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Page added on October 10, 2016
OPEC Is Still Some Way Off an Oil Deal With Russia
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Bit early to start celebrating’ amid OPEC differences: Lien
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Optimism of Saudis, Russians sent oil prices higher on Monday
Norway, western Europe’s largest oil producer, said OPEC is still some way off forging a deal to limit supply even as optimism from Saudi Arabia and Russia sent crude prices higher.
“It’s a little bit early to start celebrating an agreement,” Tord Lien, Norway’s petroleum and energy minister, said Monday in an interview with Bloomberg Television. “The difference between the OPEC countries is probably larger today than it has been earlier.”
Members of the Organization of Petroleum Exporting Countries, who surprised markets in September when they agreed to rein in output, have yet to decide on individual quotas before a meeting in Vienna next month. Saudi Energy Minister Khalid Al-Falih said Monday he’ll talk with OPEC nations and other producers and is “optimistic” about reaching a deal by the end of November, while President Vladimir Putin said Russia was ready to join the effort.
“They have made great progress, and this could end up in an agreement that will materialize around Christmas and the first quarter of next year,” Lien said. “We have to give OPEC credit for having balanced unbalanced markets on many occasions before.”
Rising Crude
OPEC last decided to reduce output in 2008 during the global financial crisis, agreeing on a record cut that reversed a collapse in crude prices. On Monday benchmark Brent futures rose as much as 3.5 percent to $53.73 a barrel, a one-year high but still more than 40 percent below their level two years ago.
An attempt by producers to freeze output in April failed as Saudi Arabia refused to proceed without the participation of Iran, which insisted on its right to restore output lost to years of international sanctions.
Norway, which isn’t an OPEC member, has said it has no intention of joining any international production agreement as it’s pumping about half as much oil as in 2000. The country’s Conservative-led government is budgeting for crude at an average price of about $52.50 a barrel next year. Saudi Arabia’s Al-Falih said Monday that a return to $60 wasn’t “unthinkable” by the end of 2016.
9 Comments on "OPEC Is Still Some Way Off an Oil Deal With Russia"
shortonoil on Mon, 10th Oct 2016 8:09 pm
For some inexplicable reason Bloomberg thinks that the Russians are stupid? The Russians would receive a greater revenue from their oil sales if they don’t cut, or expand their production (they are probably the only major producer that could).
The last really stupid Russian died in a drinking bout with Peter the Great.
JuanP on Mon, 10th Oct 2016 10:07 pm
Putin says Russia ready to support OPEC oil production freeze or cut.
https://www.rt.com/business/362241-putin-oil-production-opec/
yoshua on Tue, 11th Oct 2016 1:11 am
Crude Oil Production
1 Gallon Crude Oil 37.5 API = Energy Content 140.000 BTU
Extraxtion Cost = 15,000 BTU
ICE efficiency = 20 Percent
Extraction Cost = 15.000 BTU * 5 = 75.000 BTU
Refinery Cost = 10,000 BTU
Refinery efficiency = 80 Percent
Refinery Cost = 10.000 BTU * 1.25 = 12.500 BTU
Distribution Cost = 5,000 BTU
ICE efficiency 20 Percent
Distrubution Cost = 5.000 BTU * 5 = 25.000 BTU
Total Production Cost = 112.500 BTU
Extraction = 50 Percent
Refinery = 10 Percent
Distribution = 20 Percent
Total Production Cost = 80 Percent
EROI = 140.00 BTU / 112.500 BTU = EROI 1.25 : 1
These numbers are close to the EIA numbers.
http://www.eia.gov/petroleum/gasdiesel/
Russia is most likely cannibalizing on its gas and coal reserves to produce oil.
Saudi Arabia doesn’t have coal and only has some gas.
Davy on Tue, 11th Oct 2016 6:21 am
If oil goes to $30 instead of $60 and with a few other inconvenient economic occurrences like currency disruptions and TBTF bank shocks we are in trouble. We are in the danger zone. It is not going to take much to crash this Ponzi. It is a weird time now because we have all these dangers including war and still our lives are normal. There is still optimism out there despite the storm clouds on the horizon, crazy really.
Davy on Tue, 11th Oct 2016 7:28 am
“A Strange “Production Cut” – OPEC Oil Output Hits Record High As Rosneft Says “No” To Production Cap”
http://tinyurl.com/zcusnmm
“earlier today Igor Sechin, Russia’s most influential oil executive and head of energy giant Rosneft said his company will not cap oil production as part of a possible agreement with OPEC. His comments underline how difficult it is for Russia to get its oil companies to freeze or cut output as part of a potential deal with the Organization of the Petroleum Exporting Countries designed to support oil prices. “Why should we do it?” Sechin, known for his anti-OPEC position, told Reuters in Istanbul on Monday evening, when asked if Rosneft, which accounts for 40 percent of Russia’s crude oil output, might cap its production.”
“Earlier on Monday, Sechin told reporters that Rosneft planned this year to raise its oil production, already the world’s largest among listed producers, above the 203 million tonnes (4.1 million barrels per day) it produced in 2015. Sechin said he doubted some OPEC countries, such as Iran, Saudi Arabia and Venezuela, would cut their output either: “Try to answer this question yourself: would Iran, Saudi Arabia or Venezuela cut their production?”
rockman on Tue, 11th Oct 2016 11:01 am
“OPEC last decided to reduce output in 2008 during the global financial crisis, agreeing on a record cut that reversed a collapse in crude prices.” Same ridiculous statement as made in ’08. OPEC didn’t VOLUNTARILY cut production…it was forced to reduce output as a result of the decline in consumer demand.
And how do we know that? The annual price of oil in 2008 was $100/bbl and in 2009 it was about 40% lower at $62/bbl. And how much more $62 oil did the even more robust global economy consume in 2009 then the robust global economy consume in 2008? It didn’t: the world consumed 400 million bbls of CHEAPER oil LESS in 2009 then it did of REASONABLY priced oil in 2008.
And guess what happened to global oil consumption when 4Q 2014 oil prices fell about 30% by 1Q 2015? Global oil consumption DECREASED. Granted the magnitude of the swings were as great this time around but the dynamic was the same. And the increase in consumption in response has surged much faster during this cycle. But regardless it’s the same cycle. Including the efforts by the oil exporters to increase to record volumes in order to max revenue in response to lower oil prices.
Exactly like they did more then 3 decades ago. And so far with the same outcome: increasing consumption at a relatively stable price. A price that remained stable in the 1980’s cycle for the 15+ years until the early 2000’s.
History doesn’t always repeat itself. But so far it seems to be trying.
rockman on Tue, 11th Oct 2016 11:04 am
Correction: “Granted the magnitude of the swings were NOT as great this time around…”
curlyq3 on Tue, 11th Oct 2016 11:49 am
Howdy Tanada, I get this message when I attempt to login. I rebooted per your instructions. I could not post in the Technical Support forum!
“The specified username is currently inactive. If you have problems activating your account, please contact a board administrator.”
curlyq3
yoshua on Tue, 11th Oct 2016 12:39 pm
Saudi Capital Spending to Drop 71% in 2016 Amid Cheaper Oil
http://www.bloomberg.com/news/articles/2016-10-11/saudi-capital-spending-to-drop-71-in-2016-amid-low-oil-prices