Wednesday Nov. 9, - Bloomberg L.P.€¦ · Wednesday Nov. 9, 2016 Nov. 9, 2016 OPEC Deal Becomes...
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Wednesday Nov. 9, 2016 Nov. 9, 2016 OPEC Deal Becomes More Urgent, Harder After Trump By Grant Smith and Angelina Rascouet, Bloomberg News OPEC was already struggling to finalize a deal on production cuts this month. And then Donald Trump was elected President of the U.S. OPEC faces increasing urgency to take measures that will support oil prices as Trump's surprise victory threatens to deepen a market sell-off, said . Yet the UBS Group uncertainty arising from the President-Elect’s — from climate change to the U.S. policies shale industry and sanctions on Iran — will make resolving differences between producers even harder. “The pressure on OPEC to come up with a deal only increases in the wake of Trump’s victory,” said , an analyst at UBS in Zurich. “Even though the oil Giovanni Staunovo market is rebalancing, the political uncertainty in the short term leaves oil prices vulnerable to downside, that makes it more urgent for OPEC to act.” The result is “bearish for the emerging markets, which drive oil-demand growth” because Trump has vowed to scrap international trade agreements in Latin America and Asia, according to consultant . His surprise win could also weaken prices by FGE aiding a revival in U.S. shale oil production. , the CEO of Harold Hamm Continental who has advised Trump on energy policy, is “solidly pro-domestic oil and Resources gas development,” FGE said. Trump’s various policy positions could either support or weaken oil prices, making it more complicated for OPEC to conclude a deal, said , chief executive David Hufton officer of brokers in London. PVM Group The next U.S. president is likely to treat climate change agreements “skeptically” and moves towards limiting carbon dioxide output are “likely to slow or reverse,” potentially boosting demand for fossil fuels, according to FGE. Trump has also said he would undo last year’s nuclear accord with Iran, potentially reversing increases in the Islamic Republic’s oil exports, said . Full on web. RBC Capital Markets story For more analyst insight on the OPEC meeting, click . here Market Watch 10:30 a.m.: EIA weekly oil inventory report Today: Genscape's weekly ARA crude stockpiles report Today: Exploration, Production Processing Forum, Moscow All times eastern Events "The sound of an deal OPEC being made is often misinterpreted by the media and analysts as the sound of a deal unwinding." – Paul Horsnell, Global Research Analyst, Standard Chartered Quote of the Day Big Oil Looks Past Profit Crunch as Cash Flow Shows Recovery: Majors see cash from operations rise three quarters in a row What to Read Talking Heads EIA Raises 2017 U.S. Crude Outlook The raised its outlook for U.S. crude production to 8.73 million barrels a day in 2017 from its EIA October forecast of 8.59 million barrels a day, the agency said in its monthly Short-Term Energy Outlook, published Nov. 8. Its 2016 forecast was also revised up to 8.84 million barrels a day, from 8.73 million, on the back of increased drilling activity in the Permian. — Christopher Sell, Bloomberg Briefs Editor Market snapshot taken at 12:10 p.m. London time. U.S. market closed at time of snapshot.
Transcript of Wednesday Nov. 9, - Bloomberg L.P.€¦ · Wednesday Nov. 9, 2016 Nov. 9, 2016 OPEC Deal Becomes...
Wednesday
Nov. 9, 2016
Nov. 9, 2016
OPEC Deal Becomes More Urgent, Harder After TrumpBy Grant Smith and Angelina Rascouet, Bloomberg NewsOPEC was already struggling to finalize a deal on production cuts this month. And then Donald Trump was elected President of the U.S.
OPEC faces increasing urgency to take measures that will support oil prices as Trump's surprise victory threatens to deepen a market sell-off, said . Yet the UBS Groupuncertainty arising from the President-Elect’s — from climate change to the U.S. policiesshale industry and sanctions on Iran — will make resolving differences between producers even harder.
“The pressure on OPEC to come up with a deal only increases in the wake of Trump’s victory,” said , an analyst at UBS in Zurich. “Even though the oil Giovanni Staunovomarket is rebalancing, the political uncertainty in the short term leaves oil prices vulnerable to downside, that makes it more urgent for OPEC to act.”
The result is “bearish for the emerging markets, which drive oil-demand growth” because Trump has vowed to scrap international trade agreements in Latin America and Asia, according to consultant . His surprise win could also weaken prices by FGEaiding a revival in U.S. shale oil production. , the CEO of Harold Hamm Continental
who has advised Trump on energy policy, is “solidly pro-domestic oil and Resourcesgas development,” FGE said.
Trump’s various policy positions could either support or weaken oil prices, making it more complicated for OPEC to conclude a deal, said , chief executive David Huftonofficer of brokers in London.PVM Group
The next U.S. president is likely to treat climate change agreements “skeptically” and moves towards limiting carbon dioxide output are “likely to slow or reverse,” potentially boosting demand for fossil fuels, according to FGE. Trump has also said he would undo last year’s nuclear accord with Iran, potentially reversing increases in the Islamic Republic’s oil exports, said . Full on web.RBC Capital Markets story
For more analyst insight on the OPEC meeting, click .here
Market Watch
10:30 a.m.: EIA weekly oil inventory reportToday: Genscape's weekly ARA crude stockpiles reportToday: Exploration, Production Processing Forum, Moscow
All times eastern
Events
"The sound of an deal OPECbeing made is often misinterpreted by the media and analysts as the sound of a deal unwinding."
– Paul Horsnell, Global Research Analyst,
Standard Chartered
Quote of the Day
Big Oil Looks Past Profit Crunch as Cash Flow Shows Recovery: Majors see cash from operations rise three quarters in a row
What to Read
Talking Heads
EIA Raises 2017 U.S. Crude Outlook
The raised its outlook for U.S. crude production to 8.73 million barrels a day in 2017 from its EIAOctober forecast of 8.59 million barrels a day, the agency said in its monthly Short-Term Energy Outlook, published Nov. 8. Its 2016 forecast was also revised up to 8.84 million barrels a day, from 8.73 million, on the back of increased drilling activity in the Permian.
— Christopher Sell, Bloomberg Briefs Editor
Market snapshot taken at 12:10 p.m. London time. U.S. market closed at time of snapshot.
Oil Buyer's Guide 2 Nov. 9, 2016
Talking Heads
OPEC Summit: Deal or No Deal?Compiled by Christopher Sell, Bloomberg BriefsIt's been said before, and it will doubtless be said again: OPEC's reputation is on the line when it meets in Vienna in three weeks' time. Speculation about whether the cartel can agree to cut crude output to about 32.5 million to 33 million barrels a day swings almost daily from sunny optimism into gloom and back again. Can a deal be agreed? We asked four prominent oil analysts. Their comments have been edited and condensed.
Paul Horsnell, Global Head of Commodities Research, Standard CharteredWe think that the market has written off the chances of a deal too quickly.
OPEC often reaches agreements in a fairly noisy way and, like many organizations, it rarely reaches a definitive deal before a deadline. The sound of an OPEC deal being made is often misinterpreted by the media and
analysts as the sound of a deal unwinding. We think that OPEC has already moved surprisingly far down the road to a deal, with three weeks still to go before the meeting.
The only remaining substantive issue within OPEC is whether Iran will commit to a freeze; all other issues are red herrings and not deal-breakers. The Algiers meeting exempted Libya, Nigeria and Iran from cuts, but other key producers insist that in return, Iran should commit to not increasing output. Iran’s short-term ability to increase appears limited; output has been fairly static since June.
This limited output upside, plus support for a deal from Russia, suggests to us that an agreement is likely in Vienna, but we would not be surprised if negotiations continued down to the wire. The consequences of failure, plus the political capital already expended, are a strong incentive for agreement.
Comments received Nov. 7
Abhishek Deshpande, Lead Energy Analyst, NatixisOPEC, in theory, needs to agree on a deal to cut back meaningful and effective volumes of crude if it wants to avoid further downside in oil prices. Most of the excess in the market is OPEC-led and hence it is OPEC that needs to take action to reduce this surplus.
On the one hand, some key players including Saudi Arabia and Iran, seemed to be taking positive steps in achieving a potential cut. On the other, producers such as Iraq, Nigeria and Libya have raised concerns with their continued increase in supplies recently and exemption demands.
However, we believe OPEC is under considerable pressure this time to find a solution, and with Saudi and Iran looking conducive to a positive dialogue, there is an increasing probability for OPEC to act and agree before the year end.
We also believe that if OPEC fails to agree then the market will lose faith in OPEC's function as a cartel and swing producer. It will also cause even bigger damage to the oil fundamentals in the medium term with a third year of low capex budget worldwide. We still maintain a maybe scenario given the unpredictability around OPEC and the ability of any one member to derail the talks.
Comments received Nov. 3
Michael Poulsen, Oil Risk Manager, Global Risk ManagementThough it might be a deal equivalent to selling rubber band by the yard, I think there will be some sort of a deal.
A lack hereof would significantly lower the relevance of OPEC. Whether the “deal” will be: (1) an actual cut equally shared amongst the members (highly unlikely given the recent statements from various members); or (2) a
large cut by a single producer (also somewhat unlikely, given the experience by the Saudis in the 70’s); or (3) some creative mix of redefining production levels and cuts (for a short time, e.g. one month), agreements with non-OPEC producers — a rabbit being pulled from a hat — remains to be seen.
Basically OPEC needs to keep the stew boiling for another year or so. If producers can keep it together for 12-18 months, demand will have caught up with supply and the market could absorb the extra shale oil, whilst letting OPEC countries produce around current levels.
Ultimately, it might actually have been cheaper for OPEC countries to simply buy the shale oil companies, rather than try to force them out of business. Leaving aside any potential political block of such a deal, the math is not that far off.
Comments received Nov. 2
Ole Hansen, Head of Commodity Strategy, Saxo Bank OPEC will reach a deal (of some sort) -- Most members can ill afford a prolonged delay in achieving market balance. This, together with the immediate risk that long liquidation could force a sell-off towards $40, increases the risk that verbal intervention will lose the power to support the market.
Agreeing to cuts while the price is under pressure is probably easier to achieve than while its rising. With production rising from exempt countries such as Nigeria and Libya, a cut at the high end of what was announced is likely only to support stabilization at this stage. In order for the cartel to achieve a price above $55 a barrel, a bigger cut or the involvement from non-OPEC producers will be required.
The election of Donald Trump in the U.S. as President has added an additional dimension for OPEC, considering he is pro-fossil fuel and wants to re-introduce sanctions against Iran.
Comments received Nov. 9
Today's Oil News
Source: Standard Chartered
Source: Natixis
Source: Global Risk Management
Source: Saxo Bank
Oil Buyer's Guide 3 Nov. 9, 2016
Today's Oil News
SupplyOil erased losses as global markets
adjusted to Republican Donald Trump's election as the 45th U.S. president. Futures were little changed in New York, reversing an earlier decline of 4.3 percent. Turbulence in financial markets calmed and a knee-jerk sell-off of risky assets abated as Trump, 70, promised to try to unite America’s divided political factions after his victory over Hillary Clinton. The result nonetheless rattled markets that had banked on a continuation of economic and trade policies under a Democrat president. Most polls had shown Clinton ahead of Trump going into the vote and websites that took bets on the victor had put her odds of winning at 80 percent or more. Full on Terminal.story
Tullow Oil cut its forecast for full-year output at the $4.9 billion TEN project off Ghana. Production at the Tweneboa-Enyenra-Ntomme fields is expected to reach an average annualized rate of 15,000 barrels a day this year, the London-based company said today in a statement. That compares with an August guidance of 23,000 barrels a day. “Production ramp-up has been slower than expected due to water-injection commissioning taking longer than planned, which has limited the volume of water injected” at TEN, Tullow said. Full
on Terminal.story
Nigerian militants have blown up the Forcados , the Niger export pipelineDelta Avengers' spokesperson Mudoch Agbinibo said in a Twitter post. Full story on Terminal.
Venezuela's President Nicolas Maduro wrote to the leaders of Russia, Iraq, Iran and Saudi Arabia, urging that decisions be taken at the highest level to implement OPEC's Algiers agreement, according to a statement from the Ministry of Petroleum. Full on story Terminal.
Crude inventories in the ARA region fell 7.2 percent in the week ended Nov. 4 to 58.99 million barrels, Genscape data show. Full on Terminal.story
South Africa is no longer proposing to take a free 20 percent stake in new oil and natural gas ventures amid industry concerns that would deter investment, according to law firm Norton Rose Fulbright. Full on Terminal.story
Japan's Fuji Oil will receive a "small amount" of U.S. crude at its refinery in early January, the company said today. Full on Terminal.story
OMV, central Europe’s biggest energy company, beat third-quarter profit expectations after reporting it would get as much as $1 billion from selling its stakes in U.K. oil and gas fields. Third-quarter adjusted net income rose 22 percent to 447 million euros ($500 million) on sales of 5.2 billion euros, the Vienna-based company said in a statement today. Analysts expected a 286 million-euro profit on 4.7 billion euros of sales. Full on Terminal.story
China Petroleum Engineering & Construction Corp., an engineering unit of CNPC, signed a service contract with the Algerian state oil company Sonatrach on Nov. 6 to upgrade its refining facilities, it said in a statement on its website today. Full on Terminal. story
Demand
Companies
A Donald Trump win puts a floor under oil as risk will be seen to rise, said Petromatrix. “I don’t see oil falling much from current levels” given potential for greater geopolitical risk after Trump was elected as the 45th U.S. president, Olivier Jakob, managing director of Petromatrix in Zug, Switzerland, said by telephone. Full on Terminal.story
Iran's Oil Minister Bijan Namdar Zanganeh is "optimistic" an accord will be reached at the next OPEC meeting on a collective output ceiling for the group, the Oil Ministry's news agency Shana reported. Full on story Terminal.
OPEC's strategy to decrease oversupply has worked, said theU.A.E. Energy Minister Suhail Al-Mazrouei. The glut of 2 million barrels a day last year has declined "significantly," he said. Full on storyTerminal.
OPEC’s chief warned of prolonged instability in the oil market if the producer group and other major crude suppliers fail to act jointly to limit output and curb a global glut. An inability of OPEC to implement the deal it reached in Algiers in September will have “negative consequences on the already fragile state of the industry," he said. Full on Terminal. story
Shell's San Francisco-area refinery shut its fluid catalytic cracker late on Nov. 7 for emergency repairs, a person familiar with operations said. Full on story Terminal.
Marathon's Canton, Ohio, refinery plans a multiunit turnaround to begin in July 2018 and run for around four to six weeks, according to two people familiar with operations. The units scheduled for shutdown include the fluid catalytic cracker and alkylation unit. Full story on Terminal.
Market Calls
Refinery Outages
U.S. Election
Oil Buyer's Guide 4 Nov. 9, 2016
U.S. Election
What Donald Trump Means for U.S. Energy PolicyBy Christopher Sell and Darshini Shah, Bloomberg Briefs EditorsDonald Trump was elected the 45th president of the United States. The real-estate developer and reality-TV star, a Republican who has never held public office, defeated Democrat Hillary Clinton after a punishing campaign that exposed searing divides in the American public. Here is a reminder on where he stands on key energy policies:
Benchmarks
Oil Buyer's Guide 5 Nov. 9, 2016
Benchmarks
For live spot prices, click or run on Bloomberg. For crack here BOIL<GO>
spreads, click or run here CRKS<GO>
Futures Based Swaps
PERIOD WTI BRNT WTI/BRNT NYULSD NYULSD/WTI
Bal Mo 43.6 44.62 -1.02 140.89 15.57
16-Nov 44.24 45.81 -1.57 142.86 15.76
16-Dec 44.97 46.67 -1.7 144.51 15.73
17-Jan 45.61 47.42 -1.82 145.48 15.5
Bal Qt 43.92 45.21 -1.29 141.88 15.67
Q1 17 45.62 47.38 -1.76 145.25 15.38
Q2 17 47.23 48.95 -1.73 147.33 14.65
Q3 17 48.14 49.89 -1.76 151.12 15.34
Bal Yr 43.92 45.21 -1.29 141.88 15.67
Cal 17 47.45 49.23 -1.78 149.64 15.4
Cal 18 49.89 52.22 -2.33 159.4 17.06
PERIOD NYULSD/BR NYRB NYRB/WTI NYRBBR RBHO
Bal Mo 14.55 133.72 12.56 11.54 -7.17
16-Nov 14.19 132.86 11.56 9.99 -10
16-Dec 14.03 134.04 11.33 9.63 -10.47
17-Jan 13.68 136.26 11.62 9.81 -9.22
Bal Qt 14.37 133.29 12.06 10.77 -8.59
Q1 17 13.62 141.96 14 12.24 -3.29
Q2 17 12.93 156.44 18.48 16.75 9.11
Q3 17 13.58 148.86 14.39 12.63 -2.26
Bal Yr 14.37 133.29 12.06 10.77 -8.59
Cal 17 13.62 146.13 13.93 12.15 -3.51
Cal 18 14.73 150.12 13.16 10.83 -9.28Source: Bloomberg
For live swap prices, click or run on Bloomberghere CFVL<GO>
Spot prices as of end of previous day. Futures as of 7:30 a.m.
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