A major part of the fall in oil prices last year was driven by concerns over the rising production levels of Iran. With nuclear sanctions in place, Iran had been forced to significantly curtail production due to lack of buyers. Once those sanctions disappeared due to the Iranian nuclear deal, the country was prepared to begin exporting crude en masse once more. That outcome caused investors to panic and led oil prices to fall considerably.
Analysts reassured the markets that it would take a couple of years for Iran to get production back to pre-sanctions levels. Almost all of this conventional wisdom has turned out to be incredibly wrong.
Iranian oil production has rebounded much faster than many analysts ever anticipated as the chart below shows. At this point, Iran is roughly back to pre-sanctions production levels. Score one against analysts who expected the process to take years.
An oil supply glut has put pressure on oil prices. In the absence of voluntary production cuts, Goldman Sachs analysts say unplanned outages and disruptions may be necessary for prices to rise.
Oil prices (CLN16.NYM) have been kept at low levels largely due to the glut in global supply.
While low prices have been bad news for the industry (OIL) and the oil-driven economies, producers have been reluctant to cut back for fear of losing market share.
In the absence of voluntary production cuts, Goldman Sachs analysts say unplanned outages and disruptions may be necessary for prices to rise.
Internal differences are killing OPEC and its ability to influence the markets has all but evaporated, top Russian oil executive Igor Sechin told Reuters in some of his harshest remarks ever about the oil cartel.
Russia, which has been hit hard by the oil price collapse, was flirting with the idea of cooperating with OPEC in recent months until tensions between OPEC members Saudi Arabia and Iran ruined a global deal to freeze output.
Sechin – one of the closest allies of President Vladimir Putin – was the only Russian official to consistently oppose the deal with OPEC even after the Kremlin effectively endorsed the plan.
Now that his gloomy predictions about talking to OPEC have come to pass, Sechin feels vindicated and wants to help Russia avoid similar embarrassment in future.
Falling oil prices which started in late 2014 have highlighted an increased emphasis on the cost of producing oil, particularly from shale oil formations in the U.S. With 50 percent of U.S. oil production coming from U.S. shale, analysts initially estimated breakeven prices for shale oil operations to be at $75 per barrel, then lowering those estimates to $50 per barrel, and now, in some core regions, breakeven prices are as low as $30-$35 per barrel.
The reason U.S. shale continues to see lower breakeven prices is because companies in the U.S. continue to innovate shale drilling techniques and technology. Similarly, Canadian shale drilling continues to improve alongside that of the U.S., and Canada has implemented similar technological progress towards the extraction and refining of oil from its oil sands. This continued U.S. improvement in oil and gas drilling, extraction, and refining technology provides for the hypothesis that such cutting-edge and unrivaled capability has the effect of anointing a qualification to those within the industry as “the technological superpowers of oil.”
Extreme turbulence may be the new normal for the oil market.
That’s the message from Citigroup, which on Tuesday became the latest oil bear to defect to the bullish camp. Edward Morse, Citi’s commodities guru, believes oil prices could rise to $61 a barrel by next year because the epic supply glut may soon be over. That echoes a recent optimistic call from from Goldman Sachs.
But Morse also has a warning for investors: oil prices are likely to gyrate way more than they used to. Of late, it’s not unusual to see oil prices move up or down by 3% to 4% on an intraday basis.
“The brave new world of petroleum promises to be volatile and the ‘new normal’ for oil makes stability elusive,” the Citi strategist wrote in a research report.
As the price of crude oil nears $50 a barrel for the first time this year, traders are split over whether the near 80 per cent rally since prices bottomed in January can keep going.
Here are five things to watch that could dictate the next move in the price of Brent crude, currently trading near $49 a barrel, and US benchmark West Texas Intermediate which is more than $48.
Rep. Lummis spoke on the House floor about a hearing on the Bureau of Land Management’s (BLM) proposed rule on Planning 2.0. This rule, if finalized, puts state, county and local input at risk for future federal land and resource management decisions. Under current law, the BLM is required to take this input into account. However, the new rule would give BLM discretionary authority to reduce local governments’ input in important resource management decisions for years to come.
Oil prices jumped more than 3 percent on Wednesday after the U.S. government reported crude inventories fell unexpectedly for the first time since March, adding to concerns over supply disruptions in Canada and Nigeria.
The U.S. Energy Information Administration (EIA) said crude inventories fell 3.4 million barrels last week, compared with analysts’ expectations for an increase of 714,000 barrels and the American Petroleum Institute’s (API) build of 3.5 million barrels in preliminary data issued on Tuesday.
Bernard Looney, BP chief executive, upstream, posed these questions to his audience: “Is this [oil] price shock different than the others? Is it lower for longer, or is it lower forever?” He answered, “Let me be clear. At BP, we don’t think that it is lower forever.” Especially with the long-term global energy demand picture looking so strong, he said. And even after the usual cuts that companies make during such tough economic times, they will have to continue to improve productivity to meet this growing energy demand. “Improving productivity is the best insurance we can have for whatever future you chose to believe in,” Looney said.