Crude futures plunged by the most in more than two weeks as jitters reverberated through markets a day after the Federal Reserve provided a gloomy outlook for the U.S. economy.
Oil headed for its first back-to-back weekly gain since June on signs the U.S. and China could be edging closer to a trade deal and as a growing list of central banks start easing policy to shore up growth.
Oil’s set for its longest stretch of declines on record after entering a bear market, with investors awaiting a weekend meeting of OPEC and its allies to discuss output strategy.
OMV said it expects to book around €1.6billion in write-downs in its upstream business on top of €300million charge in its downstream business.
As the price of oil hits an 11-year low, Energy Voice looks at the cost of producing a barrel around the globe.
Russia's Deputy Finance Minister Maxim Oreshkin said on Friday that the ministry saw the oil price trading around $40 to $60 a barrel for the next seven years. International prices for oil, Russia's chief export, have plunged over the year and a half, adding to the pressure on its finances from international sanctions over its part in the crisis in Ukraine.
Oil traded near the lowest close in more than six years as speculation OPEC will keep markets oversupplied countered a drop in US crude stockpiles. Futures slipped 0.5 percent in New York after closing 9.5 percent lower in the four days since OPEC’s Dec. 4 decision to effectively abandon its output target. The exporters’ group raised production in November to a three-year high, according to its monthly report. US stockpiles along the Gulf Coast fell the most since December 2012, according to government data Wednesday. Refiners typically drain tanks to reduce their tax burden, which is determined by year-end levels.
The global oil industry is set to repeat this year’s $200 billion of investment cuts in 2016, raising even more concerns than the current slump in crude prices, according to the chief executive officer of Italy’s Eni SpA. "What is worrying me is not the price of today; it is what is happening in the industry,” CEO Claudio Descalzi said in an interview with Bloomberg TV from the COP21 climate change conference in Le Bourget, France. “We cut about $200 billion and I think next year we are going to do the same and that can create in the mid term an imbalance between supply and demand."
Husky Energy said it plans to keep its budget in the next year unchanged from 2015 and is planning for $40 per barrel of oil. The company said it would spend $2.9billion to $3.1billion in 2016 in comparison with $3billion this year. Husky also plans to sell some of its midstream assets in western Canada as it looks to strengthen its balance sheet.
On Friday, OPEC concluded its 168th Meeting of the Oil Production and Exporting Countries Conference, with members agreeing to effectively abandon the 30 million barrel per day (mmbbl/d) production limit which has been in place since 2011. Brent crude, the international standard benchmark, fell some 3.23% on Monday to the lowest front month futures price since late 2008.
Iran may roil global oil markets with plans to sell about 45 million barrels of fuel stored in tankers in the Persian Gulf within three months of the removal of sanctions on its economy, according to analysts. Most of the stored oil is condensate that contains a sulfur compound, which complicates sales because many refineries can’t process it, said Victor Shum of IHS Inc. and Robin Mills at Dubai-based Manaar Energy Consulting. To market this large amount of oil within three months -- the equivalent of about half a million barrels a day -- Iran will have to resort to offering deep discounts, they said. “Iran’s getting ready to open the taps,” Shum, IHS’s head of oil market research, said by phone on Oct. 26. “If they want to unwind this supply in the current weak market, they’ll have to offer discounts. It’s a buyer’s market.”
Oil climbed from a three-week low as traders snapped up contracts dragged down by expanding U.S. inventories. December futures rose as much as 1.7 percent to $45.95 a barrel in New York. They settled at $45.20 on Wednesday after US government data showed stockpiles expanded by 8.03 million barrels last week, the biggest increase since April and more than twice the gain forecast. “There was a perfect excuse yesterday to send oil through $45 after the bigger-than-expected rise in inventories,” Ole Sloth Hansen, an analyst at Saxo Bank A/S, said by e-mail from Copenhagen. “That did not happen and it could potentially signal that traders are looking to pick up contracts at the bottom of the range that has prevailed since early September.”
Oil held near $47 a barrel after Chinese government data showed the economy expanded quicker than forecast in the world’s second-biggest crude user. Futures were little changed in New York after advancing 1.9 percent Friday. Gross domestic product rose 6.9 percent in the third quarter from a year earlier, according to the National Bureau of Statistics.
A year after oil sank into a bear market, the industry is still hunkering down for a long period of low prices, with Europe’s biggest producer seeing only the first glimpses of a recovery. In the last five months, US production sank by 590,000 barrels a day, or more than 6 percent. The bad news: Drillers are cutting costs with a speed and brutality not seen in decades, enabling many to continue producing at a high level even as prices remain low. Goldman Sachs Group Inc. sees crude falling by another $10 a barrel as storage tanks fill up in the coming months. “I see the first mixed signs for recovery,” said Ben Van Beurden, Royal Dutch Shell Plc’s chief executive officer, speaking at the Oil & Money conference in London.
The last place oil producers want to be when prices plummet to profit-demolishing lows is midstream on a billion-dollar project in one of the costliest parts of the planet to extract crude. Yet that’s exactly where half a dozen oil sands operators from Suncor Energy Inc. to Brion Energy Corp. find themselves with prices for Canadian oil now hovering around $30 a barrel. While all around them projects have been postponed or canceled, their investments were judged too far along when the oil game suddenly moved from offense to defense. These projects will add at least another 500,000 barrels a day -- roughly a 25 percent increase from Alberta -- to an oversupplied North American market by 2017. For companies stuck spending billions in a downturn, the time required to earn back their investments will lengthen considerably, said Rafi Tahmazian, senior portfolio manager at Canoe Financial LP.
Oil climbed amid speculation the drop below $50 a barrel in London for the first time since January was excessive. Brent futures gained 1.7 percent, paring a 5.2 percent fall on Monday. US oil prices have slumped close to levels that will curb supply growth, according to consultant Petromatrix GmbH. The nation’s crude inventories probably declined for a second week, according to a Bloomberg survey before government data due Wednesday.
Petrofac has been awarded a $780million contract from KOC (Kuwait Oil Company) for its manifold group trunkline in the country. The international oil and gas services provider said the win will play an integral part in KOC’s plans to increase and maintain its crude production over the next five years. There are three new gathering centres – forming part of the broader engineering, procurement and construction contract - already being built.
Russian President Vladimir Putin’s government told its economic team to stick to a conservative budget for this year as crude oil prices began rising, according to two officials in Moscow. The government rejected new forecasts prepared by the Economy Ministry this week as too optimistic, the officials said, asking not to be identified as the discussion isn’t public. Earlier this week, the ministry raised its estimate for this year’s average crude price to $60 a barrel from $50, they said. Oil and natural gas contribute about half of Russia’s budget revenue.
US stocks bounced back yesterday after losing ground for three weeks as the dollar’s rally against the euro abated. Elsewhere in financial markets, oil closed at a six-year low, below $44 a barrel, as supplies continue to outpace demand. Treasurys gained after some mixed reports on the economy. The stock market has stumbled in recent weeks as the dollar has surged against the euro. The US currency has been rising on expectations that the Federal Reserve will start to raise interest rates even as the European Central Bank continues to provide stimulus to that region’s economy. A stronger dollar is a problem for big US companies that rely on overseas sales because it makes their goods more expensive in foreign markets and reduces the value of the profits they bring back home to the US.
An oil price fall to $40 a barrel will put the brakes on a significant amount of global supply, a report has warned. Energy research consultancy Wood Mackenzie said falling oil prices risks making producing fields “cash negative” which leas to an immediate break on production. It estimates that a Brent price of $40 a barrel or below would see producers shutting in production at a level where there is a significant reduction of global supply, with US onshore ultra-low production volume “stripper wells” could be first to be cut.
The FTSE 100 Index completed its best week in three years today - just a week after its worst in three years. London’s top-flight was up 3.9% after recent market jitters were assuaged by indications from the US Federal Reserve that while the world’s largest economy is improving there will be no hurry to raise interest rates. The FTSE 100 has enjoyed its biggest weekly climb since December 2011, adding £62 billion to the value of its constituent companies.