Dr. Daniel Fine: OPEC in Houston and Steel Pipes From China

For a week in March, Houston was the site of a world assembly of oil producers engaged in an OPEC-Russia dialogue with American shale or light tight oil producers on supply and — indirectly — price. 

OPEC and Saudi Arabia pitched a market information offensive. 

Put simply, American oil producers should cut-back or stabilize output in a “family” arrangement to avoid an expansion of supply that threatens the price of world oil.

But there is no U.S. Oil Company (government owned) in America, unlike all members plus Russia which are state companies. Russia is a mix. OPEC members are a price-setting cartel. So, a restaurant in Houston was selected as the site for an elite dinner of OPEC and American shale oil operators.  

Platitudes and generalizations dominated the American-initiated conversation, because anything more would be in violation of U.S. anti-trust laws.

Saudi Arabia, consistent with its effort to sell shares in itself in an Initial Public Offering (forthcoming), emphasized there was enough future world demand to satisfy the Americans as well as OPEC.  

This was 1.5 percent growth per year for the next decade or two.  Almost silence, however, on Saudi Aramco's capacity expansion of another l.5 million barrels per day as “spare capacity.”

Does the future demand short term or long term offer support for an unspeakable and unenforceable supply agreement that involves enough for all? Will American shale producers in the Permian exclude themselves from capturing any growth of demand?  

Devon, no longer in the San Juan Basin, but dominant in Oklahoma, is going for double-digit production increases yearly and is increasing its dividend to shareholders who might otherwise be attracted to the idea of drilling and completing less to prop up the price per barrel. 

The Houston dinner failed, as a half a dozen companies did not show up in compliance with legal restrictions. It failed to persuade the America shale industry to act with OPEC's oil supply and price management as a “family” and not as a law-breaking cartel.  

Flashback to 2016: Iranian oil likely to push prices lower

Less than a week later, Iran signaled that it would not renew the production cut that has removed 1.8 million OPEC barrels of oil from the world and increased prices.  
Saudi Arabia was projecting a forecast that a tight market for oil is ahead this year or next as oil projects will not replace wells while demand is strong.

Few were sold on this forecast since shale oil well completions are effectively responsive to price signals with well completions compared to conventional replacement-based on prior oil field investment.

Oil traders are largely unconvinced or agnostic listening in to the Houston contradictions. Most will watch Iran in late May as a sell signal in the making of algorithms.

The Trump Administration on steel tariffs takes the Obama Administration's failure to do so as a starting point. It was Secretary of the Treasury Lew under Obama who made the case for tariffs during his many visits to Beijing. He would accuse China of promoting an overcapacity of steel production for export and consequent flooding of the American market and the United States with cheap steel.   

The Chinese no doubt listened politely to the words but did not anticipate action. They followed a strategy of export price advantage for driving American-owned and operated steel out of business.

Action was taken last month by President Donald Trump. And yet nothing in the customary reaction against Trump recalled that President George W. Bush declared sanctions against Chinese Steel export dumping over 10 years ago, which lasted 18 months, and is credited for an American steel innovation-led comeback.

National security requires American made high-quality steel not only for defense and defense-industrial capability, but also for the complex steel in San Juan and Permian natural gas and steel pipelines. 

What is needed is metallurgy for manufacturing and equipment for continuous casting, cooling, rolling and welding. There is only one plant left in the United States that has some capacity for high strength pipeline steel (API X70 and X80). 

The oil and gas industry in the San Juan Basin should not depend on imports from a non-continental foreign source as a matter of national security.   
China already dominates the American market (oil and gas) for steel valves. There is vulnerability if China follows its rare earth history.   

First, it lowered prices via exports. Second, with this weapon, American rare earth domestic production failed and China bought the technology and transferred it to China. Third, China raises prices for American users of rare earths.

The North American Trade Agreement (NAFTA) negotiations continue with more confidence that fuels (natural gas) will be exempt from negative outcomes. The exemption for Canada and Mexico from steel and aluminum tariffs based on a no-threat-to-national-security finding and continental sources, suggests understanding that trade in fuels will not be restricted.

Daniel Fine is the associate director of New Mexico Tech's Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.

New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

Visit source site


HoustonChinaChina National Petroleum Corporation CNPCsteel pipe suppliersSeamless steel pipesteel pipe distributorOPECSinopecNon-OPECRussiaShaleOhio ShaleEagle Ford ShaleShale Oil MarketMarcellus ShaleMancos ShalePermian BasinPermianBakken crudeBakkenBakken GasConcho ResourcesChevron CorporationOccidental PetroleumOil producersoil productionGeopoliticsDelaware BasinBusiness newsNew MexicoSaudi ArabiaSaudi AramcoUnfair TradeFair TradeFreetradeTradePresident TrumpDonald TrumpSan Juan BasinOklahomaOklahoma CityAmerican Petroleum InstituteNational SecurityNational Security CouncilWhite Houseenergy securityForeign affairsForeign policyAmerica Firsteconomic nationalismrepublicanRepublicansIndependent Oil and GasupstreamdownstreammidstreamDr. Daniel Finelatest oil and gas newsoil and gas industry newsnewsoil and gas newsoil newsweekly news updateweekly oil newsWorld Newsmoneyoil & moneyhedge fundshedgersCommoditiescommoditycommodity tradingChamber of Commerce

More items from wfine94268

Oil bust could spur natural gas turnaround in San Juan Basin

If Merrion and key industry analysts are correct, there might be a silver lining in the oil crash caused by the coronavirus pandemic — it could end up helping northwestern New Mexico natural gas producers and even give a lift to state revenue in a time of crisis. The potential upside: The drop in ...

Will Fine

Posted 4 months agoLink > San Juan Basinnatural gasoil bust +36

Massive revenue shortfall in new state forecasts

The last time state economists released revenue forecasts, New Mexico had a massive oil boom with no end in sight. Those same economists released dire revenue projections on Wednesday, suggesting New Mexico could take in between $1.7 billion and $2.4 billion less than originally expected during t ...

Will Fine

Posted 5 months agoLink > Santa FeSANTAFENewMexico +58

New Mexico watching as Texas considers limits on oil production

Laws governing oil production in New Mexico stem from the Oil and Gas Act of 1935, which, among many other things, suggests the state can impose statewide caps on oil production, as well as more explicitly allowing it to cap output at specific reservoirs or “pools” of oil to “prevent waste.” If p ...

Will Fine

Posted 6 months agoLink > Dr. Daniel FineFarmington New MexicoGovernor of New Mexico +54

Dr. Daniel Fine & T Greg Merrion on the OIL PRICE WAR and U.S. collapse

Interview with Oil and Gas Expert Dr. Daniel Fine with T.Greg Merrion of Merrion Oil D r. Daniel Fine and T. Greg Merrion of Merrion Oil are experts in their fields.  Dr. Fine raises the fact the oil market was manipulated and explains just how it was done.  T Greg gives an acrual account of from ...

Will Fine

Posted 6 months agoOpinion > oil newsBusinessNewsBusiness news +44

Trump promises oil, gas industry assistance a day after WTI traded negative

Natural gas prices may increase Reducing oil production may have some positive impact on the San Juan Basin. Because the Permian Basin has been producing a surplus of natural gas, and there is no way to send all the natural gas to markets, the San Juan Basin natural gas prices have reached histor ...

Will Fine

Posted 6 months agoLink > Dr. Daniel FineFarmington New MexicoGovernor of New Mexico +27
All posts from wfine94268