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OPEC and non OPEC meet in Vienna again

OPEC and non OPEC meet in Vienna again

Following on our article OPEC agrees to cut Oil Production, today is a day when OPEC and non OPEC meet in Vienna again as planned with one single item on their agenda.  This is whether to carry on with their agreed 5 months ago productions cut or leave it to the market to decide.  
The Organization in a short meeting, decided to extend for nine months, until end March 2018, the agreement entered into force on January 1st, in an effort to continuing its efforts to re-balance the market; the imbalance between supply and demand having been literally a halving of the price of a barrel in three years.

This formidable study and essay of Bloomberg written by Alex Devine gives us a view as to what eventually is behind the different participants’ motives to this meeting: i.e. their potential revenues that are necessary if they wanted to make ends meet this year.  We reproduce the whole article here below with our thanks and compliments tothe author and the publisher.

Oil Producers Set for 9 More Months of Cuts: OPEC Reality Check

Reeling from the worst oil-market rout in a generation, producers controlling about 60 percent of world supply came together last year determined to put an end to the global glut. Five months on, their historic deal to cut output has failed to drain inventories or sustain prices much above $50 a barrel after early gains brought U.S. competitors roaring back to life.

On Thursday, ministers from the Organization of Petroleum Exporting Countries and its allies meet in Vienna to decide whether to prolong their agreement. Major producers including Saudi Arabia, Russia and Iraq favor an extension for nine months and, while other options will be discussed, consensus is building around an agreement that runs through next March.

While OPEC has impressed the market with unprecedented levels of compliance since the cuts started in January, they’ll be harder to maintain if the deal is extended. Supply may also increase from Libya and Nigeria, two OPEC countries exempt from the accord, which are making progress in tackling the political crises that slashed their output.

Following is the latest position of each OPEC country plus Russia. The respective shares of supply are based on April levels. Estimates for the price each member needs to balance its 2017 budget are from the International Monetary Fund unless stated otherwise.

Algeria

  • Price needed: $64.70
  • Share of OPEC production: 3.3%
  • Algeria burned through cash during the oil-price rout to plug a budget deficit, and has counted on the supply deal to restore prices. Energy Minister Noureddine Boutarfa, whose shuttle diplomacy helped bring about the agreement last year, has said he backsa nine-month extension — as do most signatories to the deal. On Tuesday, he said “I think we have an agreement to do nine months.”

Angola

  • Price needed: $83 (RBC Capital Markets)
  • Share of OPEC production: 5.2%
  • Angola will find output cuts hard to sustain in the second half as new projects boost flows, Bloomberg’s Julian Lee writes. State explorer Sonangol canceled the sale of oil blocks this month as low crude prices make them untenable.

Ecuador

  • Price needed: $78 (RBC)
  • Share of OPEC production: 1.7%
  • Plunging prices for oil, Ecuador’s biggest export, and a devastating earthquake in 2015 prompted the country’s socialist government to pile on debt. President-elect Lenin Moreno campaigned on promises to boost spending further and will be counting on improved oil prices to avert a fiscal crisis. On Monday, the Oil Ministry said it would back an extension of production cuts.

Gabon

  • Price needed: $61 (RBC)
  • Share of OPEC production: 0.63%
  • Gabon reentered OPEC in the middle of 2016 and has ambitious growth plans — to more than double current production of 200,000 barrels a day by 2020. Its agreed cut, of 9,000 barrels a day, represents about 4 percent of daily output. The group’s smallest producer, Gabon depends on oil for about half state revenue.

Iran

  • Price needed: $51.30
  • Share of OPEC production: 11.8%
  • Iran was allowed to increase output under the OPEC deal as it recovered from international sanctions that crippled its energy industry. Since trade restrictions were eased in January 2016, production has climbed 34 percent, according to data compiled by Bloomberg. Output stabilized this year, gaining less than 1 percent. U.S. President Donald Trump has threatened to tear up the multiparty deal that lifted the sanctions, making Iran’s future less certain. Oil Minister Bijan Namdar Zanganeh said Wednesday that an extension of nine months is acceptable.

Iraq

  • Price needed: $54.30
  • Share of OPEC production: 13.8%
  • Iraq, which initially resisted a production target, has exceeded its 4.351 million-barrel-a-day limit in each month of the deal, according to data compiled by Bloomberg. Nevertheless, Oil Minister Jabbar Al-Luaibi backed a push from Saudi Arabia and Russia to prolong cuts for nine months, having previously favored just a six-month extension.

Kuwait

  • Price needed: $49.10
  • Share of OPEC production: 8.5%
  • While Kuwait supports the proposed nine-month extension, Oil Minister Issam Almarzooq has said that other durations will also be discussed. Along with its allies Saudi Arabia and the United Arab Emirates, Kuwait has traditionally shouldered much of the oil curbs. Almarzooq has dismissed the suggestion that deeper cuts could be made, saying they’re not “necessary right now.”

Libya

  • Price needed: $71.30
  • Share of OPEC production: 1.7%
  • The OPEC nation with Africa’s largest crude reserves saw production crippled by civil war, but as the renewal decision nears, it’s been ratcheting up output. Libya is now pumping at the highest level in more than two years after restarting its biggest oil field, Sharara, and El Feel, also known as Elephant. Together with Nigeria, Libya is exempt from the curbs.

Nigeria

  • Price needed: $127 (RBC)
  • Share of OPEC production: 5%
  • Nigeria, exempt from the cuts, has focused since January on reaching a negotiated settlement to end militant attacks on the country’s oil infrastructure so it can restore production. The 200,000-barrel-a-day Forcados pipeline is said to be fixed after a year-long disruption. That alone may be enough to undermine efforts to clear a glut — the pipeline equates to about 17 percent of the OPEC cutback.

Qatar

  • Price needed: $52.90
  • Share of OPEC production: 1.9%
  • More dependent on natural gas than on oil, Qatar enjoys among the world’s highest per-capita GDPs. But its commitment to cut crude production combined with continued fiscal austerity is likely to slow growth this year, according to Bloomberg Intelligence Economist Mark Bohlund. It would gain from an agreement that boosts prices.

Saudi Arabia

  • Price needed: $83.80
  • Share of OPEC production: 31.2%
  • OPEC’s strong compliance has often been attributable to the Saudis cutting more than they promised, making up for laggards like Iraq and the U.A.E. While bearing the heaviest burden, the Kingdom has still gained from the deal. Oil revenue more than doubled in the first quarter, helping to narrow a budget deficit and allowing the government to reinstate the perks and bonuses to its citizens that it controversially withdrew last year. But maintaining production cuts will prove harder in the second half: Saudi Arabia typically boosts output in summer to meet local demand for air conditioning; keeping a cap on output would mean foregoing exports.

United Arab Emirates

  • Price needed: $67
  • Share of OPEC production: 9.1%
  • The Saudi ally exceeded its quota in the first months of the deal, but has promised to compensate as it cuts production to carry out maintenance through May. Energy Minister Suhail Al Mazrouei has said the country would support an extension and is open to discussing a six- or nine-month agreement.

Venezuela

  • Price needed: $216 (RBC)
  • Share of OPEC production: 6.2%
  • Perhaps more than any other OPEC nation, Venezuela needs an extension. It gets almost all its export revenue from oil, and the price collapse three years ago left the economy reeling. The country reduced output more than any other OPEC member in the last year and production is likely to keep falling— not because it’s adhering to the supply deal but because foreign operators have fled and it doesn’t have the cash to keep fields working. Oil Minister Nelson Martinez supports the proposal to extend cuts for nine more months.

Russia

  • Price needed: $40 (Figure used to calculate country’s 2017-2019 budget)
  • Continued backing from the world’s biggest energy producer is vital to the continuation of the deal, and the Kremlin has gained handsomely so far from its cooperation. The rally in prices boosted budget revenue from oil and natural gas above 500 billion rubles ($8.9 billion) in February for the first time in almost two years, Finance Ministry data show. However, oil companies such as Rosneft PJSC will find restraining output more painful going forward as planned projects must be put on hold. Energy Minister Alexander Novak said he supports a nine-month extension, possibly with an option for another three months.

 

 

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When will Robotics be applied to our Transportation

Following our article “The end of ever-rising consumption of Oil is in sight” here is something that is close and related to that, e.g. Self-driving cars.  It is about when will robotics be applied to our transportation modes and be made accessible to the public at large. Automation and Artificial Intelligence that are obviously required in any self-driving vehicle have been in and out of our life for so many years that I personally cannot recall anytime without it either hearing and / or being talked about it, disserted on, etc.  As a matter of fact, there has never been in the technological world as much change as there is now and still is. The prevalence of the combustion engine car has never been as much under question as it is now because of its direct impact on the environment.  There is still strong belief however (as per confirmed forecasts) that the number of this type of cars worldwide will increase from less of today’s billion to something short of 2 billion by 2035 whilst that of the electric car would be from 0.1% to 6% of that figure. McKinsey Automotive & Assembly in an article covering their insights produced an enlightening review of the on-going work in progress.  Here it is with our compliments to the team of authors.   Self-driving car technology: When will the robots hit the road? By Kersten Heineke, Philipp Kampshoff, Armen Mkrtchyan, and Emily Shao As cars achieve initial self-driving thresholds, some supporters insist that fully autonomous cars are around the corner. But the technology tells a (somewhat) different story. The most recent... read more

The end of ever-rising consumption of Oil is in sight.

Donald Trump has just left Saudi Arabia for Israel with a $350 billion worth of contracts under his arm.  One wonders if he would gather as much in the latter country.  In any case, the president of the USA seems to have tabled a lot of his plans if not all on getting America’s manufacturing, etc. back to where it stood years past.  Doing so would mean as before, heavy reliance on the easy resource that is fossil fuel in whatever form be it conventional and / or Shale. But he seems to ignore that there’s a growing consensus that the end of ever-rising consumption of Oil is in sight. OPEC and Russia as world greatest producers have helped a great deal in the past but recently antagonised the US by literally cutting back their production.  As it happens they only helped the US emerging Shale sector to come back in force and recapture its share of the world market. At this conjecture, an enlightening article of Wall Street Journal written by Lynn Cook and Elena Cherney was published on May 21, 2017 on perhaps the most critical aspect of the fossil oils industry that is of their natural reserves as combined with all related industries peaking shortly any time.  We would of course reiterate our wish to cover for as much as we can all matters that relate to the MENA region.  The Peak Oil hatchet hanging over the heads of all oil producing countries and by extension on all non-petro economies has long been in the air.  “All good things must come to an end” has been a refrain... read more

May 19, 2017 Iran’s presidential elections

Internal and geo-strategic issues Iran is at a crossroads in its history; 56.4 million voters are called to the polls to elect their new president.  These May 19, 2017 Iran’s presidential elections with a risk of having a high abstention rate happen in a background of a general situation that is much better than in the past, inflation is under control although unemployment is relatively high.  For these elections of 2017, it is mainly a duel between Hassan Rouhani, 68, reformer elected in 2013 and a 56 year old conservative Ebrahim Raissi, former Attorney general.  Whatever the results, after these elections, the prospects for growth in the medium and long term are dependent on the pace of reintegration of Iran into the global economy, the speed of the reforms as detailed in the new five-year development plan and especially how to apply, to implement and to boost non-oil segments by creating a level playing field between existing players and new entrants, (winners of the reforms of the future are not those of today) but also to work to improve the business environment and the efficiency of the labour markets but also to work to improve the business environment and the efficiency of the labour markets balancing flexibility and fairness and enter the workforce of the informal sphere within the real sphere. According to the first partial results as per Reuters on May 20, 2017, the Iranian outgoing president Hassan Rouhani is said to be widely re-elected totaling approximately 56%.  The results will officially be announced on Sunday May 21, 2017. Iran’s Geopolitics details The Islamic Republic of Iran proclaimed on... read more

MENA fast growing youth segment is dominant

The MENA region is made of a variety of countries with in each one there is a variety of “people of many creeds and cultures” and for some differing ethnicity that go historically back for millennia.  These countries do however meet in that, the MENA fast growing youth segment is dominant, increasingly university educated and therefore exigent in terms of their intended quality of life. This beautiful picture is somewhat tarnished by the fact that almost half of all aggregated youth of the MENA is unemployed and to rub salt in the wound it is happening in the fastest and most active region of the earth. In effect, development projects whether building towers or infrastructure works are mainly manned by imported labour generally from South East Asia and managed by skilled personnel hired from Europe.  This very ordnance of things is with the advent of low of oil exports related revenues is currently being adjusted, not necessarily to the advantage of the local youth. Education institutions are relatively well endowed with quality academics and installations of reputable calibre.  Vocational centers could be thought to be lagging behind especially in those countries of the Gulf where the need for these is as it were made redundant by all public and private enterprising tending to succumb to the facile solution of the easily approachable expatriate workers agencies.  The situation in the heavily-populated countries of the North African half of the MENA is not exactly better in terms of employment of their young populations.  Programmes of training and facilitating employment are all but homogeneously generalised within each country and / or between... read more

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