Mary Johnson

Last week in energy: Crude market sentiment turns bullish, no exit strategy for OPEC & more

Blog Post created by Mary Johnson on Oct 30, 2017

oil rigHere are the top headlines from last week’s Oil Viewsletter from VANDA Insights. You can download the full report here.

 

Troika of factors push Brent toward $60 again. How stable are they?

Crude market sentiment has turned bullish in recent weeks on account of three major factors:

  • High degree of confidence that OPEC and it’s non-OPEC collaborators in the output cut deals will stay the course for as long as needed.
  • Escalation of armed conflict in Iraq between the Kurdish population and the federal government in Baghdad.
  • Growing certainty that U.S. shale is recovering but not rebounding in 2017.

Read more here

 

OPEC may not want an exit strategy

Saudi energy minister Khalid al-Falih’s remarks at an investment conference in Riyadh last week signal an important shift in OPEC’s longer-term policy on actively managing the oil world’s supply-demand balance. “When we get closer to that (OECD oil stocks falling to their five-year average), we will decide how we smoothly exit the current arrangement, maybe go to a different arrangement to keep supply and demand closely balanced so we don’t have a return to higher inventories," he said. “The intent is to keep our hands on the wheel between now, and until we get to a balanced market and beyond, we are not going to do anything that is going to disrupt the path we are on.”

Read more here

 

Iraq: Fear factor trumps amid uncertainty

The situation in Iraq remains extremely fluid, but two elements have emerged clearly so far in the first tension-filled month after the Kurdish referendum for independence on Sept. 25:

  • The federal government in Baghdad and its armed forces have the upper hand in the battle for power and control of oil in northern Iraq.
  • The worst case scenario on oil supply disruption has not come to pass.

Read more here

 

Shale producers come to OPEC’s aid, unwittingly

While the U.S. oil drilling rig count has been sliding since August, the ratio of well completions in the shale basins has been creeping up. Third-quarter results and earnings calls of major US oil services companies in recent days including Schlumberger, Halliburton and Baker Hughes confirm moderating investment appetite among producers. There is “...a growing focus from E&P companies on financial return and the need to operate within cash flow rather than the pursuit of production growth,” Schlumberger noted.

Read more here

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