• 7 hours Oil Prices Rise After API Reports Major Crude Draw
  • 8 hours Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 8 hours Gazprom Speaks Out Against OPEC Production Cut Extension
  • 9 hours Statoil Looks To Lighter Oil To Boost Profitability
  • 10 hours Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 11 hours Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 12 hours Whitefish Energy Suspends Work In Puerto Rico
  • 13 hours U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 1 day Thanksgiving Gas Prices At 3-Year High
  • 1 day Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 1 day South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 1 day Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 1 day Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 2 days Iraq Steps In To Offset Falling Venezuela Oil Production
  • 2 days ConocoPhillips Sets Price Ceiling For New Projects
  • 4 days Shell Oil Trading Head Steps Down After 29 Years
  • 4 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 4 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 4 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 4 days Venezuela Officially In Default
  • 5 days Iran Prepares To Export LNG To Boost Trade Relations
  • 5 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 5 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 5 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 5 days Rosneft Announces Completion Of World’s Longest Well
  • 5 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 5 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 6 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 6 days Santos Admits It Rejected $7.2B Takeover Bid
  • 6 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 6 days Africa’s Richest Woman Fired From Sonangol
  • 6 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 6 days Russian Hackers Target British Energy Industry
  • 6 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 6 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 7 days Lower Oil Prices Benefit European Refiners
  • 7 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 7 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 7 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 7 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
Alt Text

Iraq Struggles To Keep Oil Exports Elevated

Iraq is struggling to offset…

Alt Text

Can Russia Break Its Oil Dependence?

Russia’s economic growth is struggling,…

Alt Text

Trudeau, Where Is Your Back Up Plan For The Arctic Ban?

The five-year moratorium on oil…

Fractalerts

Fractalerts

Fractalerts is a fin-tech company based in Geneva, Switzerland. They provide trading alerts and market analysis. They are part of the Fractal SA family.

More Info

The Inevitable Winners Of The OPEC Meeting

Oil rig

OPEC, Oil and Tankers.

This week, the informal meeting of OPEC, alongside the International Energy Forum, has given rise to a possibility of another output limit. Whether or not this will happen is up for debate, however, as with any deal there are going to be winners and losers.

For some countries the limit is essential. Take Algeria for example. On Sunday, the Algerian energy minister said that "[w]e will not come out of the meeting empty-handed". And it is in their interests that a decision is made, simply because both Venezuela and Algeria need a deal to prop up the price of oil. There is a real fear that prices could dip to sub $20 a barrel levels if no decision is made, and that will leave many producers pumping at below market rate, so with every barrel they will be making a loss (if they aren’t already).

But even some of the big players need to do something to boost the price. Recent figures suggest that Saudi Arabia will suffer a fiscal deficit of around 13.5 percent of their GDP. And the IMF say that the Saudi’s will need an oil price close to $67 a barrel to level out the economy.

In fact, Saudi Arabia is in worse shape than is commonly thought. With the drop in oil money being directly linked to lowered salaries for government workers. Some ministers will see their pay packet drop by 20 percent.

So is anyone actually benefitting from these low prices?

Back in March the BBC did an editorial entitled ‘Cheap oil is taking shipping routes back to the 1800s’. They were one of the first news sources to report on how plummeting oil prices were causing ships to circumnavigate the Cape of Good Hope instead of taking the shorter trip through the Suez Canal. Why? Well at up to $350,000 a ship, the Suez Canal is expensive and enough fuel to sail around the tip of Africa is simply the cheaper option. Related: Is This $24 Billion Petrochemical Megaproject A Boon For Oil?

One of the reasons that this is the case is because of the type of fuel that the ships use. They run on ‘Bunker Fuel’, a thick, heavy residue that is left over once gasoline, diesel and other hydrocarbons are extracted during the refining process.

Each barrel of oil (42 gallons) produces 12 gallons of diesel and 19 gallons of petrol, with additional hydrocarbons added in to the mix. The residual bunker fuel makes up for about between 6-10 gallons per barrel.

So now let’s crunch the numbers…

If a barrel of oil is trading at around $48 a barrel, and diesel and petrol are averaging out at $2.38 and $2.25 (plus taxes) a gallon respectively, then that more than covers the cost of the barrel. That makes the price of bunker fuel almost negligible. In fact, you can pick up a metric ton of the stuff for around $260.

But the abundance of oil arriving at port has led to more and more tankers to become ‘floating storage’ as land based options fill up to capacity. At the moment, with all this oil around, the tankers are coming off best. Historic low fuel prices, and long term rental agreements to boot.

In fact, whichever way the OPEC meeting goes this week, the ship owners will be happy.

By Fractalerts

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




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