México

Guyana

Trinidad
& Tobago




Very usefull links







Very usefull links





Institutional
links

 


OPEC
\



TT My Energy

 




 

 



IAEA


 




 


PW
Business Partners

 


IRAQ OIL
THE FORUM

 


Blogspots

FxHQ Forex News

The Global Barrel

Tiempo Cultural

Gustavo Coronel

Iran Watch.org

Le Blog des
Energies Nouvelles

News Links

AP

AFP

Aljazeera

Dow Jones

Oil price

Reuters

Bloomberg

Views and News
from
Norway

 

 

 

PW ISSUES....
Inside, confidential and off the record

 

 

 

OPEC  to increase output 

 

 

NOC Libya

180th OPEC Conference & 12th OPEC and Non-OPEC Ministerial Meeting – 3rd December 2020

 



John Hall: OPEC Agrees to Increase Output Gradually During 2021



In spite of the pandemic, OPEC would still like to celebrate its sixtieth anniversary, and like all long-term relationships, attitudes change and for OPEC, so too do partners. There is always talk of discord in the relationship and that it is on the verge of collapse, but reality always kicks in as the members realise that without the support of each other, and particularly the main players, their voices would never be heard, individual policies would falter, and they would lose any sense of direction. As one of the smaller members said to me some time ago, we each have one vote, yet those with a bigger output seem to have a bigger vote! Not all are equal.

The partnership of Saudi Arabia, the recognised leader of the group, with Russia, one of the largest non-OPEC producers in the world, has brought together over twenty oil-producing nations with the objective of bringing together the needs of each and balancing the output of oil to supposedly the benefit of both suppliers and consumers. Invariably, this does not work, and one is usually suffering to the benefit of the other. Without the partnership of these two main players there would be little control in the market.

As in all meetings, decision making is not easy, and for this one the dilemma was whether to retain the output cut currently at 7.7mbpd or reduce it by 1.9mbpd from January 2021 or do it gradually by 0.5mbpd each month. They have, however, now agreed that they will put 0.5mbpd back into the market from January but, at the same time, will meet each month to confirm the precise amount up to 0.5mbpd.

There is concern that there is a stock overhang building up and that several members are overproducing anyway while Libya, which has been absent for some years due to civil war, has bounced back and for now is looking to make up lost business. Iraq and Russia are also understood to have overproduced while UAE, usually a staunch supported of Saudi and its directives, has invested heavily and brought in outside investment to develop its oil infrastructure further and is, therefore, keen to increase output to 5mbpd by 2030. It also wants those members who have overproduced to cut further to compensate for their over-production.

A few years ago, I remember listening to Rex Tillerson as head of Exxon. At the time, the market was depressed and the industry was bleating that with low oil prices investment would fail. Tillerson’s view was that you look ahead, long-term, and not base strategy on the price day by day, and UAE appears to be following this logic.

The pandemic has hit demand across the world, and as it recovers there is much talk of being carbon neutral by a certain date, somewhere around 2050. To get there, we shall need to see a dramatic reduction in the use of fossil fuels yet, wherever one looks, oil and gas will still appear to be the main energy sources in use at the time. OPEC is concerned, as too are all oil companies, and while investors are supposedly moving out of the sector, others are maintaining their positions as a level of reality remains with the recognition that the sector is a long way off being dead.

Much of the conservation talk is coming form the OECD countries with the exception in recent years of the USA. However, the change in presidency from Trump to Biden will give a serious boost to such cleaner energy policies as President-elect Biden has stated his intention to bring the US back to the Paris Agreement. At the same time, he will perhaps hope to find a resolution to the Iran crisis and, if possible, resurrect the nuclear agreement with Iran and allies. This will be a difficult and long-term task primarily because the infrastructure within Iran has changed from being somewhat moderate to now conservative, hard line and anti-American. Of course, should agreement be reached and sanctions lifted, Iran will be free to increase output again, also adding to the frustration of OPEC. Coincidentally, as I was writing this report, news came through that Iran will not accept any preconditions proposed beforehand by the Biden administration.

There is hope in the US in particular that the recovery package being proposed by a bipartisan group of lawmakers will inject enthusiasm and demand in to the market and similarly, around the world where other countries are formulating such plans. Nevertheless, the pandemic needs to be brought under control for the impact to be felt. Several vaccines are now close to fruition and there is hope that once mass vaccination has taken place, markets will recover. Yet, what is also being realised is that the “anti-vaxxers” probably account for as much as forty percent of the population and therefore overall vaccination programmes will have limited impacts.

In spite of any confidence OPEC may see in the market ahead, it has revised its forecasts downwards and now expects oil demand, which has fallen from 99.7mbpd in 2019 to 90.7mbpd in 2020, to rise modestly from now until 2040 to 109.4mbpd and from there, to plateau and fall back to 109.1 in 2045. Less than they had forecast earlier but by no means recognising the demise of oil in the lifetime of many of us today. In the meantime, the IEA expects oil demand for 2020 to fall to 91.3mbpd, slightly higher than OPEC with demand rising by just over 1mbpd to 2030 against the 2019 level, bringing the two close to alignment for 2030.

Some level of recovery will prevail but, for now, OPEC needs to be careful not to bring about another oversupply situation. Stocks are still high and demand remains depressed while, in the background, the US rig count is picking up again and so too will output. It knows that as the price moves over the $50 mark, shale follows on and that they are keen to avoid. Currently, Brent is trading at around $48 and WTI around $45. Perhaps day-to-day events may push it over $50, but being realistic, we shall probably not know the extent of the recovery until midway through 2021 and not see any significant change in the oil price until then. For safety and to maintain a level of harmony across the OPEC and OPEC+ spectrum, my guess is that what we have seen today is sufficient to pacify all members for a while longer.

John Hall/Alfa Energy/ Dec. 4, 2020

 

 

John Hall joined Alfa Energy in 2013 as Chairman, where his specific interest is the development of the company’s profile in the areas in which it primarily operates - across the EU and the US. He is Fellow of the Energy Institute, a Member of the Parliamentary Group for Energy Studies, an Associate Member of the Chartered Institute of Purchasing and Supply, and a Member of the Market Research Society. He began his long career in the industry when he set up John Hall Associates in 1973, a company which merged with Energy Quote in 2009 and currently trades as Energy Quote JHA.

Original article


PW ISSUES....
12/29/2020

Inside, confidential and off the record

Is an independent journalist effort from Petroleumworld, on Inside, Confidential and Off The Record Information, the views are not necessarily those of Petroleumworld

Follow us in : twitter / Facebook

Send this story to a friend Copyright© 1999-2020. Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ stories by anyone provided it mentions Petroleumworld.com as the source. Other stories you have to get authorization by its authors.Internet web links to http://www.petroleumworld.com are appreciated.

Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!

We invite all our readers to share with us
their views and comments about this article.
Write to editor@petroleumworld.comBy using this link, you agree to allow PW
to publish your comments on our letters page.
Petroleumworld.com

Hit your target - Advertise with us



Any question or suggestions,
please write to: editor@petroleumworld.com
Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels





 

 


TOP

Contact: editor@petroleumworld.com/Telephone:(58 414) 276 3041

Editor:
Elio Ohep.

Director & Producer: Elio Ohep

Contact: editor@petroleumworld.com

Advertising:Malena Vasquez:58 412 952 5301
Technorati Profile

PW in Top 100 Energy Sites


CopyRight ©1999- 2020, Petroleumworld ™  / Elio Ohep- All rights reserved

Legal Information

 

This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.
We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from Petroleumworld or the copyright owner of the material.Internet Web links to http://www.petroleumworld.com are apreciated.

 

Petroleumworld no se hace responsable por los juicios de valor emitidos por esta publicacion, por sus colaboradores y columnistas de opinión y análisis. Aceptamos colaboraciones previa evaluación por nuestro equipo editorial, estamos abiertos a todo tipo o corriente de opiniones, siempre y cuando a nuestro juicio esten dentro de valores éticos y morales razonables. Petroleumworld alienta a las personas a reproducir, reimprimir, y divulgar a través de los medios audiovisuales e Internet, los comentarios editoriales y de opinión de Petroleumworld, siempre y cuando esa reproducción identifique a la fuente original, http://www.petroleumworld.com y se haga dentro de el uso normal (fair use) de la doctrina de la sección 107 de la Ley de derechos de autor de los Estados Unidos de Norteamérica (US Copyright) Internet Web links hacia http://www.petroleumworld.com son apreciadas.

.