Archive for category Oil

Norway’s model of prudence in oil wealth

The Monitor’s Editorial Board
Christian Science Monitor

As more nations set up funds for the money earned from natural resources or exports, many also adopt principles of transparency and accountability – and a concern for future generations. They should look to Norway, which runs the largest ‘sovereign wealth fund.’

FEBRUARY 28, 2017 —In about 20 countries, revenue from oil drilling accounts for more than 10 percent of the economy. This natural wealth has long been a tempting source of easy cash for a government’s short-term needs or budgetary holes. Yet as oil prices have fallen, more petroleum-producing nations are taking the long view. They are saving or investing the money to benefit future generations – and to prepare for the day the oil wells run dry.

In recent years, the world has seen a rapid rise in the number of government-run kitties, or “sovereign wealth funds.” In all, more than 75 of these funds now hold $7.4 trillion. Most sock away money earned from natural resources. Others are set up by big exporters, such as Singapore, to keep their foreign earnings for future needs.

With so much money, the funds can be easy targets for politicians. Yet even as the funds have multiplied, many have adopted principles, set down nearly a decade ago by the International Monetary Fund, to be transparent and accountable in how the money is invested and spent.

It also helps that the world’s largest sovereign wealth fund is also a model. Norway, which is Western Europe’s largest oil producer and one of the world’s largest natural gas exporters, has put aside more than $900 billion in its fund since the 1990s. To put that in perspective, the fund owns more than 1 percent of the world’s traded equity shares. Its purpose is to shield the country’s economy from price fluctuations in oil and to support government savings. Read the rest of this entry »

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Oil rises on Goldman forecast, signs producers complying with cuts

By Scott DiSavino | NEW YORK
Dec 16, 2016

Oil rose on Friday, edging closer to new 17-month highs, after Goldman Sachs boosted its price forecast for 2017 and producers showed signs of adhering to a global deal to reduce output.

Brent futures rose $1.19, or 2.2 percent, to settle at $55.21 a barrel, while U.S. West Texas Intermediate crude rose $1, or 2 percent, to settle at $51.90 per barrel.

That put both contracts on track to rise for a fourth week in the last five, with Brent up around 23 percent during that time and U.S. crude up about 20 percent.

The premium of the Brent front-month over the same U.S. contract closed at $2.26 a barrel, its highest since the end of August.

“We’re up today because Goldman Sachs bumped up its oil estimates and the Russians said their oil companies would reduce output,” said Phil Davis, managing partner of venture capital fund PSW Investments in Woodland Park, New Jersey.

The Organization of the Petroleum Exporting Countries agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1, its first such deal since 2008. Russia and other non-OPEC producers plan to cut about half as much. Read the rest of this entry »

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Exclusive: Cost of pump-at-will oil policy spurred Saudi OPEC U-turn

By Rania El Gamal and Dmitry Zhdannikov | DUBAI/LONDON
Dec 15, 2016

Saudi Arabia has long said it could produce as much as 12 million barrels per day (bpd) of oil if needed, but that pump-at-will claim – which would require huge capital spending to access spare capacity – has never been tested.

Sources say the kingdom may have stretched its current limits by extracting a record of around 10.7 million bpd this year, which could be one reason why Riyadh pushed so hard for a global deal to cut production.

Riyadh, the world’s top oil exporter, felt the burn of cheap oil this year when crude was trading below $50 a barrel, as the reality of its costly war in Yemen and the task of shaking up its economy to create thousands of jobs began to sink in.

With tight resources, Saudi Arabia found itself weighing the prospect of investing billions of dollars to raise oil output further if it wanted to gain more market share under a strategy adopted in 2014.

Instead, cutting production amid a global glut and low prices to take the pressure off its oilfields, secure better reservoir management and save itself unnecessary expenses, seemed the perfect deal.

“You invest in raising your production when prices are high, not when they are low,” a Saudi-based industry source said. Read the rest of this entry »

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The world’s biggest oil trader thinks we may never see $100 oil again

by Will Martin
Business Insider
FEB. 8, 2016

The price of oil might never go above $100 per barrel ever again, and will stay beneath $60 for as long as ten years, according to the boss of the world’s biggest independent oil trader.

In an interview with Bloomberg TV, Ian Taylor, CEO of Vitol Group said: “It’s hard to see a dramatic price increase. You have to believe that there is a possibility that you will not necessarily go back above $100, you know, ever.”

The price of Brent crude, the European benchmark, peaked at around $140 in 2008 before crashing as low as $45 per barrel in early 2009.

It then recovered substantially, and traded around the $100 mark for nearly three years between 2011 and 2014.

However, since summer 2014, the huge supply glut in global markets, driven by OPEC, has forced prices down as low as $28 per barrel. Right now, both major benchmarks are hovering between $32-35 per barrel. Read the rest of this entry »

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Iran Kicks Off Plan to Boost Oil Exports as Sanctions Lifted

Anthony Dipaola and Hashem Kalantari
January 17, 2016

Iran is beginning efforts to boost oil production and exports amid a global supply glut after the removal of sanctions that shackled its economy and capped crude sales.

The Persian Gulf country is targeting an immediate increase in shipments of 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday in an interview in Tehran. Iran plans to add another half million barrels within months. The additional crude will push prices lower when it enters markets that are already oversupplied, said Robin Mills of Dubai-based oil consultant Qamar Energy.

“The oil ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran’s crude exports by 500,000 barrels,” the official Islamic Republic News Agency reported. Zamaninia said the plan is “still valid” and will be done in a “managed way to minimize the negative impact” on prices.

Buyers of Iranian crude are free to import as much of its oil as they want after the International Atomic Energy Agency determined that the country had curbed its ability to develop a nuclear weapon. As holder of the world’s fourth-largest reserves of crude and biggest deposits of natural gas, Iran gains immediate access to about $50 billion in frozen accounts overseas, funds the government says it will use to rebuild industries. The end of sanctions also opens the door to foreign investors such as Total SA and Eni SpA.

Benchmark Brent crude has dropped 22 percent this year, closing last week at less than $29 a barrel amid oversupply and the looming surge in Iranian output. Gordon Kwan, a Hong Kong-based analyst at Nomura Holdings Inc., said by e-mail that prices may drop as low as $25 a barrel on Monday. Read the rest of this entry »

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Saudi Arabia has bigger problems than Iran

— Tobin Harshaw
Malay Mail Online
January 8, 2016

JANUARY 8 —Saudi Arabia’s feud with Iran over the beheading of a prominent Shiah cleric led to a lot of overwrought speculation about Sunni-Shiah tensions rising to tear up the Middle East. Those more steeped in regional affairs point to the other 46 men beheaded, almost all of whom were Sunnis charged with terrorism.

The theory here is that the execution of the preacher, Nimr al-Nimr, was less about provoking Shiahs than pre-empting domestic outrage over the deaths of so many Sunnis, who make up 85 per cent of the country’s population. The kingdom has rarely been concerned with domestic opinion in its 90 years of statehood. Does Saudi Arabia now fear unrest among the masses? Should it?

Outside of North Korea and the New England Patriots, few institutions are more opaque than the Saudi royal court. But over the last year, the first in the reign of 80-year-old King Salman, the famously hidebound monarchy has undergone a shocking and risky makeover.

Salman, who took over last January 23 on the death of his half-brother King Abdullah, was widely expected to be just a caretaker. Instead, he took care of business. Within months, he replaced the anointed crown prince with his nephew Mohammed bin Nayef, the longtime interior minister. Yet he also watered down this new heir’s influence by dismantling the crown prince’s previously independent court.

The real winner was the king’s young son, Defence Minister Mohammed bin Salman, who became deputy crown prince and gatekeeper to those seeking the king’s attention. The prince was named head of the new Council of Economic and Development Affairs, which took over many powers of the finance ministry, and was given control over Saudi Aramco, the state-owned oil monopoly. (Yesterday, he suggested that the kingdom may consider selling a stake in the oil giant.) Read the rest of this entry »

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Shell Exits Arctic as Oil Slump Forces Industry to Retrench

New York Times
SEPT. 28, 2015

As oil prices have continued their steady decline this year, rig after rig has been shut down, costing thousands of jobs in the United States. Yet major oil producers have been loath to pull the plug on their most ambitious projects — the multibillion-dollar investments that form the backbone of their operations.

Until now. On Monday, Royal Dutch Shell ended its expensive and fruitless nine-year effort to explore for oil in the Alaskan Arctic — a $7 billion investment — in another sign that the entire industry is trimming its ambitions in the wake of collapsing oil prices.

The announcement was hailed as a major victory by environmentalists, who had fought the project for years, only to be stymied by pressure inside and outside the industry to increase domestic oil production. Read the rest of this entry »

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Economic research body says ringgit to decline further if confidence crisis remains

The Malaysian Insider
4 August 2015

The ringgit can be expected to deteriorate further if Malaysia does not solve its confidence crisis stemming from political instability in the country.

Malaysian Institute of Economic Research (MIER) executive director Dr Zakariah Abdul Rashid said lack of public confidence is the key factor resulting in the weakening ringgit, should crude oil prices remain stable.

“The political situation is complex – from the lack of confidence on how 1MDB is handled to the Cabinet reshuffle – these have put pressure on investors’ confidence and the ringgit,” he said during MIER’s 13th national economic briefing. Read the rest of this entry »

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Futures markets have much to say about oil’s direction

Gregory Meyer
Financial Times
July 17, 2015

For a brief, brave moment this year there was a sense the worst was over for the oil sector. This week, that feeling evaporated.

Iran’s agreement to curtail its nuclear programme, potentially restoring its place as a leading crude exporter, was just the latest hunk of bearish news thrown at the oil market. Saudi Arabia and Iraq are pumping record volumes. US drillers have again added rigs to probe for oil in shale rocks. China’s furious fuel demand growth is easing. For investors pondering exposure to oil through futures, shares or bonds, standing back seems the safest course.

The $50 a barrel plunge in spot oil prices from a year ago has been breathtaking. But to grasp the industry’s deepening woes, look at what futures markets are saying.

The price of West Texas Intermediate crude delivered in December 2016 has fallen below $60 a barrel, the lowest since any exchange listed that futures contract. Between the financial crisis and last year, the contract levitated between $80 and $100. Read the rest of this entry »

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As scandal rocks Malaysian government, B.C. pushes LNG deal with state-owned gas giant

By Warren Bell in Opinion | July 15th 2015
National Observer

Christy Clark is recklessly planning on linking the next generation in BC to the Malaysian government, which in the last few days has headed into the worst financial and political scandal in its recent history – the latest in a long history of questionable government behaviour.

The B.C. legislature is now sitting, at Premier Clark’s behest, in a rare summer session whose sole purpose is passing legislation to facilitate a sweetheart financial deal with Petronas, the giant Malaysian oil and gas company. Petronas wants to build a massive plant to liquefy fracked gas on tiny Lelu Island in the center of prime salmon habitat at the mouth of the Skeena River.

Petronas is wholly owned by the Malaysian government (which has been controlled by a single ruling coalition, Barisan Nasional, for the last 50 years). Petronas supplies the Malaysian government with as much as 45 per cent of its budget, according to Reuters. Read the rest of this entry »


For Asia’s Oil Consumers, It’s a Buyer’s Market

by Eric Yep
Wall Street Journal
July 16, 2015

With ample supply, oil refineries in Asia have increasing influence over prices

SINGAPORE—With oil prices at half what they were a year ago and crude flooding into Asia from all directions, buyers from the west coast of India to southern Japan are, for the first time in decades, spoiled for choice.

The changing balance of power is already affecting the regional market share of key producers. With a full return of Iranian supplies now looming, following a nuclear accord this past week, competition will likely heat up further.

Oil consumers, mainly the refineries that turn crude into products such as gasoline and jet fuel, face a dilemma in this “new normal” era. Do they stick with multiyear contracts with long-established suppliers, primarily from the Middle East, or buy more oil on spot markets, getting cheaper prices but risking security of supply?

Asian refiners, located far from major oil-producing regions, previously have tied up as much as 95% of their crude intake through long-term contracts with reliable producers such as Saudi Arabia’s state-owned oil giant Saudi Aramco. Read the rest of this entry »

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Why Saudis Are Holding Strong on Oil

By Meghan L. O’Sullivan
JAN 26, 2015

A consensus has emerged since the death of King Abdullah of Saudi Arabia that the kingdom will not change course on oil policy. This consensus is probably right, at least for the short term. It is, however, correct for reasons other than the ones that most observers have invoked.

Moreover, while it looks unlikely that the kingdom will alter oil production in the coming months, barring a major change of heart of non-OPEC producers, interesting changes to Saudia Arabia’s cabinet roster and other energy policies and could be closer than most realize.

The basis of the conventional wisdom is rooted in personalities. New King Salman bin Abdulaziz has pledged continuity, stating he will adhere to the “correct policies” of his predecessors. He also said that oil minister Ali Al-Naimi will stay in his post. Read the rest of this entry »

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Revised 2015 Budget should declare war on corruption, incompetence and extravagance to provide example and leadership of government commitment to austerity, accountability and integrity

The revised 2015 Budget should declare war on corruption, incompetence and extravagance to provide example and leadership of government commitment to austerity, accountability and integrity.

Such a campaign would save the Malaysian government and taxpayers scores of billions of ringgit, which would help the country tide through the looming economic crisis as a result of the sharp fall in prices of oil and commodities and the weakening of the Malaysian ringgit.

Despite the greatest investment in anti-corruption campaign, with the Malaysian Anti-Corruption Commission developing into a huge bureaucracy but with very little to show in terms of results, the Najib premiership is still far behind the Abdullah and Mahathir premierships in both ranking and score of the annual Transparency International (TI) Corruption Perception Index (CPI).

Malaysia lags seriously behind other countries in the battle against corruption, particularly Indonesia and China, and Malaysia is at risk of being overtaken by these two countries which had occupied the bottom two of rungs of the TI CPI 1995 two decades ago in a matter of a decade.
Read the rest of this entry »

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It is not too late for Najib to convene a special meeting of Parliament to present the revised 2015 Budget

The question the Prime Minister, Datuk Seri Najib Razak must answer is why he is not convening a special meeting of Parliament to present the restructuring of the 2015 Budget.

As it is Parliament which approved the RM273.9 billion 2015 Budget, it is only right and proper, fully in accord with the principle of parliamentary democracy, that Najib should convene a special Parliament to present the restructured 2015 Budget because of the weakening of ringgit and the plunging oil prices.

It is not too late for Najib to do what is right, and convene a special meeting of Parliament to present the revised 2013 Budget as a special Parliament can be convened even within 48 hours. Otherwise, Najib would be showing utter contempt to Parliament and the principle of parliamentary democracy. Read the rest of this entry »

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India fails to exploit oil price slump

By M K Bhadrakumar
Asia Times
January 8, 2015

As an energy-deficient country whose import bill for oil in the last financial year stood at $150 billion, the sharp fall in oil prices is a moment to celebrate. There are two ways to celebrate. One could be to open the champagne bottle and enjoy the good things in life. Then, there is a second way – the Chinese way – which is to seize the happy hour to plan for the future.

The Indian government is sipping champagne. The budget deficit significantly narrows and that is good news for the upcoming annual budget. A Morgan Stanley report in September calculated that a mere 10 percent drop in oil price could bring down the current account deficit by 0.6 percent of India’s GDP – no small matter.

However, how is the government taking advantage of the unexpected windfall? Plainly put, the benefit has not been passed on to the consumer. Whereas in the US, the average gasoline prices have reached their lowest level in the past four-year period, there is no such luck for the Indian consumer. Worse still, the government’s price fixation method is so opaque that a suspicion forms that private oil companies are being enabled to make huge profits. Read the rest of this entry »

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Fears grow over fallout from Petrobras corruption scandal

Samantha Pearson in São Paulo
Financial Times
January 7, 2015

Fears are growing over the systemic impact of the corruption scandal at Petrobras, Brazil’s state oil producer, as one of the construction firms linked to the allegations edges closer to default and the country’s credit rating comes under pressure.

OAS, which is building the world’s third-largest dam and revamping São Paulo’s international airport, has missed two debt payments over the past week after the scandal restricted its access to funding, forcing it to preserve cash to pay for operations.

Analysts said that similar difficulties across Brazil’s construction and oil industries could have knock-on effects on the world’s second-largest emerging market economy, especially if Petrobras itself cannot regain access to capital markets.

“The risk is that the government would have to provide financial support to Petrobras in the event of an acceleration of debt,” Mauro Leos, Moody’s sovereign analyst for Brazil, told the Financial Times. Such a scenario “could lead to a credit event”, affecting Brazil’s sovereign credit rating, he added.

The warning comes as President Dilma Rousseff is battling to protect Brazil’s coveted investment grade rating with a series of market-friendly measures — efforts that could be obscured by the prospect of bailing out Petrobras, Mr Leos said.

With more than $139bn in total debt, Petrobras ranks as the world’s most indebted oil producer, but it retains an investment grade credit rating. Read the rest of this entry »

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Fuel prices drop 30 sen, 35 sen

The Malaysian Insider
31 December 2014

The retail prices for fuel in the country will be reduced between 30 sen and 35 sen from tomorrow following the downtrend in global crude oil prices, said Deputy Finance Minister Datuk Ahmad Maslan today.

He tweeted that RON95 petrol will be priced at RM1.91 a litre, a reduction of 35 sen, RON97 at RM2.11 a litre (35 sen drop) and diesel at RM1.93 a litre (30 sen drop). Read the rest of this entry »

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The Conventional Wisdom On Oil Is Always Wrong

By Ben Casselman
Five Thirty-Eight
Dec 18, 2014

In 2008, I moved to Dallas to cover the oil industry for The Wall Street Journal. Like any reporter on a new beat, I spent months talking to as many experts as I could. They didn’t agree on much. Would oil prices — then over $100 a barrel for the first time — keep rising? Would post-Saddam Iraq ever return to the ranks of the world’s great oil producers? Would China overtake the U.S. as the world’s top consumer? A dozen experts gave me a dozen different answers.

But there was one thing pretty much everyone agreed on: U.S. oil production was in permanent, terminal decline. U.S. oil fields pumped 5 million barrels of crude a day in 2008, half as much as in 1970 and the lowest rate since the 1940s. Experts disagreed about how far and how fast production would decline, but pretty much no mainstream forecaster expected a change in direction.

That consensus turns out to have been totally, hilariously wrong. U.S. oil production has increased by more than 50 percent since 2008 and is now near a three-decade high. The U.S. is on track to surpass Saudi Arabia as the world’s top producer of crude oil; add in ethanol and other liquid fuels, and the already on top. Read the rest of this entry »

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Oil slide threatens Malaysia’s fiscal progress

By Andy Mukherjee
December 3, 2014

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Just when Malaysia was beginning to plug the holes in its public finances, the prospect of a sharp reduction in oil revenue is threatening to undermine fiscal progress and weaken the currency.

Petronas is playing spoiler. The state energy company recently warned that its contribution to the government’s exchequer – in the form of dividends, taxes and royalties – could slide 37 percent next year from an estimated 68 billion ringgit ($20 billion) in 2014.

Such a shortfall in the main source of government’s oil-and-gas revenue would easily exceed 2 percent of GDP. That would wipe out the 1.7 percent of GDP in annual savings the government hopes to achieve by scrapping domestic fuel subsidies from Dec. 1.

The fiscal hit could be even larger if oil prices next year remain below the $75 a barrel on which Petronas based its forecast. That would threaten the government’s target of reducing the budget deficit to 3 percent of GDP, from an estimated 3.5 percent this year.

The finance ministry is refusing to give up on the 2015 target just yet. It may hope that Petronas can be persuaded to make a less drastic cut in its dividend payment. Read the rest of this entry »

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Six reasons oil’s price plunge has shaken the markets

Malcolm Maiden
The Age
December 2, 2014

Oil is a key economic input and its price has fallen sharply. All things being equal, that’s a plus for global growth, but the markets are in turmoil. Here are six key reasons why oil’s price plunge has the markets gyrating.


In 2011, 2012 and last year oil averaged $US95.13 a barrel, $US94.15 a barrel and $US98.05 a barrel respectively, a spread of just $US3.90. It averaged $US100 a barrel in the first six months of this year and got to $107.26 a barrel on June 20. Monetary policy was still loose and the consensus was that the oil price would not move sharply in either direction.

Instead, it tipped into an accelerating price slide, to about $US75 a barrel ahead of last week’s meeting of the Organisation of the Petroleum Exporting Countries (OPEC). It hit $US66.15 a barrel on Monday, after the world’s biggest producer, Saudi Arabia, failed to back OPEC production cuts, and was still below $US70 a barrel on Tuesday despite a 3 per cent-plus bounce. Investors didn’t see the price slide coming, and haven’t worked out what it means. Read the rest of this entry »