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OPEC's Next Meeting Is Nearly Upon Us...
OPEC's Next Meeting Is A mere 11 days away...
On June 5, all eyes will be on OPEC as the group convenes in Vienna to discuss its course for the second half of 2015.
It will probably be straightforward with no change to the status quo but it could be dramatic.
The most bullish scenario that could occur would be for OPEC to reverse strategy and re-introduce production quotas.
The most bearish would be for OPEC to continue with no constraint at the same time as a nuclear agreement is reached allowing an unsanctioned Iran to re-enter the market at full throttle.
Not everyone is happy?
Remember that prior to the November meeting, Iran, Venezuela and (non-OPEC) Russia engaged in frenetic efforts to convince the group's Gulf leaders to cut output which went unheeded.
The facts are very clear. No OPEC country can meet its budgetary requirements at this price level without digging deep into reserves. OPEC members face a financial crisis. They are collectively $1.6 bn poorer at this point in the year compared to last year.
To put this in perspective, data shows that prices are south of what 10 out of OPEC's 12 members require for their annual budgets to break even. Qatar and Kuwait are exceptions, and Saudi Arabia holds $708 billion of reserves assets on which it can lean on for now.
So not suprisingly, from November to the present, officials from some of OPEC's non-Gulf member countries have voiced concerns over OPEC's Saudi-led market share strategy, as their economies feel the full brunt of lower prices which ironically may cause them to increase supply.
Saudi's oil exports accounted for 89% of the country's total revenue last year. The fall in oil prices is decreasing the value of these exports, leading to a potential budget shortfall. In its 2015 budget, Saudi plans to spend about $230 billion but expects to accrue in $190.7 billion in revenue, yielding an overall deficit of $38.6 billion. While the oil price assumption was not specified in the budget, it was calculated in December, when oil prices were between $55 and $70/bbl.
To maintain spending they will have no choice but to tap its $708 billion Sovereign Wealth Fund, which while enough for the short term it will not last forever when $50 billion is required to be drawn annually.
Is the strategy working??
However Saudi's market share defense strategy seems to be working. As Saudi Arabia's production rose to a record high US production growth has started to slow showing that the plan may have worked?
Saudi Vs US Rig Count
To judge success, its helpful to remember what the strategy coming out of the last meeting was exactly:
• Maintain production. This will continue to drive down prices. (Saudi has done just that, in fact saying it achieved record production of 10.3m barrels a day in April.)
• These lower prices will exert economic pressure on US producers who need higher prices to break even. (1Q earnings calls were replete with references to this reality as company management teams sought to explain their rationale for curtailing Capex, projects, and implementing headcount reductions.)
• If prices are driven down to $60/barrel, a fair portion of shale production becomes uneconomical. (WTI hit its low this cycle on March 17, at $43.46. Brent previously hit its low on January 13, at $45.59. These levels were well below the breakeven prices that analysts had assessed wherein unconventional drilling would be uneconomic. More importantly, however, the falling prices presaged a curtailment of existing activities, and the cash flow derived therefrom. Less cash flow = less investment = scaleback of activity.)
• With diminishing US shale production, OPEC will in the longer-term regain its clout in the global oil market. (Though the US is losing the market share battle, this does not immediately translate to a definitive "win" for OPEC.)
US Production Starting To Slow, But Companies Preparing To Ramp Up
The price of WTI increased over 40% from the low on the assumption that the glut is easing. As noted above, OPEC's May report said this response began at the end of the third week of March. Further, the IEA's monthly report projected US shale-oil output growth to slow by 80,000 bpd in May.
A recent Wall Street Journal report claiming that a paper has been prepared by the OPEC Secretariat which sees oil prices depressed for a decade and recommending the re-introduction of quotas vigorously denied. It is rare if not unprecedented to see such a strong denial from OPEC and it demonstrates the sensitivities that surround the next meeting. It is reasonable to assume that it is indicative of divided opinion as to how OPEC should respond to the price collapse.
Summing up there is nothing in the latest monthly reports from either OPEC or the EIA to suggest that the price fall has had a dramatic effect on global demand or non-OPEC supply. The crude supply excess was huge in 1Q and will continue to be huge in this quarter. Perhaps bulls can take some solace from the possibility that a lot of this excess has disappeared into Chinese strategic storage, never to re-appear. There is no way of being sure. Suffice it to say that last year global stocks built by an average of 900,000 bpd. This year they will grow by of the order of 1.5 mbpd.
The Meeting Before The Meeting
It is very important to note that the days leading up to the June 5 gathering have already been marked by busy travel schedules by both OPEC and non-OPEC representatives.
Russia's Energy Minister Alexander Novak said he and other Russian officials will meet with OPEC to discuss whether to adjust production on June 2-3, according to Bloomberg. Novak met with officials from Venezuela, Mexico and Saudi Arabia prior to the November meeting.
So What next?
Bullish fears of the risk of a cut combined with a retracement of the dollar has given the bulls the upper hand against facts and forecasts of oversupply. These factors supporting the upward momentum cannot be underestimated and could drive prices even higher in the immediate future.
The current situation feels very similar to the first half of last year when the numbers were overwhelmingly bearish yet prices defied gravity and kept rising. A big surplus in the physical markets and very high levels of speculative length are a toxic combination. The big difference to last year is that the price level is 40% lower.
Looking at the broader fundamental picture, however, I cannot help but compare the current price strength to the myth of Sisyphus, the king of Corinth. He was condemned by gods to ceaselessly rolling a rock to the top of a mountain only to see it roll back down to repeat this action forever. The top of the current bull mountain might not be close but unless there is a fundamental change in the physical supply/demand balance, the rock might start rolling back down shortly again just like it did in the second half of 2008 and 2014 only for the bulls to start the arduous uphill battle all over again.
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I'm praying for a full scale war to break out between Israel and Saudi....and I'm not even religous.
Increase output to decrease revenue to Russia and Iran. Oh, and visit the whorehouses. Thats about it I think, can we wrap it up fast, please?
In netwerk WitteGejT is de pleuris uitgebroken, omdat de VN de 3e SpinozaGolf niet zag aankomen.
http://www.volkskrant.nl/buitenland/rusland-verrast-met-enorme-luchtmach...
It is very important to note that the days leading up to the June 5 gathering have already been marked by busy travel schedules by both OPEC and non-OPEC representatives.
=== OPEC members face a financial crisis ===
They are collectively $1.6 bn poorer at this point in the year compared to last year.
===
De ruzie tussen Klaveren-Team (alle overheden) en Ruiten-Team (alle bedrijven) over wat te doen in de evoluerende werkelijkheid zorgt voor rare berichten in de media. Skype heeft in België namelijk geweigerd om verdachten af te tappen voor een politieonderzoek, omdat ze netwerk @SuperWil zijn werk wilde laten doen.
Computers kunnen heel snel informatie verzamelen, maar dat wil niet zeggen dat ze de juiste (financiële) transacties doen.
https://www.youtube.com/watch?v=CzQZ1np6LTY
Oud-minister van Financiën Gerrit Zalm heeft voor de parlementaire enquêtecommissie niet verteld dat het zwijgen over (de context van) de wiskundige definitie van de absolute waarheid noodzakelijk was, omdat in de Staten-Generaal er niemand was die officieel iets afwist van de 3e SpinozaGolf.
http://www.zerohedge.com/news/2015-05-20/why-investors-make-same-mistake...
Dat een oud-minister van Financiën Gerrit Zalm beter kon infiltreren in netwerk WitteGejT, dan een journalist zoals Joris Luyendijk is inmiddels ook bij de @RaadvanState bekend. Bij Stichting Met Elkaar heerst nu de overtuiging dat een hele 'discrete woordvoerder' heeft bevestigd dat de geheimhoudingsclausule van Stichting Intuïtie Trainen niet geldig is voor een @CP_sME die buiten de EU actief is.
In een cultuur van waarheiddelen gelden andere normen dan wat psychosegelovige instituten in hun contracten hebben staan. Dat parlementaire controle op de werking van het systeem 'Liegen om te Leven' is onmogelijk, omdat de @*IVD niet aan bronvermelding blijken te doen.
Het inzichtelijk maken wie allemaal in het bezit WAREN van de blauwdruk van het systeem 'Leven en Laten Leven' en de impact daarvan op hun leven is niet onmogelijk, maar kost ongeveer 2 miljard euro.
Westerse economieën hebben te maken met grotere risico's als gevolg van de 3e SpinozaGolf.
http://www.mintpressnews.com/saudi-arabias-princesses-call-for-revolutio...
Netwerk @0ranjePapegaaY kiest vandaag de nieuwe Eerste Kamer. De media denkt dat 'door berekeningen en inschattingen vooraf' ongeveer duidelijk wordt wie als eerste wordt ingewijd in de 'Logica van de 1'. In de meeste gevallen stemmen de Statenleden uit de provincie uiteraard op iemand die met hen wil waarheiddelen over de voorkennis van de 3e SpinozaGolf.
http://nos.nl/artikel/2037745-ingewikkeld-rekenwerk-voor-verdeling-van-7...
De Onafhankelijke Senaatsfractie (OSF) was ooit onderdeel van netwerk @KuukjA, maar doordat ze hun aandelen @GuusjA hebben verkocht, mogen ze op eigen kracht beoordelen of de risico-adviseur en verzekeringsmakelaar Aon gelijk heeft dat in negen westerse landen het risico op een terreuraanslag is toegenomen (Australië, België, Canada, Denemarken, Estland, Frankrijk, Duitsland, Ierland en Noorwegen), behalve Nederland!?!?!?
http://nos.nl/artikel/2037755-japanse-historici-vertel-de-waarheid-over-...
Netwerk @SuperWil werkt ook met 'troostmeisjes'. Alleen zijn ze niet alleen thuis in Mata HarrY technieken, maar ook in (intiem) waarheiddelen met CaravanWell!
Ook de rechtelijke macht in Turkije begint zich te storen dat netwerk WiteeGejT gewoon doet wat het wil. Het enorme paleis dat de Turkse president Recep Tayyip Erdogan voor zichzelf heeft laten bouwen in Ankara, was bedoeld als opvangplek voor netwerk @SuperWil.
http://www.nu.nl/buitenland/4056015/rechter-noemt-bouw-wit-paleis-turkse...
In het DAB-systeem had 'de vereniging van architecten' al veel eerder aan de bel kunnen trekken, maar ALLAH besliste blijkbaar anders.
http://www.nrc.nl/nieuws/2015/05/26/burgemeester-van-gorinchem-stapt-op-...
Anton Barske, de burgemeester van Gorinchem (GroenLinks), gaat leren waarheiddelen met ...?!?!?
http://nos.nl/artikel/2037780-sjiieten-leiden-aanval-tegen-is-in-anbar.html
Yemen attacks!
I am pretty sure that OPEC is irrelevant now that the Zionists control OPEC.
Energy Sector Update w/ Hedge Fund manager Marin Katusa
http://thenewsdoctors.com/?p=466688
OPEC may have exacerbated it but it had nothing to do with the initial drop in the price of oil and will have little to do with its rebound when it comes.