Strong words need to be followed by strong actions otherwise they simply discredit the speaker in the future. Khalid al-Falih the Saudi Energy minster, and Alexander Novak his Russian counterpart, pledged in Beijing to do “Whatever it takes” to reduce the global glut in oil products inventory. However, unfortunately for Russia and OPEC, at this point changing the direction of the oil markets will require more than just a catchy headline.
Last Saturday the central Asian nation of Turkmenistan disclosed it’s discovery of what experts within the country believe to be a very sizable natural gas field almost adjacent to its coast with the Caspian Sea. This discovery is very well timed for the former Soviet republic which is currently discussing the possibility, with the European Union, of building a pipeline under the Caspian Sea. This pipeline could potentially link Turkmenistan’s gas fields with lucrative European markets.
With the cartel’s meeting in Vienna drawing closer by the day the question on everyone’s mind is: “What will OPEC do?” After the Saudi agreement with Russia, it is clear production cuts will be extended and OPEC has only three choices: decrease, maintain, or increase output.
The OPEC oil market report for the month of May acknowledged a fact which astute investors in the oil sector have long known to be true, namely the cartel is losing power. A surge in U.S. output which is dominated by oil shale led to OPEC raising estimates for non-OPEC growth by 370,000 barrels per day (bpd) from April’s estimates. This represented a 64% rise from April’s projections and growth of 950,000 bpd from the previous year. This outlook marks a dramatic departure from the cartel’s estimates for growth in the U.S. just 6 months ago when production cuts were first announced last November.
Almost everyone is happy when oil prices fall and consumers save money at the pump. However, there is a difficulty with oil prices falling too far too fast which is almost never brought up. Everything that has a beginning has an end, and this includes the oil industry. There will come a day when the world’s oil demand will peak and the oil industry will begin its slow decline into history. When this day will come is still the subject of much debate; but whether in 20 years or 80, it is coming. When that day environmentalists anticipate so eagerly does come to pass what will remain? Among other things, the infrastructure which once moved oil across the globe.
Recent years have seen a resurgence in American oil production and with the United States edging closer and closer each year toward becoming the second largest producer of crude oil in the world.
This is the final segment in a three part series discussing the recent past and future of oil prices and the reasons why prices are where they are. Currently there is a glut in oil inventories worldwide. There are a number of factors contributing to this continuing situation as I have detailed in there previous two segments of this series but in the end it can all be summed up into one simple statement: All parties whether they are individuals, corporations, or nations tend to do what is in their own best interest.
This is the first of a three part series discussing the recent past and future of oil prices and the reasons why prices are where they are. April was an interesting time for the crude oil market. From late March until the latter half of April oil prices were above $50 a barrel and oil bulls became excited by the idea that a supply cut led by OPEC and Saudi Arabia would soon tighten balances and lead to increased prices. This has not come to pass and here is why I am doubtful that change in the near future.
This week, ExxonMobil and Chevron released quarterly results from Q1 2017. Both released numbers that topped consensus estimates. Some analysts have suggested the Exxon’s numbers can provide insight into the energy sector, as follows. As the world’s largest publically traded oil and gas company, ExxonMobil can say a lot about the oil economy as a… Keep reading →
Last week was a tumultuous week for traders in oil markets as lingering doubts over the effectiveness that a production cut led by the nations of the Organization of Petroleum Exporting Countries (OPEC) was achieving the desired result of reducing global oil supply. The market has been saturated for over two years and some producers… Keep reading →
