Nigeria’s Minister of State for petroleum resources and President of the OPEC conference Emmanuel Ibe Kachikwu (left), and OPEC’s secretary general Abdalla Salem El-Badri of Libya attend a news conference after a meeting of the Organisation of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Friday, December 4, 2015.
OPEC nations decided on Friday to keep producing oil at their current high levels, effectively acknowledging their inability to push up crude prices.
An attempt to nudge the cost of oil higher would have involved lowering output. Instead, the organisation’s endorsement of present output, which is more than 1.5 million barrels a day above the formal ceiling of 30 million barrels, is likely to push the price of oil down further.
The ministers of the Organis-ation of the Petroleum Exporting Countries appeared to have little choice. Major producing nations in the cartel were opposed to reducing output. Instead, OPEC is poised to produce more oil.
Iran, which once pumped around four million barrels a day and is now down to about half that, is preparing to come back fully on line once it sheds nuclear-related sanctions in a few months.
Senior oil official Amir Hossein Zamaninia said last week Iran hopes to bring an extra 500,000 barrels on the market by early next year. He said he hopes the extra output will be accommodated within OPEC’s formal ceiling of 30 million barrels a day.
Arriving for Friday’s meeting, Iranian oil minister Bijan Namdar Zanganeh said Iran is ready to discuss a ceiling for its production but only after his country makes a “full return to the market.”
Iraq is also resurgent. The country has seen the fastest rise in crude production in the world this year. It was pumping more than 4 million barrels a day last month and was responsible for last month’s biggest monthly rise in output among all OPEC countries.
And the ministers agreed to readmit past member Indonesia, to expand their ranks to 13. While that country’s production goes mostly for domestic consumption, that move could also add some to the total amount of OPEC barrels on sale.
A final statement on the meeting was unusual in not mentioning any decision on production ceilings. But conference president Emmanuel Ibe Kachikwu told reporters that there was agreement to maintain “current actual production”, which is well above the formal ceiling set at 30 million barrels a day.
Friday’s news pushed oil prices down, with the US benchmark rate sliding 2.7 per cent on the day to US$39.99.
The decision effectively leaves it up to individual members how much crude to pump and was a strong signal of OPEC’s eroding ability to act as a group in efforts to influence supply, demand and prices.
Kachikwu acknowledged as much, telling reporters asking about Iran’s return: “At the end of the day every country has a sovereign right to bring to the marketplace its resources.”
“The logic is simple,” he said, of OPEC’s present clout in a market where non-members such as Russia and U.S. shale producers play an increasingly large role. “We are only 35 per cent of the producers and there are still 65 per cent out there.”
Some OPEC members are producing at their limit and like at previous meetings, the pressure was on swing-producer Saudi Arabia, which accounts for about a third of OPEC’s output, to cut back. But the desert kingdom remained opposed.
The Saudis already resisted cutbacks a year ago, a strategy calculated to put higher-cost outside competitors like United States shale oil producers out of business. The hope was that would eventually lead to a drop in supply and a rebound in prices.
That plan clearly hasn’t worked, with benchmark US crude’s value falling by more than 40 per cent over the past year and now hovering around the US$40 mark per barrel.
Cushioned by past profits on oil, the Saudis can hold out, even if production costs exceed sale revenues. Not so much some others.
Kachikwu, the conference president who also represented Nigeria at the meeting, acknowledged that continued low prices will hurt his country.
“There will be pain,” he said.
1. Oil and the Global Economy
Oil prices rebounded last Friday on better-than-expected Chinese factory data after six days of decline. At the close NY oil futures were up $2.75 a barrel to close at $105.97 and London crude was up $1.45 to close at $108.22. The IEA reported last week that global refining increased by 3.1 million b/d in June as new refining capacity came online and maintenance shutdowns at several big refineries concluded. Although Beijing reported a 9.7 percent increase in factory production during July over last year, there has been growing skepticism of late about the accuracy of China
The price of oil finished with a small loss Monday as traders waited for potentially market-moving news at midweek.
US benchmark crude for August delivery slipped eight cents to US$103.14 a barrel on the New York Mercantile Exchange.
Brent crude dropped 29 cents to US$107.43 on the ICE Futures exchange in London.
Oil was pushed higher last week by worries that turmoil in Egypt could disrupt shipments through the Suez Canal and a report showing robust job growth in the United States in June.
Later this week, the US Energy Department releases its weekly report on supplies of crude oil and petroleum products, the US Federal Reserve releases minutes of its recent policy meeting and OPEC issues its monthly update on the oil market.
A large decline in US supplies, or signs that OPEC decreased output last month could boost prices, analysts say.
Additional insight into the Fed’s thinking on monetary policy should also influence trading.
In other energy futures trading on the Nymex Monday, wholesale gasoline dropped one cent to US$2.88 per gallon; natural gas rose 12 cents to $3.74 per 1,000 cubic feet, and heating oil fell one cent to US$2.98 per gallon.
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The price of oil fell to near US$95 a barrel on Monday, as the dollar continued to strengthen against the yen and other major currencies.
Benchmark oil for June delivery fell 87 cents to finish at US$95.17 a barrel on the New York Mercantile Exchange.
The stronger dollar is pushing down oil prices, analysts said. The dollar has risen in recent days against the euro and last week passed the 100-yen mark for the first time in four years.
Since oil is traded in dollars, a stronger dollar makes crude and other commodities less appealing to investors with other currencies.
“This, like the stock market, ends up pulling a lot of money out of commodities and into more reliable risk,” said Carl Larry, president of Oil Outlooks and Opinions, a research analysis firm.
An increase in OPEC’s output, which grew by 280,000 barrels to 30.46 million barrels a day in April compared with March, also helped drag down prices by boosting concerns about excess supply.
And weak refining data from China further undercut crude. Government statistics showed China’s refining output in April was the lowest since last August.
drift higher
Brent crude, which is a benchmark for many international oil varieties, was down US$1.09 to end at US$102.82 a barrel on the ICE Futures exchange in London.
United States drivers saw gasolene prices drift higher over the weekend, up two cents since Friday to a national average of US$3.58 a gallon.
In other energy futures trading on Nymex, wholesale gasolene fell four cents to finish at US$2.82 a gallon, heating oil lost two cents to end at US$2.89 a gallon and natural gas rose two cents to finish at US$3.93 per 1,000 cubic feet.
– AP
Read more:
The price of oil fell to near US$95 a barrel on Monday, as the dollar continued to strengthen against the yen and other major currencies.
Benchmark oil for June delivery fell 87 cents to finish at US$95.17 a barrel on the New York Mercantile Exchange.
The stronger dollar is pushing down oil prices, analysts said. The dollar has risen in recent days against the euro and last week passed the 100-yen mark for the first time in four years.
Since oil is traded in dollars, a stronger dollar makes crude and other commodities less appealing to investors with other currencies.
“This, like the stock market, ends up pulling a lot of money out of commodities and into more reliable risk,” said Carl Larry, president of Oil Outlooks and Opinions, a research analysis firm.
An increase in OPEC’s output, which grew by 280,000 barrels to 30.46 million barrels a day in April compared with March, also helped drag down prices by boosting concerns about excess supply.
And weak refining data from China further undercut crude. Government statistics showed China’s refining output in April was the lowest since last August.
drift higher
Brent crude, which is a benchmark for many international oil varieties, was down US$1.09 to end at US$102.82 a barrel on the ICE Futures exchange in London.
United States drivers saw gasolene prices drift higher over the weekend, up two cents since Friday to a national average of US$3.58 a gallon.
In other energy futures trading on Nymex, wholesale gasolene fell four cents to finish at US$2.82 a gallon, heating oil lost two cents to end at US$2.89 a gallon and natural gas rose two cents to finish at US$3.93 per 1,000 cubic feet.
– AP
Read more:
The Petrojam oil refinery in Kingston. Venezuela supplies oil to Jamaica under the PetroCaribe agreement. – File
Venezuela’s oil production is poised to reverse a dramatic decline that has seen exports fall by nearly half during
Venezuela’s oil production is poised to reverse a dramatic decline that has seen exports fall by nearly half during
Hopes that the United States Federal Reserve will do more to support the US economy drove oil to its biggest gain in two months on Thursday. Meanwhile, natural gas rose the most since January 2010 on signs of increased use of the fuel by utilities. Speculation that the Fed will announce new steps to boost the economy grew after government reports showed that hiring is still weak while inflation remains in check. Any boost to the economy should increase demand for oil, gasolene and diesel fuel. Benchmark crude rose US$1.29 to finish at US$83.91 per barrel Thursday in New York, the largest increase since April 11. Brent crude, which is used to price international varieties, gained 45 cents to US$97.17 per barrel in London. In Vienna, ministers of the Organisation of the Petroleum Exporting Countries (OPEC) decided to keep a production target of 30 million barrels a day. The decision had been expected. Although some members of OPEC want to reverse a recent sharp decline in oil, others worry that higher oil prices could hurt global economic growth. Oil has fallen 24 per cent from its peak in late February. Natural gas futures soared 31 cents to finish at US$2.495 per 1,000 cubic feet, the sharpest gain since January 6, 2010. The Energy Department reported that natural gas in storage grew by 67 billion cubic feet to 2.944 trillion cubic feet for the week ended June 8. That increase was four billion cubic feet less than analysts expected. Rusty Braziel, president of RBN Energy, a consulting company based in Houston, says the report relieved fears that the nation’s natural gas storage facilities would reach capacity and prices would plummet further. He sees signs that natural gas drillers have curtailed the dramatic growth in production that sent prices near a 10-year low earlier this year. At the same time, utilities are burning more natural gas in place of coal, helping to relieve the gas glut a bit. Total inventories are still 29 percent above the five-year average of 2.278 trillion cubic feet. Heating oil rose 1.69 cents to end at US$2.6278 per gallon and gasolene futures gained 2.1 cents to US$2.6764 per gallon. http://jamaica-gleaner.com/gleaner/20120615/business/business93.html Jamaicans should see more lower prices at the pumps in coming weeks as the cost of
The Petrojam oil refinery in Kingston. Venezuela supplies oil to Jamaica under the PetroCaribe agreement. – File
