miles) to the west of Bahrain, the countries linked by the King Fahd Causeway. Some 20 kilometers to the southeast is Qatar. Though a holder of the world’s third-largest gas reserves, Doha’s mature oil production is slowly declining. Shale production could give it a boost if it’s able to sidestep the obstacles posed by an embargo imposed by Bahrain, Saudi Arabia and the U.A.E. since June.

Halliburton said the resources found by Bahrain were on the “edge of the conventional-unconventional type of plays,” and it sounds somewhat like the famous Bakken of North Dakota. The mid-case estimate is for 81.5 billion barrels of oil and 13.7 trillion cubic feet of gas. Based on U.S. production numbers, five to 10 percent of the oil might be recoverable. Good flow-rates will be needed to compensate for the higher cost of offshore wells, although it might be possible to reach at least some of the resources by horizontal drilling from onshore sites, or artificially-dredged islands.

The main Middle East producers, such as Saudi Arabia, Iran, Iraq and Abu Dhabi, will not turn immediately to shale oil because of their giant, low-cost conventional resources. But several of them need new gas supplies. And shale oil is of great interest for the region’s more mature conventional producers — Oman, Qatar and Egypt — as well as for non-producing Jordan. If the current OPEC/non-OPEC pact endures, shale oil will dim the prospects for the smaller Middle East producers’ continuing adherence.

Saudi Arabia has been seeking to develop shale gas for some time, with production starting in its remote northwest. Saudi Aramco’s general manager of unconventional resources, Khalid Al Abdulqader, said in March that the Jurassic source rocks in the Jafurah Basin, which lies between the world’s biggest oil field Ghawar to the west, the Gulf to the east and Bahrain to the north, were similar in quantity and quality to Texas’s famous Eagle Ford shale, which is estimated to hold 12 billion barrels of recoverable oil and 122 trillion cubic feet of recoverable gas.

Kuwait has already begun pilot projects in its northern Jurassic resources, containing light, tight oil and sour gas. Oman’s liquefied natural gas (LNG) export facilities have been running at full capacity this year for the first time since 2007 due to BP’s development of its Khazzan tight gas field. LNG exporters, including U.S. ones, hoping to tap the Middle East’s growing energy appetite have to contend with growing competition.

Bahrain intends first to appraise the discovery with the help of service companies including Schlumberger and Halliburton, which will drill two wells this year, and then to look for international partners. Shell has assisted with studies of LNG imports and is advising Kuwait on its unconventional Jurassic reservoirs. ENI, which has enjoyed recent success in deepwater Egyptian gas, held talks in Manama in May. Total, ExxonMobil and BP, all with large gas projects in the wider region, could also be candidates, as could Apache and Anadarko, which are experienced in North Africa.

+++ V.I. (BBG) Shell Says Saving Planet Probably Means Sucking CO2 From the Air

(Bloomberg) — Cutting emissions won’t be enough to keep
the planet from warming by more than 2 degrees Celsius: to
achieve that goal, according to Royal Dutch Shell Plc, will
require sucking carbon dioxide out of the atmosphere.
A scenario report from the Anglo-Dutch oil major describes
a world woefully unprepared to meet the goals set out in the
Paris Climate Agreement. Shell says that by 2060, carbon capture
and storage must exceed global emissions as the company sets a
course for pre-industrial pollution levels. For decades after,
such facilities would need to work at breakneck pace to inhale
the carbon dioxide spewed by previous generations.
That jars with the current reality where carbon capture and
storage technology is a commercial failure, with fewer than 50
active projects compared with the 10,000 needed under one of
Shell’s scenarios for attaining climate safety.
While Shell says the report isn’t a call to arms, but
merely analysis of what’s required to meet climate goals, it’s
still a robust statement for a company that depends on fossil
fuels. The oil major may hope that such aggressive scenario
modeling demonstrates the urgent need for a carbon price.
Along with its peers, Shell has proposed charging for
carbon emissions as a way to foster the type of progress modeled
in its report. Financial penalties for pollution would also
improve the economics of carbon capture and storage projects.
With many carbon capture projects reliant on injecting the
fluid into the ground, it’s a natural line of business for a
company with expertise in drilling and geology, and Shell
already has such facilities in at least three countries.

+++ (BBG) Oil Loses Steam as Fear Over U.S. Supply Returns to Haunt Prices

..In the cards…

(Bloomberg) — Oil held losses below $62 a barrel on
concerns that it may be facing a double whammy of rebounding
American stockpiles and booming U.S. production.
Futures were little changed, after dropping 1.1 percent on
Monday. The U.S. government expects major shale regions to boost
output by 131,000 barrels a day in April, spurring fears that
surging supplies will undermine OPEC’s efforts to clear a glut.
Sentiment is being soured further as U.S. inventories are
forecast to have risen for a third week.
Oil has struggled to recover losses from last month’s
broader market slump after climbing over $66 a barrel in
January. While there’s renewed confidence over demand on a
brighter economic outlook following a better-than-expected jobs
report in the U.S., expanding American production continues to
remain a challenge to the Organization of Petroleum Exporting
Countries and its allies including Russia that are trying to
prop up prices via output curbs.
“Currently, there’s downward pressure on oil prices with
concerns remaining over surging U.S. crude production,” Kim
Kwangrae, a commodities analyst at Samsung Futures Inc., said by
phone in Seoul. “Increasing output alone is a problem but, at
the same time, we have American stockpiles rebounding, which may
continue to challenge crude from recovering.”
West Texas Intermediate for April delivery traded at $61.24
a barrel on the New York Mercantile Exchange, down 12 cents at
4:39 p.m. in Seoul. The contract declined 68 cents to $61.36 on
Monday. Total volume traded was about 53 percent below the 100-
day average.
Brent for May settlement slipped 9 cents to $64.86 a barrel
on the London-based ICE Futures Europe exchange. The contract
dropped 54 cents, or 0.8 percent, to $64.95 on Monday. The
global benchmark traded at a $3.65 premium to May WTI.
See also: U.S. Oil Export Surge Means OPEC’s Output Cuts
May Be Doomed
Production from shale regions will reach 6.95 million
barrels a day next month, the U.S. Energy Information
Administration said in its monthly drilling productivity report.
The Permian Basin is seen leading the way with an 80,000-barrel
increase. Total American output has passed 10 million barrels a
day, beating a record set in 1970.
U.S. crude inventories probably expanded by 1.9 million
barrels in the week through March 9, according to a Bloomberg
survey before Energy Information Administration data on
Wednesday. Meanwhile, stockpiles at Cushing, Oklahoma, the
delivery point for WTI futures, are forecast to have been little
changed after 11 straight weeks of declines.
Oil-market news:
* Workers at Libya’s Zawiya oil export terminal started a strike
on Monday over delayed salary payments, according to people with
knowledge of the matter, who asked not to be identified because
they are not authorized to speak to media.
* Gasoline futures in New York are down 0.2 percent at $1.8894 a
gallon.