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opec OPEC From Vienna To Doha ? -Read More

Guess who is coming to Doha

Crudenow:April 14th 2016

Crude oil Crude oil On April 17th ,2016 some opec and non-opec producers are about to meet to cap crude oil production , in an effort to stop the prices from eroding any further ... in contrast to what was said in dec 2014, that the crude price falls are temporary

Inviting oil producers who already made their position clear , to Doha , is looking for whipping boy

It also means inviting dissents, which may result in a meeting much similar to Dec 2014 Vienne meeting, which led prices to fall like a stone.

Even if some dissenting producers agree to freeze at January level the market will not take this seriously. On the contrary it would have a negative impact. While if they disagree to freeze then the market will read it as a serious crack that cannot be solved.

At best if an agreement is reached then it will be welcomed by “ Oil shale barons “ as a victory, , and would quell any idea they had to leave the industry. As for the speculators, on the Futures Market, it is flash in the pan.

To depend on the results of such a meeting to improve the market is a total misunderstanding of the reasons behind today’s “Oil crisis”

brent What we are witnessing today is a fundamental change in the structure of the oil industry, from an Oligopolistic (few producers who were able to set prices, and production levels) to a ruthless “Market” governed by new financial institutions ( Futures Market) with ultra high frequency trading algorithms completely insulated from the market fundamentals… that turns any “ rumor or news, or new data . or Doha meeting “ into nearly riskless money at speed of light . The Futures Market knows perfectly well what production freeze means :

Firstly, most Major oil producers have reported their January 2016 shown in the graph above. the intention is clear. It is not only higher than the production figures estimated by secondary sources but also higher than the 2016 February and March figures. Also, note that most oil producers have huge amount of crude stockpile already outside their territories, waiting for price rebound.

The Futures market, have already started short buying as the market is bullish and in “Contango”… thanks to OPEC meeting in Doha. And oil barons have also locked in good contracts for August delivery….

To invite Iraq, Iran, and UAE who already, made their position known, will increase the chance of a meeting without a “decision”.

The real challange is how to eliminate, the mass wold wide stocks around the world, which was built by market imbalances during 2013, 2014, and 2015 ( read 1,2,3 articles ) .Oddly enough it help in a way to limite crude oil production increases, because of storage limitations.but at the sametime,it forms a cap on prices increases

It is difficult to visualize one single scenario where such High levels of petroleum inventories will fall….. The inventory holders, believe, that prices have found the bottom, and price rebound is just a around the corner, and even thinking to add more to inventories. But as soon as price reach $45 or higher, a wave of panic destocking begins again.

As long as this level of stock is there the crisis will be with us, and as long as there are a hope of prices increases then these oil inventories will keep raising even more. It is a vicious circle

To conclude, destocking under expect increases in crude oil price is unlikely....? A prolong period of low crude oil prices. Read more

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Up-date

10:30 PM - 17 Apr 2016: Energy Minister Alexander Novak speaks to press after failed meeting of oil-producing countries in Doha

Iran volunteered to be the Whipping Boy

Surely , immediately, after , the first doha meeting between the three ( Russia, Saudi and Venzeula ) , the draft of the agreement was prepared by OPEC -Secretariat ready to be plastic stamped and signed within one hour of discussions to be followed by a nice dinner (read above "Guess who is coming"), at least to welcome a new era of OPEC Nonopec cooperations , all made in Russia.

We are not surprised at all,may be the Russians are ... because they are new to this kind of dinners, which needs more cooking . this is what happened:The Iranian, kept their invitation card close to their chest until the last minute and kept all guessing .....then.....The prince( Salaman-picture above ) , made the statement (“ If we don’t freeze, then we will sell at any opportunity we get.”)on April 16th, a day before the meeting, where all either arrived to Doha, or they were on their way ,After that statement, everybody expected that the the saudi delegation would not sign the deal . No one was surprised except the russians

Ironically,the iranian ,knew perfectly, well, that by sending low profile delegations. they will be the whippying boy

If the Russians think that one day, they can mediate between opec and non-opec, now, they know that the two do not melt together. Click ,Melting pot . However, we believe ,that the market has anticipated , the outcome of the meeting, but it was the media that made so much fuss

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Jabbar al-Jaf Econometrician Analyst