CL=F - Crude Oil May 20
| Pre. Settlement | N/A |
| Settlement date | 2020-04-21 |
| Open | 26.34 |
| Bid | 26.45 |
| Last price | 26.08 |
| Day's range | 26.29 - 26.55 |
| Volume | 1,319 |
| Ask | 26.46 |
- Oilprice.com
Political Battle Could Jeopardize World’s Most Spectacular Oil Boom
Guyana’s political impasse is a major potential threat to the nation’s oil boom and its development and continues to hold the nation in a deadlock
- Bloomberg
Global Oil Powers Grope Their Way Toward Historic Output Deal
(Bloomberg) -- The world’s largest oil producers are groping their way toward a deal to mitigate the devastating impact of the coronavirus crisis on their industry. The challenge now is to nail down numbers everyone can live with.Ministers and diplomats will spend the next two days talking about who’s willing to cut production, and by how much. The most important contributions will come from oil’s trio of big powers: Saudi Arabia, Russia and the U.S.An effective deal will require all three to participate, but not every barrel cut will be the same. Russia and Saudi Arabia are set to curb their production significantly, said people familiar with the negotiations. The U.S. is more likely to offer up the kind of gradual output reductions that will come as American companies respond to a market where prices are low and tanks are full.After a turbulent few days in which U.S. President Donald Trump’s prediction of a historic output cut was followed by sniping between Moscow and Riyadh, there were signs that diplomats were making progress. U.S. Energy Secretary Dan Brouillette held a “productive discussion” over the phone on Monday with his Saudi counterpart Prince Abdulaziz bin Salman, the U.S. government said.Trump ResistsThe talks still face significant obstacles: a meeting of producers from OPEC+ and beyond -- which has been delayed once already -- is only tentatively scheduled for Thursday. Russia and Saudi Arabia want the U.S. to join in, but Trump has so far shown little willingness to do a deal with the cartel. The Organization of Petroleum Exporting Countries and its allies will meet by video conference at 4 p.m. Vienna time on April 9, delegates to the group said. That will probably be followed the next day by talks between energy ministers from the Group of 20 on wider contributions to a production deal. The G-20 may be a more acceptable forum to bring on board the U.S. and other big oil producers outside the OPEC+ alliance -- such as Canada and Brazil. Brouillette said he agreed with Prince Abdulaziz that there should be talks within that group “in the near future.”Crude prices have fallen 50% this year, as the economic effects of the coronavirus pandemic have knocked out about a third of global demand. The price crash is so dramatic that it’s threatening the stability of oil-dependent nations, the existence of U.S. shale producers, and poses an extra challenge to central banks. Industry officials say that if a deal to cut supply in an orderly way isn’t reached, the market will simply force producers to slash output as storage space runs out.The aim of talks, first revealed by Trump last week, is to cut oil production by about 10% -- the biggest ever coordinated reduction. Crude rallied on Trump’s comments but pared those gains as the diplomatic intricacies became clearer. Brent futures fell 3.5% on Monday, trading near $33 a barrel.However, even if a deal is struck for as much as 10 million barrels per day, that will barely dent the supply glut, which is estimated at as much as 35 million barrels a day. In some corners of the physical market prices have already turned negative, and traders have been putting oil into tankers at a record pace to store it at sea.Jump TogetherSaudi Arabia and Russia both say they want the U.S., which has become the world’s largest producer thanks to its shale revolution, to join the cuts. But Trump had only hostile words for OPEC on Saturday, threatening tariffs on foreign oil, though at a briefing late Sunday he said he didn’t expect he’d have to use them. It’s not clear if Russia and Saudi Arabia will require the U.S. to publicly commit to cut production -- a challenge in the private, fragmented American industry -- or if a compromise gesture would be enough. Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank, said Moscow would like the U.S. to lift some sanctions as a compromise.Even a passive role for the American shale industry, whose output is already expected to go into decline at current prices, may be enough for a deal, according to Ed Morse, head of global commodities at Citigroup Inc.“I think there is already an understanding between Saudi Arabia, Russia and the U.S.,” Morse said. “The U.S. is a party to the agreement, in effect, because the price of oil is already reducing drilling activity to an extent that production will likely be down 1 million barrels a day by the end of the third quarter.”Russia and Saudi Arabia -- which sparred publicly between themselves over the weekend -- have disagreed about how they would calculate the cuts, according to a person familiar with the talks.Russia favors using an average of the first quarter output as the baseline, while Saudi Arabia wants to use its current April production. The difference is huge: the kingdom pumped 9.8 million barrels a day on average between January and March. In April -- as it wages its battle for market share -- it’s producing more than 12 million.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Oilprice.com
Russia’s Oil Output Falls As Global Producers Mull Unprecedented Cut
Russia’s oil production dropped slightly in the first days of April, just as it is set to join talks with other majors oil producers about a ‘massive’ production cut
- Reuters
Exclusive: Qatar Petroleum not scaling down LNG expansion despite delay in bids - CEO
Qatar Petroleum will postpone the start of production from its new gas facilities to 2025 due to a delay in the bidding process, but is not downsizing the world's largest liquefied natural gas project despite concerns of a mounting glut, its chief executive told Reuters. Saad al-Kaabi said the company is not scaling back a plan to build six new LNG production facilities, known as trains, needed for an ambitious domestic scale-up, though commercial bids from contractors and the start of output will be delayed. QP, the state-run LNG producer in the world's top supplier of the fuel, had wanted to lift its output to around 110 million tonnes per annum by 2024 from today's 77 mtpa, as the first phase of its expansion.
- Zacks
The Zacks Analyst Blog Highlights: TC Energy, Imperial Oil, Suncor Energy, Canadian Natural Resources and Kinder Morgan
The Zacks Analyst Blog Highlights: TC Energy, Imperial Oil, Suncor Energy, Canadian Natural Resources and Kinder Morgan
- Reuters
Russia and Saudi 'very close' to oil deal, Moscow signals big cuts
Saudi Arabia and Russia are close to a deal on oil output cuts to reduce a global glut, a top Russian negotiator said on Monday, while sources in Moscow said it was ready for significant cuts, ahead of talks planned for this week. A supply deal between OPEC, Russia and other producers, a group known as OPEC+, that had propped up oil prices for three years collapsed in March, just as the impact of lockdowns to limit the spread of the new coronavirus destroyed demand. Riyadh and Moscow blamed each other for the failure and launched a battle for market share, sending oil prices to their lowest in two decades.
- Reuters
Russia's major oil companies resume oil supplies to Belarus in April - sources
Russia's major oil companies, Rosneft, Lukoil and Gazprom, are set to resume Urals crude supplies to Belarus refineries in April after a three month suspension after Moscow and Minsk agreed supply terms, four industry sources familiar with supply plans told Reuters on Monday. Russia's oil supplies to Belarus are set at roughly 0.6 million tonnes for April so far, according to the sources. Companies may decide to send more oil to Belarus in April if they find the supplies profitable, they added.
- Bloomberg
Aramco’s Bondholders Get Dragged Down by Saudi Oil-Price War
(Bloomberg) -- The oil-price war isn’t doing any favors for Saudi Aramco’s bondholders one year on from the state-owned company’s debut on international capital markets.Trumpeted at the time as one of the most anticipated offerings of the year, the $12 billion of bonds have just clocked an 8.2% loss in March, their worst ever monthly performance, as crude prices more than halved. The outlook isn’t good either. Baltimore-based T. Rowe Price, which manages $1.2 trillion, says the securities will remain under pressure as long as the world’s top oil producers fail to agree on supply curbs.“It’s been, for the market, a reality check,” said Willem Visser, a T. Rowe fixed-income analyst. “Aramco tries to project itself as being a triple-A rated credit that’s bigger and better than the other oil majors, but people forget about the political risk.”Aramco’s $3 billion of bonds due 2029 now trade with a higher yield than the government’s debt of similar maturity.That contrasts with a year ago, when the energy giant issued its Eurobonds. The notes priced with a lower yield than those of the government itself, a rarity in corporate bond markets.Equity investors have also been hit. Aramco listed around 1.5% of its stock in the Saudi capital of Riyadh in December. Its market value has fallen from a peak of $2 trillion to $1.7 trillion. The stock remains below the 32-riyal listing price it surrendered a month ago.Aramco’s assets have still suffered less than those of peers such as Mexico’s state oil company Pemex, said Sergey Dergachev, a senior money manager at Union Investment Privatfonds GmbH in Frankfurt. That’s because it remains “one of the strongest oil and gas names in the emerging-market universe,” he said.While the oil crash has already caused Aramco to slash planned capital expenditure, it will be “very comfortable” with oil at $30 a barrel, chief financial officer Khalid Al-Dabbagh told investors in March. Brent crude prices are around $33 per barrel after rebounding 37% last week on hopes of a deal between producers. However, a meeting of the OPEC+ alliance scheduled for Monday was postponed to Thursday as Saudi Arabia and Russia traded barbs over who was to blame for the collapse in oil prices.“We like Aramco’s fundamentals, but think the valuations are now just fair rather than attractive,” said John Bates, a corporate-bond analyst in London with PineBridge Investments Europe.(Updates prices in sixth, eighth paragraphs)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Reuters
Russian Sokol crude sinks to record discount as demand slumps -sources
Russia's Sokol crude, which yields more middle distillates like jet fuel and gasoil from refining, has slumped to a record spot discount in the Asia market, two trade sources said on Monday, as fuel demand takes a hit from the coronavirus pandemic. Indian oil explorer ONGC Videsh sold one 700,000-barrel cargo of Russian Sokol crude for loading between June 2-8 at a discount of around $8 a barrel to Dubai quotes via a spot tender that was closed and awarded last Friday, likely to a trader, the sources said. In comparison, last month ONGC sold a Sokol crude cargo loading May 22-28 at a spot premium of around $3.20 a barrel to Dubai quotes to a trader, sources told Reuters at the time.
- Simply Wall St.
Is Woodside Petroleum Ltd (ASX:WPL) Excessively Paying Its CEO?
Peter Coleman has been the CEO of Woodside Petroleum Ltd (ASX:WPL) since 2011. First, this article will compare CEO...
- Reuters
Global stocks jump as virus deaths slow; oil falls on OPEC+ delay
World stock markets jumped on Monday, encouraged by a slowdown in coronavirus-related deaths and new cases in some of the world's hot spots, while a delay in talks between Saudi Arabia and Russia to cut supply sent oil prices tumbling again. In New York State, Governor Andrew Cuomo said that despite an increase in the number of cases and deaths, a daily decline in number of new hospitalizations and other data suggest a possible plateau in the crisis. Signs of stabilization in New York are "probably the most important thing given the amount of capital that's controlled through managers that live in the area," said Thomas Hayes, managing member at Great Hill Capital LLC in New York, before Cuomo's update.
- FX Empire
A Light Economic Calendar Leaves the Markets in the Hands of COVID-19 and OPEC
It’s risk-on early in the day, with COVID-19 numbers supporting riskier assets. Updated figures and news from OPEC will influence later, however.
- Bloomberg
Trump Says He Doesn’t Expect to Impose Tariffs on Oil Imports
(Bloomberg) -- President Donald Trump said he doesn’t think he’ll have to impose tariffs on imported oil to blunt the impact of a price war between Russia and Saudi Arabia, but held out the option to protect U.S. oil producers.“I would use tariffs if I have to,” he said at a White House news conference on Sunday, restating his position from Saturday’s briefing. “I don’t think I’m going to have to.”The U.S. has been in talks with Russia and Saudi Arabia about cutting excess production that’s cratered global oil prices, including calls between Trump and the leaders of both nations. But despite Trump’s assertion last week the two countries would cut production by 10 million to 15 million barrels, no agreement has been reached.“We want to save a great industry,” Trump said of the U.S. oil industry. “If they don’t get along, I would do that, yeah, I would do tariffs, very substantial tariffs.”Read more: Negotiators Race for Global Pact With U.S. Role in BalanceOPEC+, the former alliance between the Organization of Petroleum Exporting Countries and Russia, delayed a meeting aimed at ending the price war on Saturday after fresh tension between Riyadh and Moscow over who was to blame. The alliance will tentatively plan to meet virtually on April 9 instead of Monday. Brent futures dropped as much as 12% on Sunday.The International Energy Agency said that the deepest production cuts in the oil industry’s history wouldn’t be able to steady oil markets, where demand has collapsed because of the coronavirus outbreak.“It was the virus that killed it,” Trump said of the industry. He also noted again that low prices have benefits to the U.S. economy, a top oil consumer.“I’m seeing 91 cents a gallon out on the road,” he said. “A lot of people are happy. I see very inexpensive jet fuel, we’re trying to save the airline industry.”(Updates with additional Trump remarks beginning in fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
Oil Producers Race for Output Deal With G-20 at Center Stage
(Bloomberg) -- Saudi Arabia, Russia and other OPEC+ nations are racing to negotiate a deal to stem the historic oil price crash, with the G-20 taking center stage to bring into the fold the U.S. and other energy producers.U.S. Energy Secretary Dan Brouillette held a “productive discussion” over the phone with his Saudi counterpart Prince Abdulaziz bin Salman, the U.S. government said, a further sign that the diplomatic talks continue apace.The talks still face significant obstacles: a meeting of producers from OPEC+ and beyond -- which has been delayed once already -- is only tentatively scheduled for Thursday. Russia and Saudi Arabia want the U.S. to join in, but U.S. President Donald Trump has so far shown little willingness to do so as part of a deal between the Organization of Petroleum Exporting Countries and its allies.As an alternative, oil diplomats are planning an emergency meeting of G-20 energy ministers for Friday, part of an effort to bring the U.S. and other big oil producers outside the OPEC+ alliance -- such as Canada and Brazil -- on board, according to two people familiar with the situation.Brouillette said on Monday that Washington was “going to encourage the Saudis as chair of the G-20 to perhaps convene an energy ministerial toward the end of the week” as a forum to discuss the oil market. “I expect that that’s going to happen later this week,” he said.Crude prices have fallen 50% this year, as the economic effects of the coronavirus pandemic have knocked out about a third of global demand. The price crash is so dramatic that it’s threatening the stability of oil-dependent nations, the existence of U.S. shale producers, and poses an extra challenge to central banks. Industry officials say that if a deal to cut supply in an orderly way isn’t reached, the market will simply force producers to slash output as storage space runs out.The aim of talks, first revealed by Trump last week, is to cut oil production by about 10% -- the biggest ever coordinated reduction. Crude rallied on Trump’s comments but pared those gains as the diplomatic intricacies became clearer. Brent futures fell 2% on Monday, trading near $33 a barrel.Russia and Saudi Arabia are “very, very close” to reaching a deal on oil-production cuts, Kirill Dmitriev, chief executive officer of the Russian Direct Investment Fund, said in an interview with CNBC.However, even if a deal is struck for as much as 10 million barrels per day, that will barely dent the supply glut, which is estimated at as much as 35 million barrels a day. In some corners of the physical market prices have already turned negative, and traders have been putting oil into tankers at a record pace to store it at sea.Jump TogetherSaudi Arabia and Russia both say they want the U.S., which has become the world’s largest producer thanks to its shale revolution, to join the cuts. But Trump had only hostile words for OPEC on Saturday, threatening tariffs on foreign oil, though at a briefing late Sunday he said he didn’t expect he’d have to use them. The G-20 may be an easier forum for the U.S. to embrace than OPEC.“If the Americans don’t take part, the problem which existed before for the Russians and Saudis will remain -- that they cut output while the U.S ramps it up, and that makes the whole thing impossible,” said Fyodor Lukyanov, head of the Council on Foreign and Defense Policy, a research group that advises the Kremlin.Read more: Why OPEC-Russia Blowup Sparked All-Out Oil Price War: QuickTakeIt’s not clear if Russia and Saudi Arabia will require the U.S. to publicly commit to cut production -- a challenge in the private, fragmented American industry -- or if a compromise gesture would be enough. Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank, said Moscow would like the U.S. to lift some sanctions as a compromise.Even a passive role for the American shale industry, whose output is already expected to go into decline at current prices, may be enough for a deal, said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former oil official at the White House.“Russia and Saudi Arabia’s condition that they will only cut production if the U.S. does too is going to be satisfied, because market forces will drive U.S. output down around 1 million barrels a day this year,” said Bordoff.Back ChannelsRussia and Saudi Arabia -- which sparred publicly between themselves over the weekend -- have disagreed about how they would calculate the cuts, according to a person familiar with the talks.Russia favors using an average of the first quarter output as the baseline, while Saudi Arabia wants to use its current April production. The difference is huge: the kingdom pumped 9.8 million barrels a day on average between January and March. In April -- as it wages its battle for market share -- it’s producing more than 12 million.Any agreement will require diplomatic agility at a time when nations are devoting massive resources to fighting the pandemic itself. All three players -- Crown Prince Mohammed bin Salman, Russian President Vladimir Putin and Trump -- appeared to be maneuvering to avoid blame if talks fail. Yet the U.S. president has also said he’s confident there’ll be an agreement between Moscow and Riyadh to cut production.“The chances of a meaningful deal that delivers real production cuts are low but back-channel talks are ongoing,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. “Mohammed bin Salman is under heavy political pressure from Trump to demonstrate the Kingdom isn’t trying to bankrupt the U.S. shale industry.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Reuters
Oil prices decline $3 a barrel as market remains uncertain on supply outlook
Global benchmark oil prices traded as much as $3 a barrel lower as the market opened for Monday's trading session, reflecting fears of oversupply after Saudi Arabia and Russia postponed to Thursday a meeting about a potential pact to cut production. Late last week, prices had surged, with both U.S. and Brent contracts posting their largest weekly percentage gains on record due to hopes that OPEC and its allies would strike a global deal to cut crude supply worldwide. The COVID-19 pandemic caused by the novel coronavirus has cut demand and a month-long price war between Saudi Arabia and Russia has left the market awash in crude.
- Oilprice.com
North Sea Oil Faces Crisis
North Sea oil has a relatively high break-even price, and the coronavirus crisis has wreaked havoc on operators which have already sent home thousands of employees
- Bloomberg
Saudi Arabia, Russia Push Negotiations for Global Oil Pact
(Bloomberg) -- Saudi Arabia, Russia and other large oil producers are racing to negotiate a deal to stem the historic price crash as diplomats said some progress was made on Sunday.The talks still face significant obstacles: a meeting of producers from OPEC+ and beyond -- delayed once -- is only tentatively scheduled for Thursday. Russia and Saudi Arabia want the U.S. to join in, but U.S. President Donald Trump has so far shown little willingness to do so.Oil diplomats are trying to stitch together a meeting of G20 energy ministers for Friday, as part of the effort to bring the U.S. on board, according to two people familiar with the situation.Crude prices have fallen 50% this year, as the economic effects of the pandemic have knocked out about a third of global demand. The price crash is so dramatic that it’s threatening the stability of oil-dependent nations, the existence of U.S. shale producers, and poses an extra challenge to central banks.Even the International Energy Agency, which represents nations that consume oil, is calling for action. And oil officials know that if a deal to cut supply in an orderly way isn’t reached, the market will force some producers to suspend output as storage on land and at sea fills up.The aim of talks, first revealed by Trump last week, is to cut oil production by about 10% -- the biggest ever coordinated reduction. Oil rallied on Trump’s comments last week, but then pared those gains as the diplomatic intricacies became clearer.Cut TogetherSaudi Arabia and Russia both say they want the U.S., which has become the world’s largest producer thanks to the shale revolution, to join the cuts. But Trump had only hostile words for OPEC on Saturday, and threatened tariffs on foreign oil.“If the Americans don’t take part, the problem which existed before for the Russians and Saudis will remain -- that they cut output while the U.S ramps it up, and that makes the whole thing impossible,” said Fyodor Lukyanov, head of the Council on Foreign and Defense Policy, a research group that advises the Kremlin.It’s not clear if Russia and Saudi Arabia will require the U.S. to publicly commit to cut production -- a challenge in the private, fragmented American industry -- or if a compromise gesture would be enough. Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank, said Moscow would like the U.S. to lift some sanctions as a compromise.Russia and Saudi Arabia -- which sparred publicly between themselves over the weekend -- have also disagreed about how they would calculate the cuts, according to a person familiar with the talks.But in another sign of progress, Norway -- which hasn’t joined any production cuts since 2002 -- signaled over the weekend it was ready to reduce unilaterally its output if others did. And a senior official from the oil-rich Canadian province of Alberta said it will dial into the oil meeting this week. Iraq’s oil minister said he was optimistic about a deal.Any agreement will require diplomatic agility at a time when nations are devoting massive resources to fighting the pandemic itself. It’s also a battle of wills between Putin, Saudi Crown Prince Mohammed bin Salman, and Trump. On all sides, there are maneuvers to avoid blame if negotiations fail.Trump said Saturday at a White House press briefing he’s opposed OPEC his whole life, and characterized it as a cartel, or monopoly. “I don’t care about OPEC,” he said. He threatened to use tariffs if needed to protect the domestic oil industry, even as he predicted that Saudi Arabia and Russia would come to an agreement.Meanwhile Saudi Arabia postponed its monthly price-setting event for exported oil. Saudi Aramco’s official selling prices for May will be pushed to Thursday, according to people familiar with the situation. The OPEC meeting has also been tentatively rescheduled for Thursday.The move allows the company to have a better idea of how negotiations are going before setting the prices that are its key weapon in its battle for market share. Last month, it also delayed the event in the midst of wrangling at OPEC+ and responded to the breakdown in those talks with a historic price cut -- launching the price war negotiators are now trying to unravel.(adds G20)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- FX Empire
The Week Ahead – COVID-19 and OPEC in Focus, with Economic Data on the Lighter Side
While it is a shortened week, with economic data on the lighter side, there is still plenty for the markets to focus on and OPEC and COVID-19 in particular.
- Bloomberg
Aramco Delays Oil Pricing Amid Saudi-Russia Row on Oil Cuts
(Bloomberg) -- Saudi Arabia is delaying the release of its closely-watched monthly oil-pricing list until later this week as the kingdom spars with Russia over a potential meeting of global producers that would aim to halt the collapse in crude.State oil producer Saudi Aramco is now set to announce its official selling prices for May on Thursday, according to people with knowledge of the situation who asked not to be identified because the information is private. The OSPs, as the prices are known, were due on Sunday.Aramco is holding off on the announcement to await signs of what may happen when suppliers meet Thursday to discuss crude production. The company’s media office declined to comment on the delay.With the coronavirus pandemic gagging oil demand, benchmark Brent crude has plunged 48% this year. Saudi-Russian diplomatic barbs, which are opening a fresh rift between the world’s two largest oil exporters, jeopardize a deal to cut output and keep crude from tumbling further.The coalition known as OPEC+ had curbed production since 2017, but limits on its members’ output expired at the end of March after Saudi Arabia failed to persuade Russia to accept deeper cuts. While the Saudis have changed course and are now ramping up production to record levels, U.S. President Donald Trump said suppliers are open to pumping less to take 10 million to 15 million barrels of unwanted crude off the market.The debate over new production cuts poses a challenge for the world’s most valuable listed company as it tries to decide how to price its crude. By delaying its announcement, Aramco can better gauge the amount of oil it may have available to sell next month. The postponement would also give it time to deepen its price discounts should an OPEC+ deal fall apart, as Aramco is competing for sales in a glutted market.The kingdom’s energy ministry dictates Saudi oil output, so any decision by the Organization of Petroleum Exporting Countries, Russia and other producers would determine the amount of crude that Aramco can offer customers.Refiners and traders expect Aramco to cut pricing for May due to the collapse in demand. The delay could be interpreted as an effort to put the global price war on hold and give countries more room to negotiate reductions in output.This is the second consecutive time that Aramco has delayed its key pricing announcement beyond its traditional deadline of releasing the numbers by the 5th day of each month. When it comes, the decision may affect about 14 million barrels a day of exports from the Persian Gulf because other producers in the region often follow Aramco’s lead in setting prices for their own shipments.(Updates with date for pricing announcement in second paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
How Saudi Arabia Can Save the Global Oil Industry
(Bloomberg Opinion) -- The global oil industry is on its knees. Without action from producers to reduce supply, the situation will get much worse as the world runs out of places to store crude pumped out of the ground that nobody wants. A big production cut could delay reaching that breaking point, perhaps for long enough for demand to start to pick up again. But it won’t happen unless everybody plays their part.The oil market got quite in a flap over President Donald Trump’s Thursday tweet that Saudi Arabia and Russia had agreed to cut production. But it’s quite clear from subsequent comments out of Riyadh and Moscow that nobody had pledged any such cuts; not of 15 million barrels, nor 10 million, nor even anything at all. In fact, the leaders of Russia and Saudi Arabia hadn’t even spoken with each other. Perhaps Trump was just getting his ducks in a row — setting up a fictional promise of cuts that wouldn’t materialize, which would give him an excuse to resurrect his Tariff Man persona and slap duties on imports of their oil into the U.S.But it’s clear that something has shifted, even if it’s only in tone. Saudi Arabia is now audaciously seeking a global deal to cut oil production, not just by the Organization for Petroleum Exporting Countries, nor only with the extended OPEC+ coalition that includes Russia. It did so by calling for “an urgent meeting” aimed “at reaching a fair agreement to restore the desired balance of oil markets,” among the OPEC+ group “and other countries.”That last bit is crucial. The kingdom led by Crown Prince Mohammed bin Salman is making painfully clear that the sacrifice must be shared or Saudi Arabia will take no part in it at all. There can be no free-riders.It’s a tactic the country has used before, and the current nosedive in oil prices shows it stood by its word. The kingdom was the driving force behind cuts proposed at the March meeting of OPEC+ oil ministers. But it said then, as it’s saying now, that it would only make them if others joined in too. The only thing that has changed in the last month is that the “others” has now become an even bigger group that needs to include all of the world’s big oil producers.Here’s what Saudi Arabia needs to do.At the virtual meeting of oil producers, now tentatively pushed back to Thursday from Monday, it should give its counterparts — including those who don’t show up — a clear binary choice and an unequivocal ultimatum. Either they agree to strict, enforced, observable output curbs for everybody and Saudi Arabia will join in by reducing its own output to, say, 8.5 million barrels a day (I picked that number out of the air). Or Saudi Arabia should make clear it will continue to pump 12.3 million barrels a day, which would result in prices collapsing to single digits to force oil off the market.The kingdom could even go so far as to include a list of all the countries it would require to take part. The chart above suggests who some of those required participants might be. Alongside the U.S. and the OPEC+ countries, it includes Canada, China, Brazil, Qatar, Norway and the U.K., each of whom pumps more than 1 million barrels a day.Sure, there are obstacles to be overcome. Some on that list may be more willing to participate than others. But the alternative will hurt the oil industries of the countries on that list much more than they will Saudi Arabia. And such a collapse in prices may happen anyway if the cut isn’t big enough, or is delayed.I know lots of people argue that Saudi Arabia needs higher oil prices than shale producers to fund its budget. But I’ve never been a big fan of using budgetary break-even prices for determining the relative pain that would be experienced by oil-producers. Budgets, to some extent, reflect price expectations. If you expect oil to be $60 a barrel, say, you prepare a budget based on the level of income that implies. If that price is not achieved, you can cut expenditure, draw on reserves, or borrow — all options that remain open to Saudi Arabia.The kingdom will, though, face the same storage problem as everybody else. It shouldn’t go unnoticed that Saudi Arabia said it would boost exports in May to 10.6 million barrels a day because its own refineries didn’t want as much crude because of the drop in demand. Refiners elsewhere may not want it either. Saudi Arabia will probably have to rebuild its own stockpiles, which it has drawn down during the past four years, but it has more than twice as much room to do so than is available in the U.S. Strategic Petroleum Reserve.Finally, Saudi Arabia should make clear that this is a short-term solution crafted for an extraordinary situation. It must avoid the temptation of tying any deal into a long-term supply management initiative. Anything that whiffs of an OPEC+ extension won’t fly with the U.S. or others. This is not OPEC++. It has to be a time-limited, one-off solution to the extreme situation the global oil industry is facing as a result of the world locking down to fight the Covid-19 virus. Once things pick up again — as they will — it will be back to business as usual, and a return to the dash for market share.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Reuters
Norway may cut its oil output if other big producers agree deal - minister
Western Europe's largest oil and gas producer Norway said on Saturday it would consider cutting its oil production if a global deal to curb supply is agreed by the world's biggest producers. OPEC and its allies are working on a deal for an oil output cut equivalent to about 10% of world supply in what member states expect will be an unprecedented global effort including the United States. Oil prices have shed two thirds of their value in the first quarter of the year, pummelled by a drop in demand due to coronavirus lockdowns and after Russia and Saudi Arabia failed to agree on further output cuts.
- Reuters
Trump threatens tariffs on oil imports to 'protect' U.S. energy workers
U.S. President Donald Trump said on Saturday he would impose tariffs on crude imports if he has to "protect" U.S. energy workers from the oil price crash that has been exacerbated by a war between Russia and Saudi Arabia over market share. "If I have to do tariffs on oil coming from outside or if I have to do something to protect our ... tens of thousands of energy workers and our great companies that produce all these jobs, I'll do whatever I have to do," Trump told reporters in a briefing about the coronavirus outbreak. Oil prices have dropped by about two-thirds this year as the pandemic crushes demand and as major producers Russia and Saudi Arabia boost output in a war over market share.
- Bloomberg
Trump Steps Up Oil Tariff Threat Amid Saudi-Russia Rift
(Bloomberg) -- President Donald Trump ramped up threats to use tariffs to protect the U.S. energy industry from a historic glut of oil, as efforts to forge a global deal to cut output appeared to lose momentum.Trump said Saturday at a White House press briefing he’d use tariffs if needed to protect the domestic oil industry, even as he predicted that Saudi Arabia and Russia would come to an agreement to cut output and stem the rout in prices.But such a deal looked a bit further from reach at the weekend after a diplomatic row between Saudi Arabia and Russia. A gathering of OPEC+ members and other producers scheduled for Monday was pushed back, to give more time for negotiations.Saudi Arabia, which launched a price war last month with Russia after OPEC+ talks broke down, has made clear that it won’t cut production unless other producers -- including the U.S. -- also hold back supply. But Trump said on Saturday: “I don’t care about OPEC,” a “cartel” he’s opposed all his life.The prospect of a deal to reduce the massive glut of oil caused by the coronavirus lockdown sent benchmark oil futures to a record gain last week. Oil prices have fallen about 50% this year as the pandemic has knocked out as much as a third of global oil demand. That means producers are going to have to reduce output eventually -- with or without a deal -- as storage both on land and at sea fills up.In the latest maneuver in the price war, Saudi Arabia postponed on Sunday its monthly price-setting event for exported oil. Saudi Aramco’s official selling prices for May could be pushed to Tuesday or Thursday, according to a person familiar with the situation. The OPEC meeting has been tentatively rescheduled for Thursday.The move allows the company to have a better idea of how negotiations are going before setting the prices that are its key weapon in its war with Russia for market share. Last month, it also postponed the event in the midst of wrangling at OPEC+ and responded to the breakdown in those talks with a historic price cut.On the idea of slapping tariffs on foreign oil, the U.S. oil industry is split. Some independent shale producers -- who’ve been hardest hit by the recent market slump -- are in support, while refiners and large integrated companies are typically opposed.The American Petroleum Institute, which helped arrange a meeting with the president on Friday, argues tariffs would inject uncertainty into an already rattled global marketplace.“If I have to do tariffs on oil coming from outside, or if I have to do something to protect thousands and tens of thousands of energy workers, and our great companies that produce all these jobs, I’ll do whatever I have to do,” Trump said Saturday. Low oil prices are “going to hurt a lot of jobs,” he said.That was a change in tone from Friday, when he suggested he wasn’t inclined to target Russia or Saudi Arabia with oil tariffs.Hundreds of thousands of U.S. oil industry jobs are hanging in the balance, with about $15 billion of investments wiped out from the budgets of shale explorers and many of them on the brink of bankruptcy.(Adds Saudi decision to delay pricing event from the sixth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
