David Feldman

Three Things to Know in Energy – 11/28/2016

Blog Post created by David Feldman Champion on Nov 28, 2016

1. OPEC meeting set for November 30th in Vienna.

Up until last week there was substantial hope that the coming week’s OPEC meeting and negotiations with non-OPEC countries would lead to a widely accepted oil output freeze or reduction in oil output. Aside from a few exemptions, namely Iran, Libya and Nigeria, most other major oil producers, including Russia and Saudi Arabia, were thought to be on the verge of an agreement. The general thought is that this agreement would likely send oil prices back up to their highest level in years.  However, since Friday negotiations have increasingly become unstable. 

Saudi Arabia pulled out of a November 28th meeting with non-OPEC oil producing countries, stating that “Meeting with Russia and other non-OPEC producers before OPEC ministers have a “clear decision within OPEC” is pointless.”

This triggered Iranian news to claim that Saudi Arabia is “reneging on earlier promises” and waging “a full a full-blown psychological war against Iran and a number of other OPEC members.” Though these statements from Saudi Arabia appear to indicate they’ve made a 180 degree change from their previous stance, perhaps it’s simply a negotiating tactic.  Regardless of what their intentions are, Saudi Arabia is definitely making this week’s meeting more interesting, and showing they are willing to  walk away from a deal if OPEC cannot reach an agreement that works for the Saudis.

2. Oil Prices volatile in anticipation of OPEC meeting.

Oil prices are up today (Monday), after previous week losses. Investors are debating the possibility of a production cut at this week’s OPEC meeting.

U.S. crude futures are up 1.18 cents, or 2.56%, to $47.24 a barrel on the New York Mercantile Exchange. The January contract for global crude benchmark Brent rose 1.18 cents, or 2.5%, to $48.42 a barrel on London’s ICE Futures Exchange.

Further volatility is expected as investors speculate on “will they or won’t they” strike a production deal.

3. Schlumberger strikes deal with Iran.

Despite uncertainty over what President-elect Donald Trump will do over the Iran nuclear deal, Schlumberger Ltd., the world’s largest oil driller by market value, signed a preliminary deal to study an Iranian oil field. The contract is one of the most prominent signed since the Nov. 8th election.  Donald Trump has vowed to undo a nuclear pact with Tehran signed last year by global powers. The pledge has led many international companies to freeze their plans to enter the Iranian oil market despite the country’s huge potential as an energy and consumer market.