• 6 minutes WTI @ 67.50, charts show $62.50 next
  • 14 minutes Saudi Fund Wants to Take Tesla Private?
  • 18 minutes California Solar Mandate Based on False Facts
  • 3 hours Starvation, horror in Venezuela
  • 3 hours Monsanto hit by $289 Million for cancerous weedkiller
  • 32 mins Anyone Worried About the Lira Dragging EVERYTHING Else Down?
  • 1 hour Oil prices---Tug of War: Sanctions vs. Trade War
  • 6 hours Why hydrogen economics is does not work
  • 2 hours Correlation does not equal causation, but they do tend to tango on occasion
  • 10 hours WTI @ 69.33 headed for $70s - $80s end of August
  • 10 hours WSJ *still* refuses to acknowledge U.S. Shale Oil industry's horrible economics and debts
  • 1 hour Russia retaliate: Our Response to U.S. Sanctions Will Be Precise And Painful
  • 15 hours What Turkey Sanctions Are Really About
  • 14 hours Saudi Production Cut or Demand Drop?
  • 12 hours Merkel, Putin to discuss Syria, Ukraine, Nord Stream 2
  • 8 hours Saudi Aramco IPO Seems Unlikely
Alt Text

Oil Prices Fall After EIA Confirms Crude Inventory Build

Oil prices extended their losses…

Alt Text

Kuwait Oil Production Hits 18-Month High

Kuwait’s oil ministry said that…

Alt Text

The Next Trade War Escalation Will Hit U.S. Oil

The Trump administration is now…

Precise Consultants

Precise Consultants

’Precise Consultants is a London based technical recruitment consultancy that supplies specialist personnel to the offshore oil and energy industry. The company was founded by…

More Info

Trending Discussions

OPEC’s Upcoming Meeting: All Talk Or Game Changing?

Iraq Oil

Eyebrows all over the world were raised when he said, “There is no price war” – after all, anyone with even a passing interest in the oil and gas industry over the past 25 months would disagree. But perhaps within those five little words uttered by Khalid Al-Falih is the revelation of a seminal change in Saudi Arabia’s intent for the upcoming OPEC meeting in Algeria, where informal talks on stabilizing prices will take place.

Since November 2014, OPEC’s meetings have been dominated by rumours, letters and outright calls in the press by individual members for production freezes to counter the catastrophic drop in oil prices. OPEC, led by Saudi Arabia, waged war on U.S. shale producers in a bid to topple them and rather than reducing production, went all out to flood the market and drown the competition. Instead of the quick death they would have hoped for, it’s been a long, slow and painful struggle, impacting on every oil producing nation in the world. In June 2014 the international benchmark was hitting heights of $115.71 per barrel. This week oil traded at $43.16 per barrel.

There have been rumours of deals to curb production involving OPEC members and also Russia, but all have come to nowt. The most recent attempt in April, a six-hour meeting, collapsed when Iran decided to stay at home. Oman’s Oil Minister Mohammed Al-Rumhy complained to the media outside, “Until this morning we thought there would be a deal. We didn’t know Iran wasn’t coming.”

We could, however, be arriving at the perfect storm, when events collide to create an opportunity. Things are a little different now for Iran, as Forbes reports; “(It) is now closer to reaching its post sanction output levels of 4m bpd, increasing the odds of Iranian participation in Algiers.” It’s also cut prices right back to the bone in order to attain pre-sanction production levels of 4m bpd. It is important to note however, that Iran’s support – in public – for a production freeze will only include its own production when it reaches pre-sanctions output of 4m bpd. In July it hit 3.6m bpd. Related: Expert Commentary: Traders Turn A Blind Eye To OPEC Rumors

There is new support from Iraq for a production freeze, although you could be forgiven for getting caught out by that one. After all, on August 23rd Prime Minister Haidar Al-Abadi did tell Reuters that Iraq still hadn’t raised production sufficiently. Who knows what went on between that statement and the next day, but on the 24th the deputy Oil Minister Fayyad Al-Nima popped up and said Iraq was now in a position to support measures to establish fair crude prices. Al-Abadi has cleared up any confusion by confirming what we all know: “The drop in oil prices is causing volatility and this is harming Iraq because our revenues are based on oil. Our opinion is to freeze output to support prices.”

Iraq wasn’t the only one to change its mind. On the 26th Al-Falih said, "We don't believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us” and was reassured that the “market is moving in the right direction.” According to Reuters this resulted in “global marker Brent futures (giving) back some gains, slipping as much as 35 cents, or 0.7 percent, over 20 minutes, before recovering somewhat”. Five days later Al-Falih said, “The market is now saturated with stored crude at beyond usual levels and we don’t see in the near future a need for the kingdom to reach its maximum capacity.” Related: Major Oil Indicator Reaches Lowest Level Ever Recorded

As the saying goes, ‘Fool me once, shame on you. Fool me twice, shame on me’ and for that reason, having been publicly burned by both Russia and Iran on separate occasions, Saudi Arabia will be unwilling to go into any talks, informal or otherwise, looking like it is the one who needs a deal. But the Kingdom knows it can’t go on like this forever. Last year’s all-time high budget deficit of £100bn is not likely to be breached this year (predictions put it at $87bn) but its vast foreign reserves (once as high as $737bn, but recently reported at $555bn) are being relied upon more than ever before and next month it is hoping to raise $10bn through an international bond sale. In an attempt to cut Russia’s ties to China, Saudi Aramco cut prices to China. But Russia is not the only force to contend with here - Iran is also eyeing up the Chinese market where it once (pre-sanctions) met 11 percent of the demand. Reza Yeganehshakib, a geopolitical and energy analyst told Forbes, “Iran would like to take advantage of t
he forecasted increase of China’s crude demand due to an increase in transportation fuel consumption and its petrochemical industries in the second half of the year.”

So the hot topic in Riyadh will likely be whether it has the appetite to do battle with Iran and Russia in the same way it tried to defeat the U.S. shale producers. The country, no longer the world’s biggest oil producer, knows it is not untouchable, and to preserve the might of OPEC it is ‘treading softly’ as The Telegraph puts it. Will the Algiers meeting bring change? We can but hope.

By Precise Consultants

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News