Global Oil Market - July 2
Posted: Tue Jul 02, 2019 5:17 pm
OPEC+ extends for 9 months. As expected, OPEC+ agreed to extend the production cuts, this time for nine months, pushing the 1.2 mb/d deal to the end of the first quarter of 2020. At the same time, some restless OPEC members balked at what has largely become a decision-making process between only Saudi Arabia and Russia. The extension was largely assumed by traders, so there was little impact on oil prices.
OPEC+ framework revised for indefinite cooperation. OPEC+ also agreed on a charter that would allow them to continue to cooperate beyond the nine-month deal. OPEC Secretary-General said the cooperation with the select non-OPEC countries could last for “eternity.” Also, Saudi Arabia said it would measure its success against an inventory target, using the 2010-2014 average rather than the trailing five-year average. That is a more ambitious objective, and will ultimately mean they seek to drain global inventories to a lower level.
Saudis see U.S. shale growth slowing down. The extension highlights the perpetual battle that OPEC+ finds itself in against U.S. shale growth. Cuts have only granted more space for shale, but top OPEC officials are confident in the strategy. “I have no doubt in my mind that U.S. shale will peak, plateau and then decline like every other basin in history,” Saudi oil minister Khalid Al-Falih told reporters at OPEC’s Vienna headquarters. “Until it does I think it’s prudent for those of us who have a lot at stake, and also for us who want to protect the global economy and provide visibility going forward, to keep adjusting to it.” My take is that at the current active rig count it will be difficult for U.S. oil production to increase at anything close to what the increase was last year. - Dan.
Saudi Aramco to restart IPO plans. According to Bloomberg, Saudi Aramco is beginning to restart preparations for an IPO, after shelving those ambitions months ago. Aramco had preliminary talks with banks, but work may pick up later this year, Bloomberg said.
OPEC+ framework revised for indefinite cooperation. OPEC+ also agreed on a charter that would allow them to continue to cooperate beyond the nine-month deal. OPEC Secretary-General said the cooperation with the select non-OPEC countries could last for “eternity.” Also, Saudi Arabia said it would measure its success against an inventory target, using the 2010-2014 average rather than the trailing five-year average. That is a more ambitious objective, and will ultimately mean they seek to drain global inventories to a lower level.
Saudis see U.S. shale growth slowing down. The extension highlights the perpetual battle that OPEC+ finds itself in against U.S. shale growth. Cuts have only granted more space for shale, but top OPEC officials are confident in the strategy. “I have no doubt in my mind that U.S. shale will peak, plateau and then decline like every other basin in history,” Saudi oil minister Khalid Al-Falih told reporters at OPEC’s Vienna headquarters. “Until it does I think it’s prudent for those of us who have a lot at stake, and also for us who want to protect the global economy and provide visibility going forward, to keep adjusting to it.” My take is that at the current active rig count it will be difficult for U.S. oil production to increase at anything close to what the increase was last year. - Dan.
Saudi Aramco to restart IPO plans. According to Bloomberg, Saudi Aramco is beginning to restart preparations for an IPO, after shelving those ambitions months ago. Aramco had preliminary talks with banks, but work may pick up later this year, Bloomberg said.