A new secretary-general was elected and a new member was drawn in. On June 3, Beijing time, the OPEC 169th oil conference closed in Vienna, after the meeting of Saudi new oil minister Khalid al-Falih Said that this is a successful conference. Iranian Oil Minister Zanganeh said that the atmosphere of the meeting was very calm and the members were very united.
For the previous market's expected production cap agreement, the meeting did not achieve any results, and the appearances of Falihe and Zanganeh were "ununited" and the timing was not mature.
Atlantic 600558, on the other side of the stock market, Steve Pruett, a small oilfield developer in West Texas, is preparing to open a part of the oil well. “There is a rest of $21,000 a day in crude oil,†said US shale oil producers. "If the oil price is $55/barrel, it's perfect," but the price is acceptable now.
Crude oil producers in Siberia have not been idle. In May, crude oil production continued to control daily production to over 10 million barrels.
This is the state of the supply side of the crude oil world: $50/barrel, it is okay. The question is, when is this equilibrium broken by what factors?
OPEC does not move
Given that the current crude oil market is performing well, the worst decline in crude oil prices has passed, and OPEC has decided to change its policy and oil production.
Before the official opening of the OPEC conference, few analysts thought that what production agreement could be reached at the meeting. After all, the internal dilemma of OPEC is obvious: the policy objectives between Saudi Arabia and Iran are not the same; the policy targets between the small oil-producing countries with fiscal crisis and the major oil-producing countries with fiscal turnover are inconsistent.
Falyh and Zanganeh arrived at the venue. In the face of the reporter's encirclement, Zanganeh did not talk. Farifhe said one or two words, "13 member states should encourage the market to return to balance." After the statement, the oil once broke through the $50/barrel mark.
From the current news, the meeting discussed the proposal by Saudi Arabia to implement production quota restrictions in all member states to reunite this fragmented organization. Farich suggested that OPEC should limit the daily production of crude oil to 31.8 million barrels to 32.5 million barrels, lower than the current 3277 barrels. Gulf countries such as Kuwait and Qatar tend to stand on the Saudi side.
However, the Iranian side said that it only supports the plan of setting the production quota separately for each country. "Any OPEC production cap that does not set a national quota is meaningless. If you do not set oil quotas for countries, OPEC cannot control anything. "Algeria, Venezuela and other countries are on the Iranian side and believe that it is necessary to set production quotas for countries.
The Nigerian Oil Minister has acted as a peacemaker and called on all countries to unite and conduct open discussions. After the meeting, the Nigerian oil minister said that “the relationship between OPEC members has improved significantly and Saudi Arabia has not proposed a production cap.â€
Of course, this session is not a success: Nigeria’s Balkins was elected as the new OPEC Secretary-General, and the appointment will take effect from August 1; it agrees that Gabon will rejoin the organization, and this West African country will become OPEC’s smallest member state.
After the meeting, OPEC issued a statement, "The worst decline of crude oil has ended, and international crude oil supply and demand are becoming more balanced."
The data shows that in May, OPEC's average daily output reached 32.333 million barrels, higher than the average of 31.848 million barrels last year. Falih said, "The ministers of all OPEC countries have the same view on fundamentals. The crude oil market is running well and it is believed that oil prices will continue to recover." "OPEC needs to explore new mechanisms to balance the market." After the final result of the meeting was announced, the oil dropped to $49/barrel.
The market believes that the results will not have an impact on oil prices. Before the new equilibrium of oil prices was broken, OPEC chose not to move.
Saudi capacity secret
Right now, Saudi Arabia is pushing two things: investment diversification; Saudi Aramco listed. Perhaps it is the latter that has made the oil world temporarily win peace. Saudi Aramco’s equity is a huge temptation for any investment institution. This is a contingency chip for Saudi Arabia to solve the oil world problem.
On the day of the 169th Oil Ministerial Conference, Saudi Arabia announced an investment plan unrelated to oil. The Saudi Public Investment Fund (SAPIF) invested US$3.5 billion in Uber, which will help Uber. Expand business in the Middle East.
In fact, Saudi Arabia not only invested in Uber, but also invested in Uber's direct competitor Lyft. According to foreign media, the next step, Saudi Arabia will also invest in Germany's MyTaxi, China's Didi travel and India's Ola.
Why should Saudi Arabia mix and match the application software?
Due to religious factors, Saudi women could not drive, and the introduction of taxi software allowed 70% to 90% of women in Saudi Arabia to find a convenient way to travel. Shopping, school and work, since 2014, Uber taxi applications have become popular in the Saudi capital of Riyadh. The Saudi royal family princess has recently filed an application. Every day, 2,000 cars must be on standby for women. In a word, taxi software has a market in Saudi Arabia.
Saudi Arabia’s public investment fund invests in Uber, which is a microcosm of Saudi Arabia’s economic transformation. Since this year, Saudi Arabia has increased its investment in new industries, replaced the “old oil captain†for 20 years, and announced the “2030 Vision Planâ€, according to Saudi Arabia. The deputy Crown Prince’s public statement aims to “make a more diversified fiscal revenue structure and reduce dependence on oil revenuesâ€.
However, there is a view that the investment plan for Uber is actually Saudi Arabia’s “eye-blocking methodâ€, which aims to shift the attention of the market and quietly increase production. Regardless of how high the reliability of such a guess is, one thing is certain: the daily production data of Saudi crude oil is actually a mystery.
“How many barrels of oil has Saudi Arabia sold to the market so far? Is the daily production figure released by Saudi Arabia true?†In the view of US cable network CNN, Saudi oil production is a mystery.
For a long time, as the leader of OPEC, Saudi Arabia, since the oil price plummeted, adhering to the "no reduction in production" approach, "how much to produce if you want to produce, as long as the market has demand, Saudi Arabia will supply." According to data released by Saudi Arabia, the oil production in 2014 was 9.5 million barrels per day, 9.8 million barrels per day in the first quarter of 2015 and 10.2 million barrels per day in March 2016.
The official Saudi Arabian oil production capacity is 12.5 million barrels per day. At the 2014 OPEC Oil Conference, Mohammad Al Sabban, who negotiated on behalf of Saudi Arabia, said that “12.5 million barrels of daily capacity, Saudi Arabia can sell more than half in a few days or weeks, and the other half has the ability to store for six months.â€
However, the market is dubious about Saudi's daily capacity data.
Many oil analysts dare not predict Saudi Arabia's daily production ceiling. The reasons are: First, it may be the peak of Saudi Arabia's oil production. In the past 30 years, even in the midst of a large-scale war in the Middle East, Saudi Arabia has not achieved such high output. Second, there are too many smoke bombs released by Saudi Arabia, and it is uncertain what information is real. Third, the degree of aging of Saudi oil wells is difficult to measure. For example, the Garwal oil field is the world's largest oil reserve with a recoverable capacity of 75 billion barrels, but the field has been mined for 60 years now. Fourth, Saudi reserve oil has dropped by about 30 million barrels since October 2015. If Saudi Arabia has been increasing its daily output, why does the inventory list decline?
Oil analyst Raymond James wrote in a report: "The Saudi government's oil data is seriously lacking in transparency. No one knows what its maximum output is. If Saudi Arabia recently made a move to limit production, it means that the country has no Space responds to sudden supply shortages caused by geopolitical situations or global natural disasters."
“No one gives a real answer unless a member of the royal family tells the truth,†said Tom Kloza, head of global energy analysis at the Energy Price Information Service.
However, the world is not far from the truth, because Saudi Arabia is planning to sell Saudi Aramco shares to other investors around the world, which may force Saudi Arabia to tell its secrets that have been hidden for many years. The timetable given by Fahrenheit is, "2018 is a reasonable time for Saudi Aramco to be listed."
Shale oil
$50/barrel can make shale oil producers relieved, but not yet on a large scale. For most oil companies in the United States, the perfect oil price should be above $55/barrel. "When the oil price is at $50/barrel, it is not expected that a large amount of shale oil will flow into the market." After the oil conference, Farif was I said this in the interview.
The Permian Basin is the largest shale oil storage site in North America. Before the oil price plummeted in 2014, there were 467 oil wells. In the worst of times, more than half of the wells stopped. Today, the price of crude oil is around $50/barrel. The loan application that was suspended for one year has been approved, and some oil wells have started. However, for most oil companies in the United States, if it is $55/barrel, it is perfect.
This may be OPEC's confidence, $50/barrel can make shale oil producers relieved, but not to resume mass production.
Steve Pruett, a small oilfield developer in West Texas, has idled some oil wells in order to reduce losses. "As long as it can produce $21,000 worth of crude oil per day, it chooses to stop production."
Not only is Steve Pruett daring to expand, most American small shale oil producers are afraid to start blindly, but for some of the bigger oil companies, $50/barrel is enough for them to make a profit.
Even with production conditions with wait-and-see mood, US crude oil production is enough to shake the market. According to data released last week by the US Energy Information Administration (EIA), US crude oil production in March was 9.13 million barrels per day, although this output fell by 500,000 barrels compared to the peak of 2015, but increased from 2014. 11%, nearly double the 2011. Analysts predict that by 2020, the United States will become another Saudi Arabia, with a daily output of 15 million barrels.
Matt Smith, head of merchandise research at Clipperdata, said: "Low oil prices have had an impact on shale oil manufacturers, but they have not killed the industry."
The EIA report also believes that low oil prices have not caused the decline in shale oil production, and its oil production will hit a new high next year. “Many shale oil manufacturers have made tremendous improvements in production and operation to reduce costs. Will not give up easily."
In fact, the biggest worry in the market is that oil prices above $50/barrel will trigger a major outbreak of US oil production. There are many shale oil wells in the United States that have not yet completed drilling. When oil prices are below $40, these wells are not profitable, but when the oil price reaches $50/barrel, they may be slightly profitable. The largest producer of Bakken, Squid Oil, said that if the oil price stabilizes at US$50, they will redevelop 100 unfinished wells.
Iowa is dominated by me
Iran and Russia will not accept the production cap. Iran hopes that crude oil production will return to pre-sanction levels. Russia hopes that by 2035, crude oil production will be 525-545 million barrels per year.
In the oil market supply side, Iran and Russia are also two forces that cannot be underestimated. Although the two are not in the same organization, the current oil strategy is the same: I am the main.
Before 2012, Iran had been OPEC's second largest oil exporter with a production of 3.8 million barrels per day. The sanctions were lifted in 2016, and the Iranian side said it would not only restore oil production to pre-sanction production levels, but also increase production like Saudi Arabia.
Iranian Oil Minister Bijan Namdar Zanganeh said in Vienna that although Iran has been open to discussing any oil production agreement, its Iranian quota should account for 14.5% of OPEC's total output, which is its pre-sanction share.
At present, Iran’s daily crude oil exports exceed 2 million barrels, and the export volume has more than doubled since the end of sanctions. Iran plans to increase its daily output to 4.8 million barrels in five years. For the country's oil production plan, Zanganeh said that no negative signals were received from other OPEC members regarding Iran's planned increase in oil production.
The Russian side did not send people to attend the meeting. It is worth noting that on the eve of the conference, Russian Energy Minister Alexander Novak said on the official Twitter of the Russian Ministry of Energy that “whether the issue of freezing oil production is no longer so importantâ€, “by 2035, Russia The annual output of crude oil will be 525-555 million barrels."
Despite the plunge in global oil prices, Russia has steadily increased oil production due to the devaluation of the ruble and the more flexible oil trade settlement. The data shows that Russia's annual production in 2015 was 534 million barrels. On June 3, preliminary data from the Russian Ministry of Energy showed that Russia's crude oil output in May was 45.79 million tons, an average of 10.83 million barrels per day, lower than the output of 10.84 million barrels per day in April. In March of this year, Russian oil production hit a record high of 10.91 million barrels per day in the past 30 years.
According to data released by the General Administration of Customs of China, China imported a record 4.81 million tons of crude oil from Russia in April, an increase of 52.4% over the same period of last year, surpassing Saudi Arabia and Angola, becoming China's largest oil supplier.
In 2014, before the oil price plummeted, Saudi Arabia exported a total of 49.67 million tons of crude oil to China, making it China's largest supplier of crude oil. The second place is Angola, and Russia ranks third with only 33 million tons – which is also a relatively fixed seat in recent years.
One of the reasons why Russia can become China's largest oil supplier is to accept the RMB settlement method. Gordon Kwan, head of Nomura's oil and gas research, said that Russia is expected to export more record oil to China than China is willing to accept the renminbi settlement of oil trading. If Saudi Arabia wants to regain its first place in the Chinese market, it may need to accept the renminbi for trading, rather than just relying on the dollar.
$50/barrel new balance?
$50/barrel is a price acceptable to all parties on the supply side. Unless there is a black swan incident, everyone wants to maintain this oil price level.
After the first rebound in October last year, crude oil prices have risen by about 80% after hitting a 12-year low in January this year, and oil prices have finally risen to $50/barrel in the near future.
Why is it going to rise to $50 per barrel in the near future? From the supply side, first, the supply in Nigeria is interrupted, and the output is reduced by 1/5, which is 400,000 barrels per day. Second, the average daily fire output of the Fort McMurray Oil City in Canada is reduced by 1/3. Third, US oil drilling has been reduced for seven consecutive weeks. Fourth, the economic crisis in most OPEC and non-OPEC producing countries has increased.
Jason Ganmer, an analyst at Jeffreys Consulting in the United States, believes that the average daily supply of the crude oil market in April was reduced by about 2 million barrels due to the disruption of crude oil production in Nigeria and Canada.
Judging from the current statement of the multinational oil ministers, unless the black swan incident occurs, the worst decline in crude oil prices has passed, and everyone wants to keep the current oil price level of 50 US dollars / barrel.
Farah's estimate is relatively cautious. "The average oil price this year is 43.4 US dollars / barrel, and the average oil price is expected to be 49.1 US dollars / barrel next year." Novak expects the highest oil price at the end of 2017 to rise to 65 US dollars per barrel, after the end of 2017, Crude oil prices will be at the level of $60-65 per barrel.
The research report released by Goldman Sachs recently pointed out that the oil market has changed from near-saturated to storage with a gap ahead of their expectations. "The second quarter of 2016/the second half of 2016, the US West Texas Intermediate Oil The average price of (WTI) will be $45/barrel and $50/barrel, respectively."
Goldman Sachs reported that crude oil inventories will gradually decline in the second half of 2016 more than previously expected, and in the first quarter of 2017, stocks will return to excess, as low-cost production will continue to increase supply. Goldman Sachs pointed out that the 2017 oil price forecast will be reduced from 57.5 US dollars / barrel to 52.5 US dollars / barrel, the first quarter of 2017 oil prices may even fall back to 45 US dollars / barrel.
Columnist Anatole Kaletsky also predicted that $50/barrel will be the high point of oil prices for a long time.
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