OPEC will meet later this week in Vienna, one of the two biggest OPEC meetings of the year.
Here were some interesting items I found in advance of these meetings:
OPEC Hopes for Further Oil Price Recovery Despite Glut: ‘Angola’s oil minister said on Tuesday that $80 per barrel may be right for crude, joining a chorus of OPEC officials and delegates hoping for a further price recovery in months to come despite a global glut.’
He’s right, it’s not easy, especially in the face of the global supply picture. But you have several OPEC members hoping for a rise to increase their petrodollar take. From the item:
On Monday, Saudi Arabia’s oil minister Ali al-Naimi said he saw supply thinning and demand improving although he added that it could take time for the markets to rebalance as supply was still seriously exceeding consumption. Naimi gave no oil price outlook. However, several OPEC officials who asked not to be identified told Reuters they saw crude rising to $70-80 a barrel in coming months and 2016.
The world consensus is OPEC will not adjust anything…they will keep producing oil at or near record levels. A cut back in production would send prices higher…which means United States shale production would increase, which would eat into OPEC’s market share which is what caused OPEC’s stance in the first place, last November.
“Saudi Arabia has announced the rules of the game, and Russia has no choice but to play by them,” James Henderson, who researches the Russian oil industry at the Oxford Institute for Energy Studies told Bloomberg. “Russia will keep producing as much as they can.”
Even though OPEC is expected to “stay the course” and not cut production come Friday’s meeting, there’s been a slight change in Saudi rhetoric. Instead, of saying that they’ll “never” cut production, this spring “officials have repeatedly stated that the entire cartel and non-OPEC players like Russia would need to join and bear the burden of a cut as in 1986 and 1998,” according to RBC Capital Markets’ Helima Croft.
Yes, that is softer rhetoric from OPEC, but Russia has not been playing along, actually increasing their own oil output during the oil price crash.
My outlook for crude is still bearish, which means my outlook for propane prices remains mostly bearish, especially as propane fundamentals are certainly as bearish as they have been in at least seven or eight years.
The ‘Geopolitical Strife’ value has been stripped out of oil entirely. Middle East skirmishes that used to send the market upwards as recently as two years ago are now not really affecting the market much at all and if so, just for a few days.
ISIS remains worth watching, for a number of reasons, but certainly for economic impact. I came across this item over the weekend and while I won’t sit here and say ‘the sky is falling’, I do think it’s worth a few minutes of your time to read it. Its title is ‘OPEC Under Siege as ISIS Threatens World Oil Pipeline’.
Here is one quote:
The problem for the US and the rest of the industrialised world is that the Middle East controls 60pc of proven oil reserves and with it the keys to the global economy. Should Isil capture a major oil field in Iraq, or overwhelming the government, the consequences for energy markets and the financial system would be potentially catastrophic.
We’ll see what the inventory reports show tomorrow related to crude and propane. I would expect another 2 million barrel draw in crude oil and another 2 million barrel build in propane, mostly in the Gulf…and the beat goes on. If OPEC announces no production changes at their meeting ,we could see the market soften, most likely on Monday morning.
My advice would be to submit a buy order in advance of that so if things do dip over the course of the next week or so, I can take your order out quickly and get that portion of your supply secured.
Just email me the price you would like to lock in at the terminal, the time frame and the volume amount and I will act on it for you if the markets get there.