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Old 05-19-2017, 01:47 PM   #1
Keshav
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News Full tanks and tankers: a stubborn oil glut despite OPEC cuts

http://in.reuters.com/article/us-glo...-idINKCN18F0EO

Quote:
By Catherine Ngai | NEW YORK/LONDON/SINGAPORE

After the first OPEC oil production cut in eight years took effect in January, oil traders from Houston to Singapore started emptying millions of barrels of crude from storage tanks.

Investors hailed the drawdowns as the beginning of the end of a two-year supply glut - raising hopes for steadily rising per-barrel prices.

It hasn't worked out that way.

Now, many of those same storage tanks are filling back up or draining more slowly than investors and oil firms had expected, according to global inventory estimates and more than a dozen oil traders and shipping sources who told Reuters about storage in facilities that do not make their oil volumes public.

The stalled drawdowns shed light on the broader challenge facing OPEC - the Organization of the Petroleum Exporting Countries - as it struggles to steer the industry out of the downturn caused by oversupply. With U.S. shale oil production surging, inventories remain stubbornly high and prices appear stuck in the low-$50s per-barrel range.

The market has not strengthened enough to drain many major storage facilities around the globe - which OPEC oil ministers had hoped would be a first step toward rebalancing what has been a buyer's market since late 2014.

Estimated inventories in industrialized nations totaled 3.025 billion barrels at the end of March - about 300 million barrels above the five-year average, according to the International Energy Agency’s latest monthly report.

Preliminary April data indicated stocks would rise further, the IEA said. Crude stocks stood at a record 1.235 billion barrels.

OPEC and other non-OPEC nations - most notably Russia - are now widely expected to extend production cuts for another nine months, through March 2018.

The ongoing struggle to thin supplies has forced economists to cut their oil price forecasts. Bank of America, for instance, last week lowered its 2017 target for Brent crude by $7 a barrel to $54.

During the two-year price war started by OPEC, about half a billion barrels of crude and refined products flowed into storage facilities as oil prices hit lows of less than $30 a barrel in early 2016.

Much of the inventory build-up came as traders started using storage to make easy money on the widening spread between rock-bottom spot oil prices and substantially higher prices for contracts to deliver the oil in future months.

That price spread - a market structure known as contango - allowed traders to profit even after they paid for expensive storage in facilities such as the Louisiana Offshore Oil Port (LOOP) - the only deep-water U.S. oil port and a major conduit for crude imports - or supertankers parked offshore in Singapore.

Although the storage trade has been less profitable since the OPEC production cuts, much of that oil remains in tanks, said Chris Bake, an executive committee member at Vitol, the world's largest independent trader, during an industry conference last week in London.

"This 550 million barrel-plus inventory build of crude and products that started in 2014 is still very much there," he said. "How much is going to come out? That is an ongoing debate among all of us."

"CLOGGED" WITH OIL

From the Malacca Straits in Asia to the ports of Northern Europe and the Gulf of Mexico, drawdowns of global inventories have slowed or even reversed.

In the Amsterdam-Rotterdam-Antwerp (ARA) region – one of the most expensive areas in Europe to store oil and the benchmark pricing point for fuel - crude is starting to flow back into storage because refiners are "clogged" with oil, an industry source handling deals in that region told Reuters.

Refined fuel inventories have also jumped suddenly, with gasoil in tanks in the ARA hub rising to an eight-month high earlier this month, according to Dutch consultancy PJK International. Gasoil includes jet fuel, diesel and heating oil.

At one of the world's largest oil storage facilities - on the shores of Saldanha Bay in South Africa - millions of barrels were sold in recent months, traders told Reuters.

But more cargoes are flowing right back into its tanks, which can hold 45 million barrels, as sellers struggle to find refiners to buy freshly loaded oil, the traders said.

In the Houston region, stored oil stocks touched record levels at the end of March, according to energy information provider Genscape.

The state of inventories appears more mixed in Asia.

In China, the world's second-largest oil consumer behind the United States, commercial crude stocks hit their lowest level in four years in March, according to the government-controlled Xinhua News Agency. But in nearby South Korea, inventories were near a record, according to the Korea National Oil Corp.

SLOW PROGRESS

While global inventories remain bloated, there are some signs that the OPEC cuts have dented supplies.

Recent data from the U.S. Energy Information Administration showed that nationwide stocks started draining in April this year - the first decrease for that month since 1999.

Declining costs for storage is another indication that traders and oil companies are putting less oil in storage than at the height of the price war.

At the largest U.S. storage facility at Cushing, Oklahoma, storage tanks costs about 35 cents a barrel per month, traders say, compared nearly 50 cents a year ago.

Parking oil in a supertanker off the shore of Singapore, Asia's refining hub, costs anywhere from 30 to 40 cents a barrel per month, down from 50 to 80 cents just a few months ago.

The futures contract for oil storage at the LOOP, off Louisiana's coast, dropped to about 24 cents per barrel recently, one of the lowest prices this year.

Still, the patchy evidence of draining storage has fallen far short of what investors expected after OPEC and non-OPEC nations agreed on production cuts last November.

"People were impatient and thought we'd start drawing 10 million barrels a day since the first week of January," said Amrita Sen, chief oil analyst at Energy Aspects. "We're still in excess, and there's lots of inventory around."

(Reporting by Catherine Ngai in New York, Libby George in London, Florence Tan and Mark Tay in Singapore, and Liz Hampton in Houston; Editing by Simon Webb and Brian Thevenot)
This is mostly the result of the impressive boom in domestic production combined with the effective measures to lower the cost of extraction. Peak Oil is now a punchline and Julian Simon continues to be right about the price and availability of natural resources.

Long live the V8.
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Old 05-19-2017, 02:21 PM   #2
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Default Full tanks and tankers: a stubborn oil glut despite OPEC cuts

Quote:
Oil jumps 2 percent; more investors expect output cut extension
IMO, if investors want prices to rise, they'll make it happen.
http://mobile.reuters.com/article/idUSKCN18E06K

Researching oil price articles is frustrating.
If it goes up in early trading, it seems like that's where it's going to stay.
By end of day, if it drops, the same news source will say oil is on a decline. And long term forecasting is a SWAG.

Last edited by Skylab; 05-19-2017 at 02:26 PM.
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Old 05-19-2017, 02:32 PM   #3
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They really want these prices higher as many countries like Russia, Venezuela depend for bulk GNP and countries like Norway, Sweden use to fund social programs,
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Old 05-19-2017, 03:04 PM   #4
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Quote:
inventories remain stubbornly high and prices appear stuck in the low-$50s per-barrel range.
So why the **** are prices still around $2.xx+?

Should be in the $1.30-$1.40 range.

--kC
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Old 05-19-2017, 04:01 PM   #5
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Quote:
Originally Posted by KC View Post
So why the **** are prices still around $2.xx+?

Should be in the $1.30-$1.40 range.

--kC
Because they can......

Peace,

Greg
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Old 05-19-2017, 04:20 PM   #6
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So why the **** are prices still around $2.xx+?

Should be in the $1.30-$1.40 range.

--kC
Taxes.
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Old 05-19-2017, 04:52 PM   #7
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$1.85 down here in SC. I think our gas tax is something like $0.17 a gallon.
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Old 05-19-2017, 06:29 PM   #8
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https://en.wikipedia.org/wiki/Fuel_t..._United_States

We have a 49.40 cents/gallon tax in Washington.

California is 38.13

South Carolina is 16.75

US average is 31.04

lowest is Alaska @ 12.25
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Old 05-19-2017, 06:31 PM   #9
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And we're over $3 a gallon for premium.
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Old 05-19-2017, 07:16 PM   #10
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glad I got out of my oil etf when i did... it's a funky market with so many things in the air, almost impossible to keep up-to-date on it all as a hobbyist.
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Old 05-19-2017, 11:31 PM   #11
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Originally Posted by DJ 9iron View Post
Taxes.
State taxes..... To fix our crappy roads and bridges and tunnels. Not that those taxes really end up fixing those deficiencies.
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Old 05-20-2017, 02:52 AM   #12
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On the subject of "additional costs added to gasoline" I found this gem.

tl;dr there is a lot of graft going on in the complex arrangement that adds ethanol to our fuel.

ignore the political elements of this article, please. the key parts are the existing system that was put into place under Bush and expanded under Obama.

http://thehill.com/blogs/pundits-blo...standard-swamp

Quote:

Trump should drain the renewable fuel standard swamp

Donald Trump ran for president last year on a clear, strong message pledging to deregulate the economy and create millions of new jobs. One key area where he can deregulate that would greatly benefit the economy at all levels is the federal Renewable Fuel Standard (RFS).

This rigged big government mandate was enacted as part of the Energy Policy Act of 2005 signed into law by President George W. Bush, and more recently implemented by agenda-driven bureaucrats appointed by President Obama. Under RFS, all transportation fuels sold must require a minimum volume of renewable fuels.

When the federal government intervenes in the working of the economy, it creates winners and losers. This is no less true with the RFS mandates. The “point of obligation” under RFS is where refiners of gasoline must comply with the RFS mandate to blend renewable fuels into the gasoline. Typically, this is the 10 percent ethanol you see in the gasoline that fills your tank.


During this process, a Renewable Identification Number (RIN) is assigned to the blended fuel product. The generation of the RIN at the “point of obligation” is where winners and losers, quite unnecessarily, are created due to RFS.

The major oil companies that operate large chains of gas stations and convenience stores can blend their gasoline at a per-gallon price advantage of between 10 cents to 50 cents over smaller, independent retailers. The smaller retailers who sell gasoline, but are unable to blend their own, purchase it at higher prices from the larger oil companies. Given that consumers shop around and will purchase their gas from the lowest priced seller, even an advantage of 10 cents per gallon steers most customers to the major gas station chains. RFS clearly favors the large corporate sellers of gasoline over the smaller independent gas stations.


RINs are also traded like any other commodities, including by those who are not in the business of blending fuels, and the trading of RINs has expanded rapidly “without appropriate safeguards,” according to Doug Parker, a former director of the Environmental Protection Agency's Criminal Investigation Division. This market has expanded from $1 billion in 2010 to $15 billion in 2016. The price of RINs has surged more than 5000 percent since 2005, and they now trade at 20 times the cost of a gallon of ethanol.

The result of this exploding market in RINs trading without adequate safeguards is documented fraud.
By September of last year, federal prosecutors had identified $271 million in fraud loss, as well as $71 million in seizures of illicit profits. Once again, a government program, rife with corruption and cronyism as always, results in massive levels of fraud and abuse.

Our entire economy depends on the free flow of energy, preferably at market rates, which takes place more efficiently with far less government intervention. As many as 150,000 American jobs are at danger if U.S. refiners are forced out of business. This includes truck drives, steel workers, convenience store clerks and others whose jobs depend on the energy industry. In Southern Pennsylvania alone, as many as 20,000 jobs could disappear. Most of these unemployed workers would be unable to find work in a similar field. Losing just 100 refining jobs reduces economic output by $1 billion in the local economy, and would also lead to a wave of related job losses in many other industries.

When refineries close, gas prices rise significantly. A single refinery closing in California resulted in rising gas prices in that state. As the price advantage for larger sellers of gas allows them to undercut the smaller retailers on price, more of the latter are going out of business, leaving consumers fewer choices of where to buy their gasoline. It is inevitable, that fewer options for consumers also further leads to higher prices. By forcing smaller retailers out of business, the “point of obligation” designation under RFS is not only unfair to the independent retailers, but it also a silent job killer that threatens thousands of American jobs, forcing independent refiners and smaller retailers to pay the bill for speculators profiting from the shadowy, unregulated market for these credits.

The “point of obligation” exposes consumers to volatile price spikes and allows for widespread fraud and abuse due to those who game the system in a market lacking adequate safeguards. Moving the “point of obligation” would create a level playing field between larger and smaller retailers. Larger retailers would pay their share, leading to the saving of thousands of good paying American jobs, while reducing fraud and removing the unfair advantage of larger retailers over independent retailers in the blending of gasoline.

Moving the “point of obligation” is a good first step in reforming the RFS mandate, which has led to widespread inefficiency and fraud. The RFS system is badly broken and needs reform now. The Trump administration would do a lot to uphold its pledge to implement effective deregulation and create millions of new jobs in the process by reforming RFS.
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Old 05-20-2017, 08:35 AM   #13
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I have
Exxon
Royal Dutch
BP
marathon
Luk out Russia
Total
Etc etc etc..You want talk about losing money, I have been through a lot oil crap through out my life, but this one caught me off gaurd. chevron 5000 shares at 133 crashed to like 75 I think..losses 300K alone on that one. Eh what's a couple million bucks. aThen July 2016 things where looking good made a lot of my losses back three quarters at least. Then it crashed again. Soon as price goes, US FRACKERS come online flood surplus , it will never be the same. Should got out in July even Dec, wasn't to bad. Not to mention short term bond vanguard crashed with rates increase.

I have a Suncor my oil sands was taken over by Suncor too. That was a nice loss.
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Old 05-20-2017, 12:04 PM   #14
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I was in for a whole lot less than that... I deal in peanuts. I lost a bit, but was able to trim losses.

I have a private investment that has been returning 30+% in dividends a year, let alone share value, so hard to put money elsewhere right now.
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Old 05-20-2017, 01:38 PM   #15
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I work in the environmental consulting field and much of my work is with the oil and gas industry. I knew this oil glut was coming years ago when the extraction technology improved dramatically and we started finding more and more large O&G plays across the US and aboard. Also, reserves in many cases had been underestimated and/or the technology now allows us to extract more than once thought possible. There are massive reserves throughout this country; far more than anyone could have imagined just 5 years ago. This goes for many other countries as well and for places like Russia, the Middle East, and South America, it scares the crap out of those countries because they loosing their oil-controlling power. I can see wars being manufactured solely as a way to dramatically boost oil prices.

All this oil teamed with improved efficiency has been a perfect storm. 5-7 years ago, oil exploration companies in the US were making massive amounts of money and it was drill baby, drill. Our business was booming as well with the associated environmental permitting and compliance these companies had to adhere to. I kept thinking to myself, do these companies not understand that they're going to oversupply the market and crash prices? I guess not. They kept making money and they kept giving us business with little question about our pricing. I saw the writing on the wall and started taking on work in other industries because I didn't want to be without a job when the market tanked.

Right now, my private equity clients aren't terribly interested in oil. They're going gangbusters over natural gas. I'm not sure why, but the acquisition activity has been quite high for NG over the past 3 months.
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Old 05-20-2017, 08:38 PM   #16
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****ing OPEC. Got damn cartel that makes Fidel and Escobar look like Saints.
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Old 05-20-2017, 11:45 PM   #17
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****ing OPEC. Got damn cartel that makes Fidel and Escobar look like Saints.
Indeed. It is satisfying to see them powerless for the first time in my life.
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Old 05-21-2017, 08:17 PM   #18
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Quote:
Originally Posted by MaddMax View Post
I work in the environmental consulting field and much of my work is with the oil and gas industry. I knew this oil glut was coming years ago when the extraction technology improved dramatically and we started finding more and more large O&G plays across the US and aboard. Also, reserves in many cases had been underestimated and/or the technology now allows us to extract more than once thought possible. There are massive reserves throughout this country; far more than anyone could have imagined just 5 years ago. This goes for many other countries as well and for places like Russia, the Middle East, and South America, it scares the crap out of those countries because they loosing their oil-controlling power. I can see wars being manufactured solely as a way to dramatically boost oil prices.

All this oil teamed with improved efficiency has been a perfect storm. 5-7 years ago, oil exploration companies in the US were making massive amounts of money and it was drill baby, drill. Our business was booming as well with the associated environmental permitting and compliance these companies had to adhere to. I kept thinking to myself, do these companies not understand that they're going to oversupply the market and crash prices? I guess not. They kept making money and they kept giving us business with little question about our pricing. I saw the writing on the wall and started taking on work in other industries because I didn't want to be without a job when the market tanked.

Right now, my private equity clients aren't terribly interested in oil. They're going gangbusters over natural gas. I'm not sure why, but the acquisition activity has been quite high for NG over the past 3 months.
I don't know how long you've been in the business, but I've been on rigs since I was 5. It's simply the nature of the beast. It's always a boom bust cycle. Only now, like many other things in the industrial world, it's a much larger scale. Only people to get blindsided are those that don't know any better, outsiders, and other similar like minded individuals... For the most part, the private equity groups can operate with much more efficiency than do the majors. SWEPI, Chevron, etc went bust here in PA because they had the "throw money" at everything mentality.
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Old 05-22-2017, 07:43 AM   #19
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I'm in PA..where you at. My main house Harvey's Lake PA..I have two Wells on our land in Tunkhannock,

http://stateimpact.npr.org/pennsylva...unicipality-2/

The other wells where flops..Noxen and behind the restaurant near Ricketts. They drilled, but the burn wasn't commercially feasible. That's when they learned that the shale going west was to hot and was burning the gas off, in simple turns. So two of the four made my family money, and a lot enemies too. When you drill and jeopardize the wells of your neighbors wells for their farm and lively hood wellll...but many many years latter, it's all cool no contamination, I did it in aTunk. Because if it wasn't me, the next guy would of.


This was interesting
Does The Permian’s Sweet Spot Hold 8 Times More Oil Than Predicted?
http://oilprice.com/Energy/Crude-Oil...Predicted.html

As far as the crash, I inherited all my oil crap from my family, it's always boom to bust..You never sell, that's what I was instructed. It might be a whole Presidential Term before things bounce, but this one was historic.

As for Chevron...
In the US
http://marcellusdrilling.com/2011/09...rs-in-the-u-s/

In the Word
http://www.investopedia.com/articles...-xom-ogzpy.asp

Last edited by AVANTI R5; 05-22-2017 at 07:56 AM.
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Old 05-22-2017, 12:58 PM   #20
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So I'm good to get a Durango or Jeep SRT is what yer sayin?
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Old 05-24-2017, 12:45 PM   #21
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Default OPEC nearing deal to extend oil output cut to March 2018

http://www.reuters.com/article/us-op...-idUSKBN18K0W9

OPEC nearing deal to extend oil output cut to March 2018

Quote:
By Ahmad Ghaddar, Alex Lawler and Vladimir Soldatkin | VIENNA

OPEC and non-member oil producers moved closer on Wednesday to clinching a deal on extending output cuts by nine months to clear a global stocks overhang and prop up the price of crude.

The Organization of the Petroleum Exporting Countries meets in Vienna on Thursday to consider whether to prolong the accord reached in December in which OPEC and 11 non-members agreed to cut oil output by about 1.8 million barrels per day in the first half of 2017.

The market sees an extension by nine months as the base-case scenario since OPEC's de facto leader Saudi Arabia and top non-member Russia said this month they favored such a move.

Saudi ally Kuwait signaled on Wednesday OPEC could discuss deepening the cuts, in what would come as a positive surprise for market bulls, but hopes quickly faded after a key committee recommended keeping the curbs unchanged.

Two OPEC sources told Reuters a ministerial committee comprising OPEC members Algeria, Kuwait, Venezuela, current OPEC president Saudi Arabia and non-OPEC producers Russia and Oman recommended keeping the cuts "at the same level".

The committee said in a statement it had recommended extending the cuts by nine months to March 2018.

Saudi Energy Minister Khalid al-Falih gave the thumbs up when asked whether the committee had agreed on a nine-month extension.

"Before the end of the year, prices may go above $55 a barrel," Algerian Energy Minister Noureddine Boutarfa told Reuters before the committee meeting, saying an extension by nine months should help clear the glut by the year-end.

Saudi Arabia and Russia have said that extending output curbs by nine months rather than the initially planned six months would help speed up market rebalancing and prevent crude prices from sliding back below $50 per barrel.

"OPEC has already achieved a lot. They stopped the oil market surplus from building even before they started cutting," said Gary Ross, head of global oil at PIRA Energy, a unit of S&P Global Platts.

Most OPEC ministers including Iraq's have already voiced support for extending cuts by none months.

Iranian Oil Minister Bijan Zanganeh, who clashed with Saudi Arabia in many previous OPEC meetings, has so far kept a low profile, saying extensions of six or nine months were possible. Zanganeh is due in Vienna later on Wednesday.

Under the existing deal, Iran received an exemption slightly to raise output, which has been curtailed by years of Western sanctions. Iran's production has been stagnant in recent months, suggesting limited upside potential at least in the short term.
Quote:
DEEPER CUTS

OPEC's cuts have helped push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.

Oil's earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.

But surprises on Thursday are still possible.

A substantial additional cut was unlikely, one OPEC delegate said, "unless Saudi Arabia initiates it with the biggest contribution and is supported by other Gulf members".

By 1340 GMT on Wednesday, Brent crude was trading broadly flat just above $54 a barrel. [O/R]

The price rise this year has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global stocks still near record highs.

"Production cuts cause higher prices which will incentivize more production for the U.S. shale oil and reduce the impact of the production cuts. So it's a bit cyclical," said Sushant Gupta, research director for consultancy Wood Mackenzie.

OPEC has a self-imposed goal of bringing stocks down from a record high of 3 billion barrels to their five-year average of 2.7 billion.

Algeria's Boutarfa said he believed stocks remained stubbornly large in the first half of 2017 because of high exports from the Middle East to the United States.

"Thankfully, things are improving and we started seeing a draw in inventories in the United States," Boutarfa said, adding he believed that inventories should decline to their five-year average by the end of 2017.

One industry source close to OPEC said the group could also send a message about tighter exports but it was unclear how that could be presented on Thursday.
The problem for OPEC, of course, is that the US will just ramp production back up to account for any slack in the market. The oil glut will continue until something drastic happens. War, maybe.
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Old 05-24-2017, 01:24 PM   #22
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Unless a war oil will stay low. The frackers and tar sands have substantially lowered their cost to put push out oil and make profits at low barrel prices. Oil permits at big increase to drill.
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Old 07-03-2017, 01:00 PM   #23
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Default North America Is Making OPEC Irrelevant

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North America Is Making OPEC Irrelevant

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A coalition of OPEC members and other petrostates agreed to reduce its collective production by 1.8 million barrels per day through next March, but surging North American crude production is threatening to effectively cancel out those cuts. As the FT reports, oil output in Canada’s oil sands is set to jump as projects funded well before the decline in crude prices come online over the next year and half:


A forecast released this month by the Canadian Association of Petroleum Producers sees the country’s output increasing by 270,000 barrels a day in 2017 and another 320,000 b/d next year. That combined two-year Canadian increase is equal to almost a third of Opec’s production cuts that it made with allies like Russia at the beginning of this year in an effort to raise prices.

Canada isn’t even the sharpest North American thorn in OPEC’s side, though. The United States has seen its own oil output jump 550,000 barrels per day since last November, when these petrostate cuts were first announced. American production has dipped slightly in recent weeks as producers have scaled production back slightly due to flagging oil prices, but the outlook for shale over the rest of the year is still quite strong.

Combined, Canadian and U.S. oil production is set to grow more than a million barrels per day next year, as compared to where these North American countries were when the petrostate cuts first went into place. That nullifies more than half of that petrostate production draw down.

And it’s important to note that, going forward, OPEC will be the victim of any success it manages with these cuts. If prices do start to rise—a very big if, given current market conditions—then shale producers will quickly be able to take advantage of the rebound by ramping up their own production.

This all adds up to a truth that the oil historian Daniel Yergin hit on last year: ““[t]he era of Opec as a decisive force in the world economy is over.” And while these petrostates are coming to terms with their decline in relevance, it’s North American producers that are emerging as the new dynamic force in the global oil market.
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