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OIL PRICES DROPS

OIL PRICES DROPS

As at yesterday,the oil prices slipped over doubts that large oil producers will reduce production as promised and on expectations that United States production would come up again this year. Benchmark Brent crude oil was down 23 cents a barrel at $55.22, while U.S. light crude fell 21 cents to $52.16. The Organization of the Petroleum Exporting Countries has agreed to cut production by 1.2 million barrels per day  to 32.5 million bpd from January 1 in an attempt to clear global oversupply that has depressed prices for more than two years. 

Comments by Saudi Arabia’s Energy Minister Khalid al-Falih, combined with a federal holiday in the United States are adding further downward pressure on prices, according to Olivier Jakob of consultancy Petromatrix. Falih said that OPEC and non-OPEC producers are unlikely to extend their agreement to cut oil output beyond 6 months, especially if global inventories fall to the 5-year average. We don’t really  think it’s necessary given the level of compliance, the rebalancing that started slowly in 2016 will have its full impact by the first half,thats my expectation.

Russia and other key exporters outside OPEC have said they will also cut output. But global oil production remains high and, with inventories near record levels in many areas, investors doubt that OPEC and its allies can trim output enough to push up prices. Oil money “Cuts by OPEC and non-OPEC countries have just started and it will take some time for them to filter through. We do not really expect the oil price to strengthen much more in the first quarter of 2017, said Bjame Schieldrop, Chief Commodities Analyst at SEBMarkets in Oslo, Norway. 

Meanwhile, OPEC Secretary-General Mohammad Barkindo had said in a Bloomberg Television interview last Friday that oil producers will adopt compliance mechanisms at a meeting in Vienna on January 22. Members will also meet in the city in May to assess the market and decide whether the group, as well as non-OPEC producers, need to extend the agreement to curb production, Barkindo said. Russian oil and gas condensate production averaged 11.1 million bpd for January 1-15, two energy industry sources said, down only 100,000 bpd from December.

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Net Oil Importer Indonesia Leaves OPEC Again

Net  Oil Importer  Indonesia Leaves OPEC  Again

Indonesia has suspended its membership of the Organization of Petroleum Exporting Countries (OPEC), after the oil cartel decided to cut total crude-oil production by 1.2 million barrels a day, the withdrawal comes less than a year after rejoining the cartel, as the net oil importer said it could not agree to the group’s production cuts, the decision came as the cartel agreed its first oil output cut since 2008 in a bid to tackle overcapacity and prop up prices.

The suspension could be a setback for Indonesia, OPEC’s only East Asian member, which had hoped to benefit from being closer to OPEC countries when it reactivated its membership at the start of the year. OPEC had proposed Indonesia cut oil production by about 37,000 barrels per day (bpd), or about 5 percent of its output, which would dent the already slipping oil rent in Southeast Asia’s largest economy, Indonesia suspended its membership once before, in 2009 after becoming a net oil importer, although it remains a net importer, Indonesia rejoined the group at the beginning of this year so it could play an active role in the organization’s decision-making, the latest suspension came during OPEC’s 171st ministerial Conference in Vienna.

At the Vienna gathering, members were called on to slash combined output, starting January 1, 2017 by some 1.2 million barrels per day to bring the ceiling to 32.5 million barrels. The cuts would last for six months and be subjected to a possible six-month extension. OPEC said the current market conditions are “counterproductive and damaging” to producers and customers and are not sustainable. The organization said the reduction is needed to address the serious problems of imbalance and volatility coming mainly from the supply side.

We still have a huge state revenue need, "In the draft of our 2017 budgets, we've agreed only to lower our oil production next year by 5,000 barrels from the level in 2016. Indonesian Energy Minister Ignasius Jonan said the country was told to lower its output by 5%, or 37,000 barrels per day, but that it could only afford a reduction of 5,000 barrels, we still have a huge state revenue need, “In the draft of our 2017 budgets, we’ve agreed only to lower our oil production next year by 5,000 barrels from the level in 2016.

Read more at: http://www.businessday.com                                        

 

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LIBYA RECOVERY TAKES OPEC PRODUCTION

LIBYA RECOVERY TAKES OPEC PRODUCTION

The organization of petroleum exporting countries crude output rose by 230,000 barrels per day to a record of 33.83 million barrels per day, mb/d, in october after production recovered in Nigeria and Libya and flows from Iraq hit an all-time high, the international energy agency stated. IEA also viewed the significant tasks ahead for OPEC if the oil cartel is to freeze or cuts its production and boost the price of the commodity. We can see the scale of the investors are said to be desperately awaiting the outcome of OPEC’s meeting, scheduled for November 30, after its members pledged at their last meeting in Algiers to cut oil production by as much as 2 %. This proposed production selling  would be between 32.5 mb/d and 33 mb/d. ADVERTISING inRead invented by Teads proposed output range explained that output from the group’s 14 members had climbed for 5 months running, led by Iraq and Saudi Arabia. In October OPEC supply stood at nearly 1.3 mb/d above what it was a year ago. OPEC members stated, well in excess of the high end of the proposed output range. This means that OPEC must agree to significant cuts in Vienna to turn its Algiers commitment into reality. It further said: “unfortunately for those seeking higher prices, an analysis of the other components provides little comfort, ”IEA said, highlighting that output was increasing in Russia, brazil, Canada and Kazakhstan.

 Total non-OPEC output will rise by 0.5 mb/d next year compared to a fall of 0.9 mb/d in 2016. This means that 2017 could be another  year of relentless global supply development similar to that seen in 2016. If there are no conclusion reached on November 30 then the market is expected to remain in surplus throughout the year and if this persist in 2017, there must be some risk of price falling back, according to the IEA. Price of oil dropped down from near $120 a barrel in june 2014 to below $30 early this year before coming back to around $50 and then fall back to around $46 more recently.

Weak demand a strong dollar and booming united states oil production have been seen as reasons for the dramatic fall, as well as OPEC’s reluctance to cut. The IEA also reaffirmed its view that oil demand peaked at a five-year high of 1.8 mb/d in 2015. It still predicts that demand growth would ease to 1.2 mb/d in 2016 due to sharp slowdowns in the organization for economic corporation and development, Americas and china.

 

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