TOKYO (Reuters) – U.S. crude oil futures fell in Asian trade on Friday, heading lower after posting the first significant gains for 2016 in the previous session, as the prospect of additional Iranian supply looms over the market.
West Texas Intermediate (WTI) was down 48 cents at $30.72 a barrel at 0345 GMT. On Thursday the contract rose 72 cents, or 2.4 percent, to settle at $31.20. It hit a 12-year low of $29.93 earlier this week.
WTI is on track to post a third consecutive weekly loss, down more than 6 percent. The contract is down nearly 18 percent from a 2016 high on January 4.
Brent crude was down 20 cents at $30.68 a barrel. The global benchmark settled up 72 cents, or 2.4 percent, at $31.03 a barrel on Thursday, after falling to $29.73, its weakest since February 2004.
Over the previous eight sessions, Brent had lost about $7 a barrel, almost 20 percent.
Western sanctions on Iran are expected to be lifted within days, potentially paving the way for more crude oil exports from the country, under a landmark agreement on Tehran’s disputed nuclear programme.
“This is three or four months ahead of what the market was thinking last year, so it just adds fuel to the fire,” said Tony Nunan, Oil risk Manager, Mitsubishi Corp in Tokyo.
Iran has removed the sensitive core of its Arak nuclear reactor and U.N. inspectors will visit the site on Thursday to verify the move crucial to the implementation of the atomic agreement with major powers, state television said on Thursday.
Any additional oil from Iran would add to the glut that has pushed oil prices into a deep slump since the middle of 2014.
“It is the wrong time for Iran to be returning to the oil market, both for the market and likely also for Iran,” Phillip Futures said in a note on Friday.
“It would have been so much more ideal for Iran to return to the oil scene if prices were soaring at $100,” it said.
(By Aaron Sheldrick. Reporting by Aaron Sheldrick; Editing by Richard Pullin)
ABU DHABI (Reuters) – The United Arab Emirates moved to quash talk of a potential emergency meeting of the Organization of the Petroleum Exporting Countries (OPEC) after Nigeria’s oil minister said on Tuesday a “couple” of members had requested a gathering.
Benchmark Brent crude futures slipped towards $30 a barrel to a near 12-year low before rising slightly. They have shed almost three-quarters of their value since mid-2014.
Such market conditions supported an emergency meeting to review whether OPEC should change strategy, Nigerian Minister of State for Petroleum Resources Emmanuel Ibe Kachikwu told reporters on the sidelines of an energy conference in Abu Dhabi.
However, UAE Energy Minister Suhail bin Mohammed al-Mazroui later told the same conference the current OPEC strategy was working, adding that time was needed to allow this to happen — perhaps between one and 1-1/2 years.
“I’m not convinced OPEC alone can change or can solely unilaterally change this strategy just because we have seen a low in the market,” Mazroui said.
Mazroui added that while the first half of 2016 would be “tough” for the oil market, there would be a gradual recovery later in the year, aided by an expected drop in non-OPEC production.
Indeed, OPEC has no plan to hold an emergency meeting to discuss the drop in oil prices before its next scheduled gathering in June, two OPEC delegates said on Tuesday.
OPEC’s strategy of maintaining production levels, instead of reducing supply to allow prices to recover, has been aimed at defending market share at the expense of higher-cost producers such as those in the U.S. shale sector.
The supply glut is likely to be exacerbated in 2016 by the return of Iranian supply to the market, once Western sanctions have been lifted.
“I think all the members including Iran have the right to increase their production. I don’t think we are going to restrict anyone,” Mazroui said.
Such prospects have led oil analysts to downgrade their forecasts in recent days, with Standard Chartered saying prices could drop to $10 a barrel.
The likelihood of a meeting taking place will hinge on the attitude of OPEC heavyweight Saudi Arabia, which has been at the vanguard of resistance to a production cut.
“Saudi Arabia has never held the position that it does not want to talk,” Kachikwu said. “In fact, it was very supportive of a meeting before June, at the time when we held the December meeting, if (there was a) consensus call for it.”
(By Rania El Gamal and Maha El Dahan. Writing by David French; Editing by Jason Neely and Dale Hudson)
YAOUNDE (Reuters) – Tighter public spending, economic diversification and greater regional trade are needed to spur growth in central Africa that has been hampered by plunging oil prices and security threats, the head of the International Monetary Fund said on Friday.
Speaking in Cameroon during a regional tour, IMF managing director Christine Lagarde said growth in the resource-rich CEMAC bloc – comprising Cameroon, Central African Republic, Chad, Congo-Brazzaville, Equatorial Guinea and Gabon – slowed in 2015 to around 2 percent and will increase only slightly this year.
“The prolonged slump in oil prices presents a new reality for CEMAC,” Lagarde said. “An adjustment in large scale investment plans may be necessary in the short run, to preserve fiscal viability and debt sustainability in the medium term.”
Oil has dropped from over $100 a barrel in June 2014 due to global oversupply, to around $30 a barrel this week, which provides a challenge for countries in Central Africa whose economies rely largely on exports of oil.
Some have been hit harder than others. Equatorial Guinea experienced a “severe” contraction, Lagarde said, while Cameroon saw some robust growth.
Economies have also been hit by security concerns, particularly from Islamist militant group Boko Haram which has carried out attacks in northern Cameron and elsewhere, disrupting economic activity and diverting spending from social programs to the military.
An “ambitious” reform agenda will be needed to bolster growth, which is estimated at 2 percent for 2015, down from earlier estimates of over 4 percent, Lagarde said on Friday. The bloc’s fiscal deficit is seen to have widened 6.5 percent of GDP in 2015, with only modest improvement expected in 2016.
The block’s growth is expected to hit 3.5 percent in 2016, still far below the growth of previous years.
Lagarde urged CEMAC members to rein in spending to reduce deficits during tough times and increase regional trade. Of all formal trade conducted by CEMAC countries, less than 5 percent involves intra-CEMAC commerce, according to the IMF.
(Reporting By Sylvain Andzongo, writing by Edward McAllister; Editing by Toby Chopra)
LUANDA (Reuters) – France’s Total has signed an memorandum of understanding with Angola’s Sonangol, a first step to opening fuel stations in the southern African nation, Total told Reuters on Wednesday.
Angola, the continent’s second biggest oil exporter, said in October it is reorganising its oil sector and state-owned Sonangol, but details about the changes have been sparse.
Total, the largest foreign oil company producing in Angola, said the MOU was signed by chief executive Patrick Pouyanné on Monday and paves the way to a network of Total-branded stations in Angola.
“In a first phase, products would be obtained through Sonangol,” said a Total spokesman.
Sonangol has a refinery in Luanda that produces 56,000 barrels per day.
The state-owned company said in a separate statement the agreement could represent an investment of hundreds of millions of dollars, with benefits both immediate and long term.
“This action, via a consolidated partnership between the two companies, embodies the government’s strategy to liberalise trade in the sector,” Sonangol said.
Total said it will give more detail once the shareholder agreement with Sonangol is signed.
Angola’s finances have suffered as a result of a sharp slide in oil prices since mid-2014 as oil output represents 40 percent of its gross domestic product.
Sonangol is under pressure to show how it is boosting the downstream potential in Angola, which is a major producer of crude, but does not refine enough to meet its own fuel demand.
(Reporting by Herculano Coroado; Writing by TJ Strydom, editing by William Hardy)
SINGAPORE (Reuters) – Brent crude prices fell to levels last seen in 2004 on Monday, dropping below the lows hit during the 2008 financial crisis on renewed worries over an oil glut.
Global production remains at or near record highs and new supply looms from the Iran and the United States. Crude markets are also under pressure following last week’s U.S. interest rate hikes and on signs of growing U.S. stockpiles even as more drilling rigs are deployed.
Brent futures fell almost 2 percent and as low as $36.17 per barrel on Monday, the weakest since 2004 and below the $36.20 low reached on Christmas Eve 2008 before edging back to $36.42 at 0620 GMT. Prices are still down 46 cents from their last settlement.
U.S. West Texas Intermediate (WTI) futures were down 24 cents at $34.49 per barrel and close to last Friday’s 2015 lows.
Both benchmarks have fallen more than two-thirds since mid-2014 when the rout began.
An unexpected gain in the U.S. oil rig count – by 17 to 541 – and the strength in the U.S. dollar following last week’s interest rate hike, which makes oil more expensive for countries using different currencies, all weighed on crude prices, said analysts.
“The increase in rig count even in a low crude oil price environment suggests shale producers are committed to maintaining production levels. The resilient production data reflect rising U.S. crude stockpiles, which have surged to 491 million barrels, the most for this time of year since 1930,” ANZ bank said.
The U.S. glut adds to global oversupply as the main producers, including Russia and the Organization of the Petroleum Exporting Countries (OPEC), pump hundreds of thousands of barrels of crude every day in excess of demand.
Russian production has surpassed 10 million barrels per day (bpd), the highest since the collapse of the Soviet Union, while OPEC output also remains near record levels above 31.5 million bpd. OPEC leader Saudi Arabia upped production from 10.226 to 10.276 million bpd between September and October.
Iraq’s oil minister Adel Abdul Mahdi told Reuters over the weekend that OPEC would stick to its Dec. 4 decision to not limit production despite the drop in prices.
“OPEC can’t take a unilateral decision, for example, to cut production and others … raise production,” he said.
More oil becoming available soon will add to the glut, with Iran hoping to ramp up sales in early 2016 once sanctions against Tehran are lifted.
Iran will export most of its enriched uranium to Russia in coming days as it rushes to implement a nuclear deal and secure relief from international sanctions, Tehran’s nuclear chief was quoted as saying over the weekend.
This comes only days after the U.S. voted to lift a 40-year-old ban on crude exports which could see some production released on the global market.
(By Henning Gloystein. Editing by Christian Schmollinger)
The prospect of western sanctions ending in Iran is an exciting prospect for international oil companies hoping to tap the fourth largest oil reserves in the world. According to Russia’s envoy to the U.N. nuclear watchdog, the historic Iran nuclear deal is expected to see sanctions lifted in Tehran in January 2016. The Joint Comprehensive Plan of Action (JCPOA), a deal brokered between Iran and the P5 + 1 nations (France, China, UK, Russia, US and Germany) in July 2015 after 20 months of negotiation, is ground breaking. In exchange for Iran reducing its nuclear program, including swapping non-enriched uranium to scale back its stockpile of low-enriched uranium, Europe and the US will lift international economic sanctions on Iran.
Despite concerns that the US Congress may block the deal, the prospect of oil markets opening up to international oil companies seems more likely come January 2016, with the IAEA (International Atomic Energy Association) expected to close a 12 year investigation into Iran’s nuclear program when the board meets in December 2015.
Hope for oil markets as sanctions lift
If the Iran nuclear agreement holds, western sanctions are due to begin winding back in early January 2016. Consequently, a Reuter’s poll comprising 25 oil analysts and economists predicted that as much as 750,000 barrels per day (bpd) of Iranian crude oil could enter the global market by mid-2016. International oil companies such as France’s Total, Italy’s Eni and Royal-Dutch Shell are understandably enthusiastic about the prospect of gaining traction in Iran’s emerging oil economy. With the promise of 50 new production projects in Iran’s extensive oil and gas reserves and flexible contracts on offer in 2016, the prospect of an oil boom seems tangible.
Progress on JCPOA nuclear deal
But how robust is this deal in reality? Will Iran deliver on its promise to scale back their nuclear program?
On the one hand there are promising signs that Iran is ratifying the agreement. As recently as November, 2015 the Iranian nuclear chief, Ali Akbar Salehi reported that work had begun to decommission centrifuges. This activity was additionally confirmed by complaints in Tehran from 20 MPs, claiming that dismantling work at Natanz and Fordow facilities was advancing too quickly.
Further progression of the JCPOA was evidenced by Iran granting permission for the head of the International Atomic Energy Agency to visit the sensitive military site Parchin in September, 2015. This was despite earlier parliamentary restrictions which declared the nuclear deal excluded such inspections.
However, in complete contrast to these acts of compliance, in October, 2015 Iran fired a long – range ballistic missile from a hidden military base in a seemingly confrontational act of defiance. Considering sanctions will only be lifted when Iran fulfils conditions within the nuclear agreement, this action sent confusing signals.
Political climate throws doubt on nuclear deal
There is also concern that the nuclear deal has not been ratified into local Iranian law. Rather the Iranian parliament has referred to the JCPOA as a “Plan of Action”, maintaining the agreement’s voluntary nature (according to the Iranian government). This avoids the Iranian parliament having to mandate the agreement as an international treaty or contract, which would require local governmental authorization into law.
Thus the nuclear deal, in reality, is an agreement accepted by the Rouhini agreement on the basis of good faith, but stands on shaky ground when considering the implications for future governments. Until the JCPOA deal is legislated into Iranian law it would arguably be unwise for international oil companies to leap into Iran’s oil and gas market without some serious caution.
Conditions too volatile to ensure oil market stability in Iran
Although some economists have predicted a significant global reduction in oil prices once the JCPOA “day of commencement” arrives, the shifting sands of Iran’s political and military conditions make this eventuality less likely. Even if Iran does comply with nuclear downsizing, discontinues weapons testing and demonstrates political willingness to conform to the agreement, there is still concern about the power of the military over commercial operations.
For instance the US insists sanctions will be maintained over the Iranian Revolutionary Guard Corps. Although this military corps was designed to respond to internal or external threats against Iran, it now has extensive influence in the Iranian oil and gas industry via control over hundreds of companies. Therefore, international oil companies may still find themselves hampered by sanctions if they partner with Iranian companies maintaining ties to the revolutionary guard.
When the long term political and military complexities are considered in Iran, it seems it may be some time before the Iran nuclear deal will make a significant impact on global oil markets.
ABUJA (Reuters) – Nigeria, aiming to boost its crude output, is still grappling with decrepit refineries that fail to produce fuel, which it has to import, the head of state oil firm the Nigerian National Petroleum Corporation (NNPC) said on Thursday.
Oil production is forecast to reach 2.1 million barrels of oil per day (bpd) this year and should rise to 2.4 million bpd next year, Emmanuel Ibe Kachikwu told reporters, though none was being refined domestically.
“In October we had zero performance (from refineries), we didn’t produce anything,” Kachikwu said. “As of now the refineries are still not working. We are going to try and repair them.”
In an apparent attempt to lower fuel subsidy costs amid sharply lower oil revenues, Kachikwu said refined products would be sold in a band between 87 and 97 naira per litre that is adjusted based on crude prices. Prices are currently set at 97 naira per litre regardless of market prices.
“So it’s no longer subsidy as in the air, it’s not a static number,” he said. “Probably once in quarter we say what is the price of crude, how can we reflect (it) in the price of the product to make sure we don’t pass the ceiling of 97 (naira).”
In November, the country’s top refinery official told Reuters that Nigeria aimed to produce up to 30 percent of its domestic gasoline needs by the first quarter of 2016 following an overhaul of the refineries.
Kachikwu reiterated Africa’s top oil producer was trying to secure external funding to revamp the refineries before considering their sale. “We cannot sell the refineries in their present state. They will be worth nothing.”
President Muhammadu Buhari, also oil minister, has made refurbishing the country’s dilapidated refining system a priority as he seeks to reform an industry hampered by mismanagement and corruption.
(By Camillus Eboh. Reporting by Camillus Eboh; Writing by Ulf Laessing; Editing by David Holmes and William Hardy)
In spite of growing climate concerns and plummeting oil prices, the world’s largest oil cartel has rejected limits on pumping crude oil in the coming year.
The move by the Organization of Oil Producing Countries (OPEC) virtually guarantees a continuing glut of oil along with low prices at the gas pump. Low prices could further undercut U.S. production shale oil production in 2016.
Meeting December 4, 2015 in Vienna, Austria, representatives of OPEC’s 13 member countries debated whether to cut crude production, currently about 31.5 million barrels a day, in an attempt to prop up prices.
Growth in demand is cited
In a statement following the meeting, OPEC acknowledged the oversupply but emphasized potential growth in demand next year.
“ The Conference observed that global economic growth is currently at 3.1% in 2015 and is forecast to expand by 3.4% next year. In terms of supply and demand, it was noted that non-OPEC supply is expected to contract in 2016, while global demand is anticipated to expand again by 1.3 mb/d (million barrels per day),” the OPEC statement said.
OPEC ministers divided
The failure to impose limits followed a fractious discussion within OPEC. The Vienna meeting, scheduled to last four hours, was extended to seven as members debated whether to continue a year-old policy of oversupply.
OPEC member countries produce about 40 percent of the world’s crude oil and their exports represent about 60 percent of the total oil traded internationally, which has enabled the cartel to influence oil prices, according to the U.S. Energy Information Administration.
That was evident as the U.S. benchmark rate for oil declined 2.7 percent to $39.99 a barrel on the day of the OPEC meeting.
Action could undermine U.S. producers
Saudi Arabia says it wants to protect its market share. But some analysts say Saudi Arabia wants to pump more oil in order to slow down shale oil production in the United States, leaving OPEC producers to fill the vacuum as demand grows. Shale oil is significantly more expensive to produce so these producers are even harder hit by lower prices.
A U.S. slowdown is already happening. According to Baker Hughes North American Rig Count for the week of December 4, 2015, there were 737 active rigs in the United States compared to 1,920 rigs a year earlier.
Oil production may increase
Meanwhile, OPEC production is likely to increase beyond the current 31.5 billion barrels a day.
In Vienna, Iran said it would double production to 4 million barrels a day, the amount it was producing before international sanctions were imposed. Iran’s production dropped sharply in 2012 as a result of the sanctions, which are being lifted as a result of the Iran nuclear deal. Iraqi oil production also has increased to about 4 million barrels a day.
A new reality for OPEC
The decision to keep pumping underscored the cartel’s weakened ability to collectively sway prices.
“Effectively, it’s ceilingless,” Iranian Oil Minister Bijan Namdar Zangaeh said. “Everyone does whatever they want.”
Iraqi Oil Minister Adel Abdul Mahdi noted that other producers do not operate with production limits. “Americans don’t have any ceiling. Russians don’t have any ceiling. Why should OPEC have a ceiling?”
Historically, OPEC has been able to bolster prices by squeezing production. But in November 2014, Saudi Arabia blocked calls from poorer OPEC members to cut production in hopes of halting the slide in prices. At that time, the price of oil was slightly more than $71 per barrel.
“It is a new world for OPEC because they simply cannot manage the market anymore. It is now the market’s turn to dictate prices and they will certainly go lower,” Dr. Gary Ross, chief executive of PIRA Energy Group, said at the time.
Indonesia rejoins OPEC
OPEC also welcomed the re-entry of Indonesia into the cartel after a six-year absence. The country is the fourth smallest producer of OPEC’s 13 members.
A net importer of oil that also exports, Indonesia rejoined OPEC hoping to gain greater access to crude oil supplies.
Climate change concerns
While declining to set limits on crude production, the OPEC ministers did discuss the United Nations Climate Change Conference that was ongoing in Paris at the same time.
The discussions “stressed that climate change, environmental protection and sustainable development are a major concern for all of us,” the OPEC statement said.
Efforts to reduce carbon emissions could place large oil producers in even more of a bind if governments in the climate talks move to reduce dependence on oil in favor of sustainable energy sources.
LONDON (Reuters) – Commodities trader Glencore said on Thursday it recognises Libya’s Tripoli-based National Oil Corp. (NOC) as the sole legal marketer of the country’s oil, after securing an export deal earlier this year with the state-run company.
The NOC has said it operates independently of either the rival government that controls the capital city or the internationally recognised government based in the east of the country, which earlier this year set up a separate NOC.
“International oil companies and the international community fully support NOC’s position,” said Alex Beard, head of oil at Glencore.
“They have made it very clear there is no alternative to the NOC at its legal address in Tripoli as the only recognised marketer of Libyan oil,” he said in a statement.
Bloomberg reported last week the government in the east would prevent any tanker operated by Glencore from loading oil at Libyan ports if it did business with the Tripoli-based NOC.
Under the arrangement with the existing NOC, which began in September, Glencore loads and finds buyers for all the Sarir and Messla crude oil exported from the Marsa el-Hariga port near the country’s eastern border with Egypt.
While Libyan oil exports peaked at 1.6 million barrels per day, battles between rival factions seeking to control the country, as well as strikes and blockades by local tribes, have kept production under 0.5 million bpd for most of the past year.
Mustafa Sanalla, the chairman of the Tripoli-based NOC, on Thursday reiterated comments told to Reuters in an interview earlier this month, that Libya’s oil partners and the international community fully backed the company, despite attempts by the recognised government in the east to set up a parallel oil payments system.
“The NOC, at its legal address in Tripoli, remains the only legally empowered oil contracting authority of the Libyan state,” Sanalla said.
“It remains the seat of contracts for all the production, transportation and sale of Libyan oil. The board of NOC is committed to protecting the integrity and viability of the NOC.”
(Reporting by Dmitry Zhdannikov, writing by Amanda Cooper; Editing by David Evans)