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Page added on November 23, 2014

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Iran May Propose 1 Million-Barrel OPEC Cut in Saudi Talks

Iran May Propose 1 Million-Barrel OPEC Cut in Saudi Talks thumbnail

Iran may propose that OPEC cuts its output target by as much as 1 million barrels a day to prop up prices when the country’s oil minister meets his Saudi counterpart as the group gathers this week, Mehr News reported.

Bijan Namdar Zanganeh and Saudi Arabia’s Oil Minister Ali Al-Naimi will confer on the sidelines of the meeting in Vienna of the Organization of Petroleum Exporting Countries to define a common view among its 12 members for supporting crude prices, state-run Mehr reported, without saying where it got the information. An official in Iran’s ministry didn’t immediately comment when contacted by phone.

OPEC, supplier of about 40 percent of the world’s oil, will meet Nov. 27 in the Austrian capital to assess its collective output amid a supply glut and a 27 percent drop in prices this year. Half the analysts in a Bloomberg survey last week forecast that OPEC would cut production to shore up prices, while the other half said they didn’t see it deviating from an official 30 million barrel-a-day production target.

“It would be supportive to the market,” Tom James, managing director of consultancy Navitas Resources, said by phone from Dubai, referring to a possible OPEC cut. “I’m not sure it would be enough to really push up prices and to get them back into the $90s.”

The drop in Brent crude, with the global benchmark trading at less than $80 a barrel last week, has prompted speculation of an OPEC cut. Officials from oil-producing countries stepped up diplomatic visits before the group’s meeting, discussing how to react to the plunge in prices to a four-year low.

James said he expects OPEC will refrain from announcing any output reduction this week since he sees prices stabilizing. Rather the group will monitor prices and demand into the first quarter next year to determine if a cut is warranted at that time, he said.

Saudi Arabia, OPEC’s biggest member, remains committed to seeking stable prices, Al-Naimi said Nov. 12 in Mexico. Rafael Ramirez, Venezuela’s OPEC representative, visited Algeria, Qatar, Iran and Russia. Zanganeh traveled to the United Arab Emirates, Qatar and Kuwait.

Non-OPEC Role

Zanganeh may also meet with Alexander Novak, Russia’s energy minister, in Vienna this week, Mehr reported. Russia, while not an OPEC member, said it will send Novak and Igor Sechin, head of state-controlled OAO Rosneft, the country’s largest crude producer, for meetings with OPEC officials.

Two-thirds of global oil production comes from non-OPEC producers, Suhail Al Mazrouei, the U.A.E.’s energy minister, said in comments on his Twitter account today. Producers, particularly those pumping crude from shale formations, “shall be concerned as we are in OPEC” about stability in crude markets and about finding a sustainable balance between supply and demand, he said.

Saudi Foreign Minister Prince Saud Al-Faisal met Russian Foreign Minister Sergei Lavrov in Moscow Nov. 21, and the countries said in a joint statement they’ll coordinate on “issues” affecting the energy and oil markets, without giving more detail. Saudi Arabia and Russia are the world’s two biggest oil exporters.

International sanctions imposed on Iran over its nuclear program are choking the Persian Gulf nation’s crude exports. The government in Tehran is negotiating with the U.S. and five other world powers for an agreement to lift the curbs. The countries have set a Nov. 24 deadline for final agreement, three days before OPEC meets.

Reaching agreement by the deadline is impossible because of the large number of details still to be resolved, the semi-official Iranian Students News Agency reported, citing a member of the Iranian negotiating team it didn’t identify. The parties will start discussing terms for an extension of the talks by the end of today, ISNA reported.

bloomberg



22 Comments on "Iran May Propose 1 Million-Barrel OPEC Cut in Saudi Talks"

  1. Nony on Sun, 23rd Nov 2014 10:26 am 

    US shale is the marginal barrel. It determines price. If OPEC props up price, shale turns back on and grows at 1 MM bpd/year (year after year after year). I think all the Red Queen doubters realize that now.

    Shale isn’t even something where there’s huge investment by a single player with a long payoff. It’s little guys. Thousands of wells. Bunch of gnats. Impossible to squash. Doesn’t even matter if some bks occur or some bonds default. New production gets going fast and pays off fast. And can be hedged.

    Rock is right for once. OPEC is not causing the price drop and can’t do much about it. They’d be better off funneling money to anti-fracking groups than trying to operate their cartel.

    The one bad thing is that shale will only “hold the line”. It’ can’t get us back to the $30/bbl world. But it really HAS stopped the 150 we would have had. EVery price point has tranches of oil. And shale was a very very very meaningful one at the $100 point (or so).

    Now if Obama would just open the 85% of the shelf that is off limits, approve KXL, open ANWAR, expedite infrastructure buildout on federal land (there is a gas pipeline in the Bakken tha needs to go one mile over federal land and has been held up for more than a year), we could really rock this pig.

    US O&G has made a difference…

  2. Davy on Sun, 23rd Nov 2014 10:41 am 

    NOo any cheerleading for the quality of shale resources. Any understanding beyond Econ 101 of the systematic effects of declining global oil production. Do I assume US shale will supply the world? NOo, you are showing desperation with your excessive corn porn. Show some balance and it will be better received by the sober among us.

  3. Plantagenet on Sun, 23rd Nov 2014 10:49 am 

    Shale doesn’t have to supply the world. Shale just has to provide an extra million bbl day above the point where supply meets demand and the price of oil plummets to $78 bbl

  4. Nony on Sun, 23rd Nov 2014 11:08 am 

    Davy: Go read the Piccolo and Rune Bakken predictions. They were wrong. Peakers were wrong. They had a bias to peak oil and misunderestimated* the shale. Gotta learn from that.

    *trademark dubya 😉

  5. rockman on Sun, 23rd Nov 2014 12:57 pm 

    “The one bad thing is that shale will only “hold the line”. It’ can’t get us back to the $30/bbl world. But it really HAS stopped the 150 we would have had.”

    So easily disproved. On a yearly basis 2009 was the beginning of the increase in US oil production. Oil prices shot towards that frightening $150/bbl level in early 2008. And the subsequent demand destruction knocked it down to $40/bbl by early 2009. By early 2009 before the shale plays supposedly saved us. Of course the problem with that obvious propaganda is that oil production from the shale plays had no hand in reducing the price from that record high of nearly $150/bbl. The oil shale plays were just in their infancy.

    The data can’t be argued: the beginning of the surge in US oil production, from all sources: shale, Deep Water GOM, EOR of old fields, etc. began in 2009 when the average price for the entire year was $54/bbl. It obviously doesn’t matter how little oil the US or the world produces: demand destruction, as it did long before the shale boom, will “save us from $150/bbl oil”. IOW the shale:”…really HAVEN’T stopped the 150 we would have had.” The inability of the world’s economies to handle such high oil prices will prevent them regardless of how much or how little oil we get from the shale plays…just as it did 5 years ago.

  6. Northwest Resident on Sun, 23rd Nov 2014 1:05 pm 

    rockman — Damn, that’s some ugly road kill you just made. It was kind of gross watching the juice squirt out of that “HAS stopped the 150 we would have had” lie when you hit it with your big hammer — but kind of satisfying in a morbidly delightful kind of way at the same time.

  7. shortonoil on Sun, 23rd Nov 2014 1:15 pm 

    expedite infrastructure buildout on federal land (there is a gas pipeline in the Bakken tha needs to go one mile over federal land and has been held up for more than a year), we could really rock this pig.

    If pigs had wings they could fly. Rock’n flying pigs – just what we need?

    As I mentioned the other day, if OPEC cuts prices it will only be a token to mitigate criticism for their inaction. OPEC is very aware that any cut will not be compensated for in an increase in total revenue from increased sales. OPEC will continue to pump every barrel they can produce. With prices declining why hold oil to sell next year for less money than what they can presently receive.

    As far as shale is concerned, it never was worth much, and in the near future it won’t be worth anything at all. As we approach the end of the oil age, the walking dead will be the first to keel over.

  8. Nony on Sun, 23rd Nov 2014 1:20 pm 

    Rock:

    It’s fast on/off, compared to UDW, but it’s not a fire hose. 4 MM bpd of LTO is huge and huge how fast it came on. The vast majority of oil analysts (looking at supply demand curves) say that it has been critical at stopping $150 oil.

    You routinely confuse stochastic short term changes with systemic changes in supply and demand. For instance when you said “oh supply only grew X in 3 months, but price dropped Y”. Consider the error carried to extreme (debating that a day’s price drop is not explainable in that day’s change in production). The explanation is that markets price in their understanding of future supply and demand (which is imperfect).

    Oh…and you STILL have not addressed how shale gas has grown while price dropped! how can that be a “price only, technology is unchanged” story? How can you explain the evolution of different plays at different times if everything was known about the technology and the geology? I have a simple solution. I listen to the vast industry out there who has “drilled a well” not you pumping yourself up as a big frog in a small pond, here.

    P.s. Interesting watching rockdoc call BS on some of your reserves estimating comments. Or things like tracing down your comments on the Austin Chalk to prove that it was NOT a more active play than the EF. You’re ok, man. Just don’t get so high on yourself when you’re playing industry guy with a bunch of peakers. Oh…and I could care LESS about if you have “drilled a well” when we are talking about evaluating microeconomics, dude.

  9. Nony on Sun, 23rd Nov 2014 1:24 pm 

    An easy calculation: take the price elasticity of oil (look it up in some papers) and predict how much price would go up if you took 4 million bpd of supply away. Bingo, bango. There’s the easy rationale for why US LTO has stopped the 150. Oh…and have you ever read a peer reviewed paper on price elasticity of oil?

  10. Nony on Sun, 23rd Nov 2014 1:34 pm 

    short: volume is steady (slightly up) and prices are down. That’s not peak oil. Now, make Rock’s argument about 80 being much higher than 30. That’s a great argument which I thing has HUGE TRACTION. Of course, it cuts exactly opposite of your comments about oil prices going to zero from demand drop. But…oh well.

  11. rockman on Sun, 23rd Nov 2014 2:32 pm 

    So to simplify Nony’s position from all the cluttered verbiage offered: if it weren’t for the increased oil production from the shales then oil would be back to $150/bbl and the world’s economy would handle it unlike how it responded in 2008. IOW this time around no demand destruction and the $150/bbl price tag would persist.

  12. Nony on Sun, 23rd Nov 2014 2:51 pm 

    Rock,

    1. “Demand destruction” is a silly term by people who don’t intuitively understand sliding ALONG the demand curve. Who can’t disaggregate shifts OF the supply and demand CURVES with how the interstion moves along one when the other shifts.

    2. Or maybe you are confusing long term equilibria with short term shocks.

    P.s. We also had a big finance/real estate crisis in 2008. Not sure if you noticed. Not everything is oil dependent…

    ——————–

    I’m trying not to be hard on you, but you really are not thinking through some basic concepts. It’s like talking about fluid mechanics with someone who does not understand the head loss DOES go up if the pipe gets longer even without any change in the width. Capisce? 😉

  13. Nony on Sun, 23rd Nov 2014 2:59 pm 

    Rock, if you talk about carbonate versus silicate, I’ll listen. But I’m just not impressed with your micro economical insights. You’re better than most of the peakers here. And I appreciate your holding some basic insights up to them. But you pull some boners yourself. I just don’t know that you are in your element discussing commodity pricing dynamics.

    However, here is a guy who has a very good academic and industry background in energy analysis (check his bio). See what this fellow says.

    http://www.reuters.com/article/2014/09/24/eia-forecast-idUSL2N0RP1PP20140924

  14. dissident on Sun, 23rd Nov 2014 5:10 pm 

    Iran should not bother. The current price drop is a flash in the pan. The US increase of production from non-conventional sources at about 3 million barrels per day over the last several years cannot possibly explain the current price drop. The only thing that explains aside from machinations with futures, is a demand drop. We are seeing the true state of the world economy today. The coverage of it in the press is 180 degrees out of phase with reality.

  15. Northwest Resident on Sun, 23rd Nov 2014 5:43 pm 

    Looks like Nony is suited up in full Cornucopian regalia today, pink tutu and all, mounted on his trusty steed and leading the corny charge to save the day from doomers. Watch out Nony — that’s a long fall from that rocking horse of yours. And try not to shoot yourself with that nerf gun you keep shooting all your corny arguments out of.

  16. Davy on Sun, 23rd Nov 2014 6:21 pm 

    NR, NOo is lost in his fairy world of econ 101 unable to relate to the real world. Oil is different than widgets. PO is similar to climate change in that we are not talking just a warming world we are talking a volatile world. NOo will not acknowledge the deeper systematic dynamics involved with oil and the economy today.

    As PO is approached limits of growth and diminishing returns go from incremental to a nonlinear on steroids. We are still in the bumpy plateau zone and may be a year or two. The bumpy descent is near and when it hits it will blow corn porns like NOo into a huge mood drop. NOo will be wishing he did some prep. He will wish he had adjusted his investments. The NOo will soon be a relic of a decaying corn world.

  17. Apneaman on Sun, 23rd Nov 2014 6:26 pm 

    The volume level and frequency of denial always increase as the evidence mounts. It always works that way with humans.It does not matter what is being denied. Listen how loud the climate change deniers are screaming about the record breaking Buffalo snow dump, but completely ignoring the fact that they have already had a brutal heatwave in Australia this last week, bats have been dying and falling out of trees due to the heat, bush fires are raging and it’s not even summer there yet. No matter how bad things get we will never hear the end of the rationalizations from the Cornucopian/Deniers; it’s what they do. Faith trumps evidence and facts every time because faith is an emotional balm that reduces and soothes anxiety. Once it all goes, they will be babbling non-stop about a comeback any day.We’ll be #1 again, just you wait and see!

  18. Apneaman on Sun, 23rd Nov 2014 6:32 pm 

    Many historical examples of denial by the BAU crowd in American history from this piece.

    http://www.theburningplatform.com/2014/10/16/permanently-high-plateau/

  19. Northwest Resident on Sun, 23rd Nov 2014 6:51 pm 

    Davy — “The NOo will soon be a relic of a decaying corn world.”

    Yeah… In fact, some might say he already is.

    I wasn’t tuned in to the peak oil debate back when it first really got going. But from what I’ve read on the Oil Drum archives, it seemed there was a very serious, well educated and fairly logical contingent of Cornucopians arguing their case. It was a legitimate debate at that point. Since then, all the smart former Cornucopians have converted to Peak Oil Doom Theory — they studied the data, they pondered the arguments and they converted. But there are some stragglers still bravely marching forward, carrying the Cornucopian flag into battle daily against the dreaded doomer hoards (that’s us…:-)). Guys like Nony. I personally believe that Nony is a really smart guy and that he’s just playing the Corny role because he likes to kick up the dust and stir the pot. And for that, I’d like to thank Nony. Hey Nony!! Keep marching those Cornucopian ducks in a line right out onto the firing range. Me and the boys are loaded up with birdshot and we like the target practice.

  20. Makati1 on Sun, 23rd Nov 2014 7:39 pm 

    Perhaps Nony has a huge investment in oil? Sometimes it is difficult to see the truth when your life income depends on not seeing it? Look at most financial and economic article published and you will see what I mean.
    Some even poopoo the loss of the USD as impossible because their world depends on it.

    It is difficult/impossible to be truly self-sufficient in the USSA because you can lose your home/freedom if you don’t pay your land taxes to the government and file your income tax forms every year, no matter where in the world you live, even if you had no taxable income.

  21. Apneaman on Sun, 23rd Nov 2014 9:08 pm 

    Highly intelligent people like Nony are often more prone to denial/minimization and hang on longer due to their advanced rationalization and argumentative skills. No one can fool you better than you. It can be even worse if you have been mostly successful in your life and/or, as Makati1 says, you have a lot to lose . The false bravado is just a defense mechanism and a bit of gamesmanship. No one is immune to their cognitive biases, but being aware and practicing a little self-honesty/humility can minimize the worst of it. Some people are naturally more inclined this way (some regulars here I think) while others, born with more challenging temperaments, have to work it 😉

  22. Davy on Mon, 24th Nov 2014 6:27 am 

    Appnea, good representation of a specialist. I personally am a generalist with no firm foundation. My position will very. I am only a doomer because I see overwhelming evidence for that stance. I am concerned with finding truth and balance not being right. I will turncoat when and if that is what truth and balance demands. I know you can never know truth but you can get closer to it.

    I cannot cut down a specialist. Specialization in multiple fields help a generalist like me find truth and balance. I see the corns in general to be belief holders. This is especially true in times of uncertainty like now. We are drifting on a bumpy plateau with an economy that is far from healthy. Optimism is fundamental to TPTB to maintain growth, progress, and prosperity. Sheeples must be kept in a comfort zone to this end. The sheeples need and want hope. It is natural to find corns whether specialist or generalist to see the trend of growth continue.

    If corns accept growth is over how can optimism remain? Everything they believe in is destroyed and they themselves are destroyed. We see this need for a foundation of optimism in MSM, patriotism, and religion. You have faith and you believe. It has been and will be. A firm foundation feels good.

    We know facts and statistics can be used to prove two different points often contradictory. A corn at a time of uncertainty will fight any position in opposition to their beliefs with any and every fact or statistic whether in context or out. We especially see that with PO now. PO would not be under attack unless it had merit. There are doomers that are belief holders but far fewer. A society does not run on doomers. Doomers are the prophets over the ages preaching the end of prosperity.

    NOo is gifted with his specialties but he has yet to show me balance, sobriety, and a good generalized foundation. His promotion of US shale and his view of life as a supply demand curve is shallow at best. US shale though important is not in a position to make a difference in degree or duration. Supply demand curves are a linear representation of a nonlinear multidimensional reality we call life. I appreciate your insight NOo but you don’t impress me with your grasp of reality.

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