This page has been archived and commenting is disabled.
Oil Majors Don't Share OPEC's Optimism On Oil Prices In 2016
Submitted by Andy Tully via OilPrice.com,
OPEC’s meeting in Vienna is less than a month away, and oil producers – countries and companies alike – have been raising their concerns at an energy conference in the United Arab Emirates over the cartel’s strategy to keep prices low.
The issue arose on Monday when Mohammed bin Hamad al-Rumhy, the oil minister of Oman – not a member of OPEC – told the annual Abu Dhabi International Petroleum Exhibition and Conference that oil production is at “irresponsible” levels, leaving little latitude for variations in production.
“This is [a] man-made crisis in our industry we have created,” al-Rhumy said. “And I think all we’re doing is irresponsible.”
Al-Rhumy added, “This is a commodity that if you have 1 million barrels a day extra in the market, you just destroy the market. We are hurting, we are feeling the pain, and we’re taking it like a God-driven crisis. Sorry, I don’t buy this, I think we’ve created it ourselves.”
The next day, al-Rhumy’s concerns, if not his criticism, were shared by executives of leading international oil companies: ExxonMobil of the United States, BP of Britain and Total of France. All said they expect the current glut of oil, and the resultant depression in oil prices, to last longer than anyone expected – months longer, if not years longer.
“I’m not sure we will exit from low prices before many months,” Total CEO Patrick Pouyanne said.
Lamar McKay, the director of exploration and production for BP, said he expects oil prices will stay low for some time, and Michael Townshend, the company’s director for Middle East operations, said he expects the price of a barrel of oil will rise no higher than about $60 for three more years.
These gloomy forecasts contrasted with the OPEC view. The group’s secretary general, Abdullah al-Badri, told the conference on Tuesday that 2016 is likely to be a year for positive momentum in oil markets. And on Monday, UAE Oil Minister Suhail al-Mazrouei, said a decision by OPEC to cut production to shore up oil prices would only play into the hands of its competitors.
As a result, al-Mazrouei said, he doesn’t expect OPEC to change its strategy when it meets Dec. 4. “When you are the least expensive oil, you should be the base producer,” he said.
At its meeting in November 2014, OPEC adopted Saudi Oil Minister Ali al-Naimi’s strategy of keeping production at 30 million barrels a day, despite the fall in oil prices caused by a rapid increase in production by non-members, especially the United States, which had ramped up production of shale oil.
The goal was to wage a price war that would keep oil prices so low that such producers, who rely on relatively expensive hydraulic fracturing, or fracking, can’t afford to drill for oil. The break-even point for fracking is around $60 per barrel, and oil now averages about $50 per barrel, leading to a noticeable drop in U.S. drilling.
In the meantime, OPEC nations are exceeding their production limit of 30 million barrels per day by more than 1.5 million barrels, so it’s no wonder oil prices are so low.
Concerns about low oil prices were raised before last year’s OPEC meeting, particularly by Venezuela.
Saudi Arabia had already said it opposed production cuts. Venezuela’s president, Nicolas Maduro, said he was hoping to work out ways to bolster oil prices in meeting both with members of OPEC and producers who weren’t part of the 12-member cartel.
That came to naught, however, and the Saudi plan became OPEC policy. Despite current dissatisfaction from some oil producers, there’s no reason to expect the cartel to change course if it believes its strategy is working.
»
- 430 reads
- Printer-friendly version
- Send to friend
- advertisements -
Whiners.
I wonder why the Saudis or the Russians don't just shut down the Straights of Hormuz or something...
They need the money !
Excessive non-economic oil production got you down?
Well, go cry to the masters of ZIRP, who are the only ones who could've ever made it all possible.
Virtually every producer is pumping full out in order to avoid the repo-man, yet it's all the Saudi's fault?
I for one, will be glad when the Tylers abandon this flawed meme.
And no I'm not a fan of the House of Saud. I just prefer a little coherence given Mises laid this all out nearly a century ago.
Exactly. Look around the world: US Shale? Pumping at max capacity. Canada Tarsands? Pumping at max capacity. Russia? Pumping at max capacity. Saudis? Pumping at max capacity, etc.
Is there any country on earth who's actually cut production yet? Wake me up when that happens.
US shale is closing, not pumping at max. Because of the price.
Venezuela is cutting production but only out of mismanagement.
Qtrly Earnings Growth (yoy):-47.50%
Better than expected...
James G. Ricktards, a world-renowned investment advisor and hedge fund manager, has assured that the equilibrium price is 60$.
So what's his date on WWIII creating said equilibrium? Otherwise, The Dark Ages 2.0 is gonna push demand waaaaaaay down the line.
Yeah... first they rigged the market to get Russia and America out of the oil play, now they're going bankrupt by their own design and can't turn the tide...
poor muslims... what would mohamed do...
kill some infidels and fuck his ninth wife?
Beats workin'.
Oil belongs at $35. Too bad the rulers of the fucked up countries based their budgets on what they got out of $100 a barrel.
Not my problem.
If we ate too much sugar as a child, my mother said she had no sympathy when we got a stomach ache.
I don't feel bad about Middle Eastern Sheikhs not being able to buy a third Veyron or twelfth G6.
Why $35? why not just make it $10 or $5 for that matter. True price discovery is what one is willing to pay.
1971 went to work for big oil. Aramco was getting $2 a barrel. Since the dollar has been destroyed, $35 sounds close.
is true price discovery possible with a cartel?
Yes, the definition applies. What people are willing to pay is what the price is. The fact that theres a cartel only means the price will be higher and supply lower, yet that is compatible with a market.
Again from a physical economy rather then a financial economy perspective it is how and on what oil is used.
The real story is in thconsumption jurisdictions.
The oil is not used to service real human consumption
It is used to vector people into ever increasing circles.
n
From a money standpoint it is a no brainer to restrict supply and make moar on price even if restriction must be increased over time. So, the reasons are geopolitical and possibly global economics as in we likely would be in a global recession with $100 oil. My guess is they restrict in 6 months if China begins to show some life.
he doesn't mean oil production is an an irresponsible level, he means oil prices are at an irresponsible level. Anything below $100 oil and building mega cities in the middle of the frigging desert is crazy. Sure hate it for you dude. i"m filling up my big block for a spin.
I don't believe that the Saudi's have been suppressing the price of oil solely to bankrupt the U.S. shale oil industry.
I think that the U.S. pressured them into pushing the price down so that the U.S. Dollar could be propped. After all, most commodities have been pushed down, and the main beneficiary of these artificially low prices has been the Dollar.
Otherwise, the U.S. would have already experienced hyperinflation and would have collapsed, ending the reign of the
too-big-to-fail banks.
This is more of a banker scheme than an OPEC scheme.
I smell sub $15 oil while everyone pumps furiously trying to keep the Ziobanksters from foreclosing on their shit.
https://m.youtube.com/watch?v=G_2kjISuHJo
poor dude might have sell his gold plated jet and just live in gold plated house and drive his gold plated car. Doesn't anyone ever wonder if the oil is below the cost of recovery for the last decade...how did everyone in this industry get so filthy rich? Didn't the Saudi make trillions when oil was $25/Brl?
We need the dues!
What the Saud/US divide will do to the Saud/FDR handshake is more important than what Putin can possibly do to the petrodollar.
The TRUE divide now in the Pax Americana construct is the Saud/US divide on Fossil King of the World and guarantor of PETRODOLLAR!
This Saint Andreas fault in KIng Commodity's reign is the cutting of the Gordian knot that held it all together, by the Sauds; who now believe the US has betrayed their Sunni cause by signing the deal with Shia Iran.
And DAT is the bottom line. The obscurantist Shia/Sunni divide is moar obsessive to Saud's rulers than Oil revenues, and dat is the nail in the coffin of Petrodollar!
Some conundrum dat !
Why? Cos the Saud/US alliance of the cold war days had the INSTRUMENTALISATION of Religion as the cutting edge of the cold war divide; first in Pak/afghan via the Taliban, then via Saddam to figth rabid Iran; ALL for OIL and NWO concocted globally controlled POWER by the scions of Pax Americana.
Now the US power meme and the Saud ideoligical mantra, having been ripped apart by Sunni Jihadism, in Taliban Afghan and then in reneging Saddamist Iraq, has spawned two Frankensteins : Al -Qaeda and now ISIS; BOTH the bastard sons of this US/Saud accord.
And US Oligarchy is now hamstrung, with Oil going into backwardation bigtime and setting off the debt time bomb of the Reserve's hegemonial role.
And the fever is now going to spread to every nation in the Mena region !
When you sow the winds you reap the whirlwind.
well.. you want oils war with russia? you got it..!!
despite sanctions, hated, crashing oil & gas price? who is performs best in 2015??
http://www.bloomberg.com/news/articles/2015-09-07/move-over-exxon-russia...
ahemm... reduced output? are you nuts? gazproms haven't done with US&Saudi yet!!
despite saudi WANTS russia to become PERMANENT MEMBERS of OPEC!!
http://in.rbth.com/news/2015/09/07/rosneft-ceo-no-sense-for-rusia-to-joi...
Nope! the bear haven't finished trying to tear apart US&Saudi energy business..
For once the market is working like it should. Keep pumping, you all got debt to service so keep it up. You screwed us for long enough now, now its time to screw yourselves.
Not a single one of those oil ministers gives a fuck. They are all rich already. Oil goes up, oil goes down, it wont affect their lifestyles. Were their countries to implode they would relocate to Swtizerland and dine with Kerry.
I have posted this comment on 7 million forums and discussion boards and I have yet to get a reasonable answer.
If an oil producer, big or small, has X barrels of oil in the ground, a finite number, why would they (especially OPEC countries who can 'control' the price) overproduce to sell today at $43 instead of $110+ ??
How does driving down the price get one more 'market share' ? When oil was $100/bbl, all things being equal, it was $100 across the globe. At $43, its $43 across the globe. Again, all things being equal, how does that impact market share ?
Sure, at a point in the future, when competitors fold you gain market share. Does this fall into the "market can stay illogical longer than one can remain solvent" category ?
Completely short sighted vision in my book. WTF was the intention of OPEC in the first place?
Saudi was selling 9 m/bbl/day when oil was at $100+, now they are selling 10.5 mbbl/day at $43. The math on that is staggering.
Back to the finite X reserves. No doubt Saudi and every oil producer will pump and drill and do everything they can to get down to the last drop. Then it's over, literally pack up your tent and call it a day.
So why are they overproducing, selling more of their finite resource at a low price instead of over the longer term at more than double its current price.
If the real reason of this stunt is to cause severe pain for Russia, Iran, Venezuala and others, well the oil doesn't go away. Someone will still own it and someone will still drill and pump when prices are more favorable.
So WTF is really going on here ?
Thx.
I sort of answered below.
They dont care. Those countries do not feel any pain. Countries are not even real, only people or animals feel pain and those oil ministers are rich either way.
Hint. question this: "a finite number".
Easy answer: cashflow. These companies / countries need any revenue they can get. Turning off the lights and going home is simply not an answer.
A secondary answer is that many oil plays, such as tarsands and fracking literally cannot be shut down once started (at least not without incurring extra costs in the millions).
US oil production is still up around 9mill barrels according to EIA. Once their unstustainable shale oil output drops a million BBL or two, then OPEC are back to buisness as usual.
It's not about OPEC anymore.