Opinion

OPEC Puts Icing on the Cake


As expected, OPEC and its non-OPEC partners have extended their production agreement through 2018 and even assigned “soft targets” to include Nigeria and Libya. Saudi Arabia's Energy Minister, Khalid Al Falih made it clear in his opening remarks that the goal of the year-old deal had not been fully achieved, notably referring to the IEA's five-year average stock levels, and indicating that the job of reducing inventories was only half done. On a more practical note, the coalition of countries in this deal, and the special treatment of some members, has been a tremendous diplomatic accomplishment, one not easily reconstituted. So, it makes sense to agree to carry on at this juncture. You can always abandon an agreement. It is much harder to recreate one of this breadth. The existing production deal was a rich layer cake, this extension puts icing on the cake.


OPEC and its non-OPEC colleagues have made a good decision. There is more to do to defend the current $60-plus Brent, and this extension of production restraint, along with falling Venezuelan output, should ensure higher Brent prices. But for how long will they stay the course?

 

The five-year stock level target has always been a canard. Stocks rise over time as an industry expands. So, that is a goal that is easily rationalized away at some point. The variable to keep track of is the Brent price. A year ago, when OPEC was deliberating the original deal, Brent was in the mid-$40s. Now it's in the low $60s. If Brent stays over $65 for months, the OPEC-non-OPEC deal will weaken. The signatories have indicated they will review the deal next summer. By then, all other things held equal, this deal will begin unraveling. Ironically, to the degree this view is shared by others in the market, concern over higher output late in 2018 may take some of the strength out of Brent between now and then.


Visit source site

https://esaienergy.com/?upid=10035765&ebid=1476888...

OPECNon-OPEC ProductionNigeriaLibyaSaudi Arabiaoil price

More items from oilvoice


Adoption of Autonomous Vehicles Could Increase U.S. Transportation Energy Consumption

Source: U.S. Energy Information Administration, Annual Energy Outlook 2018 Autonomous Vehicles: Uncertainties and Energy Implications Autonomous vehicles are one of the main sources of uncertainty in the future of U.S. transportation energy consumption, as autonomous vehicle technology has ...

OilVoice Press - OilVoice


Posted 3 hours agoOpinion > United StatesUSEIA +3

FACTBOX: China Threatens 25% Tariff on US Energy, Agricultural Products

The trade war between the US and China escalated on Saturday with China threatening an additional 25% tariff on $50 billion worth of US goods, including energy and agricultural products, in response to President Donald Trump's decision to place similar tariffs on the same annual value of Chinese p ...

OilVoice Press - OilVoice


Posted 3 hours agoOpinion > ChinaUnited StatesUS +10

Senex Partners With Jemena to Bring Project Atlas Gas to the Domestic Market in Late 2019

Senex Energy Limited (Senex, ASX: SXY) today announced it has executed agreements with major infrastructure operator Jemena to partner on the accelerated development of Project Atlas. Key points: Following the successful conclusion of a competitive bid process, Senex has partnered wi ...

OilVoice Press - OilVoice


Posted 9 hours agoPress > SenexSenex EnergyAustralia +4

Santos: Barossa Project Awards FEED Contracts

Santos today announced further progress on the front end engineering and design (FEED) phase of the Barossa offshore project with the award of three major engineering contracts. Santos Managing Director and Chief Executive Officer, Mr Kevin Gallagher said “These contracts reaffirm Barossa's positi ...

OilVoice Press - OilVoice


Posted 9 hours agoPress > SantosFEEDContract +3

Baker Hughes, a GE company Wins Large Scope in Equinor’s Drilling and Well Services Contract

HOUSTON & LONDON--(BUSINESS WIRE)--Jun. 18, 2018-- Baker Hughes, a GE company (NYSE: BHGE) announced today that the company was awarded an integrated well services contract to support a large proportion of Equinor's drilling and well construction activities in the Norwegian sector of the North Sea ...

OilVoice Press - OilVoice


Posted 10 hours agoPress > Baker HughesGEEquinor +6
All posts from oilvoice