Saudi Arabia and OPEC are doomed.

[Swordsmyth]

U.S. Congress should debate whether to reduce the emergency crude oil stored in the Strategic Petroleum Reserve (SPR), because America’s oil production boom has diminished its reliance on imports, U.S. Secretary of Energy Rick Perry said at a Senate hearing on Tuesday.
“Do we need that big of a reserve, particularly with the growth of the pipeline infrastructure we have and the growth in that infrastructure that’s going to occur over the next decade?” Reuters quoted Secretary Perry as saying at a hearing before the U.S. Senate Committee on Energy and Natural Resources.


As of March 29, 2019, the SPR held a total of 649.1 million barrels of crude oil, including 254.6 million barrels of sweet crude and 394.5 million barrels of sour crude oil.
The current storage capacity of the SPR is 713.5 million barrels.
The SPR was set up in the 1970s when the Arab oil embargo created a fuel crisis in the United States.
According to Secretary Perry, the world has changed a lot since the emergency reserve was created, with the U.S. now the world’s top oil producer. Therefore, Congress should consider what the proper size of the reserve should be and whether the administration should rent part of the storage capacity to private companies, Secretary Perry said.
In February, the U.S. Department of Energy said that it planned to sell up to 6 million barrels of crude oil from the SPR, with deliveries taking place in April and May.

More at: https://oilprice.com/Latest-Energy-N...m-Reserve.html

[Swordsmyth]

Over-delivering Saudi Arabia and blackouts in Venezuela helped push OPEC’s crude oil production down by 570,000 bpd from February to 30.23 million bpd in March—the lowest production from the cartel in more than four years, according to the monthly S&P Global Platts survey published on Friday.
OPEC’s de facto leader and biggest producer, Saudi Arabia, saw its production drop in March to the lowest level since February 2017. The Saudis delivered on their promise to cut more than pledged in the pact and slashed output by another 280,000 bpd last month, with March production at 9.87 million bpd, according to the S&P Global Platts survey.
Venezuela, for its part, saw its production drop to a 16-year-low, at 740,000 bpd, due to the massive blackouts that crippled oil production and exports in March, the Platts survey found.
OPEC’s second-biggest producer Iraq cut its production by 100,000 bpd from February to 4.57 million bpd in March, according to the survey. This, however, was still slightly above Iraq’s 4.512 million bpd production cap under the deal.
After an initial plunge following the U.S. sanctions on its industry, Iran’s production has been holding relatively steady over the past couple of months, and the Islamic Republic pumped 2.69 million bpd in March, the Platts survey showed.

The resumption of operations at Libya’s biggest oil field, Sharara, pushed Libya’s production up to 1.06 million bpd in March, according to the survey.

More at: https://oilprice.com/Energy/Crude-Oi...-Year-Low.html

[Swordsmyth]

The the number of active oil and gas rigs rose by 19 after two weeks of big losses in the United States this week according to Baker Hughes, in a sign that US production is still set for increases.
The total number of active oil and gas drilling rigs rose by 20 rigs* according to the report with the number of active oil rigs gaining 15 to reach 831 and the number of gas rigs gaining 4 to reach 194.
The oil and gas rig count is now just 22 up from this time last year, with oil seeing just a 23-rig increase year on year, gas rigs holding flat, and miscellaneous rigs seeing a 1-rig decrease for the year.

Despite the drop off in the number of active rigs, US crude oil production for week ending March 29 was 12.2 million barrels—another new all-time high.

More at: https://oilprice.com/Energy/Energy-G...il-Prices.html

[Swordsmyth]

Saudi Aramco, the national oil company of Saudi Arabia, is by far the largest oil company in the world. The company produces around 13 percent of the world’s oil, but its business operations have been notoriously opaque for decades. It has often been stated that the company has plenty of low-cost legacy wells that drop its overall production costs to $10 per barrel, or even lower.
Because there was no way to audit this information, the world was left to guess at the actual breakeven costs for the world’s largest oil company. This week Saudi Aramco lifted the veil on its financial condition in a bond offering for the company. (PDF link here).
There are many important financial details in the filing. The company is indeed the world’s most profitable, earning $111 billion on $356 billion in revenue in 2018. This is nearly double the $59.4 billion made by Apple, the world’s second-most profitable company, in 2018. It’s also over five times the $20.8 billion made by ExxonMobil last year.
Bloomberg points out that Aramco’s “funds flow from operations” was $26 per barrel last year, which they note was worse than Shell or Total which reported $38 and $31, respectively.
However, I found the most significant item in the prospectus to be that Saudi Aramco struggled to break even in 2016 when Brent crude averaged about $45 per barrel. Net income in 2016 was only $13 billion, and free cash flow a mere $2 billion. Contrast that with the $111 billion in income and $86 billion in free cash flow the company made in 2018 (when Brent crude averaged $71.34/bbl), and it looks like Aramco’s breakeven price is just about $40/bbl.

No wonder OPEC threw in the towel in 2016 and decided to abandon its price war with U.S. shale. OPEC’s largest member saw its income dry up and was on the verge of posting a loss if oil prices didn’t turn around.

More at: https://oilprice.com/Energy/Energy-G...ven-Price.html



And it has to be MUCH higher to support the Saudi regime's hold on power.

[Swordsmyth]

A senior Russian official has suggested Russia will press for an end of the OPEC+ production cuts after the end of June when the original agreement expires, Reuters reports.
Kiril Dmitriev, head of the country’s direct investment fund, has been a staunch supporter of the OPEC+ cooperation since the beginning, which makes his latest remarks all the more significant.
“It is quite possible that given the improving market situation and falling stocks, (OPEC and its allies) could decide in June this year to abandon supply cuts and subsequently increase output,” Reuters quoted Dmitriev as saying.
“This decision will not mean the end of the deal but a confirmation that participants continue their coordinating efforts when it is important not only to cut but to increase output depending on market conditions,” the official added in keeping with his original stance on the partnership between the cartel and Russia.
Meanwhile, Saudi Arabia’s Energy Minister also had comments to make about the agreement: Khalid al-Falih told media it was too early to say whether the agreement would be extended beyond the end of June, adding that next month would be crucial for where OPEC+ would go in the second half of the year.
“JMMC will be a key decision point because we will certainly by then know where the consensus view is and, more importantly, before we ask for consensus, we will know where the fundamentals are pointing,” he said.

More at: https://oilprice.com/Latest-Energy-N...fter-June.html

[Swordsmyth]

OPEC’s crude oil production dropped by more than 500,000 bpd month on month in March, to the lowest since February 2015, as Saudi Arabia followed through its commitment to cut deeper than pledged and Venezuela’s crisis, sanctions, and blackouts hit its supply harder than in previous months.
In its closely-watched Monthly Oil Market Report, OPEC said on Wednesday that its secondary sources’ estimates point to total OPEC-14 crude oil production averaging 30.02 million bpd in March, down by 534,000 bpd from February, and the lowest since the February 2015 production of below 30 million bpd.
OPEC’s de facto leader and largest producer Saudi Arabia followed through its commitment from February to cut deeper and pump well below 10 million bpd. Saudi Arabia’s crude oil production dropped by a massive 324,000 bpd from February to stand at 9.794 million bpd in March—just as Saudi Energy Minister Khalid al-Falih had said the Kingdom would do and pump around 9.8 million bpd in March, some 500,000 bpd below the 10.311-million-bpd commitment in the OPEC+ deal.
An OPEC member exempt from these production cuts, Venezuela, contributed inadvertently to the cartel’s mission to reduce global oil supply. Venezuela’s crude oil production plunged by 289,000 bpd to below 1 million bpd—to 732,000 bpd in March, according to OPEC’s secondary sources.


Elsewhere, the cartel’s second-largest producer Iraq also slashed production considerably, by 126,000 bpd to 4.522 million bpd according to OPEC’s secondary sources—nearly falling in line with its OPEC+ quota of 4.512 million bpd.
Production in Iran, under U.S. sanctions and exempted from OPEC’s cuts, dropped by 28,000 bpd to 2.698 million bpd, while the third member exempted from the deal, Libya, saw its production rise by 196,000 bpd to 1.098 million bpd in March after its biggest oil field, Sharara, returned to operations last month.
Projecting global oil demand in this month’s report, OPEC revised down its oil demand growth estimate to around 1.21 million bpd from 1.24 million bpd in last month’s report, saying that “this is due to slower-than-expected economic activity compared with the expectations of a month earlier.”

More at: https://oilprice.com/Energy/Crude-Oi...ns-Market.html

[Swordsmyth]

OPEC and its allies in the production cut deal are committed to rebalancing the market and will not repeat last year’s preemptive production increase to offset expectations of oil supply losses, Suhail Al Mazrouei, the energy minister of the United Arab Emirates (UAE), said on Wednesday.
“I think we have learned the lesson. We will do what is required to balance the market. We are not going to jump the gun, pre-produce the volumes that are not required yet,” the UAE’s The National quoted Al Mazrouei as saying at the Bloomberg Invest Abu Dhabi conference today.

More at: https://oilprice.com/Latest-Energy-N...-Mistakes.html

[goldenequity]

https://twitter.com/Investingcom/sta...12355608629248

[Swordsmyth]

The U.S. crude oil production juggernaut continues to move forward. In 2018, U.S. production increased 17 percent over the previous year in a dynamic that is impacting both geopolitics as well as setting a new course for American global diplomacy.
Annual U.S. crude oil production reached a record level of 10.96 million barrels per day (b/d) in 2018, 1.6 million b/d higher than 2017 levels. In December 2018, monthly U.S. crude oil production reached 11.96 million b/d, the highest monthly level of crude oil production in U.S. history, the EIA said on Tuesday. Moreover, U.S. crude oil production has increased significantly over the past 10 years, driven mainly by production from tight rock formations using horizontal drilling and hydraulic fracturing, hence the U.S. shale oil revolution. The EIA now projects that U.S. crude oil production will continue to grow this year and in 2020, averaging 12.3 million b/d and 13.0 million b/d, respectively.

More at: https://oilprice.com/Energy/Energy-G...Oil-Rally.html

[Swordsmyth]

Iraq is set to build an oil refinery of 150,000 bpd processing capacity in the northern city of Kirkuk, according to Iraqi Oil Minister Thamer Ghadhban.
The ministry said that it had “put the final touches” on building the refinery in Kirkuk, which will have a capacity of 150,000 barrels per day, Ghadhban said in a statement on Monday after visiting Kirkuk, according to Reuters.
Several Iraqi ministers visited Kirkuk this weekend to meet the governor of the province and discuss new projects and plans that have stalled, some of which were in the oil and electricity sectors.
Oil minister Ghadhban stressed the importance of Kirkuk to the Iraqi federal government.
Last November, Iraq resumed oil exports from the Kirkuk province, a year after it had stopped oil flows from the area due to a dispute with the semi-autonomous Kurdistan region.
Around 300,000 bpd of crude oil previously pumped and exported in the Kirkuk province to the Turkish port of Ceyhan were shut in when the Iraqi federal government moved in October 2017 to take control over the oil fields in Kirkuk from Kurdish forces after the semi-autonomous region held a referendum that Baghdad didn’t recognize. However, the only export outlet of the Kirkuk oil is the oil pipeline of the Kurdistan Regional Government (KRG). The Iraqi federal government and the KRG had been in talks for months to try to reach an agreement on resuming Iraqi exports from Kirkuk.
Weeks before the resumption of the Iraqi oil exports from the Kirkuk province, the Kurdistan region said that it had upgraded its oil export pipeline, boosting its capacity to 1 million bpd from 700,000 bpd, to accommodate future production growth from the region.
“This extra capacity will accommodate future production growth from KRG producing fields, and can also be used by the federal government to export the currently stranded oil in Kirkuk and surrounding areas,” KRG’s ministry said in a statement on November 4.

https://oilprice.com/Latest-Energy-N...tan-Crude.html

[Swordsmyth]

The United States nearly doubled its oil exports in 2018, the Energy Information Administration reporting on Monday, from 1.2 million barrels per day in 2017.
The 2.0 million barrels of oil per day exported in 2018 was in line with increased oil production, which averaged 10.9 million barrels per day last year, and was made possible by changes to the Louisiana Offshore Oil Port (LOOP) which allowed it to load VLCCs.

More at: https://oilprice.com/Energy/Energy-G...s-In-2018.html

[Swordsmyth]

Kuwait will start this year the first phase of a heavy oil field production, aiming to boost heavy crude output to 430,000 bpd from 60,000 bpd by January, the official Kuwait News Agency (KUNA) reports.
Heavy crude oil production from the first phase of an oil field in northern Kuwait, known as “Al-Ritqa” is forecast to hit 11,000 bpd in August this year, KUNA quoted Kuwait Oil Company (KOC) as saying.
The Al-Ritqa oil field project is aimed at boosting heavy crude oil production to 430,000 bpd from 60,000 bpd via multiple production phases by January, Fatama Al-Kanderi, who is responsible for project planning at KOC, said at a recent panel discussion organized by the Kuwaiti oil ministry.


More at: https://oilprice.com/Latest-Energy-N...uary-2020.html

[Swordsmyth]

Saudi Arabia continued to slash its oil exports as this year progressed, with February crude shipments dropping by 227,000 bpd from January to just below 7 million bpd, as the Kingdom is determined to rebalance the market in its effort to support oil prices.
According to data released on Thursday by the Joint Organisations Data Initiative (JODI) database, which collects self-reported figures from 114 countries, Saudi Arabia’s crude oil exports stood at 6.977 million bpd in February, compared to 7.254 million bpd in January and to 7.687 million bpd in December 2018, when the Kingdom started to aggressively cut oil supply to prevent another glut.
Total Saudi crude oil and oil products exports dropped by 432,000 bpd from January to 8.44 million bpd in February 2019, according to JODI’s data.


In an interview with the Financial Times in February, Saudi Energy Minister Khalid al-Falih said that the Saudis would cut production tos around 9.8 million bpd in March, some 500,000 bpd below the commitment in the OPEC+ deal. Al-Falih also said that Saudi Arabia would be cutting its crude oil exports to near 6.9 million bpd in March, slashed from the November high of 8.2 million bpd.

More at: https://oilprice.com/Latest-Energy-N...-February.html

[Swordsmyth]

Russia’s crude oil production stood at around 11.24 million bpd in the first 18 days of April, Reuters reported on Friday, citing an industry source. This means that the leader of the non-OPEC group part of the OPEC+ deal has yet to fall in line with the pledged production cuts.
As part of the OPEC+ production cuts between January and June, Russia is taking the lion’s share of the non-OPEC cuts and pledged to reduce production by 230,000 bpd from October’s post-Soviet record level of 11.421 million bpd, to 11.191 million bpd.


Moscow has repeatedly said that due to weather and geological conditions in the cold Russian winter, it cannot cut its oil production too quickly.
In March, Russia continued to gradually reduce oil production, but it missed its production cut target under the deal, according to data from Russia’s Energy Ministry.
As at the end of March, Russia cut its oil production by 225,000 bpd compared to October, excluding output from production sharing agreements (PSAs), while production was reduced by 190,000 bpd from October levels, if PSAs are taken into account, Russian Energy Minister Alexander Novak said in a statement carried by the Energy Ministry.
Russian production in March stood at 11.298 million bpd, according to Energy Ministry data in tons, calculated in million bpd by Reuters using a 7.33 barrels/tons ratio.

In early March, Novak said that Russia would speed up its oil production cuts and plans to reach its share of the OPEC/non-OPEC output reduction by end-March or early April.

More at: https://oilprice.com/Energy/Crude-Oi...tion-Cuts.html

[AZJoe]

World's largest oil field is fading faster than anyone knew

It was a state secret and the source of a kingdom's riches. It was so important that US military planners once debated how to seize it by force. For oil traders, it was a source of endless speculation.

Now the market finally knows: Ghawar in Saudi Arabia, the world's largest conventional oil field, can produce a lot less than almost anyone believed. …

When Saudi Aramco on Monday published its first ever profit figures since its nationalization nearly 40 years ago, it also lifted the veil of secrecy around its mega oil fields. The company's bond prospectus revealed that Ghawar is able to pump a maximum of 3.8 million barrels a day -- well below the more than 5 million that had become conventional wisdom in the market.

"As Saudi's largest field, a surprisingly low production capacity figure from Ghawar is the stand-out of the report," …

The Energy Information Administration, a US government body that provides statistical information and often is used as a benchmark by the oil market, listed Ghawar's production capacity at 5.8 million barrels a day in 2017. Aramco, in a presentation in Washington in 2004 … also said the field was pumping more than 5 million barrels a day …

The prospectus offered no information about why Ghawar can produce today a quarter less than 15 years ago - a significant reduction for any oil field. The report also didn't say whether capacity would continue to decline at a similar rate in the future.

Aramco wasn't immediately able to comment. …

Ghawar is so important for Saudi Arabia because the field has "accounted for more than half of the total cumulative crude oil production in the kingdom," … On top of Ghawar, which was found in 1948 … Saudi Arabia relies heavily on two other mega-fields: Khurais, which was discovered in 1957, and can pump 1.45 million barrels a day, and Safaniyah, found in 1951 and still today the world's largest offshore oil field with capacity of 1.3 million. In total, Aramco operates 101 oilfields.

Aramco produces about 10 per cent of the world's crude. … The 470-page bond prospectus confirms that Saudi Aramco is able to pump a maximum of 12 million barrels a day … While the prospectus confirmed the overall maximum production capacity, the split among fields is different to what the market had assumed. …

Aramco also disclosed reserves at its top-five fields, revealing that some of them have a shorter lifespans than previously thought. …

[Swordsmyth]

Halliburton Company expects total global offshore spending to jump 14 percent this year, one of the world’s largest oilfield service providers said on Monday as it announced its Q1 2019 results.
Halliburton’s estimate for international offshore oil and gas spending this year exceeds the single-digit estimate for total international exploration and production spending (including onshore) of its competitor Schlumberger.
“Our view of the international markets is consistent with recent third-party spending surveys, suggesting that E&P investments will increase by 7 to 8% in 2019, supported by a higher rig count and a rise in the number of customer project FIDs,” Schlumberger said in its Q1 results release last week while also flagging slowing shale oil production growth in North America.
“In line with this, offshore development activity plans continue to strengthen, with subsea tree awards reaching their highest level since 2013 last year. We are also seeing the start of a return to exploration activity on renewed interest in reserves replacement,” Schlumberger said.


According to Rystad Energy, while many shale drillers are cutting spending to focus on cash flows, internationally focused companies are expected to boost investments.
“We anticipate a return of offshore investments as project sanctioning activity has picked up considerably over the past couple years, and numerous projects will soon enter the development stage,” Rystad Energy said.

More at: https://oilprice.com/Latest-Energy-N...p-In-2019.html

[Swordsmyth]

Saudi Arabia plans to stay within the limits of its ceiling under the OPEC+ production cut deal in May and will certainly not rush to ramp up production, although it would respond to customer needs if they want more oil, Saudi Energy Minister Khalid al-Falih said on Wednesday.
As the U.S. announced on Monday that it would be ending sanction waivers for all Iranian oil customers, the Trump Administration said that it “had extensive and productive discussions with Saudi Arabia, the United Arab Emirates, and other major producers to ease this transition and ensure sufficient supply.”


While the U.S. and President Trump appear certain that Saudi Arabia would compensate for Iranian losses, the Kingdom seems reluctant to start swiftly raising production before seeing actual figures for how much Iranian oil will actually be lost and how tight the market will be.
Saudi Arabia’s oil production in May is pretty much set and will differ “very little” from previous months, Reuters quoted al-Falih as saying in Riyadh today.


Speaking today, al-Falih said, as carried by Reuters:


“Inventories are actually continuing to rise despite what is happening in Venezuela and despite the tightening of sanctions on Iran. I don’t see the need to do anything immediately.”
Saudi Arabia intends to remain within its OPEC+ quota in May, the minister said, adding that “We think there will be an uptick in real demand but certainly we are not going to be pre-emptive and increase production.”
OPEC and its partners will likely have “some level of production management beyond June,” according to al-Falih, who reiterated that it was too early to predict details about targets and production.

More at: https://oilprice.com/Energy/Crude-Oi...tion-Soon.html

[Swordsmyth]

Growth forecasts for the overall gross domestic product of Gulf Arab states stands at 2.1 percent for 2019. Gone are the days of breakneck economic development: The region's sustained real GDP growth averaged around 5.8 percent between 2000 and 2011. Instead, most Gulf Arab states will post fiscal deficits this year, and growth in some economies will decelerate. A concerning mixture of increased government spending, low growth rates and year-on-year deficits is brewing in Gulf economies. The interrelated trends suggest that while fiscal adjustments in Gulf Arab states have made some headway, these efforts have not been sufficient to offset lower global oil prices and spur desired levels of growth across the region.
Gulf Arab states have made demonstrable progress in reducing their fiscal break-even oil prices — the crude oil price required for these states to balance their budgets. Since the price of the OPEC Reference Basket of crude oil crashed from a high of $110 per barrel (/bbl) in 2014 to a low of $26.5/bbl in 2016, Gulf governments have announced plans to reduce expenditures and generate new revenue through taxes, fees, and subsidy reductions. These initiatives have yielded modest reductions in fiscal break-even oil prices across Gulf states since 2014, a year in which Saudi Arabia, Oman and Bahrain required oil prices exceeding $100/bbl just to balance their budgets.
Yet public sector budgets remain precariously dependent on hydrocarbon revenue, which complicates the ability to offset low oil prices through fiscal adjustments. The fiscal break-even oil prices for most Gulf Arab states remain above or near the upper threshold of oil price estimates for 2019. In other words, the projected crude oil prices for 2019 suggest that most states will run deficits this year. Morgan Stanley expects Brent crude to remain around $65/bbl while Goldman Sachs believes that prices may reach a fleeting high of $75/bbl. Other estimates suggest oil prices will fluctuate between $50 and $70/bbl over the next few years.



More worryingly, some governments are spending more year-on-year without realizing higher growth rates. Saudi Arabia boosted state spending by 7 percent with a $295 billion budget for 2019, reflecting the kingdom's largest budget and paving the way for the sixth consecutive year of budget shortfalls. Despite increased state spending, overall GDP growth forecasts suggest a deceleration of growth from 2.5 percent in 2018 to 1.8 percent in 2019. Non-oil growth is expected to increase to 3.6 percent, which ostensibly bodes well for economic diversification efforts. However, non-oil revenue constitutes a small portion of Saudi Arabia's total budget revenue — estimates range from 10 to 37 percent.
Oman increased spending by 3 percent in its 2019 budget; however, like Saudi Arabia, the sultanate's growth is also expected to slow from 2 percent in 2018 to 1.5 percent. Although spending did not rise as much as in the previous year, Oman's budget will produce a deficit equating to 9 percent of GDP. Total public debt may reach as high as 58 percent of GDP by 2020, but the government has been slow to implement measures to generate new revenue sources, such as the 5 percent value-added tax currently imposed in Saudi Arabia, the United Arab Emirates and Bahrain.
Bahrain possesses even less fiscal maneuverability than does Oman. Low oil prices since 2014 severely depleted the country's foreign reserves and pushed public debt to nearly 93 percent of annual economic output. Saudi Arabia, the UAE, and Kuwait extended a $10 billion fiscal aid package on the condition that Bahrain would implement a fiscal program to balance its budget by 2022. As part of this program, Bahrain agreed to introduce a value-added tax in 2019, deepen subsidy cuts and enact a voluntary retirement plan for government workers. The country's economy is expected to grow 1.8 percent in 2019, according to the International Monetary Fund, which is a comparable rate of growth to that of 2018.
Kuwait increased spending by 4.7 percent in its 2019 budget and expects a slightly smaller deficit than in 2018. Kuwaiti policymakers aim to drive economic growth by maintaining a relatively high capital expenditure ratio of 17 percent. Wages and subsidies continue to constitute a weighty 71 percent of the country’s budget, down slightly from 73 percent in 2018. This domain of expenditures remains difficult to reform in Kuwait, a country wherein 78 percent of the workforce of Kuwaiti nationals holds public sector jobs and citizens are accustomed to generous benefits from the state. Plans to better manage subsidies and introduce taxes have not materialized, but non-oil growth is expected to reach 3.5 percent by 2020.
GDP growth in the UAE, which has the region's most diversified economy, is expected to rise modestly from 2.6 percent to 2.8 percent in 2019. Bullish estimates by the International Monetary Fund and the UAE's central bank see GDP growth reaching 3.7 percent and 3.5 percent, respectively. This projected growth is directly linked to expansionary fiscal policies set in Abu Dhabi. The UAE's federal budget for 2019 was the highest in the country's history with a 17.3 percent increase over the previous year. Emirate-level budgets offered additional government stimuli. The Dubai government committed to its largest ever spending plan at $15.5 billion, while Sharjah boosted spending by 10 percent in its 2019 budget.





Where modest growth projections exist, though, other economic concerns lurk in the background. Dubai's economy expanded at its slowest rate in nine years over the course of 2018, when GDP growth registered 1.9 percent. Private sector companies in the UAE are cutting jobs at their fastest pace in a decade, and Standard & Poor's estimates that Dubai's real estate prices could decline by 10 to 15 percent in 2019. The Abu Dhabi government slashed fees related to tourism and the emirate's airport free zones to attract more foreign tourists and businesses. Meanwhile, the UAE government has launched a debt relief program for citizens and the Ministry of Human Resources and Emiratization plans to create 30,000 private sector jobs for locals in 2019 as part of a new national employment strategy.
Qatar enjoys a relatively strong fiscal position, owing to its small population and abundant natural gas reserves, but the country encountered a major shock following the Saudi-led boycott of its economy. The government boosted state spending to mitigate the boycott's negative effects and redirected $50 billion from its sovereign wealth fund and other reserves to reinforce its banking sector and exchange rate. Development goals linked to the 2022 World Cup and expanding the country's public facilities also drove additional state spending. For example, Qatar allocated $200 billion toward domestic infrastructure spending as part of its Qatar National Vision 2030.

More at: https://worldview.stratfor.com/artic...gulf-economies

[Swordsmyth]

The central Iraqi government will meet with its Kurdish counterparts soon to talk about oil exports from the now semi-autonomous region that tried to gain independence last year.
Reuters reported, citing Iraq’s oil minister, Thamer Ghadhban, that the two sides will also discuss the increase of oil production from the fields around the northern city of Kirkuk by as much as 50 percent.


In separate but related news, Thamer Ghadhban said the country had enough oil production capacity to boost output to as much as 6 million bpd if need be, although right now he did not see a pressing need for more OPEC production despite the removal of U.S. sanction waivers for Iranian oil importers.
“We have plenty of time to assess the markets’ reaction,” the official said as quoted by Reuters, echoing an earlier statement by his Saudi counterpart, Khalid al-Falih.

More at: https://oilprice.com/Latest-Energy-N...roduction.html

[Swordsmyth]

Australia has joined the growing list of U.S. crude oil importers with two tankers currently en route to Down Under with cargoes of light U.S. crude, Reuters reports, citing sources from the commodity trading industry and shipping data.
“Australia’s aging refineries were designed to run regional crude that is typically light and sweet. U.S. crude is a good substitute for typical Australian refinery feedstock,” a Reuters Refinitiv analyst explained. The bulk of U.S. crude oil output is exactly this sort of crude.
Lower freight rates have also helped more U.S. crude reach foreign markets, and as a result of this combination of favorable factors, total U.S. shipments of crude oil to Asia alone could reach 38.1 million barrels in May, according to Reuters calculations. This equals 1.2 million bpd.

More at: https://oilprice.com/Latest-Energy-N...ght-Crude.html

[Swordsmyth]

India and China are close to reaching an agreement to form a bargaining bloc to seek better oil prices from the Organization of the Petroleum Exporting Countries (OPEC), Livemint reported April 26.

More at: https://worldview.stratfor.com/situa...etter-opec-oil

[Swordsmyth]

In among the multitude of threats that Iran has made public since the US sanctions on Iran were levied, Iran has now heralded the collapse of OPEC, if OPEC members fill the void by snagging market share left unfilled by Iran and Venezuela, according to S&P Global Platts.
Iran’s oil minister said that two OPEC members were doing just that, accusing them of wielding their oil as a weapon. The two members Zanganeh was referring to were Saudi Arabia and the United Arab Emirates.


It’s interesting to note that both Saudi Arabia has unduly taken on the burden of cutting production. Saudi Arabia has agreed to keep its production to 10.311 million barrels per day, while the UAE’s target is 3.072 million bpd.
Saudi Arabia has been overachieving its share of the production cuts, producing 9.794 million bpd in March. Similarly, the UAE is producing closer to target—but is still under at 3.059 for March.
The “oil weapon”, then, to which Iran is referring, according to S&P Global Platts, is their contact with the United States to come up with a plan to ensure that the oil market is well supplied. Thus far, Saudi Arabia has not increased production to fill any void left by either Iran or Venezuela.

“By using oil as a weapon against two founding members of OPEC [Venezuela and Iran], [they] turn OPEC solidarity into division and draw the death and collapse of OPEC,” Zanganeh said, warning that any country using oil to this end should “accept its consequences.”

Venezuela’s oil production fell below 1 million bpd in March at 732,000 bpd, while Iran’s fell to 2.698 million bpd—with more decreases expected as the sanction waivers that eight countries have thus far enjoyed end today. Iran’s 208 average production was 3.553 million bpd, while Venezuela’s averaged 1.354 bpd, according to secondary sources provided by OPEC.
The tough times in which Iran and Venezuela now find themselves may continue to drive a wedge into the oil cartel as other members will naturally respond to market demand as they are able.

More at: https://oilprice.com/Energy/Energy-G...e-Of-OPEC.html

[Swordsmyth]

Crude oil production from OPEC declined to the lowest in four years last month, a Reuters survey has suggested, largely because of the continued fall in Venezuelan output and lower production in Iran resulting from U.S. sanctions.
The only voluntary production cut that contributed to the decline was Saudi Arabia’s overcompliance with the OPEC+ pact from last December and a similar degree of restraint among the Kingdom’s Gulf neighbors and allies.


According to the survey, OPEC members produced 30.23 million bpd in April, down by a modest 90,000 bpd from March but the lowest since the same month in 2015.
The combination of the above three factors earlier this month drove a spike in oil prices, with Brent topping US$75 a barrel after the U.S. announced it would not extend sanction waivers for Iran’s biggest oil clients. However, the effect of the announcement was short-lived and a perception that there is enough oil in the world to fill the gap left by Iranian crude pressured prices quickly enough, with Brent now closer to US$71 a barrel and WTI down below US$64 after touching a high of more than US$65 a barrel.

More at: https://oilprice.com/Energy/Crude-Oi...-Year-Low.html

[Swordsmyth]

Heightened volatility in oil prices as well as political instability will combine to pressure economic growth in the Middle East, the International Monetary Fund warned in the latest edition of its Regional Economic Outlook Update for the region.
Inflation in the Middle East will remain high, at about 10 percent, according to the report, with economic growth declining from some 2 percent last year to 1.5 percent this year. Yet these are the average figures. In reality, the countries in the Middle East face rather different challenges.


Iran is the country that will suffer the most from the trends the IMF talks about because of the U.S. sanctions. According to Jihad Azour, the fund’s department director for the Middle East and Central Asia, the recession already gripping Iran will deepen to 6 percent this year from 4 percent in 2018. Since Tehran has signaled it has no intention to give the U.S. what it wants—a new nuclear deal as Washington has stated—chances are this scenario is the one we will see play out in one of the Middle East’s largest countries.
Yet even sanction-free U.S. allies such as Saudi Arabia and the United Arab Emirates are not going to have it too easy this year, if the IMF’s analysts are right. The Saudi economy will grow more slowly this year, with the growth rate declining from 2.2 percent in 2018 to 1.8 percent.

More at: https://oilprice.com/Energy/Energy-G...-To-Blame.html

[Swordsmyth]

Today in the oil markets:

Opec Basket •

$59.25

-$11.82

-16.63%

[Swordsmyth]

Oil prices have plunged to one-month lows since President Trump tweeted against OPEC's "artificially high prices" thanks to soaring inventories and a surprising (high) Russian production print.

The drop was triggered by rising supply concerns (Russia production and US inventories) and demand worries (green shoots in China and US fading fast).

“U.S. inventories have come in quite high and there was already evidence and anticipation that they will be supplying more oil," said Frances Hudson, a global thematic strategist at Aberdeen Standard Investments in Edinburgh. “I don’t think we’re particularly bullish on prices from here."

Russia missed a target for production cuts in April, dampening the impact of its agreement with OPEC to prop up prices.
US crude stockpiles are at two-year highs...



More at: https://www.zerohedge.com/news/2019-...tion-surprises

[Swordsmyth]

Russia’s oil production will be cut by another 1 million barrels per day over the next week after its oil exports were restricted due to contamination issues, according to Reuters.
The contaminated crude oil was shipped through Transneft’s Druzhba pipeline, causing the pipeline operator to call on Russian oil producers to request reduced volumes—a 10 percent reduction.
The contamination issue—which Transneft says was deliberate—has been quite a headache for Russia, but European refineries are taking most of the brunt, and have caused Poland, the Czech Republic, and Hungary to release 8 million barrels of oil reserves to keep their refineries refining, and comes at a time when the market is already nervous about tightening supplies as crude production falls in Iran and Venezuela.
Russia’s oil production had already fallen in April to 11.23 million barrels per day, although the levels were still above its production quota that it agreed to with OPEC of 11.191 million bpd. Russia has dropped hints over the last month that it may be reluctant to extend the oil quotas past June—although it has yet to reduce production to those levels.


More at: https://oilprice.com/Latest-Energy-N...estricted.html

[Swordsmyth]

Saudi Arabia is still in red territory budget-wise, with the gap for this year seen at 4.2 percent of GDP.

More at: https://oilprice.com/Energy/Crude-Oi...t-Exports.html

[Swordsmyth]

Oil prices tumbled by more than 2 percent on Monday after U.S. President Donald Trump on Sunday said he would sharply hike tariffs on Chinese goods this week, risking derailing months of trade talks between the world's two biggest economies.U.S. West Texas Intermediate (WTI) crude futures were at $60.44 per barrel at 0032 GMT on Monday, down $1.50 per barrel, or 2.4 percent, from their last settlement.
Brent crude oil futures were at $69.34 per barrel, down $1.51 per barrel, or 2.1 percent, from their last close.
Trump on Sunday said on Twitter he would drastically hike U.S. tariffs on Chinese goods this week, pulling down global financial markets, including crude oil futures.
The Wall Street Journal reported that Beijing is considering cancelling all trade talks with Washington.
"Trump has taken the proverbial sledgehammer to the walnut this morning ... by threatening to slap a 25 percent tariff on a mind-boggling $525 billion of Chinese goods by this Friday," said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
Within the oil industry, there are signs of a further rise in output from the United States, where crude production has already surged by more than 2 million barrels per day (bpd) since early 2018, to a record 12.3 million bpd. That has made the United States the world's biggest producer ahead of Russia and Saudi Arabia.
The number of rigs drilling for gas in the United States fell by 3 to 183 in the week to May 3, while oil-directed drilling rigs rose by 2 to 807, data from oil services firm Baker Hughes showed on Friday.


https://finance.yahoo.com/news/oil-p...003702670.html

[Swordsmyth]

Canada’s federal government is likely to announce in mid-June that it would be proceeding with the controversial expansion of the Trans Mountain oil pipeline designed to double the pipeline flow out of Alberta to the west coast in British Columbia, Bloomberg reported on Tuesday, citing officials familiar with the issue.

Justin Trudeau’s federal cabinet will meet to discuss the Trans Mountain expansion on June 18 and is expected to take the decision on that day, officials tell Bloomberg, noting that “it’s possible but unlikely” that the government extends again the decision deadline in order to allow more time for consultations with stakeholders.

More at: https://oilprice.com/Latest-Energy-N...Expansion.html