OPEC’s monitoring committee formally recommended an extension of the cartel's production agreement to year-end, although no final decision has been made.
Russia non-committal so far. Russia still needs to come on board with the OPEC extension, and at this point, Russia is likely the most pivotal participant in determining whether or not the cuts are extended for another six months. But Russian officials said they wouldn’t commit until the official meeting at the end of May. The problem for Russia is that the initial agreement corresponded with winter months in Russia, when output typically falls. That made agreeing to the cuts easy. But the six-month extension will overlap with the Russian summer, which usually sees an uptick in production. Moreover, Russian oil companies have a handful of fields that they intend to bring online in the second half of the year. In other words, the extension will be much harder to agree to than the initial agreement.
MY TAKE: OPEC does not need Russia to agree to production cuts to keep their agreement in place. Plus, Russia can ask for a bit of an increase since demand for oil increases by over a million barrels per day from Q2 to Q3 anyway. See demand chart at https://www.iea.org/oilmarketreport/omrpublic/
It is HOT AS HELL IN SAUDI ARABIA in Q3 and they use more oil for power generation in Q3, so less to export anyway.
OPEC and Russia
OPEC and Russia
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: OPEC and Russia
By Jessica Jaganathan at Reuters
SINGAPORE, April 25 Oil prices will likely range between the low $50s and low $60s a barrel in 2017 and are unlikely to hit $70 a barrel due to excess supply, the Asian head of energy and commodities trader Vitol said on Tuesday.
March was a particularly tough trading period as it falls between peak winter and summer demand and many Asian refineries conducted maintenance, said Dato' Kho Hui Meng, president and managing director of Vitol Asia, a unit of Rotterdam-based Vitol , the world's largest independent energy trader.
"The crude market tends to be a bit more in surplus than usual because of a lack of refining capacity," Kho told reporters on the sidelines of a shipping conference.
But he said it was still not clear if the market would pick up once refineries came back on stream.
While demand is growing globally, especially in Europe, China, India and the United States, it is still being outpaced by supply, he said.
The volume of crude oil shipped from the United States to Asia has also spiked, especially to the Shandong area in China from late last year to early this year, Kho said.
Lower production costs in the United States as producers improve efficiency, a 2020 global cap on sulphur emissions that will favour lighter U.S. crudes and cheaper freight rates may mean even more U.S. crude flowing east.
Kho said light distillates, which include naphtha and gasoline, and liquefied petroleum gas will continue to grow in Asia.
"The growth in Asia tends to be more cars, more cooking and petrochemical industries (are) still quite good," he said. Residual fuel demand growth may slow.
SINGAPORE, April 25 Oil prices will likely range between the low $50s and low $60s a barrel in 2017 and are unlikely to hit $70 a barrel due to excess supply, the Asian head of energy and commodities trader Vitol said on Tuesday.
March was a particularly tough trading period as it falls between peak winter and summer demand and many Asian refineries conducted maintenance, said Dato' Kho Hui Meng, president and managing director of Vitol Asia, a unit of Rotterdam-based Vitol , the world's largest independent energy trader.
"The crude market tends to be a bit more in surplus than usual because of a lack of refining capacity," Kho told reporters on the sidelines of a shipping conference.
But he said it was still not clear if the market would pick up once refineries came back on stream.
While demand is growing globally, especially in Europe, China, India and the United States, it is still being outpaced by supply, he said.
The volume of crude oil shipped from the United States to Asia has also spiked, especially to the Shandong area in China from late last year to early this year, Kho said.
Lower production costs in the United States as producers improve efficiency, a 2020 global cap on sulphur emissions that will favour lighter U.S. crudes and cheaper freight rates may mean even more U.S. crude flowing east.
Kho said light distillates, which include naphtha and gasoline, and liquefied petroleum gas will continue to grow in Asia.
"The growth in Asia tends to be more cars, more cooking and petrochemical industries (are) still quite good," he said. Residual fuel demand growth may slow.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group