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Russia Says OPEC+ Ready To Deepen Oil Output Cuts If Needed

  • Novak: “The timely actions of OPEC+, thanks to which about 2.2 million barrels per day will be held off the market in the first quarter of next year, will allow the period of low demand to pass painlessly in the first quarter of 2024,”.
  • The OPEC+ supply decision, which the market found unconvincing, will likely erase the expected deficit early next year.
  • Prince Abdulaziz bin Salman: “I honestly believe that the 2.2 million will overcome the usual inventory build that usually happens in the first quarter,”.

The OPEC+ group is ready to take additional measures and deepen the oil production cuts in the first quarter of 2024 to avoid volatility and speculation on the market, Russia’s Deputy Prime Minister Alexander Novak said on Tuesday.

“The timely actions of OPEC+, thanks to which about 2.2 million barrels per day will be held off the market in the first quarter of next year, will allow the period of low demand to pass painlessly in the first quarter of 2024,” Novak told Russian news agency TASS.

“I would also like to note that if the current actions are not enough, OPEC+ countries are ready to take additional actions to eliminate speculation and volatility,” Novak added.  

Last week, OPEC+ announced 2.2 million bpd of cuts for the first quarter of 2024, but these include Saudi Arabia rolling over its voluntary cut, Russia deepening crude and fuel export cuts by 200,000 bpd, and several other OPEC+ members announcing voluntary production reductions for the first quarter of 2024. Novak’s comments  follow remarks from Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman, who told Bloomberg on Monday that the OPEC+ production cuts could extend beyond March 2024 if the market requires it, criticizing commentators for failing to understand the output deal. The Saudi energy minister suggested that this would change once “people see the reality of the deal”.“I honestly believe that the 2.2 million will overcome the usual inventory build  that usually happens in the first quarter,” Prince Abdulaziz bin Salman told Bloomberg. NN: Oil in the sixties is a non starter for OPEC.

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Voluntary cuts by OPEC+ disappoint traders

Blackmask blog: dangerous Markets:
The benchmark Brent crude, which had initially rallied on the news close to $85.00 a barrel, plunged  into the $78 a barrel area, close to a $7.00 a barrel plunge in panic liquidation

Crude oil prices  plunged Friday after the Organization of Petroleum Exporting Countries and their allies (OPEC+) voluntarily agreed on a fresh production cut of nearly 1 million barrel a day by early 2024. Bringing total cuts close to  a whopping 3 milion barrels per day. The move failed to enthuse traders and, instead, drew scepticism on the group’s ability to achieve supply cuts target.

Hedge Funds remain unconvinced about the implementation of the supply cuts as the OPEC+ cartel, that consists of  80% of the world’s major oil-exporting nations, announced additional ‘voluntary cuts’ starting January 1 until the end of March 2024. The cuts were announced by each member country and not the group as a whole,  (which is not that unusual) drawing uncertainty on the group’s ability to maintain the cuts.

OPEC officials said additional voluntary cuts, designed to take the total reduction above 2.2 million barrels a day (bpd) or about 2 percent of the world supply, would be announced by individual members in due course rather than the secretariat, Financial Times reported.

In spite of Hegde fund AI spin,  global oil demand growth continues to remain strong defying challenges from high interest rates, stubborn inflation, slow economic growth and geo-political tensions. This growth is driven by demand normalization and China’s re-opening our binary trade.

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Oil Drop on an OPEC+ Output Cut

OPEC+ Agrees on Significant Output Cuts Amid Market Uncertainty In a decisive move, OPEC+ members, led by Saudi Arabia, have agreed to substantial voluntary output cuts totaling about 2.2 million barrels per day (bpd) for early next year. This announcement, which emerged from the group’s online meeting, has sent ripples through the global oil markets. Despite the sizeable cut, benchmark global oil prices settled down by around 2%. This reaction is attributed to the voluntary nature of the reductions and prior investor expectations of even deeper cuts.

The total curbs, amounting to 2.2 million bpd, include an extension of the existing voluntary cuts by Saudi Arabia and Russia of 1.3 million bpd. The additional 900,000 bpd of cuts include 200,000 bpd of fuel export reductions from Russia, with the rest being divided among six other OPEC+ members. Saudi Arabia, Russia, the UAE, Iraq, Kuwait, Kazakhstan, and Algeria are among the producers who have agreed to unwind these cuts gradually after the first quarter of next year, depending on market conditions. Brazil Joins OPEC+, Boosts Bloc’s Clout Amid Cut Skepticism

The meeting also focused on discussing output for 2024, amidst forecasts of potential market surplus and weaker economic growth. The decision to invite Brazil, a top 10 producer, to join OPEC+ signifies a strengthening of the group’s influence in global oil production. NN: Their is everything to like here. You saw massive hedge fund computer driven market manipulation. Lest it run its course. OPEC  has spoken. The market is not listening. Every time they have done so its ended in tears.

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Israel-Hamas ceasefire expires, rockets reported….. Netanyahu’s office: Israel committed to war goals

The ceasefire between Israel and Hamas expired on Friday with neither side confirming another extension. Meanwhile, Palestinian media reported explosions and gunfire in northern Gaza, and rocket sirens sounded in southern Israel. Hamas-controlled Palestinian Interior Ministry said Israeli “aircraft fly over Gaza and its vehicles open fire in the northwest of the Strip.” Hamas also said “intense armed clashes have renewed” in the northern Gaza Strip. On Thursday, Israeli Defense Minister Yoav Gallant said Israel “will resume fierce fighting across the whole Gaza Strip” as soon as the effort to return hostages is “maximized.”

Netanyahu’s office: Israel committed to war goals

Israeli Prime Minister Benjamin Netanyahu’s office said on Friday that with the return to fighting, Israel stands ready to achieve its war’s goals, which include the elimination of Hamas, the safe return of hostages, and ensuring that Gaza no longer poses a threat to Israeli residents. “The terrorist organization Hamas-ISIS violated the plan, did not live up to its duty to release all the kidnapped women today, and launched rockets at the citizens of Israel,” the prime minister’s office said in the statement. Namely, the days-long humanitarian pause between Israel and Hamas ended this morning with neither side confirming the extension of the agreement. The Israeli military confirmed the resumption of the aerial bombardment of the Gaza Strip. NN: My read is its only a matter of time before the war begins again. Israel is committed to wiping Hamas of the face of the earth.

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Netanyahu: Nothing will stop Israel from destroying Hamas

Israeli Prime Minister Benjamin Netanyahu told United States Secretary of State Antony Blinken on Thursday that they “swore to destroy Hamas, and nothing is going to stop” Israel from that.

The remark came ahead of a meeting between both parties in Tel Aviv to discuss the latest developments in the war. Furthermore, Netanyahu told reporters that he was also going to discuss more details about “the next phase” of the fighting against Hamas with Blinken.

In addition to this meeting, Blinken, who is on a Middle East tour, also met with Palestinian Authority President Mahmoud Abbas and Israeli Opposition Leader Yair Lapid to discuss the war and “additional regional issues,” as quoted by Lapid’s office.

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OPEC+ cuts total 2.2 million barrels per day

The Organization of the Petroleum Exporting Countries formally confirmed on Thursday that total voluntary cuts to the joint total production of the group and its allies will amount to 2.2 million barrels per day until the end of March 2024.

Saudi Arabia’s one million bpd and Russia with 500,000 bpd will be leading the way, followed by Iraq with 223,000 bpd, the United Arab Emirates with 163,000 bpd, Kuwait with 135,000 bpd, Kazakhstan with 82,000 bpd, Algeria with 51,000 bpd and Oman with 42,000 bpd.

“These voluntary cuts are calculated from the 2024 required production level as per the 35th OPEC Ministerial Meeting held on June 4 2023, and are in addition to the voluntary cuts previously announced in April 2023 and later extended until the end of 2024… Afterwards, in order to support market stability, these voluntary cuts will be returned gradually subject to market conditions,” OPEC pointed out.

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OPEC+ meeting on key oil production decision is on the radar screen

The meeting of the Organization of Petroleum Exporting Countries and its allies, also known as OPEC+, is set to begin virtually on Today with member states to decide on the future oil production volumes amid a tumultuous geopolitical stage, which further fueled concerns about the stability of the oil market. Crude prices experienced declines during the first six months this year primarily driven by tight monetary policies, underwhelming economic recovery in China, and the brief banking sector crisis in the United States and Europe, which raised questions about the commodity’s demand around the world. However, global markets encountered additional supply-side shocks beyond those prompted by the conflict in Ukraine. Two of the oil cartel’s largest producers, Russia and Saudi Arabia committed to voluntary crude output reductions earlier this year in an attempt to stabilize the global market, with both countries deciding to maintain reduced levels of production until the end of December. The International Energy Agency previously warned that additional output cuts will only push prices higher amid “strong inflationary pressures,” with OPEC+ oil production projected to fall by 300,000 barrels per day next year. The commodity prices came under additional pressure following the start of the war between Israel and Hamas on October 7, with markets thrown into concern that the conflict could spread throughout the region, which accounts for one-third of the world’s seaborne oil trade. Market participants are closely watching the reactions of the Middle Eastern nations to the raging conflict which could define the outcome of the oil cartel’s meeting on production quotas for 2024. The temporary humanitarian pause between the two parties offered some relief to oil prices just ahead of the group’s meeting. NN: Nothing a 3 million BPD production cut can’t solve. Its a done deal!

 

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EIA: US crude inventories up by 1.6 million barrels

 

Energy Information Administration reported an estimated inventory increase of 1.6 million barrels for the week to November 24. This compared with a sizeable build for the previous week, at 8.7 million barrels, which pushed prices lower last week, contributing to other bearish factors. A day earlier, the American Petroleum Institute estimated a crude oil inventory dip of a little over 800,000 barrels for the week to November 24. In fuels, the EIA estimated inventory builds for the week to November 24. In gasoline, the agency reported a stock increase of 1.8 million barrels for the third week of November, with production averaging 9.3 million barrels daily. This compared with a modest inventory increase of 700,000 barrels for the previous week, when production averaged 9.4 million barrels daily.In middle distillates, the Energy Information Administration estimated an inventory build of 5.2 million barrels for the reporting period, with production averaging 5 million barrels daily.

This compared with a middle distillate inventory draw of 1 million barrels for the previous week, when production stood at an average 4.9 million bpd.

Oil prices, meanwhile, remained volatile ahead of the OPEC+ meeting on Thursday, when most expect the cartel to announce an extension of its production cuts. Since the extension is already factored into prices, chances are the official announcement will not prompt any significant changes.

Yet some expect deeper cuts from Saudi Arabia and this could move prices higher, according to analysts. Just how much higher and for how long is a different question.

“All eyes are on OPEC+ policy and demand outlook toward the end of this year, but WTI is expected to hover around $76, with a range of $5 each above and below, for a while unless OPEC+ significantly expands production cuts,” the president of Nissan Securities’ NS Trading, Hiroyuki Kikukawa, told Reuters.  ING analysts, meanwhile, cautioned that OPEC may delay its meeting yet again if it fails to reach an agreement on policy in advance. Internal disagreements were the cause of the first postponement. If the meeting is delayed again, prices will likely fall, ING said.

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OPEC Source Tells Reuters Bigger Cuts A Likely Option

An OPEC+ source told Reuters on Monday that the expanded cartel is considering bigger oil output cuts during its November 30 meeting, which was originally delayed for four days over a production quota dispute between OPEC leaders and African nations. The unnamed OPEC+ source told Reuters he expected an option for a “collective further reduction” in oil production during the next meeting. The source’s comments echo similar comments made earlier in November suggesting that additional cuts would be considered. Last week, analysts increasingly chimed in to predict either an extension of the existing 1 million-barrel-per-day voluntary cuts or additional cuts to support prices which have fallen from highs of close to $100 per barrel in September to barely holding down $80 currently. Late last week, reports emerged that OPEC+ was making progress in talks with its African producers over their oil output quotas next year after Angola and Nigeria requested a higher production ceiling next year. Both countries took a cut in their quotas at the June 2023 meeting of OPEC+ as they had consistently failed to pump to their quotas. At the same time, for next year, the UAE is set to increase exports of its flagship Murban crude grade after negotiating a higher production quota in the OPEC+ deal. For years, the UAE has argued it should be allowed to pump more than its current OPEC+ quota as it is raising its production capacity. At the June meeting, the UAE won an upward revision of its quota that will take its production up by 200,000 barrels per day (bpd) to 3.219 million bpd for 2024.Earlier on Monday, the OPEC General Secretariat slammed the International Energy Agency (IEA) for its “moment of truth” report on the oil and gas industry released last week. The IEA suggested that the world now has a stark choice between oil and gas and worsening climate change. OPEC criticized the agency for vilifying the industry and ignoring cost and energy security issues. NN:

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Oil Markets Remain Focused on OPEC+

Despite the dramatic reaction of oil markets to news that the OPEC+ meeting would be postponed, oil prices are set to end the week with little real change as traders now await the outcome of the November 30th meeting. The seesawing in oil prices seen over the past weeks has wound down as the market awaits the OPEC meeting, postponed from this week to November 30 and changed from an in-person summit to an online event. ICE Brent front-month futures have settled within a narrow frame of $81-83 per barrel the entire week, with the Thanksgiving holidays in the US keeping the main developments firmly focused on the Eurasian landscape. A better outlook for China’s property sector was offset by higher US inventories, so OPEC+ will be the trendsetter for the next weeks’ pricing direction.NN: I learned a long time ago before the masses became aware of fake news a important lesson. Watch what thet instead of listening to what they say, And here is what they are doing:

According to Standard Chartered, the U.S. oil hedge book are 62% below 2020 levels.

Now let me tell you what they are DOING. You hear the bullshit about oil going into the sixites because demand is collapsing for oil. That ts the bullshit they tell you. If they beloved that they would be hedging at $80 oil to protect their profits. They flat out are not. Which means they are planning for much higher oil prices. Oil producers typically use a short hedge to lock in oil prices during times of falling crude prices, if they believe prices are likely to go even lower in the future. U.S. producers obviously  are not convinced there’s much downside to oil prices, as current hedging activity proves.