OPEC to eye oil market strategy

Iran’s oil minister said today that his country’s full return to global oil markets following the impending lifting of sanctions is not negotiable, Platts reports.

As a result of low oil prices, dozens of Canadian oil sands projects have been canceled, suspended or put on hold. The WSJ Dollar Index, which tracks the dollar against other major currencies including the euro, recently traded down 0.7% after the European Central Bank announced smaller stimulus measures that investors expected.

Jessop pointed out that there was in fact “a strong case for OPEC to increase its current output target… perhaps to 31 mbpd, to accommodate the return of Indonesia”.

The oil minister was responding to a report from Energy Intelligence in which a senior OPEC delegate said Saudi Arabia was preparing a proposal for an eventual 1 million barrels per day (bpd) output reduction and that Iran would be expected to participate in the reduction.

USA crude CLc1 was trading up 21 cents at $41.29 per barrel at 0022 GMT, after settling up almost 3 percent on Thursday. US output has soared in recent years due to new drilling technologies, and OPEC decided at a meeting in November 2014 not to cut its own production in response.

Although American drillers have cut production first, they have a key advantage vs. the oil sands and deep-water producers, in that frackers can cheaply drill and cap a well in the short run in preparation for pumping a future inventory.

Oil prices were briefly lifted overnight by news that Saudi Arabia, the de facto leader of the cartel, would propose a production cut only on the condition that non-OPEC members, such as Russian Federation, also adhere to the cut. That is why the OPEC players have gone in for overproduction.

Oil minister Ali al-Naimi told a Riyadh conference in April that Saudi Arabia was ready to revive prices “but with the participation of the main producing and exporting countries and based on clear principles and high transparency” – a sentiment repeated by officials many times since then.

USA crude stockpiles increased by 1.18 million barrels to 489.4 million last week, keeping inventories more than 120 million barrels above the five-year seasonal average, Energy Information Administration data showed Wednesday. Crude-oil stockpiles alone rose for the 10th week in a row, according to the EIA. The agency also expects China’s oil demand to rise by 585,000 barrels a day or 5.6% year-on-year in 2015.

The 12-nation Organization of the Petroleum Exporting countries began meeting Friday with prices of USA benchmark crude up marginally but still just above $40, near the lows of the world economic crisis seven years ago. RBOB gasoline futures remained flat at 1.296 a gallon at the NYMEX.