(Bloomberg) OPEC’s meetings in Vienna have for decades offered a heady mix of wealth, power and intrigue. The latest one may feel more like a wake.
The closest OPEC came to operating like a true oil cartel was in the early 1970s. Back then, it controlled more than half the world’s oil supply and was more or less aligned in trying to manage pricing and, for many members, throwing off the remnants of colonialism.
(seekingalpha.com) If you have been following what we have been writing you will know that we have become bullish on oil (NYSEARCA: USO ) prices for the next few years.
As with most of our opinions we have arrived at this one by listening to what some of the world’s best investors are saying about oil and why they are saying it.
We believe that Jeremy Grantham is another voice worth paying attention to, and it turns out that he too believes oil is going higher, perhaps significantly so. Source: GMO.
“The fall in discovered volumes for conventional oil outside North America [to just 2.8 billion barrels, the lowest level since 1952] has been steady and dramatic during the last few years. We’ve seen four consecutive years of declining oil volumes, which has never happened before. The bottom has completely fallen out for conventional exploration, and the result portends a supply gap in the future that is going to be challenging to overcome. In the current cost-cutting environment, the outlook for 2016 discovery volumes is not likely to be better, either.”
Leta Smith, director, IHS Energy, upstream industry future service
Oil briefly traded above $50 a barrel last week but quickly fell back to close at $49.33 in NY and $49.32 in London on profit taking and uncertainties about the status of the global oil glut. For the past two months, oil prices have been driven higher by a series of unplanned production outages in Kuwait, Libya, Canada, Nigeria, and concerns about the political stability of Venezuela. Currently, about 3.5 million b/d of normal production is offline. While some of these outages, such as the 1 million b/d fire-caused drop in tar sands production, will be short-lived, other situations such as in Nigeria, Libya, and Nigeria could last indefinitely.
(Reuters) Brent oil futures climbed above $50 a barrel on Thursday for the first time in nearly seven months as a global supply glut that plagued the market for nearly two years showed signs of easing.
Oil prices have rallied in recent weeks as a string of outages, due in part to wildfires in Canada and unrest in Nigeria and Libya, knocked out nearly 4 million barrels per day of production.
(oilprice.com) A report by Rystad Energy has revealed that new oil discoveries in 2015 totaled 12.1 billion barrels, which is the least amount of new oil discovered in a single year since 1952.
Last year was also the fifth year in a row in which the amount of new reserves discovered was smaller than in the previous year.
E&Ps have slashed their exploration budgets repeatedly in a bid to weather the effects of the oil price drop. They’ve laid off hundreds of thousands of staff and have focused on staying afloat, lacking not just the money, but also the motivation to look for new oil when profitability is questionable.
(Bloomberg) Global crude supplies will start to dwindle in as little as two years, boosting prices, as the industry cuts investment to weather the worst market collapse in a generation, according to Statoil ASA.
Oil companies reduced capital expenditure last year and are likely to cut it further this year and next, Statoil’s Chief Financial Officer Hans Jakob Hegge said in an interview in London. Lower spending means there could be a “significant effect” on crude supply after 2020, he said.
“I’ve been coming to Singapore once a year for the last 15 years, and flying in I have never seen the waters so full of idle tankers,’ said a senior European oil trader a day after arriving in the city-state.”
Keith Wallis and Roslan Khasawneh, for Reuters
Last week began on a bullish tone with oil prices climbing to a seven-month high, Goldman Sachs talking about the end of the oil glut, and columnists predicting a new spike in prices. All this optimism was based on solid Chinese oil imports, strong US gasoline demand, and production outages in Alberta, Nigeria, Libya and Venezuela. As the week moved on, however, the market became less optimistic as US, European, and Asian crude stocks continued to rise, and prices failed to break through the $50 a barrel barrier.
(artberman.com) The global oil market is returning to balance based on the latest data from the EIA. That should mean higher oil prices but how high must prices be to save the industry?
Data suggests that oil producers need prices in the $70-80 range to survive. That is unlikely in the next year or so. Without more timely price relief, the future looks grim for an industry on life support.
