• 2 hours Higher Oil Prices Reduce North American Oil Bankruptcies
  • 4 hours Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 6 hours $1.6 Billion Canadian-US Hydropower Project Approved
  • 7 hours Venezuela Officially In Default
  • 9 hours Iran Prepares To Export LNG To Boost Trade Relations
  • 11 hours Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 17 hours Saudi Oil Minister: Markets Will Not Rebalance By March
  • 22 hours Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 1 day Rosneft Announces Completion Of World’s Longest Well
  • 1 day Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 1 day Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 1 day Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 1 day Santos Admits It Rejected $7.2B Takeover Bid
  • 2 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 2 days Africa’s Richest Woman Fired From Sonangol
  • 2 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 2 days Russian Hackers Target British Energy Industry
  • 2 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 2 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 2 days Lower Oil Prices Benefit European Refiners
  • 2 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 3 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 3 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 3 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
  • 3 days Shell: Four Oil Platforms Shut In Gulf Of Mexico After Fire
  • 3 days OPEC To Recruit New Members To Fight Market Imbalance
  • 3 days Green Groups Want Norway’s Arctic Oil Drilling Licenses Canceled
  • 4 days Venezuelan Oil Output Drops To Lowest In 28 Years
  • 4 days Shale Production Rises By 80,000 BPD In Latest EIA Forecasts
  • 4 days GE Considers Selling Baker Hughes Assets
  • 4 days Eni To Address Barents Sea Regulatory Breaches By Dec 11
  • 4 days Saudi Aramco To Invest $300 Billion In Upstream Projects
  • 4 days Aramco To List Shares In Hong Kong ‘For Sure’
  • 4 days BP CEO Sees Venezuela As Oil’s Wildcard
  • 4 days Iran Denies Involvement In Bahrain Oil Pipeline Blast
  • 7 days The Oil Rig Drilling 10 Miles Under The Sea
  • 7 days Baghdad Agrees To Ship Kirkuk Oil To Iran
  • 7 days Another Group Joins Niger Delta Avengers’ Ceasefire Boycott
  • 7 days Italy Looks To Phase Out Coal-Fired Electricity By 2025
  • 7 days Kenya Set To Give Local Communities Greater Share Of Oil Revenues
Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

More Info

OPEC Eyes $70 Oil

OPEC

Brent prices hit $60 a barrel 10 days ago and have maintained that level ever since, sparking talk that this could be the new floor under oil prices and that $70 oil in the short term is now not only in producers’ wildest dreams, but a real possibility.  

Although OPEC never officially admitted it, analysts have largely thought that pushing oil up to $60 was one of the cartel’s goals with the production cut deal.

Three weeks before OPEC’s November 30 summit in Vienna, some oil producers have already started thinking that $70 is the ‘fair price’ for oil, fairer than $60, Julian Lee, oil strategist for Bloomberg First Word, writes.

But if the cartel wants to target a higher price (which it won’t officially communicate to the market), it will likely trigger a new wave of U.S. shale production next year. More importantly, that higher oil price target may meet the resistance of Russia—the leader of the non-OPEC group of producers’ pact—which is now generally viewed as steering the OPEC/non-OPEC oil production policy, together with OPEC kingpin Saudi Arabia,

Both the Saudis and Russians have signaled that they’re willing to extend the pact beyond March 2018, lending further support to oil prices over the past few weeks.

The higher the price of oil, the stronger the temptation for OPEC members to cash in on short-term gains and cheat (even more than they do now). Currently, Saudi Arabia is over-complying with its share of the production cuts, covering for rogue members—most prominently, OPEC’s second-biggest producer, Iraq.

Related: Russia Aims To Dominate Middle East Energy

Saudi Arabia needs oil prices at $70 per barrel in 2018 for a budget breakeven, the International Monetary Fund (IMF) estimated last week, while Russia claims that it “can live forever” at $40 oil.

Although the November 30 meeting will discuss the production cut deal, OPEC and the Russia-led non-OPEC producers may not make or communicate a firm decision on extending the pact at that summit.

Last week, Russia’s Energy Minister Alexander Novak said that the decision would likely come at a later stage—a delay that the market would surely be displeased with.

“If we see that the market is not balancing then we’ll do it. I can give you a more specific answer if you can find me any person now who can say what the market will look like in five months. If you find a person like this, I will shake his hand,” Reuters quoted Novak as saying through a translator.

Maybe no one can correctly predict how the oil market will look like in March 2018, but the recent oil price rally made analysts and investors much more bullish than they were just a couple of months ago.

“We think both fundamental data and an improvement in trader sentiment act as strong support for a continued test of the upside for oil prices,” Paul Horsnell at Standard Chartered told the Financial Times.

Money managers had a near-record net long position in crude oil and refined products contracts as of end-October, with the net long position soaring nearly 720 million barrels since end-June to 1.022 billion barrels, just shy of the February record of 1.025 billion barrels, Reuters’ John Kemp writes. The amassed long positions mean that hedge funds and other money managers expect oil prices to continue rising, but the amount of the net longs also raises the risk of a sharp correction if and when investors decide to take profits, Kemp says.

Related: Can Oil Prices Hit $65 This Week?

Part of the oil price movements in the next few weeks hinges on the OPEC-Russia production deal rhetoric leading up to the November 30 meeting. While it looks like Saudi Arabia continues to convey the “whatever it takes” message, its key partner in the pact—Russia—appears to be stalling, unwilling to give U.S. shale very solid reasons to boost production next year.

“Russia appears to be trying to slow down the extension talk until there is more clarity on the outlook for balances and what they mean for prices in 2018,” consultancy Energy Aspects told the FT.

Some OPEC producers may be vying for a ‘fair price’ of above $60, but $70 oil could be a deal-breaker for Russia, a further incentive to cheat for OPEC, and an additional impetus for U.S. shale to defy skeptics.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




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