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Petrostates Discuss Production Freeze to Stabilize Market
Russia’s Energy Minister Alexander Novak, Qatar’s Energy Minister Mohammad bin Saleh al-Sada, Saudi Arabia’s Oil Minister Ali al-Naimi, and Venezuela’s Oil Minister Eulogio del Pino attend a joint news conference following their meeting in Doha, Qatar on 16FEB. Reuters
This week’s snapshot focuses on talks of a production freeze by some petrostates amidst a global supply glut that has seen the price per barrel of oil sink to its lowest level since 2004. Executives have indicated that they believe it will be years before oil returns to USD90 or USD100 a barrel, the norm over the last decade. The plan represents a reversal for Saudi Arabia in particular. As oil prices have slumped, the country, the de facto leader of OPEC, has avoided trying to manage the market through cuts. Instead, it has continued to ramp up production, even as prices dropped sharply. Nonetheless, if prices remain low for another year or longer, King Salman, who assumed power in January 2015, may find it difficult to persuade other OPEC members to keep steady against the financial strains.
News summary of events during the week of 15FEB16 – 22FEB16
Sample of Twitter handles tweeting about the talks
Sample of Third Party Validators regarding the talks
Dominick Chirichella, Partner, Energy Management Institute
“It is too early to decide if this will be a deal that does not collapse very quickly. For now, the announcement of this deal could increase the likelihood of further short-covering in the short term. Whether this is a good opportunity to reset shorts at higher levels remains a question mark. I think the deal is suggesting a weakness in Saudi Arabia with an opportunity for them to enter into a face-saving arrangement to move away from their failed market share strategy as this deal is not a cut (yet) but could eventually lead to a cut in production down the road.”
John Hall, Chairman, Alpha Energy
“Iran is saying, ‘We are not playing with you.’ If Iran is working outside OPEC, the group cannot move. OPEC cannot do anything without Iran.”
Seth Kleinman, Managing Director and Global Head of Energy Strategy, CIti
“[Iran] has the greatest scope to raise production, and so would have the most to lose.”
James Hughes, Chief Market Analyst, GKFX (London)
“It has been another tumultuous week for oil markets this week after … newsflow has pointed to a potential resolution to the ongoing supply glut. Undoubtable the biggest story of the week was the news that Saudi Arabia and Russia had agreed to freeze production … however the obvious problem with that is that we are already at record highs for oil production. The news saw oil prices jump higher, before dropping on the prospect that Iran and Iraq were not on board.”
Michael McCarthy, Chief Market Strategist, CMC Markets
“I don’t think anybody seriously believes that anything useful is going to come out of these discussions between OPEC and Russia.”
Sample of open source research conducted by TRG analysts related to the talks
Media: Agence France-Presse (AFP)
Date: 16 February 2016
Doha, Feb 16, 2016 (AFP) – The Russian and Saudi oil ministers met Tuesday in Doha to discuss the global supply glut that has sent prices plunging, a Qatari official said.
The oil ministers of Venezuela and Qatar also attended the talks, the official said.
News of the meeting between Saudi Arabia’s Ali al-Naimi and his Russian counterpart Alexander Novak pushed up oil prices on world markets, with European benchmark Brent crude rising above $34 a barrel.
Media: Associated Press
Byline: Jon Gambrell
Date: 17 February 2016
DUBAI, United Arab Emirates — Dodging reporters’ questions, the United Arab Emirates’ energy minister refused Wednesday to discuss a proposed cap to crude oil production agreed to by four oil-producing countries during a meeting the day before in Qatar, raising new questions about the proposal aimed at stabilizing global prices.
Minister Suhail Mohamed al-Mazrouei’s stance suggests regional rivalries also may be in play, as Russia and Saudi Arabia joined Qatar and Venezuela on Tuesday in agreeing to the deal if other producers go along. The surprise closed-door meeting involving the four countries in the Qatari capital, Doha, apparently did not include an Emirati official.
Media: Financial Times (UK)
Byline: Anjli Raval and David Sheppard
Date: 18 February 2016
Iraq’s oil minister on Thursday stopped short of committing to a deal to freeze crude production, but left the door open for co-operation with other big producers to shore up prices.
Adel Abdul-Mahdi said it was incumbent on the world’s largest oil producers to restore “normal” prices, as he joined Iran in giving verbal support to a Saudi Arabian and Russian-backed plan to hold output at the January level.
Media: Agence France-Presse (AFP)
Date: 19 February 2016
Singapore, Feb 19, 2016 (AFP) – Oil prices fell in Asia Friday after a sharp rise in US crude stockpiles and Saudi Arabia’s rejection of proposed output cuts shot down a rally by the battered commodity.
The about-turn came as the US Energy Department reported a 2.1 million barrel increase in US commercial crude inventories, to the highest in more than eight decades, as well as sizeable increases in gasoline and other refined products.
Byline: Alexander Winning and Maria Kiselyova
Date: 21 February 2016
Consultations on a preliminary deal between leading oil producers to freeze output should be concluded by March 1 after a group led by Russia and Saudi Arabia reached a common position this week in Doha, Russia’s energy minister said.
In a television interview aired on Saturday, Alexander Novak also said that the agreement announced on Feb. 16 was weighty enough.
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