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Saudi Arabia Says Oil Curbs Could Extend Beyond End of 2017

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Crude oil
  • Saudi Arabia Says Oil Curbs Could Extend Beyond End of 2017

Saudi Arabia’s oil minister said he’s confident that an agreement by producers to curb crude output and shrink a market glut will be extended into the second half of the year and possibly beyond.

While U.S. shale output growth and the shutdown of refineries for maintenance have slowed the impact of cuts by OPEC and its partners, producers are determined to reach their goal of reducing bloated stockpiles, Khalid Al-Falih said at the Asia Oil and Gas Conference in Kuala Lumpur on Monday. He said he’s confident the global oil market will soon rebalance and return to a “healthy state.”

Surging U.S. production has raised concern the Organization of Petroleum Exporting Countries and partners are failing to reduce an oversupply and prop up prices. Oil has surrendered all its gains since their deal late last year to cut output and with OPEC meeting in Vienna later this month, several nations have said they’d support an extension of the 6-month agreement that began in January. This is the first time the Saudi minister has suggested it could be extended beyond 2017.

“Based on the consultations I have had with participating members I am rather confident the agreement will be extended into the second half of the year and possibly beyond,” Al-Falih said. “The producer coalition is determined to do whatever it takes to achieve our target of bringing stock levels back to the five-year average.”

West Texas Intermediate crude rose 1 percent to $46.66 a barrel by 2:14 p.m. Singapore time on the New York Mercantile Exchange. Brent, the benchmark for more than half the world’s oil, was up 1 percent at $49.60 a barrel on the London-based ICE Futures Europe exchange. Both are still more than 50 percent below their peaks in 2014, when the U.S. shale boom exacerbated a market glut and triggered the biggest price crash in a generation.

“Given the extent of the over-hang I think they always knew the market was not going to rebalance in six months which is why our base case was always for a deal lasting at least one year, and if not longer,” said Virendra Chauhan, an analyst at industry consultant Energy Aspects Ltd. “Market expectations were lofty, and so OPEC will need to surprise the market with either a deeper cut, or possibly a longer than six-month extension to get prices to move higher.”

Failed Mission

Al-Falih said last month that OPEC and its partners have failed, after three months of limiting output, to achieve their target of reducing oil inventories below the five-year historical average. Group member United Arab Emirates said earlier in May that the producer group should extend the collective production cuts into the second half of the year when an expected upturn in demand will help to re-balance the crude market.

Russia, which is not member of OPEC but is part of the deal, also thinks it will be necessary to extend the reduction deal, according to Energy Minister Alexander Novak. The producers agreed last year to curb output by as much as 1.8 million barrels a day starting January. OPEC will meet in Vienna on May 25 to decide whether to prolong the deal beyond June.

While the producers curbed supply, production in the U.S., which is not part of the agreement, has risen to the highest level since August 2015 as drillers pump more from shale fields. But American crude inventories are showing some signs of shrinking, falling for the past four weeks from record levels at the end of March.

Global Demand

OPEC may have to extend its cuts for “some time” if shale pursues its relentless growth, Citigroup Inc. said in a report dated May 7. The central tenet behind the group’s decision to curb supply looks to be based on view that it’s a temporary measure, with global underinvestment in new capacity leading to a supply-gap in coming years, according to the bank. But that fails to see rapid growth in shale is displacing investment decisions that are higher up the cost-curve, the report said.

Despite lingering headwinds, the oil market is improving from early last year when markets were at a low, Al-Falih said. Stockpiles at sea have declined and U.S. inventories will continue their downward trend, he said. Global demand, meanwhile, will probably be stable from the “healthy rate” seen last year, driven by China and India, the Saudi minister said, adding that Asia was the most important market.

There’s about 20 million barrels a day of combined demand growth and natural oil-field output declines that need to be offset, Al-Falih said. “No matter how fast U.S. shale grows, it wont make a dent in that number,” he said.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns

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Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.

Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.

The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.

This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.

While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.

Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.

Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.

Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.

Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.

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Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm

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Dangote Refinery

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.

Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.

The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.

However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.

Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.

He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.

Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.

The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.

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NNPCL Pledges End to Nigeria’s Energy Scarcity Within a Decade

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Mele Kyari - Investors King

The Nigerian National Petroleum Company Limited (NNPCL) has announced a bold initiative aimed at ending Nigeria’s persistent energy scarcity within the next decade.

Mele Kyari, the Group Chief Executive Officer of NNPCL, revealed this ambitious plan during the opening ceremony of the seventh Nigerian International Energy Summit in Abuja.

Kyari’s announcement comes as a beacon of hope for millions of Nigerians grappling with chronic power shortages and energy deficiencies.

In his statement, Kyari expressed confidence that all issues related to energy scarcity in the country would be resolved within the next 10 years.

Assuring stakeholders of NNPCL’s unwavering commitment, Kyari emphasized the company’s dedication to collaborating with partners to bridge the energy deficit gap and foster prosperity for all Nigerians.

He highlighted NNPCL’s pivotal role as a key partner to oil-producing companies in Nigeria, facilitating the divestment of international oil companies from onshore and shallow water assets in the country.

Furthermore, Kyari underscored NNPCL’s statutory mandate as the enabler of national energy security, emphasizing the importance of sustainable production from divested assets to ensure energy security for Nigerians.

In addition to addressing domestic energy challenges, NNPCL is also exploring avenues for sustainable energy investment across Africa.

Kyari revealed the company’s intention to invest in the proposed African Energy Bank, aiming to secure funding for energy projects on the continent and guarantee regional energy security.

The event, attended by prominent stakeholders including government officials and representatives from international organizations, marks a significant step towards reshaping Nigeria’s energy landscape and fostering economic development through improved energy access.

As NNPCL charts its course towards energy abundance, Nigerians remain cautiously optimistic about the prospects of a brighter energy future.

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