Saturday,
December 15, 2018 07:37 AM / Oilprice Intelligence Report
After a long period of declining prices and
volatility in oil markets, the IEA claims that the OPEC+ meeting has
put a floor under both WTI and Brent.
Friday, December 14, 2018
IEA: OPEC+ puts floor beneath oil. The OPEC+ deal put “a floor” beneath
oil prices, according to the IEA’s latest Oil Market Report. The agency said
that non-OPEC supply could still outgrow demand next year, expanding by 1.5
mb/d while demand may only soak up 1.4 mb/d of that additional supply. As such,
OPEC+ might be forced to maintain the cuts through the end of the year.
However, there are plenty of uncertainties, including the extent of losses from
Iran and Venezuela, while additional outages could come from Libya or
elsewhere. For now, the IEA says the production cut deal will keep prices from
falling further, but it is still too early to tell if the agreement will
significantly boost prices.
EIA: U.S. to average 12.1 mb/d in 2019. The
EIA said in its latest Short-Term Energy
Outlook that the U.S. should average 12.1 mb/d in 2019, up sharply from a 10.9
mb/d average this year. Notably, the production estimate is mostly unchanged
from previous months, even though oil prices have crashed. The EIA even lowered
its expected price for Brent and WTI in 2019 by roughly $10 per barrel, but the
agency clearly thinks that the production gains are mostly baked in
already.
Signs of demand slowdown in Asia. Refining
figures in Asia suggest demand could be slowing down in the region, Bloomberg reports. Asian refining margins are at an eight-month low, which could be a
leading indicator of slowing consumption.
OECD stocks above average. OECD stocks rose
above the five-year average in October (the latest month for which data is
available) for the first time since March.
Neutral Zone could reopen. Saudi Arabia and
Kuwait are nearing a deal to restart idled oil fields in disputed territory along their
shared border. The so-called Neutral Zone oil fields have the capacity to produce
500,000 bpd, but have been offline for several years. The U.S. government has
leaned on both countries to resolve their differences, with an eye on shrinking
supply from Iran. Chevron (NYSE: CVX), which
jointly operates one of the fields in Kuwait, said it maintains “readiness for
a production restart when that time comes,” according to the Wall Street
Journal.
Premier Oil Plc could bid for North Sea assets. Premier
Oil plc (LON: PMO) is considering a $2 billion bid for a group of North Sea oil and gas assets
from Chevron (NYSE: CVX).
Nigeria files $1.1 billion claim against Shell. Nigeria
has filed a $1.1 billion legal claim against Royal Dutch
Shell (NYSE: RDS.A) and Eni (NYSE:
E) over a highly controversial 2011 oil license, the same
license that has also ensnared Eni’s top brass in corruption inquiries in
Italy. Nigeria filed a claim in a London court, alleging that the two oil
companies, among others, “participated in a fraudulent and corrupt scheme,”
according to the FT.
Barclays: Brent at $72 in 2019. Barclays
expects Brent to rise to $71 per barrel as early as the first quarter of 2019,
which is much more optimistic than a raft of other forecasts that have come out
lately. For the full year, Barclays sees Brent averaging $72 and WTI averaging
$65. “Brent and WTI prices are poised to rebound in 1H19,” Barclays said in a
note. “The inventory situation is far better than the last time cuts started in
early 2017, and the cuts have already begun, as shown in December data.”
China stocked up on oil when prices fell. In
at least two key regions in China, oil imports jumped by 26 percent in November
compared to the average level from the prior ten months, according to Bloomberg. The rise in imports suggests China was stocking up on crude, taking advantage
of low prices.
Famed hedge fund manager says U.S. shale makes oil harder to
predict. Andy Hall, a well-known hedge fund manager
nicknamed “God” for the huge sums he has made on oil trading, said that U.S.
shale has made the oil market much harder to predict. The short-cycle nature of
shale, which stops and starts much quicker in response to price swings than
conventional production, makes it harder to get ahead of the booms and busts.
“It used to be, on the supply side of the equation, you could predict with some
confidence what future supply was going to be, outside of global political
events,” Hall told Bloomberg. Now, “everyone is groping. There are a lot of variables that we don’t
have a good handle on.”
U.S.
Senate votes to end war in Yemen. The U.S. Senate passed a bill to end American support for the war in Yemen, against the
advice of Secretary of Defense Jim Mattis and President Trump. The Senate also
censured Saudi crown prince Mohammed bin Salman and blamed him for the murder
of slain journalist Jamal Khashoggi. The bill will have no practical effect
since the U.S. House of Representatives declined to move companion legislation
earlier this week. But the issue is not over and with Democrats taking over
control of the House in the New Year, the legislation could be revived.
Saudi Arabia aims to cut oil shipments to United States. In
an effort to drain the surplus of oil stocks, Saudi Arabia plans on curtailing
shipments specifically to the U.S., according to Bloomberg, a strategy intended to shift market psychology. Because the U.S. is
one of the few countries that offers regular and transparent data on oil
inventories, cutting down on stocks in the U.S. will transform how investors
view the global market. Visible declines in inventories, which the EIA will
report week after week, should bolster market confidence. It’s a strategy the
Saudis used back in 2017 when it tried to boost prices.
Previous Oilprice
Intelligence Reports
1.
Uncertainty
Lingers In Oil Markets Despite OPEC Cuts – OIR 121218
2.
OPEC
Surprises Markets With Last Minute Deal - OIR 081218
3.
Oil Makes Gains
Ahead Of OPEC Summit - OIR 041218
4.
Can Saudi Arabia
Counter The Oil Price Crash? - OIR 281118
5.
OPEC Drowning
Under Oil Supply Glut - OIR 231118
6.
Oil Companies
Lose $1 Trillion As Prices Crash - OIR 201118
7.
Oil Rebounds On
Hopes Of OPEC and Action – OIR 171118
Related News
1.
Oil Prices Slide
as OPEC is Seen Cutting Output Less Than Expected
2.
The Saudi
Dilemma: To Cut or Not To Cut
3.
Africa Oil and
Gas State of Play
4.
Are Oil Prices Heading
For The Rocks?
5.
4.37bn Litres of
PMS Imported into Nigeria in Q3 2018 - NBS
6.
Average Prices
of PMS, AGO, HHK and Cooking Gas – October 2018
7.
Can We Expect A
Major Rebound In Oil Prices?
8.
Is Oil Price At
Its Point of Inflection?
9.
NNPC, NCDMB,
Oando, Seplat And Many More Push The Nigerian Agenda At The 25th Africa Oil
Week
10. Outlook for
Africa’s Oil and Gas Industry Improves – PwC Report