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Oil Prices Slide as Iraq Joins Others in Seeking an Exemption From OPEC Deal

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  • Oil Prices Slide as Iraq Joins Others in Seeking an Exemption From OPEC Deal

The prospect of a crude oil production cut from OPEC — tentatively agreed to late last month — may be scuppered before it’s even been inked if the latest headlines are anything to go by.

The latest source of unease comes from Iraq, which, over the weekend, joined the likes of Iran, Nigeria and Libya in seeking an exemption to cutting oil output for an OPEC deal, scheduled to be discussed at the group’s upcoming meeting in late November.

“Iraq is looking for an exclusion for an OPEC deal to cut oil production because of its current conflict with militants,” wrote Vivek Dhar, a mining and energy analyst at the Commonwealth Bank.

“The country claims it currently produces more than 4.7 million barrels per day, which could still rise further in coming months. Iraq’s estimate of its oil output is 500,000 barrels per day more than OPEC’s estimate and remains a point of contention as OPEC prepares to assign country-specific quotas on November 30.”

On Sunday, Iraq’s Oil Minister, Jabar Ali al-Luaibi, said the nation should be exempted from output restrictions as it was fighting a war with Islamic State, according to reports from Reuters.

“We are fighting a vicious war against IS,” Luaibi said in e briefing for reporters, adding that Iraq should get the same exemption as Nigeria and Libya.

Demonstrating the difficulty OPEC members may have in agreeing to set production quotas for individual members, al-Amiri said Iraq’s share of global production had been compromised by years of conflict, stating that it “should be producing 9 million [per day] if it wasn’t for the wars.”

“Some countries took our market share,” he told reporters on the reason why Iraq, to date, has refused to cut back output.

On the upcoming OPEC meeting scheduled for November 30, he said Iraq would make its case at OPEC “in a pleasant environment” to avoid tension.

While Iraqi officials wish to conduct negotiations within “a pleasant environment”, it underlines why a deal to limit production at this meeting may prove to be a bridge too far, says Dhar.

“The internal disagreement between OPEC members remains the primary obstacle to an OPEC deal being enforced.” he says.

Dhar also says that Russia, a non-OPEC member, has also refused to commit to cutting output to support an OPEC deal, stating that “Russia’s latest draft of its energy strategy points to a mild increase in oil output from 10.9mb/d currently to 11.1 mb/d by 2020”.

Writing earlier this month, Dhar suggested that given the unanswered questions surrounding the tentative OPEC agreement and the threat posed by the US shale oil industry, an OPEC’s agreement on November 30 “probably has more chance of failing than succeeding”.

In early Asian trade on Monday, front-month WTI futures have fallen by 0.6% to $US50.54 per barrel, mirroring a similar decline in Brent futures, the global benchmark price.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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