Venezuela, Iran to Hold Talks; Seek to Boost Ties Within OPEC

- Venezuela, Iran to Hold Talks; Seek to Boost Ties Within OPEC

Wednesday, August 17, 2011
Dow Jones Newswires
CARACAS
by Kejal Vyas

Venezuela will host a summit for bilateral talks with Iran next month as the two member states of the Organization of Petroleum Exporting Countries look to strengthen their alliance.

In a statement, the Venezuelan Foreign Ministry said President Hugo Chavez spoke to Iran's President Mahmoud Ahmedinejad to organize the summit and "agreed on the need to boost the levels of coordination within OPEC" in a bid to combat "the adverse effects of the economic crisis faced by the world's dominant powers."

Chavez and Ahmedinejad also spoke on the implications of "imperial aggressions" against countries such as Libya and Syria, the ministry's statement said.

Both Venezuela and Iran are fierce critics of the U.S. and other western nations and have looked to strengthen political and economic ties in recent years.

In June, Iran and Venezuela, both known to be fierce oil-price hawks, worked together to block an OPEC agreement to raise oil output, while opponents, including Saudi Arabia, said they planned to increase production to meet higher demand.

Within Venezuela, Iran is helping with financing and construction of housing units, part of an initiative by Chavez as he prepared to bid for another six-year term in next year's elections.

Earlier this month, the two countries signed a $1 billion deal to build 10,000 houses in the South American country over the next 18 months but they didn't say how much each side would be contributing.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Indonesia After OPEC

- Indonesia After OPEC

Monday, August 15, 2011
Rigzone Staff
by Barbara Saunders

Back in 1990, former Indonesian OPEC minister Ginandjar made a jarring statement: his country would become a net oil importer and "have to drop out of OPEC" and also, that the large, multi-island Southeast Asian nation would have to diversify its energy sources to fuel its growing and modernizing population.

A few years ago, in 2008, Ginandjar's prediction came true as Indonesia pulled out of OPEC. Now, Indonesia's petro-regulatory agency BPMigas has confirmed that oil production is declining – but announced 10 new projects heavily tilted toward natural gas that should help with the energy diversification goal and Indonesia's continuation as a major LNG exporter.

The announced projects represent a total investment of $4.725 billion and are slated to come onstream between this year and 2014, the agency reported. Anticipated output is 1.750 million cubic feet of gas per day (MMcfd); 20,000 barrels oil per day (bpd); and 26,000 bpd of oil condensate, BPMigas spokesman Gde Pradnyana said in a statement.

"This reflects that the future of Indonesia's oil and gas industry will be dominated by gas," Pradnyana added. He emphasized that domestic markets, which are burgeoning with demand for gas, will get priority but did not rule out the possibility of exports.

The 10 projects are as follows:

Slated for First Production 2011 –
• Pengembangan Lapangan Jambi Merang, Pertamina-Talisman, Gas 155 MMcfd, Condensate: 12.50 bpd , 2Q 2011
• Ujungh Pangkah, Hess Indonesia & Pangkah, Oil 20,000 bpd, Gas 150 MMcfd 3Q 2011
• Gajah Baru, Premier Oil, Gas 210 MMcfd , 4Q 2011;

 

Slated for First Production 2012 –
• Terang Sirasun Batur, Kangean Energy Indonesia, Gas: 300 MMcfd 2Q 2012
• South Mahakam Phase 1 & 2, Total E&P Gas: 128 MMcfd; 5,900 bpd condensate, 3Q 2012

 

Slated for First Production 2013 -
• Ruby Gas Field Development, Pearl Oil and Sebuku, Gas 100 MMcfd, 3Q 2013
• South Belut, ConocoPhillips Indonesia, Gas 120 MMcfd, 1,000 bpd condensate, 4Q 2013
• Naga-Pelican, Premier Oil Natuna, Gas 130 MMcfd, 4Q 2013
• Sisi Nubi 2B, Total E&P Indonesia, Gas 350 MMcfd, 2Q 2013

 

Slated for First Production 2014 –
• Madura BD Deveopment, Husky Oil Madura, Gas Production 100MMcfd, Condensate 6,600 bpd, 4Q 2014

Meanwhile, the government reported recently that state revenues from the oil and natural gas sector, as of May 2011, has reached nearly US $14 billion, exceeding the state budget target by 39 percent or US $10.062 billion.

BPMIGAS chairman R. Priyono stated that as of July 2011, oil and condensate this year is estimated at 920 thousand bpd, while natural gas lifting is projected to reach 7.769 trillion Btu per day. Total lifting is proposed at 2.259 million barrels oil equivalent per day (boepd), changing from 2.31 million boepd.

"Average optimum production potentials as much as 920 thousand bpd may be achieved with fulfilled conditions, which are all new projects [being] completed on time," he said.

The Global Business Guide Indonesia commented, "The state oil and gas company Pertamina is targeting 1 million bpd by 2015 to once again make the country a net oil exporter; but this will be no easy task. The energy sector faces the challenge of meeting its export commitments, satisfying domestic demand and effectively leveraging its resources for economic growth."

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OPEC Shaves Oil Demand Outlook, Sees 'Dark Clouds' over Econ

- OPEC Shaves Oil Demand Outlook, Sees 'Dark Clouds' over Econ

Tuesday, August 09, 2011
Dow Jones Newswires
LONDON
by Benoit Faucon

OPEC Tuesday trimmed its global oil demand growth forecast for 2011 and warned it could cut the outlook further, signaling that mounting economic woes are biting into the world's crude consumption.

In its monthly report, the Organization of Petroleum Exporting Countries reduced the global demand growth forecast for this year by 150,000 barrels of oil a day--the deepest such cut this year--on a downgrade in its U.S. economic growth outlook and weakening Chinese prospects.

"Dark clouds over the economy are already impacting the market's direction," OPEC said. "The potential for consequent deterioration in market stability requires higher vigilance and close monitoring of developments over the coming months."

Global oil demand will still rise by 1.2 million barrels a day, and the downgrade represents only a fraction of the 88.14 million barrels a day OPEC expects to be consumed this year worldwide.

OPEC warned that were higher oil prices to persist or the most industrialized economies to suffer further setbacks, it might trim the forecast by another 200,000 barrels a day. OPEC produces more than one in three barrels consumed worldwide each day.

Coming hard on the heels of a drop in oil prices by over 10% since early August, the downgrade could give ammunition to an Iran-led group that has fought higher oil output. A June OPEC meeting in Vienna ended in acrimony after a Saudi Arabia-led group failed to persuade OPEC that an anticipated surge in oil demand this year merited an output increase.

OPEC Tuesday cut its U.S. economic growth forecast to 1.8% in 2011 from 2.5% previously. U.S. oil consumption data for May showed the largest decline observed since January 2010 and demand contraction in industrialized countries was expected to continue.

OPEC also said demand in China--the engine of oil consumption growth in recent years-has been losing steam. The country's factory sector grew in June at its slowest pace in 28 months, OPEC said.

OPEC estimated demand for its own crude remained unchanged for 2011 and is still up 200,000 barrels compared to last year, as the global demand downgrade is offset by lower-than-expected non-OPEC supply. The OPEC oil demand outlook, however, was cut by 100,000 barrels a day for next year.

But the group's data also still points to a supply gap of 811,000 barrels a day in the second half of this year, according to a Dow Jones calculation of the difference between current oil output and OPEC's demand forecast for the coming period.

But the crystal ball will roll into the consumers' camp with the U.S. Energy Information Administration expected to release its own report later Tuesday, followed by the International Energy Agency Wednesday.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Venezuela Oil Reserves Surpassed Saudis In 2010 - OPEC

- Venezuela Oil Reserves Surpassed Saudis In 2010 - OPEC

Monday, July 18, 2011
Dow Jones Newswires
LONDON
by Benoit Faucon

Venezuela's crude proven reserves surpassed those of Saudi Arabia in 2010, making it the world's largest oil reserves holder, the Organization of Petroleum Exporting Countries said in its annual statistical bulletin.

Venezuela's proven crude oil reserves reached 296.5 billion barrels in 2010, up 40.4% on the year and higher than Saudi Arabia's 264.5 billion barrels, OPEC said.

In the long run the boost in reserves, which comes alongside increases from Iran and Iraq, may empower members of OPEC who favor a defense of high prices. However, there are doubts over whether all of Venezuela's heavy oil discoveries are economically viable.

The data broadly confirm Venezuela's statements that it had reached this level of reserves in January. OPEC normally relies on its members' assessments for statistical data.

Iraq's and Iran's proven reserves were also respectively upgraded by 24.4% to 143.1 billion barrels and by 10.3% to 151.2 billion barrels respectively, roughly in line with the countries' earlier disclosures.

Venezuela, Iran and Iraq were part of a group that refused to endorse a Saudi-led push to hike output at an acrimonious OPEC meeting June 8.

Analysts have questioned how economic Venezuelan reserves additions could be, as most come from the heavy and extra-heavy oil in the Orinoco Belt, which is difficult and expensive to extract.

Venezuela's statistics have long been a controversial topic in oil circles, though disagreements on the matter have recently eased. The International Energy Agency last month said it revised the method used to calculate the country's oil-production figures, bringing its estimates closer to those of Caracas.

The set of statistics may also vindicate Iran's claims that sanctions aren't crippling the development of its oil and gas industry. For instance, crude oil exports from the Islamic Republic to Europe in 2010 rose 34.5% to 764,000 barrels a day on average.

Overall, Iranian oil exports rose by 0.7% as exports to Asia and the Pacific fell by 11%. Iranian natural gas reserves and exports rose by 11.8% and 48.7% respectively.

Last year, the European Union implemented stringent sanctions on Iran which, without banning crude purchases, complicate them by putting restrictions on insurance, financial services and energy sectors.

The numbers also underscore the recovery of the Nigerian oil industry with 17 more rigs active in the West African nation and 437 additional producing wells, following a successful amnesty for militants in 2009.

Overall, the numbers show OPEC members strongly benefited from higher oil prices in 2010, with the total value of their petroleum exports up 27.2% at $745.1 billion and their overall gross domestic product rising 11.2% to $2,325 billion.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Platts: OPEC Pumps 29.57 MMbpd in June

- Platts: OPEC Pumps 29.57 MMbpd in June

Friday, July 08, 2011
Platts

The Organization of the Petroleum Exporting Countries' (OPEC) pumped an average 29.57 million barrels per day (bpd) of crude oil in June, an increase of 530,000 barrels per day as Saudi Arabia, Kuwait and the United Arab Emirates (UAE) boosted production, a Platts survey of OPEC and oil industry officials and analysts showed July 8. In May, OPEC production was 29.04 million bpd.

Despite the sizable month-on-month increase, however, the June volume was lower than the 29.8 million bpd estimated for February, when the escalating unrest sweeping across North Africa and the Middle East was beginning to affect Libyan production. Increases totaling 760,000 bpd were partly offset by combined reductions of 230,000 bpd.

"These numbers show that OPEC still has a lot of work to do, because the world's economy is going into a period where demand rises, and the loss of Libyan output makes meeting that demand problematic," said John Kingston, director of news for Platts, a leading global energy, petrochemicals and metals information provider and publisher of this monthly survey report.

"What isn't certain is just how much of that hole will be filled by the release of oil from strategic stocks ordered by the International Energy Agency, and how much of the burden of supplying the market will be lifted from OPEC because of that action," Kingston said.

Saudi Arabia boosted output by 450,000 bpd to 9.5 million bpd in June, accounting for the biggest single volume increase. But participants in the survey said that not all of the increment would be exported because of higher demand from the domestic power generation sector.

Saudi production has been climbing in recent months in an attempt to compensate for lost volumes from Libya. The Saudis even created two "special" crude blends aimed at replicating the higher quality Libyan grades, although these failed to attract refiners.

At OPEC's June 8 meeting, Saudi Arabia pushed for a 1.5 million bpd output increase on top of estimated actual production of 28.8 million bpd. But Iran, which currently holds the OPEC presidency, Algeria, Angola, Ecuador, Libya and Venezuela opposed an increase and the talks broke up in disarray, leaving OPEC to issue a statement saying that "no formal decision was reached on a production agreement" and that the group would next meet on December 14 in Vienna.

The failure to reach a deal on production levels effectively renders the previous agreement, in place since January 2009 and which set a target of 24.845 million bpd for the 11 members bound by quotas, redundant.

Leaving the meeting, Saudi oil minister Ali Naimi said the kingdom and its Gulf neighbors would unilaterally boost production to ensure that markets were not left short of oil.

OPEC's own economists had forecast a big jump in demand for OPEC crude in the second half of the year, the Vienna secretariat's monthly oil market report for May projecting that the call on OPEC would rise by as much as two million bpd between the second and third quarters.

Two days after OPEC's acrimonious June 8 meeting, the secretariat published a new market report forecasting the call on OPEC crude at 30.9 million bpd in the third quarter--2.1 million bpd more than the second quarter call--and 30.5 million bpd in the fourth. This would leave a "sizable gap" between estimated production from OPEC and projected demand for its crude, the report said.

The International Energy Agency's (IEA) June 23 decision to release 60 million barrels of emergency oil stocks, however, has prompted some speculation as to whether Saudi Arabia will increase production to the extent that might have been anticipated immediately after the OPEC meeting.

The IEA said the effect of the disruption of Libyan crude exports had become more pronounced and that the normal seasonal increase in refiner demand over the summer would further exacerbate the shortfall.

The IEA said greater tightness in the oil market could undermine global economic growth, and that it would review the impact of the stock release within 30 days of June 23 to determine if a further release was necessary.

Global crude futures prices initially fell sharply after the IEA announced its stock release, but have since recovered all of that price ground.

Some participants in the survey, meanwhile, have revised their estimates of Venezuelan production following the International Energy Agency's re-evaluation of its Venezuelan supply methodology last month. This has resulted in the Platts survey's Venezuelan estimate rising to 2.35 million bpd in June from 2.23 million bpd in May.

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ANALYSIS: OPEC Indecision Underscores Market Sensitivity

- ANALYSIS: OPEC Indecision Underscores Market Sensitivity

Tuesday, June 14, 2011
Rigzone Staff
by Barbara Saunders

Like a seesaw poised to go this way or that, the oil market teeters in a delicate balance in the wake of OPEC's indecisive most recent meeting.

The major producing nations failed to reach an accord on a plan to raise production quotas at the June 8 meeting, marking the first time in some two decades that OPEC members were unable to agree.

Those nations opposed to output increases — Venezuela, Iran, Iraq, Ecuador, Libya, Angola and Algeria — feared that they would lead to a price crash. This would be devastating to the revenues of the already-wobbly economies of these poorer OPEC nations, which have little to no spare production capacity. At the other side, the four proponents of increased output quotas — Saudi Arabia, the United Arab Emirates, Kuwait and Qatar — worry that shortages could loom as spare OPEC production capacity continues to dwindle. This could cause prices to soar, and in turn, snuff out still-fragile recoveries from the extended economic recession.

Swing supplier Saudi Arabia is concerned that its spare capacity is already in the danger zone as consumption continues to be brisk.

Saudi Arabia, determined to remain a reliable supplier, previously swore to expand production regardless of the meeting's outcome. Meanwhile, the consuming-member nations of the International Energy Agency (IEA) have vowed to drawdown emergency stocks if Saudi Arabia doesn't keep its pledge to hike production. The IEA believes that OPEC spare capacity may be much lower than statistics released by the organization. As part of the IEA commitment to energy security, U.S. President Obama says that he's willing to tap the rarely used, roughly 730 million barrel Strategic Petroleum Reserve (SPR.) At this level, the SPR would last for about 34 days at consumption levels of 21 million b/d.

Although there is plenty to be concerned about, one analyst said that the OPEC decision is not one. "The split in OPEC doesn't really affect production plans. In the short-run, the Saudis have already said they're going to be increasing output," Adam Sieminski, director of energy research at Deutsche Bank told Reuters news service. "But what it does do is show the mess the decision making process is in."

But John Feller, chief economist for the American Petroleum Institute, told Rigzone that Saudi additions to supply from spare productive capacity may be of small comfort. "We don't know what the Saudis are going to do," Feller said. "We don't know what they can do. We don't know what volume and type of oil they have to produce in their spare capacity. It might not be very easily refinable."

'Fragile Equilibrium'

Recalling the seesaw analogy, whatever the outcome of the Saudi moves and OPEC, the oil market today is in a very "fragile" equilibrium and it would take little to teeter-totter it in a vastly different direction, Feller noted.

For months, crude oil has hovered around $100 per barrel, fluctuating relatively little around that level on day-to-day market news. Fears of steadily rising consumption — particularly in China — have both some OPEC factions and IEA member nations concerned about the potential for actual supply shortages and price spikes.

On the other hand, there also are worries about whether $100 per barrel is the "magic mark" perhaps already putting a drag on the economy. There is a lag-time between the gathering and assessment of statistics and an actual event, so higher oil prices could conceivably already have led to an economic slowdown. This is why economists watch employment statistics so closely, as these will tend to precede an overall economic deceleration.

The U.S. Bureau of Labor reported very little change from May in its June 3 statistics, with unemployment still hovering at a much higher than normal 9.1 percent. This would tend to indicate that the U.S. economy is still not strong enough to withstand higher priced oil.

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IEA 'Still Assessing' Oil Market after OPEC Stalemate

- IEA 'Still Assessing' Oil Market after OPEC Stalemate

Tuesday, June 14, 2011
Dow Jones Newswires
PARIS
by Geraldine Amiel

The International Energy Agency is in talks with member countries following last week's OPEC meeting and is "still assessing" the oil market situation before considering any potential response, Executive Director Nobuo Tanaka said Tuesday.

Tanaka reiterated that the IEA "stands ready to act" if the market requires additional oil. At the same time, Tanaka, whose organization represents consuming countries, expressed confidence that Saudi Arabia could pump additional oil to meet supplies, he said in an exclusive interview with Dow Jones Newswires. The IEA has authority to coordinate an emergency response of oil from its member governments.

Tanaka's remarks came less than a week after a Vienna meeting of the Organization of Oil Exporting Countries concluded in acrimony after members failed to agree to boost output to meet anticipated demand growth. The surprising outcome continued to reverberate Tuesday, as OPEC's Secretary General expressed concerns that oil prices could rise later this year.

OPEC split last week on whether to boost output by some 1.5 million barrels a day, a plan favored by Saudi Arabia and some other Gulf producers. Some OPEC members, including Iran, were skeptical additional supplies were needed. The members that fought the increase have also tended to favor somewhat higher oil prices.

OPEC Secretary General Abdalla Salem Al-Badri, the official spokesman for the organization, said Tuesday that oil prices "will go up for sure" if the would rise later this year if the supply gap in many official forecasts comes to fruition, Reuters reported. The OPEC official was also quoted as saying high prices will hurt economic growth, Reuters said.

Also Tuesday, EU Energy Commissioner Gunther Oettinger told Dow Jones Newswires in Stockholm that the European Union plans to discuss oil market issues at a meeting with OPEC in Vienna later this month.

"We want to speak (with OPEC) about security of supply for 2011 and 2012 and to speak about what is a feasible price," Oettinger said in an exclusive interview.

Asked whether he was worried about a high oil price, Oettinger said: "No, I'm not worried".

Meanwhile, Tanaka said he was confident Saudi Arabia could use its spare production capacity to put additional oil on the market following the OPEC meeting. Saudi Arabia plans to immediately boost output to as much as 10 million barrels a day, Gulf sources have said.

The issue will be "how fast" the Saudis can put additional oil on the markets, Tanaka added, noting that Saudi domestic oil consumption is expected to increase during the summer.

Tanaka later told the audience that the at the IEA, "we stand ready to take all our options." But Tanaka said the IEA would tap emergency supplies only after a "disruption" such as if Saudi Arabia and other OPEC members were unable to pump more oil. He said some of the current anxieties were reminiscent of the oil market in 2008.

The IEA warned on May 19 that it was prepared to "consider using all tools" if OPEC failed to boost output, a statement that was seen by producers as a veiled threat that the IEA would tap strategic supplies if OPEC didn't pump more oil.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Platts: OPEC Boosts Oil Output in May

- Platts: OPEC Boosts Oil Output in May

Tuesday, June 14, 2011
Platts

The Organization of the Exporting Countries (OPEC) pushed out an additional 200,000 barrels per day (b/d) of crude oil in May, boosting output to 29.04 million b/d from 28.84 million b/d in April, showed a just-released Platts survey of OPEC and oil industry officials and analysts.

OPEC kingpin Saudi Arabia, which vowed after OPEC's June 8 meeting in Vienna to ensure that world oil markets would not suffer any supply shortage, accounted for most of the additional barrels.

"You can see that the task ahead of Saudi Arabia, and any other nation determined to meet what is expected to be steadily increasing demand, is substantial," said John Kingston, Platts global director of news. A difference of opinion in what the market needs was the topic of unresolved debate at last week's OPEC meeting, which Saudi Oil Minister Naimi called the "worst ever," and which ended with the parley breaking up and taking no action.

"OPEC produced 29.8 million b/d before the Libyan uprising and it's only climbed back above 29 million b/d with the increases of the past month," Kingston added. "Most supply/demand estimates see an absolute minimum need for output of 30 million b/d in the second half of the year. It's a large jump, and all eyes will be on Saudi Arabia to see if it can get the job done."

Excluding Iraq, which does not participate in OPEC output agreements, the 11 members bound by quotas (OPEC-11) increased output by 160,000 b/d to 26.34 million b/d in May from 26.18 million b/d in April, the survey showed. This left OPEC-11 overproducing their notional 24.845-million-b/d target by 1.5 million b/d.

But that target, in place since January 2009, is now redundant following the failure of OPEC's June 8 ministerial meeting in Vienna to reach an agreement on output.

Saudi Arabia and its fellow Gulf Arab producers wanted OPEC to increase estimated April output of 28.8 million b/d by 1.5 million b/d to 30.3 million b/d, in line with the OPEC secretariat's projections of higher demand for OPEC crude in the second half of this year. Algeria, Angola, Ecuador, Iran, Libya and Venezuela opposed an increase.

As the Vienna talks broke up, Saudi oil minister Ali Naimi told reporters it and its Gulf neighbors intended to meet the expected higher demand.

"Saudi Arabia and the other three GCC countries are able and willing to supply whatever the market needs," he said, referring to Kuwait, the United Arab Emirates and Qatar which, with Saudi Arabia are members of the Gulf Cooperation Council, or GCC.

"The market is not going to see any shortage because we could not reach agreement at this meeting. We are willing and we are able and we will deliver what is needed," Naimi said.

Saudi Arabia, which had been producing well above its notional OPEC quota of just over 8 million b/d for some time, increased output by some 200,000 b/d in May, to 9.05 million b/d from 8.85 million b/d in April.

Other increases came from Nigeria, Qatar and Venezuela, while volumes dipped in Algeria, Angola, Iran, Libya and the UAE. Libyan crude production had been running close to 1.6 million b/d before the rebellion against the regime of Moammar Qadhafi, now in its fifth month, but dropped to an average of around 160,000 b/d in May from 200,000 b/d in April.

Saudi-owned newspaper al-Hayat reported, according to senior OPEC sources, June 10 that the country planned to raise oil production to 10 million b/d in July and to maintain that level for a month before reducing output in August in line with an expected dip in demand.

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Commodity Corner: Oil Gains After OPEC Meeting Ends in A Draw

- Commodity Corner: Oil Gains After OPEC Meeting Ends in A Draw

Wednesday, June 08, 2011
Rigzone Staff
by Matthew V. Veazey

Thanks in part to a lack of consensus from OPEC, July crude oil gained $1.65 Wednesday.

The front-month contract settled at $100.74 a barrel after the oil cartel, meeting in Vienna, failed to decide whether to increase production quotas for its 12 member countries.

Saudi Arabia, Qatar, United Arab Emirates, and Kuwait advocated raising production—a position shared by the U.S. and other major oil importers that are trying to bolster their weak economies. Iran, Iraq, Venezuela, and the remaining countries save Nigeria urged keeping production at current levels. Nigeria took neither side in the contentious meeting.

Oil peaked at $101.89 and bottomed out at $98.02 during the midweek session.

Much of the central and eastern U.S. is experiencing a heat wave. Not surprisingly, demand for air conditioning has been on the rise. Also not surprisingly, July natural gas settled higher Wednesday.

Natural gas gained two cents to end the day at $4.85 per thousand cubic feet. The futures price fluctuated from $4.77 to $4.87.

Gasoline for July delivery lost a penny Wednesday, settling at $2.98 a gallon. The front-month contract traded within a range from $2.96 to $3.03.

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Opec talks collapse at 'worst ever' meeting

- Opec talks collapse at 'worst ever' meeting

Jun 9, 2011
Tamsin Carlisle and April Yee

VIENNA // The price of oil soared close to US$120 a barrel yesterday as Opec failed to reach agreement on production targets during a six-hour meeting described by the Saudi delegate as "one of the worst" ever.

The 12-nation group gathered behind closed doors at Opec's headquarters in Vienna while oil traders held their breath.

Earlier in the day it had been suggested the crude producers were close to agreement on a plan to increase production targets and to exclude Libya, which has halted production in the wake of its civil war, from the Opec quota system.

The delegates emerged from their meeting an hour earlier than expected, however, stunning oil markets with their failure to agree.

"We were unable to reach an agreement … this is one of the worst meetings we have ever had," the Saudi Arabian oil minister Ali al Naimi said, adding that his country - the world's largest oil exporter - was committed to keeping the market well supplied.

The UAE, Kuwait and Qatar, he said, had joined Saudi Arabia in supporting an increase in production quotas of 1.5 million barrels per day (bpd) over Opec's 28.8 million current daily production.

Nigeria's delegation head and Chairman of the Organization of the Petroleum Exporting Countries (OPEC) Goni Musa, left, Oil Minister of Iran and OPEC President Mohammad Aliabadi, center, and OPEC Secretary General Abdalla Salem el-Badri, right, talk to each other during the OPEC meeting in Vienna, Austria, Wednesday, June 8, 2011. (AP Photo/Bela Szandelszky) - AP

Libya also sparked intrigue as Muammar Qaddafi unexpectedly sent a delegate to the meeting, stymying plans by Libyan rebels to attend. Libya then joined Algeria, Angola, Ecuador, Venezuela, Iraq and Iran to oppose lifting quotas.

"Unfortunately at this time we are unable to reach any consensus," said Abdalla el Badri, the secretary general of the organisation that controls about 40 per cent of crude oil supply.

The International Energy Agency said it was disappointed with Opec's failure and called for "a prompt increase in supply".

The Paris-based group of energy-consuming nations added that any "potential increases in prices" caused by Opec's failure "risk undermining economic recovery".

Brent crude, the European benchmark, immediately shot up by more than $1 a barrel in late trading in London, hitting $118.58.

That widened the already yawning gap between Brent and the US benchmark West Texas Intermediate crude, which had slipped below $99 this week. The US crude climbed back above $100 early in yesterday's trading session on the New York Mercantile Exchange.

In the absence of a decision to raise the group's official output ceiling, which is some 1.4 million bpd lower than actual production in recent months, Opec will again leave unchanged the target that it set in December 2008, after crude had slid by about 80 per cent from the record $147 per barrel reached the previous July.

In what some analysts see as a reprise of the situation prevailing in the first half of 2008, crude has climbed steeply over the past eight months, with Brent averaging about $109 this year.

"Certain members believed that we should have had a production increase today. Others believed we should have some time to further assess the situation and then come to a decision," said Mohammad Aliabadi, the Opec president.

"The final proposal was that at the most we can wait for about three months during which we will assess the market situation, assess the demand and decide after that." he said.

But even on that modest proposal, the group could not reach agreement yesterday.

"I hope that in the period of three months at the latest we will be able to hold an extraordinary meeting to be able to come to a decision," said Mr Aliabadi, who only last week was appointed the caretaker oil minister of Iran.

Despite the lack of consensus, Opec took the unprecedented step of emphasising yesterday the meeting was not rancorous.

"The ministers are friends. The atmosphere was good. We had no conflict whatsoever," Mr el Badri said. "The reason we were unable to reach a decision was that everyone had their own information and data … so we were unable to agree. But the atmosphere was really friendly.

"As of today we're not in crisis. We have enough stocks; there is no shortage whatsoever."

Mr Aliabadi called for markets to "remain calm", while acknowledging that Opec ministers had failed to achieve their prime objective at yesterday's meeting, which was to reach a decision on the group's output target.

But analysts predicted a choppy market reaction with further oil price volatility virtually assured. "It's going to go up and then it's going to go down to where we are again, because we have demand destruction in the US, southern Europe," said Olivia Meyer, the chief executive of the MRL consultancy in London.

Mr el Badri said the Opec ministers specifically debated whether to raise crude production in the third and fourth quarters of this year.

Mr el Badri said the Opec ministers did not address the situation of Libya. There was no discussion of whether the North African country should be exempted from complying with an output quota when production and exports from its oilfields resume.

tcarlisle@thenational.ae
ayee@thenational.ae


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Libya leaves it late for Opec show

- Libya leaves it late for Opec show

Jun 9, 2011
April Yee

VIENNA // Libya waited until the last minute to send a delegate to yesterday's Opec meeting in what is being interpreted as a message the regime led by Muammar Qaddafi remains in control despite the ongoing civil war.

Omran Abu Kraa, Libya's former electricity chief, entered Opec headquarters hours into yesterday's ministerial deliberations through a basement garage, avoiding reporters waiting at the building's entrance. Since conflict gripped the country in February, its energy industry has been crippled by the exit of foreign oil companies, international sanctions and attacks on infrastructure.

"They want to still have a say," said Catherine Hunter, an analyst with IHS in London. "It keeps the illusion of normality. It's not a done deal that the government side will not prevail, so they've got to keep up their representation as a sovereign state. It would be an admission of defeat to not come."

Libyan rebels adjust an anti-aircraft gun as smoke from a damaged oil facility darkens the sky in Ras Lanuf, Libya. Getty Images

The organisation that controls more than 40 per cent of the world's oil supply was meeting for the first time since popular uprisings took place in parts of the Middle East and North Africa and sent the price of oil as high as US$127 a barrel.

In Libya, civil war has shut down most of its production capacity of 1.6 million barrels a day (bpd).

Last week Libya's former top oil official, Shokri Ghanem, announced his defection from Col Qaddafi's regime and stepped down from his post as Libya's head Opec negotiator and chairman of National Oil Corporation, the state oil company.

At stake yesterday was whether Libya should be exempt from a system that caps the production of member countries. If Libya were to join Iraq in being exempt from the quota system, the significance of Opec's output target could be further eroded. The ceiling is now at 24.8 million bpd, but members pump about 1.5 million bpd in excess of that, according to most estimates.

"Libya is almost theoretical at the moment because it can't actually ramp up production," said Ms Hunter, adding that redistributing Libya's quota would be an impractical solution for Opec. "What happens when Libya comes back? There's so much sensitivity about the quota system to begin with. Anything that would affect new lines in the sand on quota distribution would be contentious and would probably take more than a day."

Before the start of yesterday's meeting Libya's seat was conspicuously empty. But officials made an effort to project a common front.

"We have to be united," said Abdullah el Badri, the secretary general of Opec. "We have no other choice."

Mr el Badri deflected questions about Libya, his home country, and said he would "facilitate anybody who will want to come here".

Representatives of Libya's opposition forces, who had said they were interested in sending delegates to the meeting, were nowhere to be seen.

"At Opec, they don't want to do these things — invite rebels — otherwise they might have problems in the future," said Ehsan Ul-Haq, a senior market consultant with KBC, an energy economics consultancy. "And Opec doesn't want to create problems."

Mohammed al Sada, the oil minister of Qatar, who has backed the opposition in Libya by providing military aid and marketing Benghazi crude, insisted the discussions would not be affected by politics.

"The focus today is the economy," he said. "The focus is the supply and demand, the fundamentals.

"This is an economic type of forum so we are not addressing the political issue, though Qatar recognises the National Transitional Council and helping our Libyan brothers in many facets; we're going to continue."

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OPEC Unable to Reach Consensus; Outcome 'Unwelcome' by Some Members

- OPEC Unable to Reach Consensus; Outcome 'Unwelcome' by Some Members

Wednesday, June 08, 2011
Dow Jones Newswires
by Benoit Faucon & Summer Said

In a decision that surprised oil markets and sent oil prices higher, OPEC officials said Wednesday the group had failed to reach consensus to boost output.

"Unfortunately, we are unable to reach a consensus at this time to reduce or raise our production," OPEC Secretary General Abdalla Salem el-Badri.

Iranian Oil Minister Mohammad Aliabadi, who is also serving as president of the producer's organization, said the decision was "unwelcome" by some members.

Gulf delegates have been pushing in recent days for an increase of 1-1.5 million barrels a day. But some other OPEC members have criticized the plan, arguing that the global oil supplies are sufficient and that today's prices of $100-$115 a barrel are appropriate.

El-Badri said there was no shortage in the market. The decision means OPEC members will keep their current output unchanged.

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Iranian Oil Min: OPEC Members Couldn't Agree on Timing of Increase

- Iranian Oil Min: OPEC Members Couldn't Agree on Timing of Increase

Wednesday, June 08, 2011
Dow Jones Newswires
by James Herron

No countries from the Organization of Petroleum Exporting Countries opposed an increase in its production ceiling at the group's meeting Wednesday, said Iranian Oil Minister Iranian Oil Minister Mohammad Aliabadi.

However, agreement could not be reached on the timing and amount of an increase, so the group left it's quota unchanged, Iranian Oil Minister Mohammad Aliabadi told reporters at a briefing.

Iran, which currently holds the OPEC presidency, may call an extraordinary meeting ahead of the next scheduled meeting in December, he said.

OPEC Secretary General Abdalla Salem el-Badri said the next OPEC meeting would take place in December in Vienna. The meeting had been expected to take place in Iran, in line with OPEC custom that the December meeting is held in the home country of the organization's president.

OPEC officials announced Wednesday that they had failed to reach an agreement, a move that means output is unchanged. The move sent oil prices higher.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Commodity Corner: Oil Edges Up ahead of OPEC Meeting

- Commodity Corner: Oil Edges Up ahead of OPEC Meeting

Tuesday, June 07, 2011
Rigzone Staff
by Saaniya Bangee

Oil futures gained 0.1 percent Tuesday as traders await results from this week's OPEC meeting.

Crude for July delivery gained 8 cents to settle at $99.09 a barrel. Prices dropped as low as $97.74 before rebounding in the last 90 seconds of trading. A weaker dollar helped prevent oil prices from dropping too low.

The 12-member Organization of Petroleum Exporting Countries (OPEC) will be meeting Wednesday for the first time since the political uprising in the Middle East and North Africa. Analysts anticipate that OPEC members will increase oil production in an effort to hinder rising energy prices. By increasing production, oil prices may decrease—making up for the loss of Libyan exports due to the unrest. However, as global demand increases, it may be harder for OPEC to provide additional crude later—ultimately increasing oil prices.

Due to above-average temperatures, front-month natural gas rose for the second straight day settling at a 10-month high. Natural gas gained nearly a penny, ending the trading session at $4.83 per thousand cubic feet. The heat spurs demand for air conditioning, in term boosting the need for power-plant fuel. The intraday range for natural gas was $4.764 to $4.854 Tuesday.

July gasoline settled at $2.99 a gallon, up 4.20 cents from the previous session. Prices for gasoline traded between $2.928 and $3.002 Tuesday.

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Libya Sends Longtime Gadhafi Ally to OPEC Meeting

- Libya Sends Longtime Gadhafi Ally to OPEC Meeting

Monday, June 06, 2011
Dow Jones Newswires
by Benoit Faucon

Omran Abukraa, a long-time close ally of Col. Moammar Gadhafi and the former head of Libya's national electricity company, will be representing Libya at the OPEC meeting Wednesday, a person familiar with the matter said Monday.

But people close to anti-Gadhafi rebels said they were still considering sending an envoy to Vienna, which could set the stage for a confrontation between both parties.

Abukraa "will be replacing Shokri Ghanem [who has defected] at the meeting, but it's unclear if he is the new head of NOC [National Oil Corp.]," said the person familiar with Gadhafi's circles.

The Organization of Petroleum Exporting Countries is set to discuss a possible output increase at one of its most crucial gatherings in years.

The news about Libya's representation will lift some uncertainty about the meeting after Ghanem, the long-time head of the National Oil Corp. who normally represents Libya at OPEC, recently said he had joined the opposition to Gadhafi.

Abukraa is the former head of the General Electricity Company of Libya.

But rebels from the Transitional National Council, which is seeking Gadhafi's overthrow, are still considering whether or not they would send an emissary to the meeting.

"It will be discussed today [Monday] in Benghazi," one TNC official said. Another person close to the rebels said OPEC had been told that the rebels plan to send representatives to Vienna.

But the Council has been recognized by only handful of countries--including OPEC member Qatar--as a the official Libyan government.

That could pose problems for Libyan rebels' efforts to gain official representation at OPEC.

OPEC meets Wednesday for the first time since the Arab Spring against a backdrop of triple-digit oil prices. The producer's organization had until recently been expected to hold production steady.

But in recent days, several Gulf producers have signaled favoring an output hike when OPEC meets Wednesday to respond to mounting demand, people familiar with the matter said this weekend. However, at least one OPEC member, Iran, vocally opposes such a move.

Copyright (c) 2011 Dow Jones & Company, Inc.

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New Oil Minister Likely to Represent Iran at OPEC Meeting

- New Oil Minister Likely to Represent Iran at OPEC Meeting

Friday, June 03, 2011
Dow Jones Newswires
by Benoit Faucon

Iran's new oil ministry caretaker is likely to represent Iran at the next meeting of the Organization of Petroleum Exporting Countries, a person familiar with the matter said Friday.

That would logically make him the chairman of the crucial oil policy meeting Wednesday in Vienna, with the Islamic Republic having assumed the group's rotating presidency this year.

Late Thursday, Iranian president Mahmoud Ahmadinejad appointed Mohammad Aliabadi as the caretaker of the oil ministry, bowing to parliamentary pressure against his previous decision to run the ministry himself.

Aliabadi, a close Ahmadinejad loyalist, is better known as the head of Iran's National Olympic Committee and as the former head of its National Sports Organization.

"He has worked closely with the president," the person said.

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Iran Economy Minister May Attend OPEC Meeting June 8

- Iran Economy Minister May Attend OPEC Meeting June 8

Tuesday, May 31, 2011
Dow Jones Newswires
by Benoit Faucon

Iran's Economy Minister Shamseddin Hosseini may represent the Islamic Republic at the next meeting of the Organization of Petroleum Exporting Countries, a person familiar with the matter said over the weekend.

"It's a possibility," the person familiar with the matter said.

The considerations are bringing some clarity over who could chair the gathering at a key juncture for the producer group.

Iran's Oil Ministry caretaker head, President Mahmoud Ahmadinejad, has told officials he wouldn't attend, breaking away from earlier governmental statements that he would come.

Attendance by the economy minister, who would represent the holder of the presidency Iran, would make sense for the country at a time of increased budgetary needs from oil revenues.

But Iran's OPEC governor Muhammad Ali Khatibi said last week that "we are waiting for a decision from the president."

OPEC will have to decide June 8 in Vienna if it increases its output quotas or keeps them unchanged.

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Ahmadinejad Will Not Attend OPEC Meeting in Vienna

- Ahmadinejad Will Not Attend OPEC Meeting in Vienna

Tuesday, May 24, 2011
Knight Ridder/Tribune Business News
by Farshid Motahari, dpa, Berlin

President Mahmoud Ahmadinejad will not attend the next OPEC meeting scheduled for June 8 in Vienna, an Iranian oil ministry official said Monday.

Shojaeddin Bazargani told the official news agency IRNA that in a recent meeting, the president said that a minister would be assigned to represent the country both in the Vienna meeting and OPEC's joint session with the European Union.

Ahmadinejad last week dismissed oil minister Massoud Mirkazemi and took over the ministry himself, which would have also made him rotating chairman at the OPEC meeting in Vienna.

But Iran's constitutional watchdog, the Guardian Council, rejected the plan as illegal and said that Ahmadinejad could not run the oil ministry as caretaker.

The president's legal deputy, Fatemeh Bodaghi, said however that Ahmadinejad would remain caretaker of the ministry since the Guardian Council can only intervene on future decisions but not on those already made.

Ahmadinejad had argued that he planned to trim the cabinet, and one of his decisions was to abolish the oil ministry and merge it with the energy ministry. The plan led to wide-spread criticism in Parliament.

Ahmadinejad is involved in a row with Iran's clergy and conservative factions over his reform plans, which include reducing the cabinet from 21 to 17 ministries.

As caretaker of the oil ministry, Ahmadinejad would have been obliged to chair as well the OPEC meeting next month in Vienna, where protests against the Iranian president are reportedly being planned.

Copyright (c) 2011, dpa, Berlin

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Platts Survey: OPEC Pumps 28.84 Million Barrels of Oil Per Day in April

Platts Survey: OPEC Pumps 28.84 Million Barrels of Oil Per Day in April

Tuesday, May 10, 2011
Platts

The 12-member Organization of the Petroleum Exporting Countries' (OPEC) pumped an average 28.84 million barrels per day (b/d) of crude oil in April, down from 29.17 million b/d in March, a Platts survey of OPEC and oil industry officials and analysts showed May 9.

Excluding Iraq, which does not participate in OPEC output agreements, the 11 members bound by quotas (OPEC-11) pumped an average 26.18 million b/d during the month. This is down 340,000 b/d from the March estimate of 26.52 million b/d.

Lower volumes from Saudi Arabia, Libya and Angola accounted for almost the entire drop.

"With oil prices taking center stage, many pundits have dismissed fundamental supply and demand as a factor in the recent increases," explains Platts Global Director of News John Kingston. "One need go no further than these latest statistics to see one reason as to why the price of crude has risen so sharply. It's nice to point to an easily-understood concept like excessive speculation, but losing one million barrels per day of supply over the last two months in a market where demand has been climbing is having the result economic supply/demand theory would suggest it should have."

Some participants in the survey revisited their March estimates for Saudi Arabia after oil minister Ali Naimi said last month that the kingdom had slashed production by some 700,000 b/d to 8.29 million b/d in March because the oil market was oversupplied.

But some industry sources wondered whether the minister's figure might not have been intended as an average for the month, noting that the kingdom had submitted a figure of 8.655 million b/d to the International Energy Forum's Joint Oil Data Initiative, or JODI, for March.

In early March, Naimi said Saudi Arabia had increased production to 9 million b/d to make up for the loss of Libyan output and had even created a special blend of crude similar in quality to the lighter, lower-sulfur content Libyan grades. Refiners have shown little appetite for the new Saudi concoction, however.

The survey showed Libyan output dropping further in April, to just 200,000 b/d from 460,000 b/d in March.

In the United Arab Emirates (UAE), the 200,000-barrel-per-day drop in production from the offshore Upper Zakum field does not appear to have had an impact on overall output for the month. Industry sources said Abu Dhabi kept supply steady by amending production levels at other fields and tapping into storage to meet export commitments.

Angolan production fell 100,000 b/d to 1.6 million b/d, as maintenance and repair work continued on Greater Plutonio.

Qatari production also dipped slightly due to the production shut down at a platform of Denmark's Maersk Oil at the offshore Al-Shaheen field following a fire on April 21.

The 470,000-barrel-per-day decreases more than offset the increases of 190,000 b/d. Higher Nigerian output accounted for the bulk of the increases, but volumes also rose in Ecuador, Iraq, and Kuwait.

The latest estimates leave the OPEC-11 overproducing its official target of 24.845 million b/d by 1.385 million b/d.

There had been a suggestion earlier this month that OPEC kingpin Saudi Arabia might want to see OPEC raise its official output target at the upcoming June 8 meeting to a level closer to actual production. Subsequent soundings would appear to rule out such a move, however.

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Commodity Corner: Crude Climbs on Weaker Dollar

Commodity Corner: Crude Climbs on Weaker Dollar

Tuesday, April 19, 2011
Rigzone Staff
by Saaniya Bangee

Crude futures retreated Tuesday's earlier losses as the dollar weakened against foreign currencies.

Light, sweet crude gained $1.03 to settle at $108.15 a barrel. Tuesday marks the last trading session for the May contract.

Reaching as low as $105.50 a barrel, oil prices reversed course soaring in afternoon trading. As the dollar weakened, the euro gained strength on speculation that the European Central Bank will further increase interest rates. Additionally, strong economic data from France and Germany outweighed fears of Greece restructuring its debt. A weaker greenback increases crude's appeal amongst foreign buyers, making it cheaper.

Prices also bounced back from Monday's lows after Treasury Secretary Timothy Geithner assured there was "no risk" that the U.S. government debt would lose its top-tier rating.

Meanwhile in the Middle East, OPEC Secretary General Abdullah Al-Badri said there isn't a shortage of oil in the global market, even after the supply disruptions in Libya. OPEC believes an increase in crude production will not decrease oil prices worldwide.

Likewise, natural gas futures for May delivery rose to two-week highs settling at $4.26 per thousand cubic feet. The 12.4-cent increase came on a surprising surge in the Midwest's heating demand Tuesday. An unusual drop in weather across most of the Northwest and upper-Midwest and unexpected warmth in the south has increased demand for fuel. The intraday range for natural gas was $4.13 to $4.28 Tuesday.

As retail gasoline rose, May gasoline continued to decline, trading down 1.97 cents Tuesday. Futures settled at $3.23 a gallon increasing concerns that fuel costs will hinder economic recovery and decrease demand for motor fuel in the U.S. Gasoline prices peaked at $3.259 a gallon, before bottoming out at $3.198 Tuesday.