Oil: Russia remains outside of the OPEC out of choice

Oil Weekly

A global energy watchdog says booming production in the United States will meet 80 percent global growth in demand for oil over the next five years. Current production estimates by the U.S. Energy Information Administration (EIA) put national output at 11 million barrels per day by the end of 2019. Pioneer Natural Resources, another top shale producer, plans to lift Permian oil output by 19 percent to 24 percent this year, after a 26-percent increase in 2017.

On the last day of November, the OPEC and several non-OPEC oil exporters met in Vienna to discuss the future of the global oil market during the OPEC summit.

Crude futures +0.9% to $61.80/bbl.

This strategy worked to some extent as many shale companies went broke, but the fiscal pain became too great for Saudi Arabia, and they worked with other OPEC members and Russian Federation to take supplies off the market to support prices. However, oil vectors changed direction for downtrend after EIA reported another build of United States crude oil inventories and after a key advocate for free trade in the us government resigned, feeding concern that Washington will go ahead with import tariffs and risk a trade war. Output hit a record 10.057-million bpd in November, according to the USA department of energy.

Barkindo made the invitation while attending a dinner with the oil executives at the CERAWeek energy conference in Houston; there, he expressed his admiration for the ability of the Americans to rebound from the crude downturn by remarking, "The entire industry could learn something from them: they are able to raise production and raise efficiency, [and] it's something we in the industry need to learn".

From a near-to-medium term perspective, Brent crude oil prices look to remain supported on positive demand outlook and output restraints from the Opec and non-Opec members led by Russian Federation.

The world is in need of a stable oil market with price equilibrium.

Oil has traded above $60/bbl for most of this year as the Organization of Petroleum Exporting Countries and allied producers continue efforts to drain a global supply glut through voluntary cuts. And with USA production expected to keep surging, OPEC's caps may prove less effective in boosting prices.

The new levy isn't even in place yet, and already it is drawing howls of complaint from some of the very sectors of USA industry Trump has pledged to protect.

According to the Wall Street Journal, American crude oil capacity is expected to reach a record level of 12.1 million barrels a day by 2023; an increase of almost 2 million barrels per day from current levels.

"Global economic growth is lifting more people into the middle class in developing countries and higher incomes mean sharply rising demand for consumer goods and services", the IEA said. "However, I don't believe that this strength will be long-lived with rising US production and a strengthening dollar", said Phillip Streible, senior market strategist at RJO Futures in Chicago.

The export market will also still be constrained even with Enbridge's expected 450,000 barrels a day of expansion, but the IEA raised doubts that the capacity additions from Kinder Morgan's Trans Mountain and TransCanada's Keystone XL pipeline projects will actually get built.

We jointly agreed then [on last year's meeting with United States shale producers] that we should continue with this dialogue. The investment yielded four billion barrels of crude, condensate and NGLs globally - not since the 1930s was so little oil found. With non-OPEC supply rising quickly, particularly in the U.S., OPEC may struggle to figure out a way to increase output without pushing down prices, according to the IEA's analysis.

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