Sep 12, 2019

OPEC faces a "daunting" price balance challenge despite alliance with Russia

Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman. Photo by Karim Sahib/AFP/Getty Images

If you want evidence that new Saudi Oil Minister Abdulaziz bin Salman faces a challenging job heading OPEC's top producer, the International Energy Agency's latest outlook this morning isn't a bad place to start.

Why it matters: The Saudis want a tighter market and higher prices to support domestic spending. More broadly, the report signals the ongoing difficulty OPEC faces influencing the market despite the 3-year-old alliance with Russia

What they're saying: IEA's monthly report explains what's facing OPEC+, the alliance of OPEC and Russia (among others). "The challenge of market management remains a daunting one well into 2020," IEA said.

  • "Soon, the OPEC+ producers will once again see surging non-OPEC oil production with the implied market balance returning to a significant surplus and placing pressure on prices."
  • It notes that even though U.S. production growth has cooled off, it's still rising on the year and lots of new supply from Brazil and elsewhere is coming too.

Where it stands: Oil prices slid after the report came out, reversing gains earlier in the day. This morning, Brent was trading around $59.54.

  • Reuters reports that today's meeting of OPEC and Russian officials in Abu Dhabi did not address whether to deepen the existing production-cutting pact.
  • "The new Saudi energy minister ... said any discussion on deeper cuts would be left for the next OPEC meeting," they report.

The big picture: Oil markets are more broadly caught between competing forces as the week nears its end.

  • The prospect of a thaw in U.S.-Iran relations is putting downward pressure on the market. So is sluggish demand growth, though IEA, unlike last month, did not cut its demand growth forecast again.
  • But other forces are more supportive. Declining U.S. crude stockpiles and a slight de-escalation in the U.S.-China trade fight. President Trump last night announced a 2-week delay in tariff increases on $250 billion worth of Chinese goods.

Go deeper: OPEC's tough balancing act

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Oil prices plunge after report of quick Saudi production return after attacks

A Saudi Aramco production facility near al-Khurj. Photo: Fayez Nureldine/AFP/Getty Images

Crude oil prices fell sharply Tuesday, reversing some of their major increases over recent days, after Reuters reported that Saudi Arabia will quickly restore output lost during attacks on its facilities over the weekend.

Why it matters: The report, if borne out, will ease fears of a prolonged outage from the strikes against a massive processing facility and oil field in OPEC's largest producer and the world's largest crude oil exporter.

Go deeperArrowSep 17, 2019

Oil price spikes expected after attacks on Saudi facilities

Smoke billows from an Aramco oil facility. Drone attacks sparked fires at two Saudi Aramco oil facilities. Photo: AFP/Getty Images

Crude oil prices are expected to surge when Asian markets reopen Sunday night (U.S. time) as traders respond to Saturday's attacks against major oil processing and production sites in Saudi Arabia.

Why it matters: The alleged drone strikes, which took large volumes of production offline, are stark evidence of security risks facing OPEC's largest producer and the world's largest crude oil exporter.

Go deeperArrowSep 15, 2019

Saudi Arabia says oil output to be restored by month's end

Saudi Energy Minister Prince Abdulaziz bin Salman. Photo: -/AFP/Getty Images

Saudi Arabia hopes to fully restore oil output curtailed by Saturday's attacks by the end of September and have already revived 50% of the lost production, the kingdom's energy minister said Tuesday, per multiple reports.

Why it matters: The comments by Prince Abdulaziz bin Salman — and an earlier Reuters report of the rough timeline — are putting downward pressure on oil prices, which had soared in the wake of the attacks against a major processing plant and oilfield.

Go deeperArrowSep 17, 2019