Goldman Sachs Raises Oil Price Forecast Following OPEC Deal

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OilPrice.com 19 July, 2021 - 10:00am 28 views

Will OPEC deal increase oil prices?

OPEC Plus Agrees on Oil Production Increase, Easing Pressure on Supplies and Prices. ... Under the deal announced on Sunday, OPEC Plus, a group of 23 nations led by Saudi Arabia and including Russia, will increase output each month by 400,000 barrels a day, beginning in August. The New York TimesOPEC Plus Agrees on Oil Production Increase, Easing Pressure on Supplies and Prices

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

Last week, Goldman Sachs reiterated its $80 price forecast for Brent crude despite reports that Saudi Arabia and the United Arab Emirates (UAE) had reached a deal on oil production that would extend the OPEC+ deal until the end of next year.

“The agreement had two distinct points of focus: a moderate increase in production which will keep the market in deficit in the coming months, as well as guidance for higher capacity which will be needed in coming years given growing under-investment,” Goldman Sachs said in a note, as carried by Reuters.

The agreement that OPEC+ reached is a $2 per barrel “upside” to Goldman’s $80 a barrel call for this summer, as well as a $5 upside to the forecast of Brent of $75 a barrel next year, the bank said.

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Oil producing nations agree deal to control prices

BBC News 19 July, 2021 - 11:10am

The Opec cartel and partners such as Russia will boost supply from August after prices climbed to two-and-half-year highs during the pandemic.

The move should have an impact on petrol prices at the pump, which have also rocketed.

The price of Brent crude oil is up 43% this year to almost $74 a barrel.

Last year, Opec and its partners cut production by a record 10 million barrels per day (bpd) amid a pandemic-induced slump in demand and collapsing prices.

However, this year the price of oil has surged as economies have reopened, contributing to rising inflation in some countries and threatening to put the brakes on the global recovery.

Oil producers have been seeking to ease the cuts, but a row between Saudi Arabia and the United Arab Emirates threatened to derail the plans earlier in July.

Abu Dhabi had blocked a proposal by Riyadh and Moscow to extend output curbs to 2022 after they rejected its demand to produce more oil.

The unusually public dispute between the close allies had raised fears about the stability of the "Opec +" cartel, which controls more than 50% of the world's oil supplies.

Under the new deal, Opec and partners have agreed to increase supply by a further two million barrels per day from August until December 2021 to help stabilise the market.

Higher output quotas have also been agreed for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.

The cartel said it would phase out by September 2022 oil production cuts that were brought in last year.

Russian Deputy Prime Minister Alexander Novak told public television channel Rossia 24 that the members had been "constructive" and found "consensus".

"The pandemic is not yet overcome, but we are seeing that thanks to vaccination all over the world, demand for our production is recovering as is the use of cars and air planes," he said.

"It is therefore very important for us to fulfil our responsibilities and allow a recovery of the world economy."

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OPEC+ agrees to boost oil supply as prices surge

Fox Business 19 July, 2021 - 11:10am

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OPEC+ ministers agreed on Sunday to boost oil supply from August to cool prices which have climbed to 2-1/2 year highs as the global economy recovers from the coronavirus pandemic.

The group, which includes OPEC countries and allies like Russia, crucially agreed new production allocations from May 2022 to overcome differences between Saudi Arabia and the United Arab Emirates (UAE) that threatened the plan.

OPEC+ last year cut production by a record 10 million barrels per day (bpd) amid a pandemic-induced slump in demand and collapsing prices. It has gradually reinstated some supply to leave it with a reduction of about 5.8 million bpd.

From August until December 2021 the group will increase supply by a further 2 million bpd or 0.4 million bpd a month, OPEC said in a statement.

The group had agreed to extend their overall pact until the end of 2022 from an earlier planned date of April 2022, to leave more room for manoeuvre in case global recovery stalls due to new virus variants.

Whilst both Riyadh and the UAE had been supportive of an immediate output boost, the UAE had objected to the Saudi idea to extend the pact to December 2022 without getting a higher production quota.

To overcome the disagreement, OPEC+ agreed new output quotas for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.

The overall adjustment will add 1.63 million bpd to supply from May next year, according to Reuters calculations.

The UAE will see its baseline production, from which cuts are being calculated, increase to 3.5 million bpd from May 2022 from today's 3.168 million.

Saudi and Russia will see their baselines rise to 11.5 million bpd each from the current 11 million.

(Reporting by Olesya Astakhova, Rania El Gamal, Alex Lawler, Ahmad Ghaddar and Dmitry Zhdannikov; Writing by Dmitry Zhdannikov; Editing by Elaine Hardcastle)

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No sustainable good can ever come out of deceptive oil price wars

IOL 19 July, 2021 - 11:10am

OPEC IS AT it again – or to be exact, two of its eminent constituent members are.

The Kingdom of Saudi Arabia, the de facto owners of Opec and the United Arab Emirates, the third-largest producing power in that group, are mulling over the possibility of a discord.

At its conclusion, yet uncertain, it must permit for the recognition of the UAE as a powerful broker within the brotherhood without wresting the reins of control from Riyadh.

The inevitable consequence of so much sabre-rattling has been the sharp increase in the oil price.

From the depressed West Texas Intermediate oil contracts priced below zero in early 2020 to a staggering $75 per barrel in mid-July, so many questions are bound to follow.

The reasons for the stand-off, rhyming quite close to the ones advanced during the last oil price wars of May last year are various, we are told.

The Saudis didn’t approve of the UAE peace pact with Israel.

Equally, the recent launching of the Murban Index of the Abu Dhabi oil barrel was not in their contemplation as a complement to the Opec normative compact. And, to whatever extent of extremity, the diminution of the UAE’s force deployment in Yemen irritated them visibly.

Predictably, the kingdom unfurled a set of premeditated measures that were strategically calculated to remind the Gulf Co-operation Council (GCC) of the importance of its leadership in the region.

Accordingly, these measures and their cumulative impact started piling up with a telling effect on the Emiratis.

For the UAE, seeing the changing of guard at the White House, they plotted to endear themselves to the new president, Joe Biden, and his foreign policy at the expense of a Riyadh busy contemplating its next political move.

Abu Dhabi had a few prominent things on their list that fanned their umbrage.

The removal of the blockade against Qatar found them ill-prepared.

Of late, the Saudis have determined that companies not domiciled in their jurisdiction can no longer participate in construction contracts in the kingdom.

Besides, the most coveted tariff concessions on goods emanating from UAE Free Zones have been removed.

Furthermore, all flights from the UAE have been proscribed from landing in the kingdom, ostensibly on account of the rising cases of Covid-19 infections in the UAE.

Based on reported sources, the kingdom proposed the phasing in of 400 000 barrels per month until April 2022.

The UAE considered it opportune to remind its assembled audience that its basic quota threshold needed to be revised upward.

Prince Abdulaziz bin Salman, Minister of Petroleum of the Kingdom of Saudi Arabia, weighed in on the side of rationality and compromise.

However, the Minister of Energy and Infrastructure of the UAE, Sheikh Suhail A Mazrouei, asked for fairness.

So many concerned observers, including Ghadi Francis of the West Asia Post, are in deep reflection on the possibility of failure of negotiations and so, on the future of the unity of Opec.

And so the battle lines were drawn, or so it seemed.

Stripped of all artifice, various pieces of the feuding puzzle do not cohere into defining a war, neither of these allies nor about Opec oil prices. Something does not add up.

It may be that there’s a war after all. And if Sun Tzu is correct, all warfare is based on deception.

With the vantage of seeing so many moving parts from outside looking in, there is a perturbing pervasiveness of guile throughout this prose. Or as the Arabs would coin it, “muruna”.

Perhaps from some prism of a looking glass, it is possible to behold glimpses of a disconnect that cognitively enfeebles this oil price war narrative.

First, it is possible that the muchvaunted fuss will thud out in a disappointing wimp after a few rounds of negotiations.

Second, after the scheduled August Opec meeting, their relationship will flourish again as if nothing dark ever habited the bottom of the pond.

Above all, no matter the reading of the reasons of the discord, none of them jointly or severally, can ever coax these old-time allies to a meaningful conflict, least of all accounting to differences of approach to the production quotas inside Opec.

After all, they would be well served to remember the iconic words of admonition from Lawrence of Arabia, that “as long as the Arabs fight tribe against tribe, so long will they be a little people, a silly people”.

Empirically, however, there are parties that are poised to benefit supremely from this stand-off, as in all wars, real or perceived.

For as long as the stand-off persists, the oil price, resulting from this and other chance contributory factors, is bound to rise, fulfilling as it does, the prophecy of a $100 per barrel before the end of the year.

There is no doubt that the Opec brotherhood stand to recoup some of the losses suffered during the oil prices collapse of yesteryear.

The US is another. They have a perverse incentive for seeing oil prices rise beyond certain price ranges.

Considering their largest export is the greenback, any significant uptick in oil price indices, may just conveniently sequester the excessive liquid overhang resulting from the US Federal Reserve’s latest quantitative easing interventions.

Besides, the current pricing levels are conducive for shale exploration and production reawakening.

With the US silently content, the feuding allies would both and simultaneously be endeared to the foreign policy juggernaut of the Biden realpolitik, which is as urgent as it is unstoppable.

The backdrop against which this political theatre is playing out is noticeably haphazard and constantly in flux. The lifting of the wide-reaching sanctions against Iran may soon come into effect, possibly as early as September.

The calculus of Tehran’s return to the productive and exporting organisation may portend an attenuation of the combined production leverage enjoyed by the Saudis and Emiratis, and whatever deriving political advantage they enjoyed.

With the Mullahs untethered from technical export bridles and back in the fold, the tensile sinews holding the cartel in lock step compliance will be severely strained by other extraneous considerations. And in that wise, the UAE’s desire to shore up its baseline production threshold may suffer substantially, at least at first.

While the deflationary tell-tale signs are beginning to factor themselves in the future pricing of commodities, the reported development of the US supplying liquefied petroleum gas to Venezuela must worry some parts of Opec even more, beholding this unexpected spectre with consternation and dismay.

Perhaps not so much for missing out on the economic potential it portends, but more for the inscrutability of its symbolism. Would this gesture be preparatory ground for lifting sanctions against Venezuela?

There are too many variables to contend with in deciphering this political riddle.

In the end, no sustainable common good can ever derive from high oil prices or deceptive wars for that matter designed to lift prices by skilful contrivance.

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Commodities Week Ahead: Delta Variant The New Fear Watchword For Metals, Energy

Investing.com 19 July, 2021 - 11:10am

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After months of attempts by market bulls to downplay it, the Delta variant of COVID-19 is beginning to show its most virulent impact yet on risk appetite, not just in stocks but also commodities.

Energy and metals fell along with futures of the Dow , S&P 500 and NASDAQ as the dollar sat near its highest levels in months amid fears of the Delta variant's growing spread. 

Daily infections have been surging from the United States and Europe to Asia, and the global seven-day average of new cases each day is over half a million for the first time since May. Traders are holding their breath as England lifts most social curbs.

When the dollar rallies, commodities priced in the greenback become costlier to own for holders of other currencies, forcing a bearish outcome. The US dollar index hit an intraday high of 92.76, not far from last week's three-month top of 92.832. 

With the latest drop, oil prices have lost about $6 a barrel over the past 11 days, with US crude going from a seven-year high of $76.98 on July 6 to Monday’s low of $70.34.

National Australia Bank senior currency strategist Rodrigo Catril, on the bank's morning podcast, made no illusions about what was driving the risk aversion in commodities and stocks.

"The market is really trading on the uncertainty in the air around COVID," Catril said. "That is the dominant factor.”

Aside from the Delta variant, Friday’s surprising fall in the closely-followed US consumer sentiment measured by the University of Michigan also unsettled investors, Catril said.

It is not known yet if the weak trend will persist through the week. On many occasions, markets have tumbled at the start of the Asian week, only to rally the same day or the next in Europe and the US. But even if a rebound were to occur, Delta concerns may not go away easily.

This week's markets data calendar is also fairly bare until Friday, when global purchasing managers' index figures are published. 

Notably missing will be the chatter of senior officials from the Federal Reserve who will observe a blackout on speeches and comments, leading up to the central bank’s monthly policy meeting on July 27-28. Fed speeches typically lend direction to currencies and metals during the trading day.

Thus, virus outbreaks and responses to those could dominate news cycles, as lockdowns tighten and expand in Asia. 

Oil’s slump for the fourth time in five days was surprising, given that OPEC+ tried to do just what was needed to get a production deal out for August, while keeping its output well below demand levels.

The 23-nation OPEC+—which groups the 13 member Saudi-led Organization of the Petroleum Exporting Countries with 10 other oil producers led by Russia — said it will increase supply by 2 million barrels from August through December. 

The deal to add 400,000 barrels daily each month over the next five months was precisely what the alliance tried to conclude two weeks ago, before the United Arab Emirates objected to having its baseline output—from which cuts are being calculated—stuck at March 2020 levels.

Under the revised deal, the UAE will see its baseline production increase to 3.5 million bpd from May 2022 from today's 3.168 million.

OPEC+ also agreed on new output quotas as well for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq. The Saudis and Russians who lead the cartel will see their baselines rise to 11.5 million bpd each from the current 11 million. The overall adjustment will add 1.63 million bpd to supply from May next year, according to Reuters calculations.

The net addition of 2 million barrels agreed over the next five months is still short of an estimated 3.5 million barrels of higher demand envisaged for the period. But that demand estimate was also made before the Delta-induced COVID escalation we’ve seen in recent weeks.

On the supply side, Iran’s first crude export from outside the Persian Gulf and beyond the Strait of Hormuz is also on investors’ radars this week. The shipment will leave from Jask in the Gulf of Oman, said Vahid Maleki, director of the Jask Oil Terminal.

Meanwhile, COVID-19 cases involving the Delta variant continue to increase and cloud the fuel demand outlook as some countries, including Australia and South Korea, reintroduced restrictive measures to curb their latest outbreaks. The UK on Saturday reported the highest number of daily COVID-19 cases since January 2021 ahead of England’s lifting of most restrictive measures on July 19.

To be sure, there’s no certainty on what the demand for oil will be over the next five months, though it’s expected to be substantial. Likewise, there’s no knowing what the fall-to-winter wave of the pandemic will be, though it could also be substantial.

In the United States COVID cases are on the rise again, exacerbated by the more transmissible Delta variant.

President Joseph Biden said on Friday his administration was bracing for a “pandemic of the unvaccinated” as latest breakouts appeared to mainly involve those who had resisted vaccination for political and other reasons.

Current and former federal health officials say that millions of Americans are jeopardizing their health, freedom and finances by not getting vaccinated and putting themselves at risk of the most infectious coronavirus strain yet.

Dr. Scott Gottlieb, who was commissioner of the US Food and Drug Administration during the Trump administration, told CBS' Face the Nation on Sunday:

"Most people will either get vaccinated, or have been previously infected, or they will get this Delta variant." 

"And for most people who get this Delta variant, it's going to be the most serious virus that they get in their lifetime in terms of the risk of putting them in the hospital.”

Dr. Francis Collins, director of the US National Institutes of Health, said earlier in the week that the United States was “losing time” in the race to get more than half of the population fully vaccinated before the end of summer. “The Delta variant is spreading, people are dying, we can't actually just wait for things to get more rational," Collins said.

Vaccines have been available to most Americans for months, but still only 48.2% of the country is fully vaccinated, according to the US Centers for Disease Control and Prevention—and the rate of new vaccinations is on the decline.

Meanwhile, case rates have been going up dramatically. In 47 of the 50 US states, the rate of new cases in the past week are at least 10% higher than the previous week, according to data from Johns Hopkins University. Of those, 35 states have seen increases of over 50%.

Relaxed rules in England have already been greeted by a mixture of nerves and excitement by London clubbers in the wee hours, but the day also begins with epidemiologists sceptical and the prime minister, finance minister and health minister isolating as cases spread.

"The Netherlands relaxed all restrictions and saw cases soar from 500 to 10,000 per day in two weeks, and the government has had to reverse course and is now waiting nervously to see what happens to hospitalisations.”

"The UK's 'freedom day' today has some worried it could have a similar experience."

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OPEC+ oil deal sends prices lower — and this could be a buying opportunity

CNBC 19 July, 2021 - 11:10am

Oil prices fell more than 2% on Monday afternoon during Asia hours after OPEC and its allies agreed to end oil production cuts.

Brent crude futures fell 2.13% to $72.02 per barrel, while U.S. crude futures fell 2.09% to $70.31 per barrel.

But having a deal is "better than no deal" for the Organization of the Petroleum Exporting Countries and its allies — known collectively as OPEC+, according to an oil analyst who said a continued stalemate could mean rising production and plunging prices.

"I think they decided that having a deal was better than no deal," Andy Lipow, president of Lipow Oil Associates, told CNBC.

The group agreed to increase production by 400,000 barrels per day on a monthly basis from August, as it moves to phase out production cuts of about 5.8 million barrels per day by September 2022. It comes as oil prices hover close to their highest levels in more than two years.

Negotiations to increase production previously stalled, after the United Arab Emirates rejected the group's proposal for the rollback of the oil cuts. It left the industry as well as investors in limbo as experts warned that prices could either hit the roof or collapse without an agreement.

"If they didn't have a deal, they would be left to their own devices and we could really see a free for all on increasing production from all of them, at a time when the return of demand still remains in question, due to the delta variant," Lipow told CNBC's "Street Signs Asia" on Monday.

He was referring to the highly transmissible Covid variant that's spread to more than 100 countries, pushing cases to record highs in several countries.

"This agreement should give market participants comfort that the group is not headed for a messy breakup and will not be opening up the production floodgates anytime soon," said Helima Croft, head of global commodity strategy at RBC Capital Markets.

Last year, to cope with lower demand as the Covid crisis hurt economies and people could not travel much, OPEC and its allies agreed to curb output by almost 10 million barrels a day from May 2020 to April 2022. 

"So the one thing that we do know is that OPEC+ did not want to see a return to prices last year in the $10 to $20 a barrel range," Lipow said.

Prices fell to historical lows last year, as the impact of the pandemic wiped out oil demand. The West Texas Intermediate crude fell below zero for the first time, before recovering to over $10 a barrel at one point. Brent oil fell to a nearly two-decade low of nearly $20 per barrel.

This could be a buying opportunity for investors, says Lipow.

The "silver lining" is that the pace that OPEC+ is restoring oil production is still slower than the increase in global demand for oil, he said. That will support prices ahead.

"Really, this is a buying opportunity for well over the next six months, as those inventories around the world continue to decline. Here in the United States, we've reduced our crude oil inventories by 75 million barrels since April 1, and that's indicative of what's happening around the rest of the world."

Lipow said oil prices could go up to $78 a barrel for international benchmark Brent.

"I still think that the world has to wrestle with a return of demand and this delta variant that we're seeing spreading around the world. And that, of course, is keeping a dampener on prices," he said.

Croft, too, cautioned that uncertainty could still lie ahead, as OPEC might reverse the 400,000 barrels a day increase.

"As the Saudi oil minister stated, the group can pause, reverse or continue with the 400 kb/d monthly increase based on key contingencies such as Iran ... and global COVID case counts," she wrote in a note on Sunday.

The U.S. and Iran are re-negotiating a 2015 nuclear deal, which could mean a return of Iranian oil to the market.

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UAE and OPEC+ Have Made Up, But It Won't Last

Bloomberg 19 July, 2021 - 11:10am

Once the shock of Covid-19 passes, a structural problem will reemerge; namely that the world has an abundance of oil but a shortage of capacity to absorb emissions from that oil

The United Arab Emirates patched things up with OPEC+. The relationship is doomed anyway.

Just as the prior OPEC+ meeting was breaking up in acrimony earlier this month, BP Plc released its annual numbers-fest, the Statistical Review of World Energy. Observing that OPEC+ had stepped in to stabilize oil prices last year, Spencer Dale, the company’s chief economist, added:

... [W]hether this means it will always be able to do so depends on the type of shock affecting oil markets. The nature of OPEC’s power to shift supply intertemporally from one period to another means it has the ability to offset temporary, short-lived shocks.

OPEC+ is a relatively blunt instrument. It can withhold oil to address excess supply and support prices, or “shift supply intertemporally" in Dale’s phrasing. OPEC+ did this beginning in 2017 to reduce bloated oil inventories. It did it again last year in response to the pandemic.

This is why, even as the UAE and OPEC+ reengage now, they will still pull apart over time. Once the shock of Covid-19 passes, a structural problem will reemerge; namely that the world has an abundance of oil but a shortage of capacity to absorb emissions from that oil.

The world used about 173 billion barrels over the past five years, according to BP’s figures. Proven reserves still increased slightly, hitting 1.73 trillion barrels at the end of 2020. Even if demand increased in a straight line from 96.5 million barrels a day this year to 150 million a day in 2040, reserves would cover that almost twice over.

Except, of course, even the most bullish forecasts don’t have demand growing at anything like that, partly because of what it would mean for emissions. The last set from the International Energy Agency projected demand at 101 million barrels a day by 2040 — unless the world goes full net-zero, in which case demand gets cut in half. So there’s plenty of oil to be had — and at a reasonable price: Rystad Energy, a consultancy, estimates 1.3 trillion barrels could be produced at an average real Brent price of $50 each.(5)Brent traded at around $74 on Friday.

Any oil producer with a lot still in the ground, the wherewithal to boost production and the ability to live with lower prices would be crazy to hold back forever. In a recent report comparing OPEC+ to the old International Tin Agreement — which collapsed in 1985 because of cheaper supply and substitution (sound familiar?) — energy economist Philip Verleger calculated the hit to members if they opened the taps and oil fell to $40. The most resilient, losing 14% of its take, was the UAE. Similarly, the UAE enjoys the lowest fiscal breakeven cost of any OPEC member in 2021, at $65 a barrel and heading lower.

OPEC+ is ever more divided in terms of capabilities and needs. It is tough to imagine a club hosting both the UAE and Venezuela — the former’s gross dometic product per capita being 127 times the latter’s — navigating the twilight of the oil age nimbly and cohesively.

Of 23 members, 15 sport GDP per capita below the emerging-market average of about $11,000; 11 suffered a decline in that metric over the past decade (pre-Covid); and 14 saw their oil output peak more than a decade ago.(9) Six members, accounting for roughly a sixth of spare capacity, hit this dubious trifecta.(10)

Meanwhile, only four display none of those three weaknesses: Bahrain, Russia, Saudi Arabia and the UAE. Together, they hold more than half of OPEC+ capacity, both total and spare. Bahrain, however, is too marginal to matter. Russia, meanwhile, isn’t a member of the old OPEC group. And with its floating ruble cushioning against weaker oil prices, it will likely abandon production targets when it suits — as it was ready to do before Covid-19 hit. That leaves just Saudi Arabia and the UAE, both of which are preparing for a world of peak oil demand, but with the latter displaying more nimbleness and resolve.

In its recent net-zero “roadmap", the IEA calculated that average per capita income from oil and gas sales for producer economies would drop to 1990s levels this decade and around half that in the 2030s. Maybe such projections are, as Saudi Arabia says, like living in “La La Land." The more salient point is that most of OPEC+ can barely manage the current reality; just La La-ish Land would be hell for them.

This is why expectations of national oil companies stepping in to fill the gap as Western majors restrain investment should be tempered. Many state oil champions struggle just to maintain production on their home turf, let alone conquer the world. As oil demand peaks and falls, some nominally low-cost petrostates will more likely shrink output because of economic disruption. Recall that much of OPEC+ “discipline" in its first couple of years was really just the agony of Venezuela playing out.

Meanwhile, the haves will boost production, most likely by loosening nationalist constraints on foreign investment, something the UAE is ahead on, too. OPEC and its successor were formed for a world in which oil demand only rises and reserves are like money appreciating in the bank. As the world changes, those members able to do so will cash in and check out. 

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U.S. oil drops 6% to below $70 as OPEC prepares to boost production, Covid concerns weigh

CNBC 19 July, 2021 - 09:07am

West Texas Intermediate crude futures fell below the key $70 level Monday for the first time in more than a month as OPEC and its allies agreed to raise output, and as the delta Covid variant threatens global demand.

U.S. oil dropped more than 6% to hit a session low of $66.81 for its biggest one-day decline since March. The contract is now 13% below its recent high of $76.98 from July 6, which was the highest level in more than six years. International benchmark Brent crude slipped 5.9% to trade at $69.23 per barrel.

The group of 23 nations, known as OPEC+, agreed Sunday to increase production by 400,000 barrels each month beginning in August. The output hike will continue through September 2022, at which point the entirety of the nearly 6 million barrels per day the group is still withholding will be back on the market.

The announcement came after the group's initial meeting July 1 fell apart amid a disagreement between Saudi Arabia and the United Arab Emirates over the latter's baseline production quota.

"We view [Sunday's] deal as supportive to our constructive oil price view with supply increasingly becoming the source of the bullish impulse and evidence of non-OPEC supply shortfalls likely in the coming months," Goldman Sachs said in a note to clients. The firm pointed to discipline among U.S. producers as providing a floor for oil prices, although it noted that the delta variant could lead to price gyrations in the coming weeks.

OPEC+'s July meeting ending without an agreement sent the oil market into turmoil because it opened the door for the group to potentially disband, with each nation pursuing an independent production policy.

"This was a renewal of OPEC+ vows," RBC's Helima Croft said Monday on CNBC's "Worldwide Exchange." "We think the market can absolutely absorb the additional 400,000 barrels per month...this is a constructive agreement."

Energy stocks moved lower on the heels of oil's decline. The group dipped 4.5%, making it the worst-performing S&P 500 sector. Occidental, Diamondback Energy, Schlumberger and Marathon Oil were among the biggest decliners, each falling more than 6%.

Despite Monday's downturn some Wall Street firms believe a tight market will continue to support prices. Credit Suisse raised its forecasts Sunday night and now sees Brent averaging $70 per barrel in 2021, up from a prior estimate of $66.50. The firm raised its WTI forecast to $67 for the year, up from $62.

Citi, meanwhile, sees Brent and WTI climbing to $85 or higher this year. "The summer season for petroleum markets should be stronger than usual this year on pent-up leisure demand," the firm said in a note to clients.

"With oil demand growth outpacing supply growth in the near term, we still expect a tight summer, which should boost oil prices," added UBS. The firm envisions Brent climbing to $80 before retreating to $75 by the end of the year.

Even with Monday's drop, WTI is still up 38% for the year amid a recovery in demand as worldwide economies reopened, and as producers kept supply in check. In April 2020 OPEC+ implemented historic cuts of nearly 10 million barrels per day in an effort to support prices as demand for petroleum products plunged. WTI briefly traded in negative territory for the first time on record.

As oil prices have returned to pre-pandemic levels, fuel prices have jumped. The national average for a gallon of regular gas stood at $3.17 on Monday according to AAA, up 97 cents over the last year.

"[Sunday's] deal will likely please the White House, which has worried not only about the impact of higher gasoline prices on US consumers but also about a major rift between its key regional allies as it seeks to build a grand producer coalition to tackle climate change," RBC's Croft said Sunday in a note to clients.

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