Saudi Arabian Cabinet said on Tuesday that its government praised the latest decision by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil-producing nations to “voluntarily” extend the oil production cuts during the remaining part of the year. The governmental body noted in a statement that the confirmation of “the decision of the Kingdom and the other seven countries […] was taken at their meeting in Riyadh.” In addition, it reaffirmed that the move seeks to align with “precautionary efforts made by the OPEC+ group supporting the stability and balance of oil markets.”
JP Morgan, S&P Global, Rystad Look at Latest OPEC+ Move
In a report sent to the world on Monday by the J.P. Morgan Commodities Research team, analysts at J.P. Morgan outlined that they view OPEC+’s latest move as “market neutral for global crude oil balances and prices in 2024”.
The analysts highlighted in the report that the group extended 3.6 million barrels per day of existing cuts until the end of 2025, with a “major focus on undercompliance”, and prolonged an additional 2.2 million barrels per day of cuts until September 2024, “followed by tapered increases over 12 months”.
“We find current oil prices $8 too cheap and continue to make a bullish case for oil in 3Q24 largely based on our outlook for demand,” the analysts said in the report.
“Oil demand grew by only by 1.3 million barrels per day in the first quarter, underperforming our expectations by 0.6 million barrels per day almost entirely due to a warm winter,” they added. “But demand is in the midst of a transition, moving from a period of seasonally low consumption in April and May and into a peak summer travel season,” they continued. In the report, the J.P. Morgan analysts said the composition in demand growth will likely shift from liquids heavy petrochemicals to crude-rich products like gasoline and jet fuel.
“Consequently, we anticipate global oil demand to accelerate by 2.5 million barrels per day from the end of April through the end of August, in turn boosting global refinery runs by four million barrels per day over the same period,” they added in the report.
The J.P. Morgan analysts said in the report that the rollover of the full 5.8 million barrels per day of OPEC’s supply reductions until October 2024 should tighten balances, “resulting in a 1.1 million barrel per day inventory draw in the third quarter”. “Importantly, we see similar inventory declines as observed last summer (two million barrel per day draw this August vs 2.4 million barrels per day in August 2023) and, accordingly, expect a similar price action, with Brent oil moving at least $10 higher from current levels by September,” they added. The price in the $90s should keep pressure on the U.S. administration in the run-up to elections but also open the door for the alliance to bring a small proportion of its curbed production in October, the analysts noted in the report. “Assuming good compliance with … [the] announced output levels and no changes to demand, our balance shows only a small 0.1 million barrel per day surplus in 4Q24,” the analysts highlighted. They added, however, that “pressure on prices could build after that, as supply outside of OPEC rises and demand slows in 2025”. “Our global liquids balance projects a shift from a small 0.2 million barrel per day deficit in 2024 to a much looser 2025,” they continued. “Global oil demand growth will likely decelerate from 1.4 million barrels per day this year to one million barrels per day in 2025 as the last phase of the post-pandemic rebound dissipates and advancing energy efficiencies and an expanding electric vehicle fleet gain ground,” the analysts went on to state. Non-OPEC+ supply is set to surge by 1.8 million barrels per day, underpinned by large-scale, price-inelastic offshore developments in Brazil, Guyana, Senegal, and Norway, the analysts said in the report. “In total, eight floating production, storage, and offloading (FPSO) vessels with a combined capacity of 1.4 million barrels per day are committed for delivery in 2025. With demand gains set to slow, and non-OPEC supply surging, the market would likely shift into a large one million barrel per day surplus next year,” they added.
S&P Global, Bhushan Bahree, Executive Director, S&P Global Commodity Insights, said, “OPEC+ member countries would like to start increasing oil production without negatively impacting prices” but added that “they cannot do that just yet”.
“The need for more OPEC+ oil on a durable basis in the near future is not immediately evident and the group’s ministers reflected that in their latest decisions on supply to markets,” Bahree added. Bahree noted in the piece that, two years ago, at this time, OPEC+ output was 2.2 million barrels per day higher than it is now. “Total non-OPEC+ crude oil output is 3.1 million higher now, with more than half that growth coming from the United States alone,” Bahree said. “Put another way, OPEC+ has had to make room for the rising output of others or face downward pressure on prices,” Bahree added. Paul Tossetti, Executive Director, S&P Global Commodity Insights, said, “this time around, the timetable is a message to markets that these countries are willing to at least stay the course, even if disinclined to cut output further, to support prices by continuing to restrain their output for longer if necessary – at least for a time, anyway”. Tossetti also noted in the statement that, “an increase in quota does not automatically translate into more supply”. “The United Arab Emirates, for instance, is participating in additional voluntary cuts at this time. But the adjustment does change the share of the OPEC+ pie, giving the UAE a larger slice,” he added. “It is important to note that OPEC+ has both the ability and the will to execute a crafted strategy.
The group’s strength in the upstream sector is now complemented by a downstream complex refining growth of two million barrels per day over the last few years, while the Atlantic Basin has seen significant erosion,” Sahdev added. The Rystad analyst warned in the update that geopolitics was the “wild card for any unwind surprise” at the meeting.
Why has Netanyahu backed away from an officially announced peace plan
Israeli Prime Minister Benjamin Netanyahu says he is not ready to consider a truce in Gaza until Israel’s conditions are met. His announcement follows a statement by an Israeli government spokesperson that Netanyahu would “stop the war,” to allow the return of hostages. On Friday, US President Joe Biden unveiled what he called a three-phase Israeli plan for a cease-fire. For more on this, we talk to Ehud Olmert. He was prime minister of Israel from 2006 to 2009 and joins us now from Jerusalem. We also talk to Yossi Beilin who served in a variety of ministerial positions in the Israeli government before retiring from politics in 2008. He was also one of the architects of the 1993 Oslo Accords. He’s now a journalist and business consultant. NN: Oslo is what created the Gaza mess to begin with. And the blood in on Olmert’s hands among others
Hamas on Israeli offer: We don’t want to start from square one
The Palestinian militant group Hamas stressed on Tuesday that there will be no new rounds of discussion with the Israeli party until it approves the last draft proposal that the group previously agreed to.
“We did not accept to receive what was offered to us by the mediators, because we do not want to start from square one,” a senior Hamas official told Al Mayadeen, adding that the group is “surprised” by Washington’s pressure on mediators to push the proposed deal “while the Israelis do not agree.” The Hamas official also said that the group’s delegation would not be traveling to Cairo for talks today.
US President Joe Biden previously outlined the three-phase proposal put forward by Israel that, according to him, includes a complete ceasefire in the Gaza Strip. However, Israeli Prime Minister Benjamin Netanyahu indicated that the US president did not present details of the agreement, pointing out that Israel would not agree to a ceasefire until all hostages had been released and Gaza no longer represented “a threat” to Israel. NN: Their is no deal on the table. This is little more than a desperate Biden blue pill wet dream.
Oil prices fall to 3-month lows on oversupply woes
The price of crude oil for front-month deliveries hovered around its lowest point in three months on Tuesday after the recent OPEC+ meeting sparked concerns about a possible commodity oversupply in the face of weakening consumption in the United States. OPEC+ unexpectedly rolled out a plan to restore some production to the market this year, adding to the bearish momentum crude has been experiencing for months. OPEC and its allies over the weekend agreed to start rolling back some production cuts starting in October, earlier than many market watchers had expected. The curbs will continue in full in the third quarter, before gradually phasing out over the following 12 months. Analysts had been torn on whether the decision would be bearish for crude, or whether the group would still be able to diligently manage the market. Oil has dropped over the past two months as geopolitical risks ebbed and demand showed signs of weakening. Evidence of a softening physical market has also arisen, with Brent’s prompt spread narrowing to 13 cents, closely approaching a bearish contango structure that signals ample supplies in the near future. “The market is coming to terms with the wind-down of the voluntary cuts starting in October,” Ryan McKay, a commodity strategist at TD Securities, wrote in a note on Monday. “The easing of supply risk premia has already been weighing on prices and spreads, and the OPEC agreement has done little to turn that tide.” Goldman Sachs Group Inc. said the OPEC+ decision was bearish, but UBS Group AG and RBC Capital Markets LLC expressed confidence the alliance will maintain control of the market. Most analysts had expected OPEC+ to extend the curbs through to the end of the year.Oil capped a monthly loss on Friday, in part due to persistent concerns around demand in China, the world’s biggest crude importer. Supplies have also remained elevated over the past several months, and millions of barrels of American crude are sitting unsold, weakening WTI’s prompt spread closer to a bearish contango structure. Crude prices are still higher this year as geopolitical tensions from the Middle East to Ukraine raise concerns about supply. West Texas Intermediate for July settlements slipped to $73.00per barrel, while Brent for August contracts declined to sell under $77.00 per barrel in Europe.
Biden’s ceasefire proposal description allegedly ‘not accurate’
United States President Joe Biden’s explanation of a new Gaza ceasefire proposal was “not accurate,” NBC News reported on Monday, citing a senior Israeli official. According to the report, Israel did not change its conditions for a ceasefire and did not agree to withdraw its forces from Gaza. “Israel has not changed its conditions to reach a permanent ceasefire. That will only happen after our objectives are met including destroying Hamas’s military and governing capabilities,” the source told the media outlet.
Additionally, the official also said that the plan presented by Biden is not Israeli, adding that it was a proposal made by mediators to which Israel had introduced amendments. “It’s strange that they say it’s an Israeli proposal and at the same time that Israel needs to agree to it,” the source concluded.
Israel Pushes Back Against Gaza Cease-Fire Outlined by Biden
- It wants a pause and hostages for prisoners but no end to war
- White House says Israel has reached most of its military goals
Two days after US President Joe Biden laid out what he called an Israeli proposal to end its war on Hamas, it’s clear that key aspects of the deal have not, in fact, been embraced by Prime Minister Benjamin Netanyahu. As the war in Gaza approaches its eighth month, the impasse between Israel and Hamas over exchanging hostages for prisoners remains unchanged: Israel will pause fighting but not end it as long as Hamas’s governing and military structures remain intact, while Hamas will free hostages only if it’s guaranteed a permanent cease-fire. Biden said Israel has battered Hamas enough to prevent it from carrying out another attack like the one on Oct. 7, when it killed some 1,200 Israelis and took 250 hostages, and that the time has come to end the war, free the hostages and start to rebuild the badly destroyed Gaza Strip. “They don’t have the military capabilities to do what they did on the seventh of October,” John Kirby, spokesman for the National Security Council at the White House, said Sunday on ABC’s This Week. Militarily, “the Israelis have accomplished most of their goals in Gaza,” he said. Netanyahu’s government says preventing another Oct. 7 — the worst massacre in the country’s history — is the wrong criterion. Its position remains that Hamas, considered a terrorist group by the US and European Union, must be deprived of any aggressive capacity and that Israel won’t stop until that’s been achieved Biden laid out a three-phase plan on Friday that he said was Israel’s: a six-week truce involving hostage-prisoner exchanges and increased aid, followed by a focus on a permanent cease-fire and the removal of Israeli forces from Gaza, and, finally, major reconstruction. Secretary of State Antony Blinken spoke with Israeli Defense Minister Yoav Gallant and Israeli Minister Benny Gantz about the proposal to achieve a full cease-fire in Gaza as part of the deal that would secure the release of all hostages, according to readouts from the US State Department on Sunday. Hamas said it welcomed any proposal “based on a permanent cease-fire” as well as “a total withdrawal from the Gaza Strip.” Israeli officials say the plan they’ve agreed to doesn’t include a permanent cease-fire and Netanyahu issued two statements over the weekend contradicting Biden. In the first statement, Netanyahu said he’d authorized his negotiators to present a proposal aimed at returning the 100-plus hostages remaining in Gaza, but which “would also enable Israel to continue the war until all its objectives are achieved, including the destruction of Hamas’s military and governing capabilities.” The second statement was more pointed: “Israel’s conditions for ending the war have not changed: the destruction of Hamas’s military and governing capabilities, the freeing of all hostages and ensuring that Gaza no longer poses a threat.” The idea that Israel would agree to a permanent cease-fire before those conditions are fulfilled “is a non-starter,” the statement added. Defense Minister Gallant said Sunday that Israel is working on an alternative to Hamas rule in Gaza that involves isolating areas to remove Hamas operatives and introducing forces that will allow the building of an alternative government. White House officials told reporters on Saturday that Netanyahu’s comments were related to domestic politics and part of an effort to appease his right-wing flank.
Netanyahu: Draft doesn’t include stopping the war
Israeli Prime Minister Benjamin Netanyahu extended an invitation to National Security Minister Itamar Ben Gvir for a meeting to address the new proposal for the release of hostages and a potential ceasefire agreement with Hamas, local media reported on Monday. The invitation came in response to Ben Gvir’s threat of government dissolution if Netanyahu’s administration “continues to push for a deal and lead the agreement.” Local media reports indicate that Netanyahu assured Gvir that the new proposal does not encompass an end to the conflict in Gaza, contradicting the statements made by United States President Joe Biden.
IDF fails to intercept drone from Lebanon
The Israeli Defense Forces (IDF) on Sunday disclosed its unsuccessful attempt to intercept a drone launched from Lebanon towards Nahariya. The drone crashed in the city, sparking a fire that firefighters are said to be extinguishing. There have been no reported injuries resulting from the incident and authorities are assessing the situation and investigating the origins of the drone’s launch. NN: Back to the drawing board. Or in this case the Cadcam machine. These system were designed to intercept rockets that ark in the sky. Low-flying drones that fly on a horizontal axis are a hard target. Worse yet even harder to pickup on radar because they have little metal and hide in the ground clutter. It is a brand new world.
OPEC+ Extends Oil Cuts Into 2025
OPEC and its partners in OPEC+ this weekend decided to extend their production cuts, including both voluntary and group-wide cuts, until 2025.
Energy Intelligence’s Amena Bakr reported that the voluntary cuts specifically would be extended until the third quarter of 2024, after which the countries currently cutting would begin to bring back production if the market conditions are right. Goldman Sachs Group Inc. said the decision was bearish given a recent increase in inventories, but UBS Group AG and RBC Capital Markets LLC expressed confidence the alliance will continue to diligently manage the market. Most analysts had expected OPEC+ to extend the curbs through to the end of the year.
Oil prices slipped despite the news of the solid extension of the overall cuts, likely because most of the total cuts, which amount to some 3.66 million bpd, per Bakr, come from the voluntary scheme, totaling some 2.2 million bpd. Another reason for the reaction of oil traders was probably the upward adjustment of the UAE’s production quota. The OPEC member has been grumbling against the production cuts so the rest of the cartel raised its production baseline by 300,000 bpd at this weekend’s meeting. However, “The deal should allay market fears of OPEC+ adding back barrels at a time when demand concerns are still rife,” Energy Aspects’ Amrita Sen told Reuters. The agreement aims to keep supporting oil prices while easing the production restraints against which some members — such as the United Arab Emirates — have chafed as they sought to have their output levels upgraded.
“The market had not expected an unwinding of the cuts from October,” said Vandana Hari, founder of Vanda Insights in Singapore. “On the positive side for OPEC+, the agreement should help maintain cohesion. A long term continuation of lopsided cuts would have been a source of friction.” Trading volumes were higher than usual on Monday, but oil option skews are still signaling bearishness. So-called puts — which profit from lower prices — remain at a wide premium over the opposite calls.Oil capped a monthly loss on Friday in part due to persistent concerns around the demand outlook for China, the world’s biggest crude importer. The prompt spread for Brent briefly slipped into a bearish contango structure last week, and fuel markets have been flashing signs of weakness.Futures are still higher this year after geopolitical tensions from the Middle East to Ukraine raised concerns about supply. Israel has pushed back on a cease-fire plan laid out by US President Joe Biden, as the war in Gaza approaches its eighth month. “We are waiting for interest rates to come down and a better trajectory when it comes to economic growth … not pockets of growth here and there,” Saudi Arabia’s energy minister Abdulaziz bin Salman said, as quoted by Reuters, in comments on what market conditions OPEC would be looking for to start rolling back the cuts.