OPEC+ members extend oil output cuts to second quarter
Mar 05, 2024

DUBAI, March 3 (Reuters) - OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter, giving extra support to the market amid concerns over global growth and rising output outside the group.


Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said it would extend its voluntary cut of 1 million barrels per day (bpd) through the end of June, leaving its output at around 9 million bpd.


Russia, which leads OPEC allies collectively known as OPEC+, will cut oil production and exports by an extra 471,000 bpd in the second quarter. Russian Deputy Prime Minister Alexander Novak gave new figures showing that cuts from production will make up a rising proportion of the measure.


Oil has found support in 2024 from rising geopolitical tensions and Houthi attacks on Red Sea shipping, although concern about economic growth has weighed. While OPEC+ was widely expected to keep the cuts in place, Russia's announcement could bolster prices further.


"There was a surprise from Russia," said UBS analyst Giovanni Staunovo, who called the developments largely expected.

"If the Russian cuts are fully implemented additional barrels would be removed from the market. So that is a surprise move no one expected and could lift prices," he added.


Brent crude settled $1.64 higher, or 2%, at $83.55 a barrel on Friday, up more than 8% so far this year.


OPEC+ members announced the cuts individually on Sunday and OPEC later issued a statement confirming the 2.2 million bpd total. Saudi state news agency SPA said the cuts would be reversed gradually, according to market conditions.


"The decision sends a message of cohesion and confirms that the group is not in a hurry to return supply volumes, supporting the view that when this finally happens, it will be gradual," analysts at investment bank Jefferies said in a report.


OIL SEEN OPENING HIGHER

OPEC+ in November had agreed to the voluntary cuts totaling about 2.2 million bpd for the first quarter, led by Saudi Arabia rolling over a cut it had first made in July.


"The rollover was anticipated but extending it to the end of the second quarter might come as a surprise," said Tamas Varga of oil broker PVM. "The market is expected to open stronger."


For the second quarter, Iraq will extend its 220,000 bpd output cut, UAE will keep in place its 163,000 bpd output cut, and Kuwait will maintain its 135,000 bpd output cut, the three OPEC producers said in separate statements. Algeria also said it would cut by 51,000 bpd and Oman by 42,000 bpd.


Kazakhstan said it will extend its voluntary cuts of 82,000 bpd through the second quarter.


OPEC+ has implemented a series of output cuts since late 2022 to support the market amid rising output from the United States and other non-member producers and worries over demand as major economies grapple with high-interest rates.

The total OPEC+ pledged cuts since 2022 stand at about 5.86 million bpd, equal to about 5.7% of daily world demand, according to Reuters calculations.


Sources told Reuters last week that OPEC+ would consider extending the latest round of output cuts into the second quarter, with one saying it was "likely".


The oil demand outlook is uncertain for this year. OPEC expects another year of relatively strong demand growth of 2.25 million bpd, led by Asia, while the International Energy Agency expects much slower growth of 1.22 million bpd.


In a further headwind for OPEC+, the IEA also expects oil supply to grow to a record high of about 103.8 million bpd this year, almost entirely driven by producers outside OPEC+, including the United States, Brazil, and Guyana.


Reporting by Maha El Dahan in Dubai, Alex Lawler in London, Vladimir Soldatkin in Moscow and Ahmad Ghaddar; Writing by Yousef Saba; Editing by Jan Harvey, Nick Macfie and Alexander Smith


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Oil eases on higher US crude output, hopes of Israel-Hamas ceasefire

By Emalee Springfield • 02 May, 2024
HOUSTON, April 30 (Reuters) - Oil prices fell 1% on Tuesday, extending losses from Monday, on the back of rising U.S. crude production, as well as hopes of an Israel-Hamas ceasefire. Brent crude futures for June, which expired on Tuesday, settled down 54 cents, or 0.6%, at $87.86 a barrel. The more active July contract fell 87 cents to $86.33. U.S. West Texas Intermediate crude futures were down 70 cents, or 0.9%, at $81.93. The front-month contract for both benchmarks lost more than 1% on Monday. U.S. crude production rose to 13.15 million barrels per day (bpd) in February from 12.58 million bpd in January in its biggest monthly increase since October 2021, the Energy Information Administration said. Meanwhile, exports climbed to 4.66 million bpd from 4.05 million bpd in the same period. U.S. crude oil inventories rose by 4.91 million barrels in the week ended April 26, according to market sources citing American Petroleum Institute figures on Tuesday. Stocks were expected to have fallen by about 1.1 million barrels last week, an extended Reuters poll showed on Tuesday. Official data from the EIA is due on Wednesday morning. Gasoline inventories fell by 1.483 million barrels, and distillates fell by 2.187 million barrels. Expectations that a ceasefire agreement between Israel and Hamas could be in sight have grown in recent days following a renewed push led by Egypt to revive stalled negotiations between the two. However, Israeli Prime Minister Benjamin Netanyahu vowed on Tuesday to go ahead with a long-promised assault on the southern Gaza city of Rafah. "Traders believe some of the geopolitical risk is being taken out of the market," said Dennis Kissler, senior vice president of trading at BOK Financial. "We're not seeing any global supply being taken off the market." Continued attacks by Yemen's Houthis on maritime traffic south of the Suez Canal - an important trading route - have provided a floor for oil prices and could prompt higher risk premiums if the market expects crude supply disruptions. Investors also eyed a two-day monetary policy meeting by the Federal Reserve Open Market Committee (FOMC), which gathers on Tuesday. According to the CME's FedWatch Tool, it is a virtual certainty that the FOMC will leave rates unchanged at the conclusion of the meeting on Wednesday. "The upcoming Fed meeting also drives some near-term reservations," said Yeap Jun Rong, market strategist at IG, adding that a longer period of elevated interest rates could trigger a further rise in the dollar while also threatening the oil demand outlook. Some investors are cautiously pricing in a higher probability that the Fed could raise interest rates by a quarter of a percentage point this year and next as inflation and the labor market remain resilient. U.S. product supplies of crude oil and petroleum products, EIA's measure of consumption, rose 1.9% to 19.95 million bpd in Feb. However, concerns over demand have crept up as diesel prices weakened . Balancing the market, output from the Organization of the Petroleum Exporting Countries has fallen in April, a Reuters survey found, reflecting lower exports from Iran, Iraq, and Nigeria against a backdrop of ongoing voluntary supply cuts by some members agreed with the wider OPEC+ alliance. A Reuters poll found that oil prices could hold above $80 a barrel this year, with analysts revising forecasts higher on expectations that supply will lag demand in the face of Middle East conflict and output cuts by the OPEC+ producer group. View on the Reuters Website

Oil and gas industry’s “strong” free cash flow to support increasing production targets

By Emalee Springfield • 01 May, 2024
Last year, the demand for loans from oil and gas companies fell 6% year-on-year, and that followed a decline of 1% in 2022. Oil and gas companies don’t need a lot of loans because they’re generating so much money these days from their underlying businesses, said Andrew John Stevenson, senior analyst at Bloomberg Intelligence. And that trend is likely to continue through the end of the decade, he said. “The oil and gas industry has experienced a number of booms and busts over the past few decades, but for now, it appears to be flush with cash,” he said. The healthy balance sheets reflect the boost that companies have received from rising oil prices, buoyed by robust demand and OPEC+ production cuts. The sector’s free cash flow is so strong that the group’s leverage ratio, which measures a company’s net debt relative to earnings before interest, taxes, depreciation and amortization, fell to 0.8 in 2023 from 2.4 in 2020, Stevenson said. The ratio will likely slide below zero by the end of the decade, he said.
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