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Tag: OPEC

  • Oil prices surge after OPEC+ producers announce surprise cuts | CNN Business

    Oil prices surge after OPEC+ producers announce surprise cuts | CNN Business

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    CNN
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    Oil prices spiked during Asian trade Monday after OPEC+ producers said they would cut production in a surprise move.

    Brent crude, the global benchmark, jumped 4.8% to $83.73 a barrel, while WTI, the US benchmark, rose 4.9% to $79.36.

    Rising oil prices could mean inflation remains higher for longer, adding pressure to a hot-button issue for consumers around the world.

    On Sunday, Saudi Arabia announced that it would start “a voluntary reduction” in its production of crude oil, alongside other members or allies of the Organization of the Petroleum Exporting Countries (OPEC).

    The cuts will start in May and last through the end of the year, an official with the Saudi Ministry of Energy was quoted as saying by Saudi state-run news agency SPA.

    The reductions are on top of those announced by OPEC+ in October, according to SPA.

    That month, oil producers had agreed to slash output by 2 million barrels a day, the largest cut since the start of the pandemic and equivalent to about 2% of global oil demand.

    Saudi Arabia now says it will cut oil production by another half a million barrels a day.

    Meanwhile, Iraq will slash production by 200,000 barrels per day, and the United Arab Emirates will decrease output by 144,000 barrels per day.

    Kuwait, Algeria and Oman will also lower production by 128,000, 48,000 and 40,000 barrels per day, respectively.

    In a Sunday note, Goldman Sachs analysts said the move was unexpected but “consistent with the new OPEC+ doctrine to act pre-emptively because they can without significant losses in market share.”

    The collective output cut by the nine members of OPEC+ totals 1.66 million barrels per day, said the analysts, who hiked their price forecast for Brent this year to $95 per barrel.

    Saudi Arabia’s energy ministry described its latest reduction as a precautionary measure aimed at supporting the stability of the oil markets, according to SPA.

    The White House pushed back on that notion — as well as the latest cuts by OPEC+.

    “We don’t think cuts are advisable at this moment given market uncertainty — and we’ve made that clear,” a spokesperson for the National Security Council said. “We’re focused on prices for American consumers, not barrels.”

    In October, OPEC+’s decision to cut production had already rankled the White House.

    US President Joe Biden pledged at the time that Saudi Arabia would suffer “consequences.” But so far, his administration appears to have back off on its vows to punish the Middle East kingdom.

    Russia, a member of OPEC+, also said Sunday that it would extend a voluntary reduction of 500,000 barrels per day until the end of 2023. The move was announced by Russian Deputy Prime Minister Alexander Novak, as cited by state-run news agency TASS.

    That decision was less surprising. Goldman analysts said they had forecast the cut would last into the second half of the year.

    — CNN’s Hanna Ziady and Arlette Saenz contributed to this report.

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  • US buying 3M barrels of oil to start replenishing reserves

    US buying 3M barrels of oil to start replenishing reserves

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    WASHINGTON — The Biden administration said Friday it is buying 3 million barrels of oil to begin to replenish U.S. strategic reserves that officials drained earlier this year in a bid to stop gasoline prices from rising amid production cuts by OPEC and a ban on Russian oil imports.

    President Joe Biden withdrew 180 million barrels from the Strategic Petroleum Reserve starting in March, bringing the stockpile to its lowest level since the 1980s. The purchase, to begin in January, will start to replenish the reserve and is likely to be followed by additional purchases, officials said.

    The Energy Department called the purchase “a good deal for American taxpayers” since the price will be lower than the $96 per barrel average the U.S. oil was sold for. The replenishment also will strengthen U.S. energy security, the department said in a statement.

    The purchase price was not announced, but benchmark West Texas Intermediate crude oil was selling at $74.50 per barrel late Friday.

    Gasoline prices, meanwhile, averaged about $3.18 per gallon on Friday, down from $3.74 a month ago and just over $5 per gallon at their peak in June, according to the AAA auto club.

    Tapping the reserve is among the few things a president can do by himself to try to control the inflation that makes Americans poorer and often creates a political liability for the party in control of the White House.

    Global oil prices were rising even before Russia invaded Ukraine last February. When Biden announced a ban on Russian oil imports in early March, he acknowledged it would come at a cost to American consumers.

    The administration completed the release of 180 million barrels in October. The reserve now contains roughly 400 million barrels of oil, down from more than 600 million in late 2021, according to the Energy Department.

    The reserve was created after the 1970s Arab oil embargo to give the United States a supply that could be used in an emergency.

    Contracts for the purchase will be awarded by Jan. 13, with deliveries to an SPR site in Texas expected in February.

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  • Gas prices fall again in NJ, nation as demand remains low

    Gas prices fall again in NJ, nation as demand remains low

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    FILE – A customer pumps gas at an Exxon gas station, Tuesday, May 10, 2022, in Miami. Gas prices have again dropped sharply in New Jersey and around the country, Saturday, Dec. 10, as demand remains slow and supplies continue to increase. (AP Photo/Marta Lavandier, File)

    The Associated Press

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  • Gas prices fall again in NJ, nation as demand remains low

    Gas prices fall again in NJ, nation as demand remains low

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    FILE – A customer pumps gas at an Exxon gas station, Tuesday, May 10, 2022, in Miami. Gas prices have again dropped sharply in New Jersey and around the country, Saturday, Dec. 10, as demand remains slow and supplies continue to increase. (AP Photo/Marta Lavandier, File)

    The Associated Press

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  • OPEC+ agrees to stick to its existing policy of reducing oil production ahead of Russia sanctions

    OPEC+ agrees to stick to its existing policy of reducing oil production ahead of Russia sanctions

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    Led by Saudi Arabia and Russia, OPEC+ agreed in early October to reduce production by 2 million barrels per day from November.

    Vladimir Simicek | Afp | Getty Images

    An influential alliance of oil producers on Sunday agreed to stay the course on output policy ahead of a pending ban from the European Union on Russian crude.

    OPEC and non-OPEC producers, a group of 23 oil-producing nations known as OPEC+, decided to stick to its existing policy of reducing oil production by 2 million barrels per day, or about 2% of world demand, from November until the end of 2023.

    Energy analysts had expected OPEC+ to consider fresh price-supporting production cuts ahead of a possible double blow to Russia’s oil revenues.

    The European Union is poised to ban all imports of Russian seaborne crude from Monday, while the U.S. and other members of the G-7 will impose a price cap on the oil Russia sells to countries around the world.

    The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.

    Oil prices have fallen to below $90 a barrel from more than $120 in early June ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.

    Led by Saudi Arabia and Russia, OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the U.S. for the group to pump more to lower fuel prices and help the global economy.

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  • OPEC+ keeps oil targets amid weakening economy, Russian sanctions

    OPEC+ keeps oil targets amid weakening economy, Russian sanctions

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    Cartel wants to gauge impact of two measures aimed at hitting Russia’s oil revenues: price cap and EU boycott.

    OPEC and its oil-producing allies have agreed to stick to their output targets as the oil markets struggle to assess the impact of a slowing Chinese economy on demand and a G7 price cap on Russian oil on supply.

    The decision at an OPEC+ meeting on Sunday was made a day ahead of the planned implementation of two measures aimed at hitting Russia’s oil revenues in response to its invasion of Ukraine: a European Union boycott of most Russian oil imports and a price cap of $60 per barrel on Russian exports imposed by the EU, the Group of Seven countries and Australia.

    It is not yet clear how much Russian oil the two measures could take off the global market, which could tighten supply and drive up prices.

    The world’s second largest oil producer has been able to reroute much of shipments it once made to Europe to customers in India, China and Turkey.

    Moscow has said it would not sell its oil under the price cap and was analysing how to respond.

    OPEC+, which includes Russia, angered the United States and other Western nations in October when it agreed to cut output by 2 million barrels per day, about 2 percent of world demand, from November until the end of 2023.

    Washington accused the group and the world’s biggest oil producer, Saudi Arabia, of siding with Russia despite Moscow’s war in Ukraine.

    OPEC+ argued it had cut output because of a weaker economic outlook. Oil prices have declined since October due to slower Chinese and global economic growth and higher interest rates, prompting market speculation the group could cut oil output again.

    But on Sunday, OPEC+ decided to keep the policy unchanged. Its key ministers will next meet on February 1 while a full meeting is scheduled for June 3-4.

     

    There was no discussion of the Russian oil price cap at the OPEC+ meeting, sources told the Reuters news agency.

    JP Morgan said on Friday that OPEC+ could review production in the new year based on new data on Chinese demand trends and consumer compliance with price caps on Russia crude output and tanker flow.

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  • OPEC maintains oil targets amid uncertainty over Russian sanctions

    OPEC maintains oil targets amid uncertainty over Russian sanctions

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    The Saudi-led OPEC oil cartel and allied producers including Russia did not change their targets for shipping oil to the global economy amid uncertainty about the impact of new Western sanctions against Russia that could take significant amounts of oil off the market.

    The decision at a meeting of oil ministers Sunday comes a day ahead of the planned start of two measures aimed at hitting Russia’s oil earnings in response to its invasion of Ukraine: a European Union boycott of most Russian oil, and a price cap of $60 per barrel on Russian exports imposed by the EU and the Group of Seven democracies.

    It is not yet clear how much Russian oil the two sanctions measures could take off the global market, which would tighten supply and drive up prices. The world’s No. 2 oil producer has been able to reroute much, but not all, of its former Europe shipments to customers in India, China and Turkey. The impact of the price cap is also up in the air because Russia has said it could simply halt deliveries to countries that observe the limit but would likely also find ways to evade the cap for some shipments.

    On the other side, oil has been trading at lower prices on fears that coronavirus outbreaks and China’s strict zero-COVID restrictions would reduce demand for fuel in one of the world’s major economies. Concerns about recessions in the U.S. and Europe also raise the prospect of lower demand for gasoline and other fuel made from crude.

    That uncertainty is the reason the OPEC+ alliance gave in October for slashing production by 2 million barrels per day starting in November, a cut that remains in effect. Analysts say that took less than the full amount off the market since OPEC+ members already can’t meet their full production quotas.

    With the global economy slowing, oil prices have been falling since summertime highs, with international benchmark Brent closing Friday at $85.42 per barrel, down from $98 a month ago. That has eased gasoline prices for drivers in the U.S. and around the world.

    Average gas prices have fallen for U.S. drivers in recent days to $3.41 per gallon, according to motoring club federation AAA.

    To prevent a sudden loss of Russian crude, the price cap allows shipping and insurance companies to transport Russian oil to non-Western nations at or below that threshold. Most of the globe’s tanker fleet is covered by insurers in the G-7 or EU.

    Russia would likely try to evade the cap by organizing its own insurance and using the world’s shadowy fleet of off-the-books tankers, as Iran and Venezuela have done, but that would be costly and cumbersome, analysts say.

    Facing those uncertainties for the global oil market, OPEC oil ministers led by Saudi Arabia could leave production levels unchanged or cut output again to keep prices from declining further. Low prices mean less revenue for governments of producing nations.

    Maintaining OPEC production targets makes sense because “right now I think they see the market as adequately priced, adequately supplied, and there’s no reason to rock the boat,” said Gary Peach, oil markets analyst with Energy Intelligence.

    The G-7 price cap could prompt Russia to retaliate and take oil off the market. But the cap of $60 a barrel is near the current price of Russian oil, meaning Moscow could continue to sell while rejecting the cap in principle. Oil use also declines in the winter, in part because fewer people are driving.

    “If Russia ends up taking off more oil than about a million barrels per day, then the world becomes short on oil, and there would need to be an offset somewhere, whether that’s from OPEC or not,” said Jacques Rousseau, managing director at Clearview Energy Partners. “That’s going to be the key factor — is to figure out how much Russian oil is really leaving the market.”

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  • OPEC+ oil producers face uncertainty over Russian sanctions

    OPEC+ oil producers face uncertainty over Russian sanctions

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    FRANKFURT, Germany — The Saudi-led OPEC oil cartel and allied producing countries, including Russia, are expected to decide how much oil to supply to the global economy amid weakening demand in China and uncertainty about the impact of new Western sanctions against Russia that could take significant amounts of oil off the market.

    The 23-country OPEC+ alliance are scheduled to meet Sunday, a day ahead of the planned start of two measures aimed at hitting Moscow’s oil earnings in response to its war in Ukraine. Those are a European Union boycott of most Russian oil and a $60-per-barrel price cap on Russian exports imposed by the EU and Group of Seven democracies.

    Russia rejected the price cap approved Friday and threatened to stop supplying the nations that endorsed it.

    Oil has been trading lower on fears that coronavirus outbreaks and China’s strict zero-COVID restrictions would reduce demand for fuel in one of the world’s major economies. Concerns about recessions in the U.S. and Europe also raise the prospect of lower demand for gasoline and other fuel made from crude.

    That uncertainty is the reason OPEC+ gave in October for a slashing production by 2 million barrels per day starting in November, which some saw as a possible move to help Russia weather the European embargo. The impact had some limitations because OPEC+ countries already can’t meet their quotas.

    With the global economy slowing, oil prices have been falling since summertime highs, with international benchmark Brent closing Friday at $85.42 per barrel, down from $98 a month ago. That has eased gasoline prices for drivers in the U.S. and around the world.

    On the other side, the price cap and EU boycott could take an unknown amount of Russian oil off the global market, tightening supply and driving up prices. To prevent a sudden loss of Russian crude, the price cap allows shipping and insurance companies to transport Russian oil to non-Western nations at or below that threshold. Most of the globe’s tanker fleet is covered by insurers in the G-7 or EU.

    Russia would likely try to evade the cap by organizing its own insurance and using the world’s shadowy fleet of off-the-books tankers, as Iran and Venezuela have done, but that would be costly and cumbersome, analysts say.

    Facing those uncertainties for the global oil market, OPEC oil ministers led by Saudi Arabia could leave production levels unchanged or cut output again to keep prices from declining further. Low prices mean less revenue for governments of producing nations.

    “We feel that the meeting will be fairly short, and the alliance will stick to the current output targets,” said Gary Peach, oil markets analyst with Energy Intelligence. Standing pat makes sense “all the more so because oil is at $87 per barrel (earlier Friday), which is a good price for everybody. … Of course, $98 is better, but right now I think they see the market as adequately priced, adequately supplied and there’s no reason to rock the boat.”

    Analysts at Clearview Energy Partners, on the other hand, expect OPEC+ to announce a production cut of 1 million barrels per day. Some members are underproducing, so that would more likely amount to a production cut of roughly 580,000 barrels per day.

    A cut of that magnitude wouldn’t cause a problem with global supplies, even when taking into consideration the EU ban on Russian oil, which is expected to pull another 1 million barrels off the market, said Jacques Rousseau, managing director at Clearview Energy Partners. Oil use declines in the winter, in part because fewer people are driving.

    But the G-7 price cap could prompt Russia to retaliate and take more oil off the market. The Saudis are “likely to share the Kremlin’s interest in quashing the G-7’s rising buyers’ cartel,” said Kevin Book, another managing director at Clearview.

    The cap of $60 a barrel is near the current price of Russian oil, meaning Moscow could continue to sell while rejecting the cap in principle.

    “If Russia ends up taking off more oil than about a million barrels per day, then the world becomes short on oil, and there would need to be an offset somewhere, whether that’s from OPEC or not,” Rousseau said. “That’s going to be the key factor — is to figure out how much Russian oil is really leaving the market.”

    ———

    Bussewitz reported from New York.

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  • OPEC+ oil producers face uncertainty over Russian sanctions

    OPEC+ oil producers face uncertainty over Russian sanctions

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    FRANKFURT, Germany — The Saudi-led OPEC oil cartel and allied producing countries, including Russia, are expected to decide how much oil to supply to the global economy amid weakening demand in China and uncertainty about the impact of new Western sanctions against Russia that could take significant amounts of oil off the market.

    The 23-country OPEC+ alliance are scheduled to meet Sunday, a day ahead of the planned start of two measures aimed at hitting Moscow’s oil earnings in response to its war in Ukraine. Those are a European Union boycott of most Russian oil and a $60-per-barrel price cap on Russian exports imposed by the EU and Group of Seven democracies.

    Russia rejected the price cap approved Friday and threatened to stop supplying the nations that endorsed it.

    Oil has been trading lower on fears that coronavirus outbreaks and China’s strict zero-COVID restrictions would reduce demand for fuel in one of the world’s major economies. Concerns about recessions in the U.S. and Europe also raise the prospect of lower demand for gasoline and other fuel made from crude.

    That uncertainty is the reason OPEC+ gave in October for a slashing production by 2 million barrels per day starting in November, which some saw as a possible move to help Russia weather the European embargo. The impact had some limitations because OPEC+ countries already can’t meet their quotas.

    With the global economy slowing, oil prices have been falling since summertime highs, with international benchmark Brent closing Friday at $85.42 per barrel, down from $98 a month ago. That has eased gasoline prices for drivers in the U.S. and around the world.

    On the other side, the price cap and EU boycott could take an unknown amount of Russian oil off the global market, tightening supply and driving up prices. To prevent a sudden loss of Russian crude, the price cap allows shipping and insurance companies to transport Russian oil to non-Western nations at or below that threshold. Most of the globe’s tanker fleet is covered by insurers in the G-7 or EU.

    Russia would likely try to evade the cap by organizing its own insurance and using the world’s shadowy fleet of off-the-books tankers, as Iran and Venezuela have done, but that would be costly and cumbersome, analysts say.

    Facing those uncertainties for the global oil market, OPEC oil ministers led by Saudi Arabia could leave production levels unchanged or cut output again to keep prices from declining further. Low prices mean less revenue for governments of producing nations.

    “We feel that the meeting will be fairly short, and the alliance will stick to the current output targets,” said Gary Peach, oil markets analyst with Energy Intelligence. Standing pat makes sense “all the more so because oil is at $87 per barrel (earlier Friday), which is a good price for everybody. … Of course, $98 is better, but right now I think they see the market as adequately priced, adequately supplied and there’s no reason to rock the boat.”

    Analysts at Clearview Energy Partners, on the other hand, expect OPEC+ to announce a production cut of 1 million barrels per day. Some members are underproducing, so that would more likely amount to a production cut of roughly 580,000 barrels per day.

    A cut of that magnitude wouldn’t cause a problem with global supplies, even when taking into consideration the EU ban on Russian oil, which is expected to pull another 1 million barrels off the market, said Jacques Rousseau, managing director at Clearview Energy Partners. Oil use declines in the winter, in part because fewer people are driving.

    But the G-7 price cap could prompt Russia to retaliate and take more oil off the market. The Saudis are “likely to share the Kremlin’s interest in quashing the G-7’s rising buyers’ cartel,” said Kevin Book, another managing director at Clearview.

    The cap of $60 a barrel is near the current price of Russian oil, meaning Moscow could continue to sell while rejecting the cap in principle.

    “If Russia ends up taking off more oil than about a million barrels per day, then the world becomes short on oil, and there would need to be an offset somewhere, whether that’s from OPEC or not,” Rousseau said. “That’s going to be the key factor — is to figure out how much Russian oil is really leaving the market.”

    ———

    Bussewitz reported from New York.

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  • OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap

    OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap

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    OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.

    Bloomberg | Bloomberg | Getty Images

    OPEC and non-OPEC oil producers could impose deeper oil output cuts on Sunday, energy analysts said, as the influential energy alliance weighs the impact of a pending ban on Russia’s crude exports and a possible price cap on Russian oil.

    OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.

    The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.

    Claudio Galimberti, senior vice president of analysis at energy consultancy Rystad, told CNBC from OPEC’s headquarters in Vienna, Austria, that he believes the group “would be better off to stay the course” and roll over existing production policy.

    “OPEC+ has been rumored to consider a cut on the basis of demand weakness, specifically in China, over the past few days. Yet, China’s traffic nationwide is not down dramatically,” Galimberti said.

    Energy market participants remain wary about the European Union’s sanctions on the purchases of the Kremlin’s seaborne crude exports on Dec. 5, while the prospect of a G-7 price cap on Russian oil is another source of uncertainty.

    The 27-nation EU bloc agreed in June to ban the purchase of Russian seaborne crude from Dec. 5 as part of a concerted effort to curtail the Kremlin’s war chest following Moscow’s invasion of Ukraine.

    Concern that an outright ban on Russian crude imports could send oil prices soaring, however, prompted the G-7 to consider a price cap on the amount it will pay for Russian oil.

    No formal agreement has yet been reached, although Reuters reported Thursday that EU governments had tentatively agreed to a $60 barrel price cap on Russian seaborne oil.

    “The other factor OPEC will need to consider is indeed the price cap,” Galimberti said. “It’s still up in the air, and this adds to the uncertainty.”

    The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.

    ‘So much uncertainty’

    OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the U.S. for OPEC+ to pump more to lower fuel prices and help the global economy.

    The energy alliance recently hinted it could impose deeper output cuts to spur a recovery in crude prices. This signal came despite a report from The Wall Street Journal suggesting an output increase of 500,000 barrels per day was under discussion for Sunday.

    OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the U.S. for OPEC+ to pump more to lower fuel prices and help the global economy.

    Bloomberg | Bloomberg | Getty Images

    Speaking earlier this week, RBC Capital Markets’ Helima Croft said there was no expectation of a production increase from the upcoming OPEC+ meeting and a “significant chance” of a deeper output cut.

    “There is so much uncertainty,” Croft told CNBC’s “Squawk Box” on Tuesday. OPEC delegates “have to factor in what happens with China but also what happens with Russian production.”

    “My expectation right now is, if prices are flirting with Brent breaking into the 70s, certainly OPEC will do a deeper cut, but the question is, how do they factor in what is going to come the next day?” Croft said. “So, I still think it is up for grabs.”

    Oil prices, which have fallen sharply in recent months, were trading slightly lower ahead of the meeting.

    International Brent crude futures traded 0.2% lower at $87.78 a barrel on Friday morning in London, down from over $123 in early June. U.S. West Texas Intermediate futures, meanwhile, dipped 0.3% to trade at $80.95, compared to a level of $122 six months ago.

    Goldman Sachs' Jeff Currie says OPEC+ highly likely to impose oil output cut

    “Barring any negative surprise during Sunday’s virtual OPEC+ talks and assuming a healthy compromise on Russian oil price cap before the EU sanctions kick in on Monday it is tempting to audaciously conclude that the bottom has been found,” Tamas Varga, analyst at broker PVM Oil Associates, said in a note Thursday.

    Varga said oil prices trading below $90 a barrel was “not acceptable” for OPEC and Russia was widely expected to introduce retaliatory measures against those signing up for the G-7 deal.

    “Choppy and nervous market conditions will prevail, but the new month should bring more joy than November,” he added.

    ‘High probability’ of an output cut

    Jeff Currie, global head of commodities at Goldman Sachs, said OPEC ministers would need to discuss whether to accommodate further weakness in demand in China.

    “They got to deal with the fact that, hey, demand is down in China, prices are reflecting it, and do they accommodate that weakness in demand?” Currie told CNBC’s Steve Sedgwick on Tuesday.

    “I think there is a high probability that we do see a cut,” he added.

    Analysts at political risk consultancy Eurasia Group said that lower oil prices “heighten the risk” of a new OPEC+ output cut.

    “Ultimately, the decision will depend on the trajectory of the oil price when OPEC+ meets and how much disruption is evident in markets because of the EU sanctions,” Eurasia Group analysts led by Raad Alkadiri said Monday in a research note.

    If Brent crude futures dip below $80 a barrel for a sustained period ahead of the meeting, Eurasia Group said OPEC+ leaders could push for another production cut to shore up prices and bring Brent futures back up to around $90 — a level “that they appear to favor.”

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  • Crude oil prices slide on concerns over China’s demand; Brent hits $82.74/bbl

    Crude oil prices slide on concerns over China’s demand; Brent hits $82.74/bbl

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    Oil prices dropped in early trade on Tuesday, weighed down by concerns about slowing fuel demand in top crude importer China amid strict COVID-19 curbs.

    Brent crude LCOc1 futures fell 45 cents, or 0.5%, to trade at $82.74 a barrel at 0113 GMT. US West Texas Intermediate (WTI) crude CLc1 futures dropped 51 cents, or 0.7%, to $76.73 a barrel.

    Brent settled down 0.5% the previous day, having slumped more than 3% to $80.61 earlier in the session to its lowest since Jan. 4. WTI settled up 1.3% on Monday, after earlier touching its lowest since December 2021.

    “Bearish moods toward oil prices are spreading in Asia due to concerns about a decline in China’s demand while the rare protests over the weekend also raised fears over the impact on the Chinese economy,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

    The rare street protests that erupted in cities across China over the weekend were a vote against President Xi Jinping’s zero-COVID policy and the strongest public defiance during his political career, China analysts said. Beijing has stuck with the zero-COVID policy even as much of the world has lifted most restrictions. Read full story

    Investors also remained cautious ahead of a key meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, on Dec. 4. Analysts at Eurasia Group suggested in a note on Monday that weakened demand out of China could spur OPEC+ to cut output.

    “Losses were limited (on Tuesday) as some investors expect that OPEC and its allies may agree on a production cut in their next meeting to support oil prices,” said Fujitomi Securities analyst Tazawa.

    Markets are also assessing the impact of an upcoming Western price cap on Russian oil.

    Group of Seven (G7) and European Union diplomats have been discussing a cap of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets. Russia calls its actions in Ukraine “a special operation”.

    But EU governments failed to agree on Monday on the cap, with Poland insisting the cap should be set lower than proposed by the G7, diplomats said. Read full story

    The price cap is due to come into effect on Dec. 5, when an EU ban on Russian crude also takes effect.

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  • OPEC cuts oil demand growth forecast again as economic challenges mount

    OPEC cuts oil demand growth forecast again as economic challenges mount

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    OPEC on Monday cut its forecast for 2022 global oil demand growth for a fifth time since April and also trimmed next year’s figure, citing mounting economic challenges including high inflation and rising interest rates.

    Oil demand in 2022 will increase by 2.55 million barrels per day (bpd), or 2.6%, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, down 100,000 bpd from the previous forecast.

    “The world economy has entered a period of significant uncertainty and rising challenges in the fourth quarter of 2022,” OPEC said in the report.

    “Downside risks include high inflation, monetary tightening by major central banks, high sovereign debt levels in many regions, tightening labour markets and persisting supply chain constraints.”

    This report is the last before OPEC and its allies, together known as OPEC+, meet on Dec. 4 to set policy. The group, which recently cut production targets, will remain cautious, Saudi Arabia’s energy minister was quoted as saying last week.

    Despite commenting on the rising challenges, OPEC left its 2022 and 2023 global economic growth forecasts steady and said while risks were skewed to the downside, there was also upside potential.

    “This may come from a variety of sources. Predominantly, inflation could be positively impacted by any resolution of the geopolitical situation in Eastern Europe, allowing for less hawkish monetary policies,” OPEC said.

    Oil maintained a decline after the report was released, trading around $95 a barrel.

    For October, with oil prices weakening on recession fears, the group made a 100,000 bpd cut to the OPEC+ production target, with an even bigger reduction starting in November.

    The report said that OPEC output fell by 210,000 bpd in October to 29.49 million bpd, more than the pledged OPEC+ reduction.

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  • Crude oil prices edge lower amid China COVID-19 woes, Brent hits $92.77/bbl

    Crude oil prices edge lower amid China COVID-19 woes, Brent hits $92.77/bbl

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    Oil prices inched lower on Tuesday, extending losses of 1% from the previous session as more extensive COVID-19 curbs in China increased fears of slowing fuel demand in the world’s second-largest oil consumer.

    Brent crude for January delivery was down 4 cents at $92.77 a barrel at 0112 GMT. The December contract expired on Monday at $94.83 a barrel, down 1%.

    US West Texas Intermediate (WTI) crude fell 18 cents, or 0.2%, to $86.35 a barrel.

    COVID-19 curbs in top crude oil importer China forced the temporary closure of Disney’s Shanghai resort on Monday, while production of Apple Inc iPhones at a major contract manufacturing facility could drop by 30% in November.

    “With China sticking to the zero-COVID policy, the oil demand outlook overshadowed a record of US oil export data from last week,” CMC Markets analyst Tina Teng said.

    Strict pandemic restrictions have caused China’s factory activity to fall in October and cut into its imports from Japan and South Korea.

    Also weighing on sentiment was the world’s largest independent oil trader Vitol saying that its sees signs of oil demand destruction, ANZ Research analysts said in a note.

    Pressuring oil prices, US oil output climbed to nearly 12 million barrels per day (bpd) in August, highest since the start of the COVID-19 pandemic, even as shale companies said they do not expect production to accelerate in coming months.

    That is likely to lead to a rise in US crude oil stocks in the week to Oct. 28 of about 300,000 barrels, while distillate and gasoline inventories were expected to fall, a preliminary Reuters poll showed.

    The poll was conducted ahead of reports from the American Petroleum Institute due at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the Energy Information Administration due at 10:30 a.m. (1430 GMT) on Wednesday.

    Brent and WTI benchmarks ended October higher, marking their first monthly gains since May after the Organization of the Petroleum Exporting Countries and its allies including Russia announced plans to cut output by 2 million bpd.

    OPEC raised its forecasts for world oil demand in the medium-and longer-term on Monday, saying that $12.1 trillion of investment is needed to meet this demand despite the transition to renewable energy sources. 

    US President Joe Biden has called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate.

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  • Wall Street reacts to U.S. releasing 15 million more barrels of oil from reserve

    Wall Street reacts to U.S. releasing 15 million more barrels of oil from reserve

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    Wall Street reacts to U.S. releasing 15 million more barrels of oil from reserve – CBS News


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    President Biden announced Wednesday that 15 million more barrels of oil would be released from the Strategic Petroleum Reserve as part of a plan to reduce gas prices. Reuters energy reporter Laura Sanicola discussed the reaction in the oil market.

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  • Biden to release 15 million barrels of oil from strategic reserve, with more possible

    Biden to release 15 million barrels of oil from strategic reserve, with more possible

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    Washington — President Biden will announce the release of 15 million barrels of oil from the U.S. strategic reserve Wednesday as part of a response to recent production cuts announced by OPEC+ nations, and he will say more drawdowns are possible this winter, as his administration rushes to be seen as pulling out all the stops ahead of next month’s midterm elections.

    Mr. Biden will deliver remarks Wednesday to announce the drawdown from the strategic reserve, senior administration officials said Tuesday on the condition of anonymity to outline Mr. Biden’s plans. It completes the release of 180 million barrels authorized by Mr. Biden in March that was initially supposed to occur over six months. That has sent the strategic reserve to its lowest level since 1984 in what the administration called a “bridge” until domestic production could be increased. The reserve now contains roughly 400 million barrels of oil.

    Mr. Biden will also open the door to additional releases this winter in an effort to keep prices down. But administration officials would not detail how much the president would be willing to tap, nor how much they want domestic and production to increase by to end the withdrawals.

    The president will also say that the U.S. government will restock the strategic reserve when oil prices are at or lower than $67 to $72 a barrel, an offer that administration officials argue will support domestic production by guaranteeing a baseline level of demand. Yet the president is also expected to renew his criticism of the profits reaped by oil companies — repeating a bet made this summer that public condemnation would matter more to these companies than shareholders’ focus on returns.

    It marks the continuation of an about-face by Mr. Biden, who has tried to move the U.S. past fossil fuels to identify additional sources of energy to satisfy U.S. and global supply as a result of disruptions from Russia’s invasion of Ukraine and production cuts announced by the Saudi Arabia-led oil cartel.

    The prospective loss of 2 million barrels a day — 2% of global supply — has had the White House saying Saudi Arabia sided with Russian President Vladimir Putin and pledging there will be consequences for supply cuts that could prop up energy prices. The 15 million-barrel release would not cover even one full day’s use of oil in the U.S., according to the Energy Information Administration.

    The administration could make a decision on future releases a month from now, as it requires a month and a half for the government to notify would-be buyers.

    Mr. Biden still faces political headwinds because of gas prices. AAA reports that gas is averaging $3.87 a gallon. That’s down slightly over the past week, but it’s up from a month ago. The recent increase in prices stalled the momentum that the president and his fellow Democrats had been seeing in the polls ahead of the November elections.

    An analysis Monday by ClearView Energy Partners, an independent energy research firm based in Washington, suggested that two states that could decide control of the evenly split Senate — Nevada and Pennsylvania — are sensitive to energy prices. The analysis noted that gas prices over the past month rose above the national average in 18 states, which are home to 29 potentially “at risk” House seats.

    Even if voters want cheaper gasoline, expected gains in supply are not materializing because of a weaker global economy. The U.S. government last week revised downward its forecasts, saying that domestic firms would produce 270,000 fewer barrels a day in 2023 than was forecast in September. Global production would be 600,000 barrels a day lower than forecast in September.

    The hard math for Mr. Biden is that oil production has yet to return to its pre-pandemic level of roughly 13 million barrels a day. It’s about a million barrels a day shy of that level. The oil industry would like the administration to open up more federal lands for drilling, approve pipeline construction and reverse its recent changes to raise corporate taxes. The administration counters that the oil industry is sitting on thousands of unused federal leases and says new permits would take years to produce oil with no impact on current gas prices. Environmental groups, meanwhile, have asked Mr. Biden to keep a campaign promise to block new drilling on federal lands.

    Mr. Biden has resisted the policies favored by U.S. oil producers. Instead, he’s sought to reduce prices by releasing oil from the U.S. reserve, shaming oil companies for their profits and calling on greater production from countries in OPEC+ that have different geopolitical interests, said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute.

    “If they continue to offer the same old so-called solutions, they’ll continue to get the same old results,” Macchiarola said.

    Because fossil fuels lead to carbon emissions, Mr. Biden has sought to move away from them entirely with a commitment to zero emissions by 2050. When discussing that commitment nearly a year ago after the G-20 leading rich and developing nations met in Rome, the president said he still wanted to also lower gas prices because at “$3.35 a gallon, it has profound impact on working-class families just to get back and forth to work.”

    Since Mr. Biden spoke of the pain of gas at $3.35 a gallon and his hopes to reduce costs, the price has on balance risen another 15.5%.

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  • How Saudi Arabia Took Advantage Of President Biden

    How Saudi Arabia Took Advantage Of President Biden

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    In December 1975, when memories of gas lines were fresh on the minds of Americans as a result of the 1973 OPEC oil embargo, Congress established the Strategic Petroleum Reserve (SPR). The law was designed “to reduce the impact of severe energy supply interruptions” such as that caused by the embargo.

    This crude oil is stored in underground salt caverns at four major oil storage facilities in the Gulf Coast region of the United States. There are two sites in Texas and two sites in Louisiana.

    Is the SPR Obsolete?

    There was once a period during which the U.S. was heavily dependent upon OPEC for oil imports. Just a few years ago, OPEC was responsible for about 40% of the oil we imported. Today, that has declined to about 10% as a result of the resurgence of U.S. oil production.

    The U.S. was a total petroleum net exporter in 2020 and 2021. We still import about 8.5 million barrels per day (BPD) of crude oil. However, we export a bit more than that in petroleum and finished products.

    Why, then, does the SPR still matter? Does the SPR still make sense given the turnaround in U.S. oil production? We can certainly argue that with the growth of U.S. oil production over the past 15 years, the SPR has become less important than it was when it was originally established.

    But selling off the oil in the SPR is a risk. According to the Department of Energy’s website on the SPR:

    “SPR oil is sold competitively when the President finds, pursuant to the conditions set forth in the Energy Policy and Conservation Act (EPCA), that a sale is required. Such conditions have only existed three times, most recently in June 2011 when the President directed a sale of 30 million barrels of crude oil to offset disruptions in supply due to unrest in Libya. During this severe energy supply interruption, the United States acted in coordination with its partners in the International Energy Agency (IEA). IEA countries released altogether a total of 60 million barrels of petroleum.”

    The Politics of the SPR

    Although the SPR has been used infrequently for “emergencies”, it has been used frequently by politicians seeking to influence gasoline prices in election years. There is a long history of this. Arguably, this was the primary reason that earlier this year President Biden announced the largest SPR release in history.

    Since the beginning of the year, nearly 40% of the SPR has been sold off. It is at its lowest level since 1984. This has undoubtedly helped drive down oil prices, but this situation is unsustainable. We now have significantly less oil in reserve should a true emergency occur. A significant supply disruption in the Middle East, Venezuela, or Nigeria could quickly remind us of the SPR’s importance.

    But why should any of this matter if we are essentially self-sufficient in our oil production? For the same reason the loss of Russian imports earlier in the year helped drive gasoline prices much higher. The oil we import is a good match for U.S. refineries, and often the oil we export is not. So, a substantial loss of oil imports — and an inability to make up for that loss with the SPR — could cause significant disruptions that lead to price spikes in both oil and gasoline prices.

    Saudi Arabia certainly recognizes this vulnerability, and they have used it against us. Over the past six months, the U.S. has drawn down the SPR by close to 1 million BPD. But at its most recent meeting, OPEC — led by Saudi Arabia — announced plans to reduce oil production by 2 million BPD from November levels.

    The SPR as Insurance

    I have compared the SPR to an insurance policy on your home. The odds that your home will be destroyed are small. But, if it does happen you will be very glad you had that homeowner’s policy.

    Now consider that you greatly reduced your insurance coverage, AND someone had an incentive to somehow profit from that. You have placed yourself in an extremely vulnerable position.

    That’s where we are now. We are more at the mercy of OPEC than we have been in a few years. I don’t think there’s any question that Saudi Arabia, in particular, would rather deal with Republicans (especially with Donald Trump).

    So, in effect they are killing two birds with one stone. By restricting production, they are potentially hurting the Biden Administration by driving up oil prices. Second, the drawdowns from the SPR have cost them money, and this will be a way for them to profit from our vulnerability.

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    Robert Rapier, Senior Contributor

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  • Is The U. S. Policy Towards OPEC+ Short-Sighted?

    Is The U. S. Policy Towards OPEC+ Short-Sighted?

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    The unanimous decision by OPEC+ to cut productions has come under fire by the U.S., with Saudi Arabia facing criticism for being short-sighted. However, the growing hydrocarbon industry in Africa is sending a message to America: Engage, or business will go to China and India.

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    University of Houston Energy Fellows, Contributor

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  • Biden facing pressure to punish Saudi Arabia after OPEC+ cuts oil production

    Biden facing pressure to punish Saudi Arabia after OPEC+ cuts oil production

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    President Biden issued a vague warning to Saudi Arabia on Wednesday, after the OPEC+ alliance of oil-exporting nations decided last week to cut oil production by 2 million barrels per day. Biden pledged “consequences” and vowed to “take action” — but some Senate Democrats are demanding a swift and concrete response. 

    Lawmakers like Sens. Bernie Sanders and Bob Menendez have floated ideas including freezing arms sales to Saudi Arabia, which is a member of OPEC+, and pulling all U.S. troops out of the country. 

    OPEC+’s move could push gas prices back up and boost Russia’s oil revenue. The national average for a gallon of on Wednesday was $3.92 — up nine cents in the last week. 

    White House officials had lobbied OPEC+ nations not to cut back. 

    “They are helping and aligning with a murderous, brutal war criminal, Vladimir Putin,” said Senator Richard Blumenthal.

    Biden said Wednesday that he wants to consult with Congress before deciding on any consequences. It’s a delicate situation, given that a rift in the U.S.-Saudi relationship could also rattle oil markets and drive up prices in the month before the midterm elections.    

    Biden himself traveled to Saudi Arabia this summer, even fist bumping Crown Prince Mohammed Bin Salman, despite his alleged role in the murder of Washington Post columnist Jamal Khashoggi. 

    But punishing Saudi Arabia wouldn’t be simple. CBS News senior security contributor Mike Morell says many of the potential punishments come with downsides. 

    “Denying arms sales to Saudi Arabia not only hurts U.S. firms selling those weapons, but it also hurts the security of the region, because we want the Saudis to have American weapons,” Morell said. “They want to have American weapons because if we ever have to fight Iran together, we want those weapons systems to complement each other.” 

    Nancy Cordes


    Nancy Cordes

    Nancy Cordes is CBS News’ chief White House correspondent.

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  • Biden has a big oil problem. Here’s what you need to know about the recent OPEC+ decision. | CNN Politics

    Biden has a big oil problem. Here’s what you need to know about the recent OPEC+ decision. | CNN Politics

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    A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.


    Washington
    CNN
     — 

    With just weeks to go until the November midterms, four letters are haunting President Joe Biden and the Democrats: OPEC.

    Last week, the Organization of Petroleum Exporting Countries (OPEC) and its allies, led by Saudi Arabia and Russia, said that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

    The group announced the production cut following its first meeting in person since March 2020. The reduction is equivalent to about 2% of global oil demand.

    The Biden administration criticized the decision in a statement, calling it “shortsighted” and saying that it’s harmful to some countries already struggling with elevated energy prices the most.

    The production cuts will start in November. OPEC+, which combines OPEC countries and allies such as Russia, will meet again in December.

    For one perspective on the OPEC+ decision and to better understand how it affects everyone, we turned to Hossein Askari, who teaches international business at The George Washington University.

    Our conversation, conducted over the phone and lightly edited for flow and brevity, is below.

    WHAT MATTERS: Can you walk us through this recent OPEC decision? What’s happening exactly?

    ASKARI: So when the war in Ukraine started, sorry to tell your audience, but the United States was not very well prepared in what it was going to do. It sanctioned Russia for this and for that. And so the price of oil started going up. And at the same time, the United States actually put sanctions on Russian oil, not on gas, on oil. And so there was less Russian oil in the Western markets.

    Russia actually started selling its oil more and more to China and to India and cutting its prices to those countries. So they would buy Russian oil, but there was a shortage of oil.

    Another reason why the shortage had developed was America basically sanctions like a mad cowboy, if I may say that. It has sanctioned Venezuela for many years.

    But Saudi Arabia, with the new effective ruler who’s known as MBS, he has cozied up to Putin. And so when President Biden went and saw him a few months back and kind of asked him to increase oil production – I’m sorry to say this, I have to throw in this bit of politics – I think America really shamed itself by doing that.

    Of course, MBS did not respond positively. But now he, in fact, has gone over the top. He has agreed within OPEC – and of course he’s the main spokesman in OPEC with Russia – that they will cut back.

    WHAT MATTERS: What does the OPEC decision mean for the average American?

    ASKARI: From where we are now, crude oil prices by the end of the year, my guess, maximum, they’ll go up by $5 a barrel. Now, a lot of people think they’re gonna go up more than that. I don’t believe that, because I think the world economy is going to grow less and I think that we are going to see some Venezuelan oil come on the market, and I think we may see some deals made so some more Iranian oil may come on the market.

    For gasoline, I think Americans can see maybe prices going up from where they are today, if nothing else happens, by about another 30 to 50 cents a gallon.

    However, there is also another problem for Americans that is home heating oil, and that can also go up. So for the average American, they’re going to pay, no matter what, something more per gallon of gasoline at the pump. And I think there’s going to be more of an impact, actually, on the fuel oil that they heat their houses with. So it’s gonna put on the squeeze on the average American. There’s no two ways about it.

    WHAT MATTERS: What should the US do now?

    ASKARI: I think the United States should be much, much tougher with Saudi Arabia because we have bent over backward to accommodate them in every way. And we have looked the other way with what they’ve done. And now it’s the time to be tough. They’ve been tough with us. I think the President of the United States should be tough with Saudi Arabia.

    WHAT MATTERS: What else can the US do in terms of helping with oil prices in the immediate term?

    ASKARI: I think undoubtedly this administration has very bad rapport with US oil companies and energy companies. I think that there should be more behind-the scenes cooperation with the oil companies and the administration because you really need them now to cooperate.

    I know a lot of people don’t believe in fracking, but maybe it’s time to do some more fracking. Maybe it’s time to increase output. They can increase output elsewhere too. I think that would be extremely, extremely helpful.

    And I think the US oil companies – and I’m not a backer of oil companies, please don’t misunderstand – but I think they feel that the administration basically just wants to drive them out business.

    WHAT MATTERS: Anything else you’d like to add?

    ASKARI: Some people think that OPEC decisions are purely economic. Some people think purely political. It has always been both, especially for Saudi Arabia.

    It is really Saudi Arabia and the United Arab Emirates driving OPEC’s decision. I think Americans should understand it’s not the other members, it’s not Nigeria or Iran. I feel Americans should understand who are our friends and who are not our friends.

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  • Gas prices in the U.S. expected to rise

    Gas prices in the U.S. expected to rise

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    Gas prices in the U.S. expected to rise – CBS News


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    A decision by the OPEC+ alliance of oil-exporting nations to cut production of crude coupled with refinery woes in the West and Midwest are pushing gas prices higher just before the midterm elections. Jonathan Vigliotti reports.

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