Oil

[GMDino]

OPEC+ and Putin agree to cut oil production again.

https://www.npr.org/2022/10/05/1126754169/opec-oil-production-cut

Quote:Russia and Saudi Arabia agree to massive cuts to oil output. 



A man walks past OPEC headquarters in Vienna on Tuesday on the eve of the 45th meeting of the Joint Ministerial Monitoring Committee and the 33rd OPEC and non-OPEC Ministerial Meeting. The in-person meeting of OPEC members led by Saudi Arabia and allied members headed by Russia will be the first in the Austrian capital since the spring of 2020.
Joe Klamar/AFP via Getty Images

The OPEC+ alliance announced a 2 million barrels a day cut in oil production Wednesday — an amount that could drive oil and gas prices back up after weeks on a downward trend.

The meeting of the 24 OPEC+ oil-producing countries, including Russia, comes at a time when much of the world is already battling soaring energy costs. A supply cut will also exacerbate tensions between Saudi Arabia and the U.S., where President Biden has been trying to rein in prices at the gas pump ahead of the midterm elections.

The White House called the decision "shortsighted" and said in a statement the administration would "deliver another 10 million barrels from the Strategic Petroleum Reserve to the market next month, continuing the historic releases the President ordered in March."

OPEC+, formed in 2016, includes the 13 Organization of Petroleum Exporting Countries members and 11 other non-OPEC members. In a statement, the group justified today's decision due to "uncertainty that surrounds the global economic and oil market outlook."

It's unclear how much of a price increase the supply cut would cause. The world consumes up to 100 million barrels of oil a day, so taking 2 million off the market would have a noticeable effect.


The move is seen as a bid by Saudi Arabia to prop up prices, which had reached up to $120 a barrel during the spring but began to tail off over concerns about a slowing global economy. They fell to less than $90 a barrel in September.

Observers say one sign of the alliance's renewed focus is that this is its first in-person meeting since the pandemic began.

Yasser Elguindi, the head of macro research at Energy Aspects, says there's a perception that the Saudis are trying to push prices back to or above $100 per barrel by cutting production and tightening the market. He says the magnitude of the proposed cut has caught people by surprise.

"OPEC is trying to shock and awe with a big production cut number that is going to get people's attention," he says. "And they're trying to support prices to keep them from falling further."

Elguindi says reducing production would be a stark reversal of recent policy for OPEC+. The last time the group slashed oil production was in May 2020, when demand plummeted in the early days of the coronavirus pandemic.

Since then, it's been slowly increasing production. Then last month, the group switched gears and cut 100,000 barrels on the market. That's one-tenth of what analysts predict OPEC+ could announce Wednesday.

The move could be seen as a rebuke to President Biden, who traveled to Saudi Arabia during the summer to appeal for production increases. This was despite Biden's comments in the past that he considered the kingdom a pariah state. He also publicly blamed Saudi Crown Prince Mohammed bin Salman for his involvement in the death of Saudi journalist Jamal Khashoggi at the Saudi Consulate in Istanbul in 2018.


President Biden and Saudi Crown Prince Mohammed bin Salman (far right) attend the Gulf Cooperation Council on July 16 in Jeddah, Saudi Arabia.
Evan Vucci/AP

"It seems clear that this is not the outcome that Biden wanted when he went over to Saudi Arabia looking for more oil," says Jacques Rousseau, managing director of ClearView Energy Partners. "And so that could definitely be an issue going forward."
Saudi Arabia has also been concerned about a flood of oil from emergency stockpiles of Western nations. Rousseau says roughly 180 million barrels have been released globally since March, and 75% of that (about 134 million barrels) has come from the U.S. Strategic Petroleum Reserve.

"This has been a very significant reserve release," he says, which has caused global supply to get ahead of demand. "So that's one of the reasons why Saudi Arabia may lead OPEC+ to take some oil off the market, so that supply and demand can get more in balance."

A dramatic cut in oil production could also help Russia, which is co-chair of OPEC+. Its economy is based on energy revenues, now critical to its war effort in Ukraine. Despite sanctions, Russia hasn't experienced a huge decline in production.

That could change by year's end, when the European Union is expected to stiffen sanctions on Russia. Elguindi says it's interesting to note that the Russians — until now — have never asked for production cuts.

"And about a week ago, they effectively came and asked OPEC to cut production by a million barrels a day," he says. "I think that's a recognition that they are going to lose some volume going forward, and whatever they're going to lose in volume, they need to make up for in price."

Rousseau says even if OPEC+ announces a sharp reduction, Russia's production isn't actually going to go down — because the country is already producing well below its quota due to sanctions and the inability to develop investment in new oil infrastructure.

Saudi Arabia, he says, may need to handle the bulk of any potential production cut.

Just fond memories of this:



This is just another reason why the US should have been working on getting off oil's teat for decades now.

Instead our "leaders" just keep saying it will take decades to change anything and putting it off...again and again.

[Stewy]

This is all kinda irrelevant considering OPEC has been 3.5 million barrels per DAY behind it's quota for 6+ months running, with the shortfall growing each month.

[GMDino]

(10-05-2022, 09:40 PM)Stewy Wrote: This is all kinda irrelevant considering OPEC has been 3.5 million barrels per DAY behind it's quota for 6+ months running, with the shortfall growing each month.

The ANNOUNCEMENT is what will cause the issues.  Plus another two million a day op top of whatever shortfalls there are.

[Stewy]

(10-05-2022, 09:59 PM)GMDino Wrote: The ANNOUNCEMENT is what will cause the issues.  Plus another two million a day op top of whatever shortfalls there are.

No.  The announcement won't cause long term issues.  Just short term.  The market is already bullish and really hasn't even reacted to the announcement.  It ha Biden reacting, but there is almost nothing the POTUS can do, except to continue to erode our energy security by continuing to drain the SPR, but even this is like trying to add to the ocean by pee'ing in it.   It's simply math.  If the announcement comes to fruition then that is 100 million barrels off the market by the end of November.....they US releasing ` million barrels per day between now and then only cover 50 million barrels.  This bandaid is finite and the market knows it, which is why the SPR release all along has been politics and not effective policy.

Here's Great Britain's reaction to energy security, directly opposed to us here in the US - https://oilprice.com/Latest-Energy-News/World-News/UK-Launches-Massive-Oil-Gas-Licensing-Round.html  <---This is an effective long term ENERGY SECURITY policy, when combined with investment in renewables, for pushing into the energy transition.

It's what OPEC does, not what they SAY that matters.  How much they produce and sell can be measured with some confidence.  They can talk all they want, but they know and I thought I had shared here, that talking only does so much.  Oil is a commodity but LONG TERM prices are controlled by multitudes of measurable factors, which filters through talking and posturing. 

As such, Russia's part of of this is just posturing, as they have been losing market share for a while due to the war and sanctions.  Any REAL reduction will likely come from Saudi Arabia, and any real reduction will be evident on a month to month basis, to which the market will react.

[GMDino]

(10-07-2022, 10:24 AM)Stewy Wrote: No.  The announcement won't cause long term issues.  Just short term.  The market is already bullish and really hasn't even reacted to the announcement.  It ha Biden reacting, but there is almost nothing the POTUS can do, except to continue to erode our energy security by continuing to drain the SPR, but even this is like trying to add to the ocean by pee'ing in it.   It's simply math.  If the announcement comes to fruition then that is 100 million barrels off the market by the end of November.....they US releasing ` million barrels per day between now and then only cover 50 million barrels.  This bandaid is finite and the market knows it, which is why the SPR release all along has been politics and not effective policy.

Here's Great Britain's reaction to energy security, directly opposed to us here in the US - https://oilprice.com/Latest-Energy-News/World-News/UK-Launches-Massive-Oil-Gas-Licensing-Round.html  <---This is an effective long term ENERGY SECURITY policy, when combined with investment in renewables, for pushing into the energy transition.

It's what OPEC does, not what they SAY that matters.  How much they produce and sell can be measured with some confidence.  They can talk all they want, but they know and I thought I had shared here, that talking only does so much.  Oil is a commodity but LONG TERM prices are controlled by multitudes of measurable factors, which filters through talking and posturing. 

As such, Russia's part of of this is just posturing, as they have been losing market share for a while due to the war and sanctions.  Any REAL reduction will likely come from Saudi Arabia, and any real reduction will be evident on a month to month basis, to which the market will react.

I just said "issues".  Gas prices rising a few weeks before an election is never good for the party in control...even if there is very little they can do about it one way or the other.

The general public simply blames whoever is in charge when it happens with no knowledge of how it works.

And I only have a small understanding of how it works, but too many have no idea.

[Stewy]

(10-07-2022, 01:23 PM)GMDino Wrote: I just said "issues".  Gas prices rising a few weeks before an election is never good for the party in control...even if there is very little they can do about it one way or the other.

The general public simply blames whoever is in charge when it happens with no knowledge of how it works.

And I only have a small understanding of how it works, but too many have no idea.

All true as we are 1 month from mid-terms.  I skeptical that it will change votes though.

[GMDino]

Anecdotal evidence:  But we were all over the county yesterday and today for a some pre-planned events and across the board locally regular gas went from 3.85 to 3.99.  Two exceptions where the stations are across the road from each other and are both sticking to 3.85.