Opec

Last week’s Opec meeting in Vienna confirmed that power has drifted away from the cartel that shaped the oil market for so long. The organisation was unable, as some wanted, to cut production which across Opec is running at about 1.4m barrels a day in excess of the official target. Equally, it was unable to increase production, as others favoured, in order to drive US producers of so-called “tight oil” – that is oil from shale rocks extracted through fracking – out of the market. The conclusion of the meeting was to do nothing. This means that prices will continue to be set by supply and demand. Over the last few weeks prices which had sunk in the spring appeared to be stabilising at around $ 65 a barrel for Brent with WTI five or 6 dollars lower. But such prices were not secure and now, short of a very dramatic development such as an attack by Islamic State of Iraq and the Levant on Saudi Arabia, all the odds are that prices will now fall back again.

Brent Crude Oil Future twelve month chart Read more

 

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The provisional agreement to control Iran’s nuclear ambitions led to another fall in oil prices on Friday as the market anticipated the lifting of sanctions and the resumption of full scale Iranian exports. The fall is now overdone and for a series of reasons we are likely to see prices rise — modestly — before the summer.

First, the Iranian agreement is provisional and depends on negotiation of crucial details before the next deadline in June. A number of concerned parties — from the Revolutionary Guards in Tehran, who do not want to see the lucrative business interests they have built on the back of sanctions eliminated, to the Israeli government in Jerusalem, which does not believe that any promises from Iran can be trusted —have no interest in seeing the deal completed. Read more

Wind turbines in Peitz, Germany.

Wind turbines in Peitz, Germany © Sean Gallup/Getty Images

Forget Opec. If cartels can’t control output, they can’t control prices and in due course they fall apart, usually with a great deal of ill will in the process. The evidence of the last six months is that Opec can’t control the market — ask yourself how many Opec members want to see a price of $60 a barrel for their oil. Some in Saudi Arabia think a low price can squeeze out competing suppliers, but that feels like a justification after the fact of a fall which they can’t control. The question now is how the process of adjustment to the new price level will work. Read more

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There were two contenders for this year’s award. The most obvious, and certainly the man who has won the most coverage in this (and every other) publication, is Vladimir Putin. Mr Putin has certainly been highly visible, but he has actually changed very little in the energy market. Russian gas still flows to Europe and to Ukraine, helped by western payments of outstanding debts. Europe may be rethinking its energy mix and opening new and more diverse sources of supply, but any change will be very gradual. Russia will trade more with China and India, but that was coming anyway and is a natural and logical balancing of supply and demand. Read more

The fate of proposals to reform the Mexican oil and gas industry, now being considered by the country’s lawmakers, matters well beyond Mexico itself. The outcome could reshape the energy sector in a number of important countries. Read more

The Brent oil price fell by more than six dollars last week and at $ 104 is now 20 per cent below its recent peak in the spring of 2012. No particular events have triggered the fall. There has been no deal with Iran which would end sanctions. Economic activity levels are hardly exciting but they haven’t suddenly collapsed. Uncertainties around North Korea might normally have been expected to push prices up. Read more

The World Economic forum is getting underway in Davos, Switzerland. Getty Images

Fashions come and go and the agenda for the annual meeting of the World Economic Forum in Davos is usually a pretty good guide as to whether skirts are long or short this year. This year’s title for the meeting is “Resilient Dynamism”, which is very cool. But the issues that have slipped down the agenda are energy security and climate change.

There are a few odd sessions, but the focus has shifted and apart from one brief reference to natural resources, neither energy nor climate are mentioned on the web page setting out this year’s themes. This is a very big change from only four or five years ago, when both were prominent topics at every meeting. Read more

The new paper from the Belfer Center at Harvard on the prospect of sharply rising oil production over the next decade is a substantial and interesting piece of work.   The headlines, however, oversell the content.  America isn’t about to be self-sufficient in oil or to start exporting a surplus.  Around the world there is indeed plenty of oil but politics are likely to keep production well below the physical potential.

The report “Oil: The Next Revolution” by Leonardo Maugeri, is based on a detailed field by field analysis of the world’s oil resources. Read more