THE OPEC Thread pt 7 (merged)

[eXpat]

CNBC BREAKING NEWS FROM MELISSA FRANCIS: OPEC HAS NO PLANS FOR EXTRAORDINARY MEETING RIGHT NOW

Following is the unofficial transcript of breaking news from CNBC’s Melissa Francis. All references must be sourced to CNBC.

MELISSA FRANCIS: GOOD MORNING CARL. THIS COMES FROM A SOURCE INSIDE OF OPEC JUST A FEW MINUTES AGO SAYING THAT THE GROUP HAS HAD CONSULTATIONS ABOUT AN EXTRAORDINARY MEETING AND FOR THE MOMENT THERE IS NO PLAN. NOW THAT IS A DIRECT QUOTE. “AT THE MOMENT THERE IS NO PLAN.” READ INTO THAT WHAT YOU LIKE. IT MEANS OBVIOUSLY THEY ARE TOGETHER TALKING ABOUT THIS THEY ARE CONSIDERING IT THEY HAVEN’T CLOSED THE DOOR TO IT. AT THE MOMENT THERE IS NO PLAN. CRUDE OIL OF COURSE OVERNIGHT TRADING DOWN AFTER WORD CAME FROM KUWAIT’S OIL MINISTER THAT OPEC MEMBERS WERE CONSIDERING A MEETING SO THIS CONFIRMS THAT AND SAYS THEY ARE IN CONSULTATIONS AT THE MOMENT NO PLAN FOR A MEETING, BUT WE WILL CERTAINLY KEEP YOU POSTED ON THIS STORY. RIGHT NOW, CRUDE OIL IS TRADING DOWN SLIGHTLY AHEAD OF THE OPEN.

http://www.cnbc.com/id/41947383

[eXpat]

Nothing to see, move along...
Qatar Oil Min: OPEC Will Address Supply If There Is A Real Problem

DOHA (Zawya Dow Jones)--The Organization of Petroleum Exporting Countries will address oil supplies if there's a "real problem" but doesn't see the need to ramp up output at present, Qatar's oil minister said Tuesday, a day after U.S. crude prices hit their highest level in two and a half years on concerns over wider supply disruptions in Libya.

"With the world looking at supply, OPEC will address it if there is a real problem of supply, but figures show us there is no problem with supply--it is all speculation and psychology," Mohammed Al Sada told Zawya Dow Jones Tuesday in Doha, Qatar's capital.

"We cannot see the need to increase the supply at this stage because we have a very comfortable situation as far as supply and stock is concerned," Al Sada said.

The April Nymex crude oil futures contract, which surged to a fresh 29-month high of $106.95 a barrel on Monday, took a breather in early trade Tuesday. At 0715 GMT, the contract was down $1.29 at $104.15.

http://online.wsj.com/article/BT-CO-20110308-702100.html

[bratticus]

Platts survey: Opec pumps 29.17 million barrels of oil per day in March
Platts / Apr 14, 2011

The 12-member Organization of the Petroleum Exporting Countries' (Opec) crude oil production output plunged by 630,000 barrels per day (b/d) in March to average 29.17 million b/d, according to a just-released Platts survey of Opec and oil industry officials and analysts. Higher volumes from several member states failed to cover the loss of 930,000 b/d of Libyan supply, the survey showed.

(click for source)

The OPEC price chart shows that a second price cycle has formed. It takes a lot to force the price so high; things have to be squeezed by opposing forces from different directions. In 2005 the world had already reached the petroleum production plateau. Meaningful increases in crude oil production have never been possible since. In order to drive up the price the economy had to be tweaked and dropping the US prime interest rate to a minuscule size was the driving force that pushed in the inflation direction while the world's crude oil production pushed the other way.

Here in 2011 the economic force pushing upwards is quantitative easing.

The term "quantitative easing" originated in Japan. The Japanese phrase had three words. The first one translated as "quantitative" could also be translated as "pertaining to the amount of". The second one which is not used in the common English translation is "monetary". The third, "easing" can also be translated as "relaxing" as in "relaxing regulations." Put them together and the result is "the relaxing of regulations on the amount of money" or "relaxing regulations that restrict the amount of money in existence."

Not only the US QE2 600 billion but two additional forms of cash injection are underway at the same time.

Japan’s Bond Futures Gain a 3rd Week as BOJ Injects Record Cash
By Masaki Kondo / BusinessWeek / Mar 25, 2011

The Bank of Japan’s 40 trillion yen ($494 billion) of successive one-day cash injections from March 14 to March 22 helped increase lenders’ deposits at the central bank to a record. The BOJ maintained its overnight lending rate last week at a range of between zero and 0.1 percent and doubled the size of its fund that bought assets including government bonds and corporate debt.

Debt Fight Unleashes QE3 by Stealth: Economist
CNBC / Mar 14, 2011

“As the Treasury has gotten closer to the debt ceiling, it has been forced to start running down its cash reserves," he noted. "From around $300 billion a month ago, the Treasury only had $100 billion in cash left at the end of last week. The critical point is that the Treasury keeps that cash on deposit with the Federal Reserve.” Those funds get deposited into the banking system and show up as excess reserves, he said. “The 200 billion dollar decline in the size of Treasury deposits has led to a corresponding increase in the size of reserve balances.” “Admittedly, this is a bit geeky, but that expansion of reserve balances is effectively a quantitative easing," Ashworth said.

Adds up to well over a trillion dollars of money being created and injected into the system. But it can't go on forever and when it stops what will the world's economy look like? It will look like the second cycle, a near mirror image of 2008 playing out in 2011.

Without quantitative easing there will be no $250 oil because the economy will collapse due to a price which is lower than that price. This will complete the second cycle.

‘Peak Demand,’ Yes, But Not the Nice Kind
By Chris Nelder
Friday, March 5th, 2010

... Most people thought the nearly 2 mbpd decline in U.S. petroleum demand from 2007 through 2009 owed to efficiency and people driving less.

In reality, only about 15% owed to reduced gasoline demand. The other 85% was lost in the commercial and industrial sector: jet fuel, distillates (including diesel), kerosene, petrochemical feedstocks, lubricants, waxes, petroleum coke, asphalt and road oil, and other miscellaneous products.

Very simply, when oil got to $120 a barrel it cut into real productivity, and forced the world’s most developed economies to shrink. At $147, it wreaked serious damage. ... the new normal will be cycles of bumping our heads against the supply ceiling, falling dazed to the floor, rising back to our knees, then finally standing, only to bump our heads against the ceiling once more.

[Pops]

Agreed, demand may not be elastic but jobs numbers are, at least in the short run.

The smart move was made by the countries that instituted high FF taxes. Since there was no question about high prices consumers had a clear signal: learn to be energy frugal or be poor.

Not so here in the land of the free, home of the "overtaxed". <snort>

[eXpat]

I'm not holding my breath
Saudi plans big oil output increase as OPEC meets

VIENNA (Reuters) - Saudi Arabia is planning to lift oil output sharply in June, whatever policy OPEC adopts this week, in an effort to rein in high fuel prices.

Riyadh expects to lift production by more than 500,000 barrels a day in June to its highest for three years, a senior Gulf industry official familiar with Saudi oil policy told Reuters.

Worried about the impact on economic growth of inflated energy costs, Saudi is prepared to act alone to keep a lid on prices now at $114 a barrel for benchmark Brent crude.

Saudi Arabia is pushing the Organisation of the Petroleum Exporting Countries to revise its formal output limits at a meeting on Wednesday but, so far, only has the support of its Gulf Arab allies Kuwait and the United Arab Emirates among the 12-member cartel.

"We have to look beyond the second quarter, the market will be tight," said UAE Oil Minister Dhaen al-Hamli.

The Gulf official said Saudi production was likely to average 9.5-9.7 million bpd in June. A Reuters estimate put output at 8.95 million bpd in May.

Saudi output was last as high in the middle of 2008 after oil prices set a record $147 a barrel, shortly before recession sent prices crashing.

The extra Saudi supply won't all go for export. Direct crude burn at power plants to fuel summer air conditioning and higher refinery throughput for the return to service after maintenance of the Red Sea Rabigh refinery will soak up a significant proportion, a Middle East analyst said.

CREDIBILITY

Riyadh's production intentions may overshadow an OPEC meeting which Gulf Arab producers want to restore credibility to the producer group's out-of-date supply limits.

http://uk.finance.yahoo.com/news/Saudi-plans-big-oil-output-reuters_molt-170053929.html?x=0

[pstarr]

I'm not holding my breath
Saudi plans big oil output increase as OPEC meets

CREDIBILITY

Riyadh's production intentions may overshadow an OPEC meeting which Gulf Arab producers want to restore credibility to the producer group's out-of-date supply limits.

Credibility? During the biggest run up in oil prices ever the ME failed to significantly raise oil production. I would suggest that is because they were unable.

Incidentally, the article quotes Iran not favoring increased quotas. No surprise there.

[Graeme]

OPEC Keeps Lid on Oil Production Targets

OPEC decided on Wednesday to maintain its crude oil output levels and meet again within three months to discuss a possible production increase.

Before the meeting, several delegates had followed Saudi Arabia’s lead in favoring increased output as a means to lower high oil prices and protect demand in countries facing a global slowdown.

The 11 members of the Organization of the Petroleum Exporting Countries that are under production quotas are already exceeding them. Their output is an estimated 26.15 million barrels daily — about 1.3 million barrels above the daily overall OPEC production target of 24.85 million barrels a day agreed two years ago.

Iran and Venezuela came to the meeting opposing any move to increase output, which would have probably lowered prices for benchmark crude from the present levels of around $100 a barrel.

But OPEC powerhouse Saudi Arabia, which favors prices of around $80 a barrel, wanted higher production levels — and served notice that it was prepared to raise production unilaterally, to close to 10 million barrels a day from its present daily production of about 8.7 million barrels.

nytimes

[Puchica]

OPEC's failure to agree on production leads oil ministers to worry that capacity will increasingly be outstripped by demand.

http://www.newsdaily.com/stories/tre75924u-us-opec/

[ColossalContrarian]

For a price, I'm sure Russia will play swing producer.

[bratticus]

For a price, I'm sure Russia will play swing producer.

I hope you are not holding your breath while you wait for that to happen.

CPC exporting less oil in June, Russia boosts refining
Reporting by Alla Afanasyeva; writing by Jessica Bachman; editing by Anthony Barker / Reuters / June 2, 2011

MOSCOW, June 2 (Reuters) - Russian and Kazakh oil exports via the Caspian Pipeline Consortium (CPC) will fall in June, off 4 percent from the initial volume planned, as Rosneft (ROSN.MM) sends less crude abroad to increase its refinery throughput.

In May, after an acute gasoline shortage hit many Russian regions in March and April, supplies of Russian crude into the CPC system dropped by half, mainly because the country's biggest oil company, Rosneft, lowered exports to increase domestic refinery flows.

The CPC loading schedule, seen by Reuters on Thursday, showed the pipeline group will ship 2.542 million tonnes in June, down from the 2.643 million tonnes originally planned for the month.

In June, CPC will receive 255,000 tonnes of crude from Russian sources, down from an average of 450,000 during the first four months of the year.

Another CPC crude supplier, Karachaganak Petroleum Operator, will also ship less crude this month than it did in May. ...

[Pops]

Russia might be the big ELM headline.

[bratticus]

Russian naphtha exports expected to fall by 30%: sources
Platts / June 9, 2011

Russian naphtha exports are expected to fall by up to 30% following a rise in export taxes but any market support may be offset by a lack of arbitrages to the east, according to sources Wednesday.

"On its own this [Russian exports] should tighten up the European market as there will be less supply," said one source.

In June, Russia enforced a 90% tax on naphtha exports in June, up from 67% in a bid to deal with a domestic shortage of gasoline.

The move was aimed at limiting exports as part of extraordinary measures to resolve the product deficit in domestic markets.

In April, Russia revised its gasoline export duty for May to $408.30/mt as it has responded to increases in international crude benchmarks.

Previously it had been indicated that the duty would be set at $304/mt, in line with the duty for all other light products.

Russia exported 1.35 million mt of naphtha and 560,000 mt of gasoline in April, according to the source.

"Russia is exporting less [naphtha] and there is less material coming into Europe as a result of this," said one source. ...

[Outcast_Searcher]

If OPEC, led by the Saudis can't actually produce enough to fill a supply gap, then higher prices followed by demand destruction WILL.

Either way, the supply gap will be filled. (Now, how many times this yupe of demand-destroying price spike must occur to get people to quit buying stupid gas guzzling vehicles is hard to say -- results thus far aren't exactly encouraging in the U.S., clearly).

The sooner demand destruction occurs and FORCES people to drive, say a Prius (or better yet a Plug in Prius in a couple of years) instead of some idiot big truck or SUV -- the better.

Iran is clearly trying to put the hurt on the U.S. -- hopefully they're actually putting far MORE hurt on themselves down the road.

[bratticus]

If OPEC, led by the Saudis can't actually produce enough to fill a supply gap, then higher prices followed by demand destruction WILL.

Aren't you about a month late?

[Ferretlover]

Here's a question for one of you bona fide oil men........

From this article I get the impression that Opec is supplying almost 2 million barrels
more than they "should". Who says what levels "should" be pumped? How does
this effect the published supply and demand charts?

Bloomberg

We already have a thread covering OPEC, and this thread has been merged with it. Please check before starting new threads. Thank you.

[sparky]

.
There is a bit of a misunderstanding , the excess OPEC production is ~2millions barrels ,
but it barely fill in for the losses of production in non-OPEC countries and Libya
there is not too much oil on the market , just enough

on top the barrels put on the market ( mostly by the Saudis ) are quite yukky , sour and heavy ,
not the sweet stuff beloved of refineries , that's going ..going...soon gone

[Ferretlover]

I heard about this thing called Peak Oil. Let's explore it!

http://peakoil.com/consumption/opec-cut ... -forecast/

[dolanbaker]

OK, what's your take on this story, is it a lack of cheap oil or currency devaluation?
Is the economy banjaxed because of a lack of an everincreasing supply of fuel or debt growing faster than it can ever be repaid?
What do you think.

[peeker01]

I see it as a lack of demand not only due to the economy, but due to a growing trend toward
substitution of other sources of energy.

Heating on the east coast was entirely coal at one time. fuel oil came into vogue because it was
cleaner and less labor intensive. Fuel oil is now being replaced with propane and natural gas because
it is cheaper and cleaner. http://www.hammerzone.com/archives/hvac ... nation.htm

The US is driving smaller and more efficient cars. As does the entire world.

Many buses and taxis in the US have converted to NG or propane. Trucks are experimenting
with LNG. http://en.wikipedia.org/wiki/Compressed_natural_gas

India and Pakistan have programs dedicated to LPG conversion for automobiles. As the price of
crude climbs and becomes more scarce, the world will join this trend. There are 10 million LPG vehicles worldwide at present.

When China experiences the eventual and unavoidable burst of their bubble, crude will fall back
to 10 dollars. http://www.taipanpublishinggroup.com/tp ... 91411.html

Currency issues might be a short term problem, but I am hearing that in the long run, the dollar will
remain a safe haven by default.

[seahorse3]

You see it as moving to more efficiency, while what I see is "demand destruction" aka a sinking economy, rising poverty, unemployment etc in the West.