Tag Archives: OPEC

IEA Declares OPEC Has Accomplished Its Mission: Oil Is Now “Balanced”

Tuesday, 24 April 2018 05:17

This article appeared online at TheNewAmerican.com on Monday, April 23, 2018:

“It’s not for us to declare on behalf of the Vienna agreement [the OPEC production-cut agreement in force since January 2017] that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” said the International Energy Agency (IEA) last week. Those production cuts, aided by the rolling disaster in Venezuela that continues to take crude oil production off the world market, have, according to the IEA, brought down the world’s crude oil stocks within shouting distance of OPEC’s goal: the five-year average of those stocks.

Compliance among members of the OPEC cartel and its friends (including Russia) has been extraordinarily high, with Saudi Arabia helping things along by cutting its own production far more deeply than the agreement called for.

U.S. production, estimated to approach 11 million barrels a day by the end of the year (twice what it was just seven years ago), has been unable to match the production cuts and worldwide demand, which has greatly surprised to the upside.

Add in concerns that on May 12 the president of the United States will decide

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Saudi Arabia Once More Delays Plans to Sell Part of Its Oil Company

Thursday, 22 March 2018 04:29

This article appeared online at TheNewAmerican.com on Tuesday, March 20, 2018:

Coat of Arms of Saudi Arabia

Coat of Arms of Saudi Arabia

The chairman of Aramco, Saudi Arabia’s privately held oil producer, told avid listeners in Davos, Switzerland, in January that “we hope that 2018 will be the right time [to list shares of the company for sale], but ultimately we have to make sure the market is ready.”

There is increasing evidence that the market might never be ready.

When Saudi Arabia’s Crown Prince Mohammed bin Salman announced his plans in January 2016 for moving his country’s economy away from its dependence on oil (called Vision 2030), he guessed he could raise $100 billion from the sale of part of Aramco to help with the transition. He also felt that the sale of just five percent of the company would do the job nicely. In addition he thought that those shares might be offered as soon as 2017.

The year 2017 came and went, and Saudi Arabia’s oil minister Khalid Al-Falih said last week that the new deadline for the listing — in late 2018 — was now “artificial,” adding that the next target date is April 2019.

There are so many challenges facing the elites in Saudi Arabia that the deal might never take place.

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Hey, Prince! How Does it Feel to Have the Crude Oil Shoe on the Other Foot?

Wednesday, 21 March 2018 09:43

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 21, 2018:

English: Saudi Arabia

Saudi Arabia

Saudi Arabia’s Crown Prince Mohammed bin Salman is about to enjoy learning what the Old Testament teaches about the sins of his father:

The Lord is slow to anger and abounding in steadfast love, forgiving iniquity and transgression, but he will by no means clear the guilty, visiting the iniquity of the fathers on the children, to the third and the fourth generation.

In the 1970s, many of us still remember the pain and suffering that Saudi Arabia’s kings inflicted on the United States and its citizenry in retaliation for U.S. support of Israel: long lines at gas stations, alternate days to fill up, double nickel highway speeds, daylight “savings” time, and other punishments.

The prince, born in 1985, won’t remember those days, but his father, King Salman bin Abdulaziz Al Saud, most certainly does. And during his two-week sales tour of the United States, the prince is going to learn about justice delayed. He now needs the help of the United States to keep his sand castle from falling into the sea or disappearing into the Arabian desert.

Specifically, the prince has a dream – Vision 2030 – but

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Crude Oil Prices Fall Below $60, Traders Expect $55 or Lower

Tuesday, 13 February 2018 06:39

This article appeared online at TheNewAmerican.com on Monday, February 12, 2018:

With the price of crude oil for March delivery falling below $60 a barrel last week on the New York Mercantile Exchange (NYMEX), half of OPEC’s worst nightmare is taking place: Higher oil prices sought by the cartel are bringing on American production at a faster rate than ever before. The other half of the nightmare would be a slowdown in global demand for the stuff.

A sell-off was triggered by an announcement last week from the Energy Information Agency (EIA) that U.S. crude oil production exceeded 10 million barrels per day (bpd) last month — the first time since 1970 — and would continue to set records into 2018. In addition, U.S. oil rig count jumped by 26, the largest jump in a year.

Helping along was the

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With Venezuela’s Marxist Dictator Gone, the Country’s Oil Production Could Soar

Tuesday, 13 February 2018 06:32

This article was published by The McAlvany Intelligence Advisor on Monday, February 12, 2018:

By every measure, Venezuela’s Marxist dictator Nicolas Maduro isn’t long for this world. His socialist regime is losing altitude and airspeed at a most satisfyingly horrific rate. His people are starving, as are many in his army. Citizens are fleeing into Colombia to buy food missing from shelves at home, and many are staying there. He’s in default on his estimated $150 billion national debt, and his lenders – China, Russia, and Cuba – appear to be increasingly reluctant to throw good money after bad. American refineries, which have been supporting Maduro through their purchases of his country’s sticky crude, have happily cut them by two-thirds, finding more reliable sources in Canada and Mexico, and as a result helping to starve Maduro into oblivion.

Finally, his precious oil company, PdVSA, which is essentially Maduro’s only oxygen hose, is failing as well. Its production is down to a little over a million barrels a day. In 2014 it produced more than three.

So it’s reasonable to assume, as economist Herb Stein expressed it, that “if something cannot continue, it will end.” And the end of Maduro won’t be lamented.

In a burst of perhaps unjustified optimism,

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Fracking Revolution Pushes U.S. Daily Crude Oil Production Over 10 Million Barrels

Saturday, 03 February 2018 06:18

This article appeared online at TheNewAmerican.com on Friday, February 2, 2018:

November’s production of crude oil in the United States, according to the U.S. Energy Information Agency (EIA), not only exceeded October’s by four percent, but rose to a level not seen in nearly 50 years: 10 million barrels a day. The agency went even further: At this rate daily U.S. crude oil production will exceed that of both Russia and Saudi Arabia by the end of next year.

If not sooner. The EIA’s forecast is that crude oil production will grow by 10 percent this year, but that could turn out to be much too low. As Todd Staples, head of the Texas Oil & Gas Association, noted:

American crude oil [production] is a game-changer in international trade, global politics and domestic energy security. Crude oil imports are down 20 percent from 2006 and, today, we are competing with the Middle East in the export market.

These outcomes were unthinkable a decade ago.

Indeed. As recently as 2011 the United States was only producing about

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U.S. Oil Production Will Soon Overtake Saudi Arabia’s

Tuesday, 23 January 2018 06:45

This article appeared online at TheNewAmerican.com on Monday, January 22, 2018:

Fatih Birol, head of the Paris-based International Energy Agency (IEA), told a congressional committee last week, “What we see is a result of the shale revolution [fracking]. The U.S. is becoming the undisputed leader of oil and gas production worldwide. [U.S.] oil production is growing very strongly and will continue to grow. We think that this growth is unprecedented [both in the] size of the growth and the pace of the growth.”

In 1973, Saudi Arabia punished U.S. citizens with an oil embargo in retaliation for the U.S. government’s support for Israel during the Yom Kippur War. It could do so because it held the biggest hammer: Saudi Arabia controlled the world’s largest reserves of crude oil and the kingdom. Within months, the price of oil quadrupled in the United States, resulting in shortages and rationing. Gas stations were closed, and when they reopened they were forced to restrict gasoline purchases to “odd” and “even” days depending upon their customers’ license plate numbers. The federal government imposed “double-nickel” (55 mph) speed limits on highways, and experimented with “daylight saving” time in order to reduce the impact of the embargo.

Those days are long gone and not likely ever to return. Saudi Arabia and its OPEC cartel are slowly being reduced to bit players in the global energy market. Saudi Crown Prince Mohammed bin Salman saw that coming more than two years ago when he announced

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Record Bullish Bets on Crude Oil Raising Red Flags

Tuesday, 16 January 2018 06:33

OPEC countries

OPEC countries

This article appeared online at TheNewAmerican.com on Monday, January 15, 2018:

Embed from Getty Images

Traders in oil futures have just set a new record: The bets they have placed that crude oil will move even higher just set a world record. As of last week, there were 432,000 net long positions reflecting that optimism. That optimism could be short-lived. As analysts from JBC Energy consulting told its clients on Monday: “From a fundamental perspective, the surge in U.S. managed money raises a clear red flag for us.”

Since the low in June, the price for the future delivery of U.S. crude oil is up almost 50 percent, from $44 a barrel to $64 on Friday. In London, Brent crude traded above $70 for the first time since December 2014.

Their optimism is based on indisputable facts.

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Obama Fracking Rule to be Overturned by BLM in January

Saturday, 30 December 2017 07:17

This article appeared online at TheNewAmerican.com on Friday, December 29, 2017:

Map of the part of the region in Texas, red is...

Part of the Permian Basin in west Texas

A federal appeals court refused on Wednesday to reconsider its decision to overturn an Obama administration rule on fracking, holding that the issue was moot: The Trump administration is planning to throw out the rule altogether in January.

The Bureau of Land Management (BLM) said that the Obama administration’s rule “unnecessarily burdens industry compliance costs and information requirements that are duplicative of regulatory programs of many states and some tribes. As a result, we are proposing to rescind, in its entirety, the [Obama administration’s] 2015 final rule.”

The original decision in 2016 ruled that the Obama administration was guilty of federal overreach,

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The Permian Basin is Driving Another Nail into OPEC’s Coffin

Saturday, 30 December 2017 07:00

This article was published by The McAlvany Intelligence Advisor on Friday, December 29, 2017:

English: Pumpjack east of Andrews, TX

English: Pumpjack east of Andrews, TX

Just a few years ago, the Permian Basin was considered nearly depleted. But with the advent of fracking technology, the enormous basin – called a “super basin” – could now contain two trillion barrels of recoverable crude oil. That is more than the reserves of Saudi Arabia’s Aramco oil field and all of Venezuela’s proven reserves put together. IHS Markit, the world leader in information gathering and analysis, just announced that the Permian Basin’s production exceeded its previous high registered back in 1973, producing a record 815 million barrels of oil in 2017. It estimates that its daily production will approach 3 million barrels a day (mbd) next year, which will set another record of a billion barrels produced in single year.

This far exceeds the requirements for any oil basin to quality as a “super basin”: 5 billion in reserves and 5 billion in accumulated production. It also far exceeds the reserves of Saudi Arabia’s Aramco oil field (265 billion) and those of Venezuela (300 billion).

It’s also a “disrupter,” according to Pete Stark, a director of IHS: “When we consider the impact on the world’s crude markets, the Permian has to be considered a global disrupter.” IHS’ Reed Olmstead added:

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Crude Oil Price Outlook: Back to the ’40s?

Wednesday, 27 December 2017 06:23

This article appeared online at TheNewAmerican.com on Tuesday, December 26, 2017:

The same day that OPEC announced it would be extending its production cut agreement through the end of next year, the U.S. Energy Information Administration (EIA) announced that U.S. crude oil production jumped an astonishing 290,000 barrels per day from August levels.

Oil traders yawned and drove the price of crude higher. After all, it was a one-month spike, and compliance among both OPEC members and non-members remained surprisingly high. The agreement was taking crude oil off the market faster than producers were adding it. Voila! Increased demand coupled with decreased supply equals higher prices. Futures moved higher with Brent (prices set in London) moving past $62 a barrel with West Texas Intermediate (WTI, prices set in Cushing, Oklahoma) approaching $60.

Those traders were happy to ignore the increase in rig counts in the United States, and the more than 1,000 new horizontal wells being developed as a result — the highest seen since March 2015.

But all three official observers of the world’s crude oil market had a surprise waiting:

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IEA: United States to Dominate World Energy Market Within Eight Years

Thursday, 16 November 2017 06:42

This article appeared online at TheNewAmerican.com on Wednesday, November 15, 2017:

According to the International Energy Agency (IEA), the growth of energy production in the United States, doubling as it has in just the last eight years, is expected to double again in the next eight. Authors of the IEA’s annual World Energy Outlook report released on Tuesday could hardly contain their surprise: “A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50% higher than any other country ever managed; already a net exporter of [natural] gas, the U.S. becomes a net exporter of oil in the late 2020s. In our projections … the rise in US tight oil output [fracking] from 2010 to 2025 would match the highest maintained period of oil output growth by a single country in the history of oil markets.”

The U.S. production increase makes up an astonishing

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Aramco CEO Not Worried About American Frackers

Friday, 27 October 2017 07:31

This article appeared online at TheNewAmerican.com on Thursday, October 26, 2017:

English: Headquarters of Aramco Services Company

Headquarters of Aramco Services Company

Saudi Aramco CEO Armin Nasser told CNBC’s Squawk Box on Sunday that he wasn’t at all worried about American frackers, since they are concentrating on “sweet spots” — the richest fields with the highest returns — which can’t last forever: “The concentration that we are seeing today [by American frackers] is on the sweet spot of shale, and this will not last forever. You can concentrate for some time on the sweet spots and produce more oil. But ultimately you need to venture downward, and that’s where you have less quality and you require more cost to produce these barrels. Shale oil will contribute additional barrels [to world crude oil supplies], but it will all depend on the price of crude.”

Nasser no doubt was referring to data released last week that showed

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Aramco’s CEO Tells Half a Truth

Friday, 27 October 2017 07:19

This article was published by The McAlvany Intelligence Advisor on Friday, October 27, 2017:

Carbon print of Alfred Lord Tennyson, 1869, pr...

Alfred Lord Tennyson, 1869

A Yiddish proverb holds that “a half-truth is a whole lie,” while Ann Landers said that “the naked truth is always better than the best-dressed lie.” Alfred Lord Tennyson said it best: “A lie which is half a truth is ever the blackest of lies.”

Whether Aramco’s CEO intended to tell a lie or just wasn’t completely forthright remains unknown. What Armin Nasser did tell CBNC’s “Squawk Box” on Sunday certainly wasn’t the whole picture. He blew off America’s energy frackers:

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What if Your Customer Can’t Buy Your Product, but Wants to?

Tuesday, 17 October 2017 05:54

This article was published by The McAlvany Intelligence Advisor on Monday, October 16, 2017:

There are two basic rules of economics. The first is: if prices go down, more will be demanded. The second is: both sides of any economic transaction must benefit or there’s no deal.

The fracking revolution in the United States has pushed the price of crude oil down to the point where it is threatening the very existence of the OPEC cartel. Consumers are saving at the pump and the energy industry in the U.S. employs more than 10 million people, making up eight percent of the country’s gross domestic product.

But there’s been an all but invisible transformation taking place in natural gas. At least two of the Big Oil companies sell more natural gas than they do crude oil.

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U.S. Natural Gas Exports to Add 500,000 Jobs, $73 Billion to Economy

Tuesday, 17 October 2017 05:49

This article appeared online at TheNewAmerican.com on Monday, October 16, 2017:

Liquefied natural gas (LNG) tanker, section vi...

Liquefied natural gas (LNG) tanker, section view from side.

The latest estimate from API, the energy trade group, is that increased exports of LNG (liquefied natural gas) over the next 20 years will add nearly 500,000 jobs to the American economy and $73 billion to the country’s gross domestic product (GDP). Marty Durbin, API’s chief strategy officer, stated, “This report confirms that increasing U.S. LNG exports would bring great benefits to American workers and consumers and [to] the U.S. economy. Increasing the use of U.S. natural gas throughout the world means more production here at home, cleaner air, and increased energy security for our nation and our allies.”

The revolution taking place in natural gas has been almost completely overlooked.

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Latest Report: Crude Won’t See $60 a Barrel For at Least a Year

Saturday, 14 October 2017 06:39

This article appeared online at TheNewAmerican.com on Friday, October 13, 2017:

Embed from Getty Images

According to oil seers, there are two magic numbers: the five-year average of five billion barrels in crude-oil reserves held around the world in salt caverns, oil tankers, and oil storage tanks; and $60 for a barrel of oil, priced in London.

In January there were 318 million barrels of “surplus” crude above that five-year average, but by the end of September that number had dropped to “only” 170 million barrels of “surplus.” Oil traders saw the trend toward “balance” — that magical, mystical, and entirely theoretical moment when worldwide crude-oil inventories would hit that five billion barrel marker and thus be “balanced” — and started getting excited. Placing bets that oil prices would move higher as worldwide inventories continued to drop, they placed bullish bets in the futures market, which hit new highs in September.

But according to the monthly report issued by the International Energy Agency (EIA) on Thursday, that’s likely to be as good as it’s going to get:

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OPEC is Textbook Example of Classic Cartel

Wednesday, 11 October 2017 11:42

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 11, 2017:

the new OPEC headquarters in Vienna Español: S...

OPEC headquarters in Vienna

Free market economists have long considered OPEC as a textbook example of the anti-free market cartel. Its mission statement confirms it:

To coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic, and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.

This is of course the “siren song” of every cartel:

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OPEC Asks U.S. Oil Industry to Join Its Cartel

Wednesday, 11 October 2017 06:19

This article appeared online at TheNewAmerican.com on Tuesday, October 10, 2017:

Embed from Getty Images

Embed from Getty Images

At a speech in New Delhi on Sunday, OPEC’s Secretary General Mohammed Barkindo offered an olive branch to the American oil industry: Come join our cartel and together we’ll keep prices up and everyone profitable. These are his exact words:

We urge our friends [we’re all friends, now] in the shale basins of North America to take this shared responsibility with all [the] seriousness it deserves, as one of the key lessons learned from the current unique supply-driven cycle.

Translation:

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Hurricanes Hammer OPEC as Well

Tuesday, 12 September 2017 05:54

This article appeared online at TheNewAmerican.com on Monday, September 11, 2017:

Estimates are that Hurricane Irma knocked out the power to nearly six million Floridians’ homes and businesses, while both Harvey and Irma have either destroyed or heavily damaged 300,000 homes in Texas and hundreds of thousands more in Florida. Further estimates are that these two massive storms have reduced demand for oil by nearly a million barrels a day.

This is being reflected in the price of NYMEX (New York Mercantile Exchange) crude oil dropping to $47 a barrel early Monday. Last Wednesday crude was selling at more than $49.

Part of the problem facing OPEC and its grand plan to cut production to raise oil prices was its assumption that

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