Russia hints at further talks with Saudi Arabi after oil prices crash

Russia Energy Minister Alexander Novak pictured at a joint press conference during the 173rd Ordinary Meeting of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna, Austria on November 30, 2017.

Omar Marques | Anadolu Agency | Getty Images

https://www.cnbc.com/2020/03/10/oil-prices-russia-hints-at-further-talks-with-saudi-arabia-and-opec.html

• International benchmark Brent crude traded at $37.45 Tuesday morning, up over 8%, while U.S. West Texas Intermediate (WTI) stood at $34.05, around 9% higher.
• It comes after Brent and WTI both dropped 24% on Monday, sinking to more than four-year lows.
• Russia’s energy ministry has proposed to hold a meeting with Russian oil companies on Wednesday, Reuters reported, citing two unnamed sources.

Russia has refused to rule out talks with OPEC to stabilize energy markets, according to reports, after oil prices registered their worst declines in almost 30 years on Monday.

International benchmark Brent crude traded at $37.32 Tuesday afternoon, up over 8.5%, while U.S. West Texas Intermediate (WTI) stood at $33.69, around 8.2% higher.

It comes after Brent and WTI both dropped 24% on Monday, sinking to more than four-year lows.

The moves follow a breakdown in talks between the kingpin of oil-producing group OPEC, Saudi Arabia, and non-OPEC member Russia late last week.

Markets had been hoping for an agreement by both countries, and other oil producers, to curb oil output in an effort to bolster prices; their failure to agree led oil prices to crash on Monday.

Speaking to reporters Tuesday, Russian Energy Minister Alexander Novak said that Moscow had not ruled out measures with OPEC to stabilize oil markets, according to Interfax news agency.

Russia’s energy ministry has proposed to hold a meeting with Russian oil companies on Wednesday, Reuters reported, citing two unnamed sources.

They are expected to discuss whether to prolong Russia’s alliance with OPEC.

The collapse of the OPEC and non-OPEC agreement “does not appear to have been part of any pre-meditated strategy or plan on Russia’s part or done with the intention of undermining U.S. shale production,” Daragh McDowell, head of Europe and principal Russia analyst at Verisk Maplecroft, told CNBC via email.

“The arrangement was unpopular with key members of the Russian elite — notably Rosneft’s Igor Sechin — and the economic damage caused by the COVID-19 outbreak provided a handy pretext for abandoning the deal.”

How did we get here?

Last week, the 14-member group recommended additional production cuts of 1.5 million bpd starting in April and extending until the end of the year. But OPEC-ally Russia rejected the additional cuts when the broader energy alliance met on Friday.

The meeting concluded with no directive about the production cuts that are currently set to expire at the end of the month.

In response, Saudi Arabia announced massive discounts to its official selling prices for April, with state-owned oil giant Saudi Aramco expected to ramp up production.

Oil plunges 10% for worst day in more than 5 years after OPEC+ fails to agree on a massive production cut

https://www.cnbc.com/2020/03/06/oil-sinks-5percent-to-multi-year-low-on-uncertain-opec-deal.html

• Oil prices sank to multi-year lows on Friday as OPEC’s allies rejected additional production cuts proposed by OPEC on Thursday.
• U.S. West Texas Intermediate crude plunged more than 10% to settle at $41.28 per barrel. International benchmark Brent crude dropped more than 9% to hit a low of $45.18 per barrel.
• The current production cuts will be in place until the end of March as planned, but it’s uncertain if they will extend beyond this month.

Oil prices plunged more than 10% to multi-year lows on Friday as OPEC’s allies rejected additional production cuts that the organization proposed Thursday. 

U.S. West Texas Intermediate crude slid 10.07%, or $4.62, to settle at $41.28, its lowest level since Aug. 2016. It was WTI’s worst day since Nov. 28, 2014. Earlier in the session WTI traded as low as $41.11 per barrel.

International benchmark Brent crude slid 9.4% to settle at $45.27 per barrel. Its session low was $45.18, which is a price not seen since June 2017.

The meeting between OPEC and its allies, known as OPEC+, concluded with no deal on additional production cuts. The cartel and its allies agreed to meet again to monitor the situation. The current production cuts will be in place until the end of March as planned, but it’s uncertain if they will extend beyond this month.

Russian Energy Minister Alexander Novak told reporters leaving the meetings in Vienna on Friday that it meant that members could now pump what they liked starting April 1.  

“We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation. So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments,” he said.

On Thursday, OPEC recommended additional production cuts of 1.5 million barrels per day from the beginning of next month until the end of the year. 

The proposal was conditional on support from non-OPEC producers, including Russia. OPEC cautioned that the deal could only be applied on a pro-rata basis with core members set to cut 1 million barrels per day and non-OPEC partners expected to cut 500,000 barrels per day.

Oil has tumbled into bear market territory as the coronavirus outbreak has led to softer demand, and many on the Street expected OPEC to step in in a bid to prop up prices.

“The OPEC+ confab is devolving into the worst case scenario for the group. Last night, the best case scenario for the group was touted: a cut of 1.5 million bpd through year-end. That scheme hinged on Russian participation, however, which is not forthcoming,” Again Capital’s John Kilduff said.

Kilduff believes that without the additional cut of at least 1 million barrels per day WTI prices could head into the upper $30s.

The XLE, which tracks the energy sector, slid more than 4% on Friday, and is down 21% in the last month. The XOP, another oil and gas ETF, fell more than 7% to hit its lowest level on record, going back to its inception in 2006.

Virtu Financial founder Vincent Viola said he believes oil will test the $35 level again, which not adjusting for inflation is more like $28 to $32. This, in turn, will pressure many American producers.

“The exploration and production patch is going to go through a dislocation and you’re going to see a lot of bankruptcies and replacement and quite frankly restructuring of the domestic oil market,” he said Friday on CNBC’s “Halftime Report.”   

How did we get here?

The last time OPEC+ reduced supply on such a scale was in 2008 when it took 4.2 million barrels per day off the market to support oil prices in the wake of the financial crisis.

The oil producers first committed to curtailing their collective production policy back in 2016 in an effort to bolster prices, with the deal coming into force in January 2017.

In December 2019, it was extended and the alliance agreed to curb oil output by approximately 1.7 million barrels per day. Saudi Arabia then opted to cut its own production voluntarily by an additional 400,000 b/d for three months, should fellow members stick to their commitments. This brings the overall cut to 2.1 million barrels per day.

- CNBC’s Michael Bloom contributed reporting.

OPEC agrees on massive oil supply cut to offset virus impact; awaits Russia’s approval

OPEC Secretary General Mohammed Sanusi Barkindo (L), Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman (C) and Russian Energy Minister Alexander Novak (R) attend an Opec-JMMC meeting in the UAE capital Abu Dhabi on September 12, 2019.

KARIM SAHIB | AFP via Getty Images

https://www.cnbc.com/2020/03/05/opec-meets-to-decide-whether-to-cut-output-as-coronavirus-hits-demand.html

• The 14-member group, led by Saudi Arabia, decided on Thursday to cut production by 1.5 million barrels per day (bpd) through the second quarter of the year.
• OPEC added the group would review this policy at its next meeting on June 9.
• The proposed cuts, which were at the top end of analyst expectations, are believed to be conditional on approval from Russia.

OPEC has agreed to impose a deeper round of production cuts in order to support oil prices, paving the way for crunch talks with non-OPEC leader Russia, who still has to agree to the plan.

The 14-member group, led by Saudi Arabia, decided on Thursday to cut production by 1.5 million barrels per day (bpd) through the second quarter of the year.

OPEC added the group would review this policy at its next meeting on June 9.

The proposed cuts, which were at the top end of analyst expectations, are believed to be conditional on approval from Russia.

It means energy market participants will now turn their attention to a meeting of both OPEC and non-OPEC members, sometimes referred to as OPEC+, on Friday.

Ahead of the OPEC+ meeting, analysts were concerned a long-standing energy alliance between Saudi Arabia and Russia would come under intense scrutiny.

That’s because Russia’s appetite for deeper production cuts has been far from certain in recent weeks. Moscow is reportedly in favor of an extension to the current level of cuts rather than a further reduction.

Oil prices reversed early gains to move lower on Thursday. International benchmark Brent crude shed 32 cents, or 0.6%, to trade at $50.86 per barrel, while U.S. West Texas Intermediate stood at $46.68, around 0.2% lower.

Speaking shortly after the OPEC meeting on Thursday, Iranian Oil Minister Bijan Zanganeh said that Tehran would remain exempt from the proposed reduction.

How did we get here?

OPEC and non-OPEC producers first committed to curtailing their collective oil production policy back in 2016 in an effort to bolster prices, with the deal coming into force in January 2017.

In December 2019, it was extended and the alliance agreed to curb oil output by approximately 1.7 million barrels per day. Saudi Arabia then opted to cut its own production voluntarily by an additional 400,000 b/d for three months, should fellow members stick to their commitments.

In February, OPEC’s joint technical committee (JTC) reportedly recommended a 600,000 bpd reduction in oil production, and an extension of the cuts to end-2020, to alleviate downward pressure on oil prices.

Russia said at the time that it had not yet decided whether to sign up to the additional cuts, however, and that position appears to have continued.

Coronavirus outbreak causes record drop in world oil demand: Report

https://www.washingtonexaminer.com/policy/energy/coronavirus-outbreak-causes-record-drop-in-world-oil-demand-report

World oil demand will suffer the largest quarterly drop in history because of an unprecedented stoppage in economic activity in China due to the coronavirus outbreak.

Global oil demand in the first quarter of 2020 will be 3.8 million barrels per day lower than a year earlier, a steeper fall than what occurred during the 2009 financial crisis, according to a new projection Wednesday by London-based research group IHS Markit.

The previous largest decline in 2009 saw oil demand fall 3.6 million barrels per day in the first quarter.

Before the coronavirus threatened a global pandemic, IHS Markit projected world oil demand to increase in the first quarter by 0.7 million barrels per day. The volume difference between that initial projection and what it is now is 4.5 million barrels per day.

“This is a sudden, instant demand shock — and the scale of the decline is unprecedented,” said Jim Burkhard, IHS Markit’s vice president and head of oil markets.

Most of the demand decline is in China, but IHS Markit also projects demand elsewhere to fall, including in Europe, Japan, South Korea, the Middle East, and North America.

South Sudan Is Collapsing Thanks to Corruption Over Oil

Saudi Aramco Will More than Double Project Management Portfolio in 2022

 

An oil tank at Saudi Aramco's Ras Tanura oil refinery and terminal in Saudi Arabia. The company supplies crude oil to Reliance Industries' refinery in India.   © Reuters  

Saudi Aramco plans to more than double the amount of projects being managed by the firm from 200 to 418 by 2022, our sister publication Construction Week reported.

audi Aramco project engineer Eng Abdullah Al Seflan at the Future Projects Forum (FPF) said that “the vision is to be recognised as a pacesetter for the centre of excellence in project management. For cost of effectiveness of projects, we have the best in class within the oil and gas sector.”

According to Al Seflan, 23% of the project management expansion will fall under its civil and infrastructure division.

He noted that by 2021, Aramco will upgrade the Berri gas plant sulfur recovery units, and would install C3/C4 refrigeration units and storage tanks. The company is also planning to upgrade the Yanbu refinery’s sulphur recovery units, and the Juaymah Terminal offshore facility will also be expanded by 2021.

It is also planning to upgrade security facilities at the East-West pipeline’s pump stations, likely in response to attacks on those facilities in the past year.

The Hawiyah gas plant will undergo work in 2022, with plans to upgrade its buildings for risk mitigation, and with Phase 3 of its Master Gas System expansion for pipelines and distribution.

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Citgo, Aruba Reach Deal to Transfer Control of Refinery to Island Government

U.S. refiner Citgo has reached an agreement with Aruba to transfer control of the San Nicolas refinery to the island’s government, Citgo said late on Saturday, after the two parties last year suspended a contract to overhaul the facility.

Citgo, a unit of Venezuelan state oil company Petroleos de Venezuela [PDVSA.UL], has been under the control of the South American country’s opposition for more than a year after Washington slapped sanctions on PDVSA in a bid to oust socialist President Nicolas Maduro.

That transition left the future of the 209,000 barrel-per-day refinery uncertain. Citgo and Aruba in 2016 reached a 25-year, $685 million deal to refurbish and reopen the facility, which had been idled since 2012, but little progress has been made.

Citgo in a statement said the transfer agreement was the first step in a process that would result in the Aruba government taking full control of the refinery by March 16, following approval by the island’s parliament.

Aruba’s government has said it is looking for outside candidates to take over the refinery.

Citgo Petroleum Corporation, a separate entity, would continue to supply fuel to the island’s airport and gas stations, Citgo said.

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