OPEC - a dying cartel?

Is OPEC in its final death throes? The price of oil is down to 40 dollars a barrel and OPEC members are unable to agree on a strategy to get the price to rise. Some OPEC members even want non-OPEC members to agree to production cuts even though OPEC members failed to agree cuts. Venezuela wanted a cut in output of 1.5m barrels a day. Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions. Apparently "Iran has 40m to 50m barrels floating on tankers offshore that will flood onto the market as soon as sanctions are lifted. It will then crank up extra output to 500,000 b/d by the end of next year."

Is it the end of OPEC? And will that be a good thing?




Sources:
Oil Price: Latest Price & Chart for Crude Oil - NASDAQ.com
Paralysed Opec pleads for allies as oil price crumbles - Telegraph
OPEC decision to keep output high pulls oil prices close to 2015 lows | Reuters

Saudi still has an extra 2.5MMbpd it can pump if it wants to. It's trying to stuff up the US shale producers and Iran. It doesn't give much of a stuff about Venezuela.

But it can only do it for so long.

Article on the current supply.

Oil Glut Grows: 100 Million Barrels At Sea
Dec. 3, 2015 4:59 A

By Tim Maverick

The news from the oil patch is, in a word, ugly.

Despite decent growth in demand, oil inventories around the globe are growing as oil producers like Saudi Arabia, Russia, and Iraq are pumping oil at record levels.

According to the International Energy Agency (IEA), inventories of crude in developed countries stand at a record three billion barrels. Global inventories are at levels not seen in at least a decade.

And those inventories continue to grow at a pace in excess of one million barrels per day. Global oil production in October alone stood at 97 million barrels per day, according to the IEA.

100 Million Barrels Floating at Sea

Many onshore oil storage facilities are nearing capacity. In response, oil traders are storing oil at sea in supertankers.

In fact, there are now more than 100 million barrels of oil floating at sea! That's more than double the level seen earlier this year.

And these oil tankers are everywhere…

Five very large crude carriers (VLCCs) are sitting outside Chinese ports. Another 14 VLCCs are parked near ports in Southeast Asia. Each VLCC can carry about two million barrels of crude.

It's no different here. There's a record amount of crude oil sitting in ships off the Gulf Coast. Here's a graphic showing the ships off the coast of Texas:

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And complicating this problem, is Iran…

The Growing Oil Glut

As I've discussed previously, the lifting of sanctions will bring a flood of Iranian oil into an oversupplied market.

Iran supposedly has about 30 to 40 million barrels of oil sitting in supertankers near the Straits of Hormuz, ready for delivery.

But its onshore oil inventory remains a mystery. Estimates range from 12 to 60 million barrels.

And that's just the tip of the iceberg.

Iran's Oil Minister Bijan Zanganeh says Iran will wait for no one's permission, including OPEC's, to boost its oil exports. He said in September, "It's our right to return to the level of production we historically had."

Tehran specifically will increase its output by one million barrels per day within weeks of economic sanctions being lifted. The IEA estimates that Iran could bring production up to 3.6 million barrels per day six months after the sanctions are lifted. That's 800,000 barrels per day above current production and the highest level since 2011.

Iran has made its intentions fully known in regards to the price, too.

The country aims to regain its market share, no matter the price. Zanganeh said, "Our only responsibility here is attaining our lost share of the market, not protecting prices."

That's a shot across the bow of all oil producers, including the United States.

The Only Winners

The only winners here in the continuing oil market price war are the companies that own VLCCs.

Rates hit a five-year high in October at about $110,000 per day. The scramble for ships has subsided somewhat for now, and rates are back in the $60,000 to $70,000 per day range. But this is still good enough for tanker companies to make money for the first time in years.

The list of big tanker companies includes Nordic American Tankers Ltd. (NYSE:NAT), Frontline Ltd. (NYSE:FRO), Euronav NV (NYSE:EURN), DHT Holdings Inc. (NYSEHT), and Teekay Tankers Ltd. (NYSE:TNK).

As the oil glut grows, so will demand for their services. Owning stock in a tanker company is a bet against higher oil prices. And in effect, a put on oil prices.

Original Post

Full Transcript of Intel's 3Q05 Conference Call - Q&A (INTC) | Seeking Alpha

Cartel:
an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.


Saudi Arabia’s deputy crown prince, Mohammed bin Salman, said in an interview with Bloomberg that the kingdom will freeze its oil output only if Iran and other major producers agree to curb theirs.

U.S. stockpiles rose again and stocks are near record highs around the world. Yet the biggest producers, Saudi Arabia, Russia and the U.S. are all still pumping at a near-record pace. The Iranians haven’t embraced talk of cooperating on cuts, sticking to plans of increasing production by 1 million barrels a day by year’s end. On Tuesday, Kuwait’s oil minister talked about restarting an idled oil field. And the Saudi crown price’s comments Friday are more evidence Saudi Arabia and its allies won’t cap output without Iran.

The Organization of the Petroleum Exporting Countries and non-OPEC producers had a meeting planned for April 17, with some anticipating it could lead to a deal being signed. Instead, the latest news could mean the meeting gets postponed, and the deal could fall through like similar attempts during past oil crises, said Dominick Chirichella, analyst at the Energy Management Institute.

“It looks like the freeze deal may be starting to fall apart,” he said.

Crude Oil Prices Sink as Saudis Balk at Production Curbs - WSJ

Oil was knocked back from gains made in the past two weeks because of a report that output from the Organization of the Petroleum Exporting Countries rose by 64,000 barrels a day in March to 33.09 million barrels a day.

Output from Iraq and Iran was at the highest level in four years, adding to a worldwide glut of crude.

Canadian dollar, oil drop after OPEC increases crude output - Business - CBC News

So much for the cartel
:smileylaughing: