OPEC+ Faces Growing Pressure to Change Course as Ministers Meet, , on October 17, 2020 at 11:01 pm

By
On October 17, 2020
Tags:

(Bloomberg) — When OPEC and its allies met last month, Saudi Arabia’s energy minister dared oil speculators to test his determination to stabilize global markets.Now that a resurgent pandemic is threatening demand once again, the moment of reckoning is getting closer.The coalition of crude producers gathers on Monday to assess the state of the market. No supply decisions are expected until Dec. 1 but leading members Saudi Arabia and Russia are already stepping up diplomacy. President Vladimir Putin and Saudi Arabia Crown Prince Mohammed Bin Salman have spoken twice by phone in a week — the first time the countries’ leaders have done that since the depths of the oil crisis in April, when they were hashing out a deal to cut supply and bring the price war to an end.With oil stuck at around $40, and more supply coming online from Libya, the cartel is now under pressure to revise its plan to ease those output cuts. It has already relaxed them by about 2 million barrels a day, and is due to add another 1.9 million in January.While members are publicly sticking with that plan for now, OPEC Secretary-General Mohammad Barkindo acknowledged on Thursday that demand is “anemic” and the cartel will act to prevent a market “relapse.” Its own internal reports points to the risk of a new surplus. And in private, delegates admit they’re open to delaying the increase when a formal decision is taken in six weeks.Read: OPEC’s Ever-Deteriorating View of the Oil MarketInfluential voices in the market are already telling OPEC+ to be wary about the planned increase.Trading houses like Mercuria Energy Group, banks including JPMorgan Chase & Co. and institutions such as the International Energy Agency are counseling that markets remain too fragile to easily absorb the additional barrels.“Adding oil to the market at such a time is not an advisable gambit,” said Natasha Kaneva, an analyst at JPMorgan in New York.These views may be considered during Monday’s online session of the Joint Ministerial Monitoring Committee, chaired by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman and his Russian counterpart Alexander Novak. The panel won’t decide on next year’s supply, which will be finalized at the larger ministerial meetings on Nov. 30-Dec. 1.It’s a decision that will have profound implications not just for the Organization of Petroleum Exporting Countries — many of whose member nations need prices significantly above current levels to cover government spending — but also the wider industry, from shale drillers to majors like Exxon Mobil Corp.Glimmer of HopeThere have been glimmers of hope for oil prices recently that producers must take care not to snuff out.Global oil demand has recovered to 94% of pre-pandemic levels, depleting the world’s bloated inventories, the International Energy Agency estimates. Buyers in China, the world’s second-biggest consumer, are set to boost purchases after slowing down over the summer. Indian refiners are cranking up operations before the nation’s two main festivals.Stronger consumption from the two Asian behemoths will play a big part in the final decision in December. Ministers will also consider data from other parts of the world as the virus spreads, and the result of the U.S. presidential elections in early November.But a full return to prior levels of demand will take a couple of years, particularly for jet fuel, trading houses like Vitol Group and Trafigura Group predict. OPEC+ also needs to keep whittling away global stockpiles to avoid another glut and a plunge in prices.If the group “adds production as scheduled in January, then we will not draw crude stocks anymore,” Torbjorn Tornqvist, chief executive officer of trading house Gunvor Group Ltd., said in an interview.Libyan SurgeAnother reason to postpone the increase has emerged recently as Libya, exempted from the effort to restrain supply, restores output.The OPEC nation has boosted production five-fold in just a few weeks after a military commander allowed ports to reopen. It’s now pumping 500,000 barrels a day following the restart of its biggest oilfield, and the IEA estimates another 200,000 a day could be added by the end of the year.An internal report presented at an OPEC+ technical committee last week showed the group is aware of the dangers. While its central scenario predicted that global oil stockpiles will decline by 1.9 million barrels a day next year, it cautioned that if Covid-19 hits demand harder than expected and Libya stages a strong recovery, inventories could instead accumulate slightly.Delaying the planned output taper would bring its own complications, however, as countries would have to forsake the revenue additional production could bring.Another issue will be clearing the backlog of compensatory supply cuts that nations like Iraq and Nigeria owe in return for flouting quotas in the initial months of the agreement. Saudi Arabia and Russia have urged fellow members to respect their output commitments as oil prices come under renewed pressure.“Right now, when demand is fragile and Covid-19 cases are resurging, all the producers have an incentive to work together,” said Helima Croft, head of commodity strategy at RBC Capital Markets LLC.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.,

OPEC+ Faces Growing Pressure to Change Course as Ministers Meet(Bloomberg) — When OPEC and its allies met last month, Saudi Arabia’s energy minister dared oil speculators to test his determination to stabilize global markets.Now that a resurgent pandemic is threatening demand once again, the moment of reckoning is getting closer.The coalition of crude producers gathers on Monday to assess the state of the market. No supply decisions are expected until Dec. 1 but leading members Saudi Arabia and Russia are already stepping up diplomacy. President Vladimir Putin and Saudi Arabia Crown Prince Mohammed Bin Salman have spoken twice by phone in a week — the first time the countries’ leaders have done that since the depths of the oil crisis in April, when they were hashing out a deal to cut supply and bring the price war to an end.With oil stuck at around $40, and more supply coming online from Libya, the cartel is now under pressure to revise its plan to ease those output cuts. It has already relaxed them by about 2 million barrels a day, and is due to add another 1.9 million in January.While members are publicly sticking with that plan for now, OPEC Secretary-General Mohammad Barkindo acknowledged on Thursday that demand is “anemic” and the cartel will act to prevent a market “relapse.” Its own internal reports points to the risk of a new surplus. And in private, delegates admit they’re open to delaying the increase when a formal decision is taken in six weeks.Read: OPEC’s Ever-Deteriorating View of the Oil MarketInfluential voices in the market are already telling OPEC+ to be wary about the planned increase.Trading houses like Mercuria Energy Group, banks including JPMorgan Chase & Co. and institutions such as the International Energy Agency are counseling that markets remain too fragile to easily absorb the additional barrels.“Adding oil to the market at such a time is not an advisable gambit,” said Natasha Kaneva, an analyst at JPMorgan in New York.These views may be considered during Monday’s online session of the Joint Ministerial Monitoring Committee, chaired by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman and his Russian counterpart Alexander Novak. The panel won’t decide on next year’s supply, which will be finalized at the larger ministerial meetings on Nov. 30-Dec. 1.It’s a decision that will have profound implications not just for the Organization of Petroleum Exporting Countries — many of whose member nations need prices significantly above current levels to cover government spending — but also the wider industry, from shale drillers to majors like Exxon Mobil Corp.Glimmer of HopeThere have been glimmers of hope for oil prices recently that producers must take care not to snuff out.Global oil demand has recovered to 94% of pre-pandemic levels, depleting the world’s bloated inventories, the International Energy Agency estimates. Buyers in China, the world’s second-biggest consumer, are set to boost purchases after slowing down over the summer. Indian refiners are cranking up operations before the nation’s two main festivals.Stronger consumption from the two Asian behemoths will play a big part in the final decision in December. Ministers will also consider data from other parts of the world as the virus spreads, and the result of the U.S. presidential elections in early November.But a full return to prior levels of demand will take a couple of years, particularly for jet fuel, trading houses like Vitol Group and Trafigura Group predict. OPEC+ also needs to keep whittling away global stockpiles to avoid another glut and a plunge in prices.If the group “adds production as scheduled in January, then we will not draw crude stocks anymore,” Torbjorn Tornqvist, chief executive officer of trading house Gunvor Group Ltd., said in an interview.Libyan SurgeAnother reason to postpone the increase has emerged recently as Libya, exempted from the effort to restrain supply, restores output.The OPEC nation has boosted production five-fold in just a few weeks after a military commander allowed ports to reopen. It’s now pumping 500,000 barrels a day following the restart of its biggest oilfield, and the IEA estimates another 200,000 a day could be added by the end of the year.An internal report presented at an OPEC+ technical committee last week showed the group is aware of the dangers. While its central scenario predicted that global oil stockpiles will decline by 1.9 million barrels a day next year, it cautioned that if Covid-19 hits demand harder than expected and Libya stages a strong recovery, inventories could instead accumulate slightly.Delaying the planned output taper would bring its own complications, however, as countries would have to forsake the revenue additional production could bring.Another issue will be clearing the backlog of compensatory supply cuts that nations like Iraq and Nigeria owe in return for flouting quotas in the initial months of the agreement. Saudi Arabia and Russia have urged fellow members to respect their output commitments as oil prices come under renewed pressure.“Right now, when demand is fragile and Covid-19 cases are resurging, all the producers have an incentive to work together,” said Helima Croft, head of commodity strategy at RBC Capital Markets LLC.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.

,

Instant Quote

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

High West Capital Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

High West Capital Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with High West Capital Partners, LLC’s internal lending policies. High West Capital Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Singapore

168 Robinson Road
#12-01 Capital Tower
Singapore 068912

New York

Coming Soon!

Dubai

Coming Soon!

Follow Us