Oil Prices

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http://www.cnbc.com/id/102115652?trknav=...:topnews:5

Syrian Regime, Iraqi Kurds Among Those Buying ISIS Oil: Official
Andrea Mitchell and Erin McClam
4 Hours Ago
NBC News

Members loyal to the Islamic State in Iraq and the Levant (ISIL) wave ISIL flags as they drive around Raqqa June 29, 2014.
Reuters
Members loyal to the Islamic State in Iraq and the Levant (ISIL) wave ISIL flags as they drive around Raqqa June 29, 2014.
ISIS makes its fortune by selling oil from seized territory to its enemies, including the Syrian government it has vowed to topple and to Kurds in Iraq, a U.S. official said Thursday.

The official, Undersecretary David Cohen of the Treasury Department, is in charge of cracking down on ISIS finances. In remarks prepared for a speech to the Carnegie Endowment for International Peace, he said that ISIS "has amassed wealth at an unprecedented pace."

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Unlike al Qaeda, he said, ISIS gets only a small share of its money from deep-pocketed donors. It relies mostly on black-market oil sales, extortion and ransom payments, Cohen said. Estimates of how much ISIS makes selling oil have varied widely, but it is believed to be at least $1 million a day.


ISIS, which controls oil refineries in the vast territory it has seized in Syria and Iraq, sells oil to middlemen, including some from Turkey, who move it for resale, the undersecretary said. The regime of President Bashar Assad of Syria has made an arrangement to buy ISIS oil, and some oil from ISIS territory has been sold to Kurds in Iraq, Cohen said.

Read MoreUS needs to be more proactive on ISIS
He did not specify who among the Kurds was buying. But the cooperation of Iraqi Kurds, along with the main government of Iraq and rebels in Syria, is a critical element of the American strategy to fight ISIS.

Last week, the State Department assembled 20 countries and organizations to talk about ways to dry up ISIS' money, but Cohen warned that it will take time.

"We have no silver bullet, no secret weapon to empty ISIL's coffers overnight," he said, using an alternate acronym for the militants. "This will be a sustained fight, and we are in the early stages."

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http://www.cnbc.com/id/102124851?trknav=...:topnews:2

Why OPEC's losing its ability to set oil prices
Hailey Lee | @haileylee139
1 Hour Ago
CNBC.com


OPEC's glory days of steering global oil prices may be at an end.

U.S. shale oil will replace the Organization of the Petroleum Exporting Countries as the first-mover "swing producer," according to a Goldman Sachs report from the weekend—meaning OPEC is losing its power to set global prices for crude.

Read MoreOil could slide further, but where's the bottom?
Saudi Arabia, the world's largest oil exporter, no longer has "the ability to push prices lower than the production costs of U.S. shale" because any cuts from the kingdom would "accommodate the further expansion of U.S. shale, as well as reduce Saudi profits," Goldman said.

The shift in pricing power became apparent to Goldman when U.S. shale's spare capacity, at around 5 million barrels per day, exceeded Saudi Arabia's spare capacity of 1.5 million. Spare capacity refers to the amount of crude a country is able to produce in 30 days in case of an emergency.

Read More 'Bipolar' markets lose the fear; are they ready to relax?


This trend has been a long time coming, but the tipping point started this year with significant cuts in West African oil exports to the U.S., said John Kilduff, energy analyst and founding partner of commodities investment firm Again Capital. U.S. shale oil has replaced West African imports, which have been redirected to Asia.
The balance was further tipped toward the U.S. when production rebounded in Libya and Iraq despite political instability, adding to an already oversupplied market, Kilduff added.

OPEC pumped 30.6 million barrels of crude oil per day in September, a jump of 400,000 barrels from August that was driven by the Libyan output rebound, found Platts, a global energy information service.

Read More Despite washout, hedge funds not bailing on energy
OPEC's loss in pricing power is a consequence of not taking U.S. producers more seriously and cutting prices earlier for clients, said Phil Flynn, senior energy market analyst at Price Futures Group.
"Only a year ago, OPEC was still in denial, but with the slowing global economy, they can't laugh off U.S. production anymore," Flynn said.

By 2019, U.S. shale oil production will jump to 9.6 million barrles per day, from 8 million now, according to forecasts from the Energy Information Administration. In comparison, Saudi Arabia currently produces 9.6 million barrels of crude oil a day.

OPEC’s next move

All that said, market watchers across the board expect OPEC to remain highly influential when it comes to the price of oil.
The group will likely cut production when the core countries meet in Vienna on Nov. 27, according to Kilduff. "OPEC is in the process of playing chicken with the market," he said. "But their hand will be forced and they will eventually cut, with the Saudis taking on the bulk of it."

OPEC has absorbed lower oil prices up until this point, declining to cut output in a bid to maintain market share.

Read More How the US shale boom will be felt around the world
"The main reason why OPEC is not cutting production is they realize that U.S. shale is a serious threat to their global oil space," Flynn said.

The cyclical nature of the oil industry makes it unlikely that OPEC has lost its price-setting power permanently, Kilduff said: "There's a boom, bust and a new era upon us all the time. So, the jury's still out on the long-term sustainability of U.S. shale production."

Hailey Lee
News Associate

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OPEC is important because they are major exporter. US is important because they are major importer. There is a difference. And China is major player increasingly

A bit ironic that I was championing shale more than a year ago in this forum when people were still skeptical but when people are fearful now i am saying shale production likely plateau if oil price remains $80 WTI or below

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Oil prices creep higher
AFP OCTOBER 29, 2014 7:45AM

Global oil prices have risen, lifted by a weaker US dollar and ahead of the weekly US inventories report.

US benchmark West Texas Intermediate (WTI) for delivery in December rose US42c to close at $US81.42 a barrel on Tuesday.

Brent North Sea crude for December added US20c, settling at $US86.03 a barrel in London.

WTI, which had fallen Monday to a new intraday low since late June 2012 of $US79.44 before ending flat, swung between gains and losses throughout the session.

Tim Evans of Citi Futures cited "some degree of support from firmer equities and a slightly weaker US dollar, but modest trading volumes suggesting most portfolio managers are waiting for further developments."

A weaker greenback makes dollar-priced oil cheaper for buyers using stronger currencies, tending to support demand.

The market awaited Wednesday's weekly government report on US petroleum inventories.

US crude stockpiles are expected to climb by approximately 3.8 million barrels, said Robert Yawger of Mizuho Securities USA, after the previous week's 7.1-million barrel surge.

That added to worries about a global oversupply, further dampening prices.

Mr Evans of Citi Futures said that traders are also interested in what OPEC will decides its November 27 summit, faced with mounting global stocks and only slowly growing demand.

"On balance, we think traders will be cautious ahead of the OPEC meeting, with perhaps some short covering on the chance they take convincing action to support prices."

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The world is so tough now that warlords have lost their traditional sources of funding and got to fund their warfare by not cutting their lifelines... $ appears to be the root of evil even for the devils...

Oil price slide gives banks a crude shock
THE WALL STREET JOURNAL OCTOBER 30, 2014 12:00AM
Print
Oil price chartOil price chart Source: TheAustralian < PrevNext >
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IT’s not just Wall Street banks such as Goldman Sachs that got it wrong. Energy consultants and even the US government did not foresee the sharp slide in oil ­prices, which have tumbled 25 per cent since June.

Goldman shocked the market this week with a call for US oil ­prices to fall to $US70 a barrel in the second quarter of next year. Barclays just released its second price update in three weeks, and other banks are releasing lower forecasts at least monthly.

What did they miss?

The risk of discord within the Organisation of Petroleum Exporting Countries and the possibility that violence in some oil-producing nations wouldn’t interfere with oil production.

For the past three years, oil production in the US has been booming but Brent, the global oil benchmark, has largely held above $US100 a barrel. That’s because sanctions on Iran and unrest in Libya, Nigeria and elsewhere kept oil off the market, allowing supply and demand to stay balanced even as US production grew. Heading into this year, it looked like a pretty good bet to assume that supplies outside the US would stay constrained, and many analysts called for Brent to hold above $US100 again this year.

This northern summer, those assumptions fell apart as Libyan production came roaring back, Kurdish output looked set to rise and Iraqi exports held steady despite an insurgency. At the same time, weak demand in China and the eurozone came into view. The combination of these factors pushed prices lower.

Then, the widely shared assumption in the oil market that OPEC would collectively cut production to keep prices high started to look shaky. Saudi Arabia, the world’s biggest oil exporter, has indicated in recent weeks that it is comfortable with a lower oil price, and prices have fallen in response to these signals.

Citigroup’s global head of commodities research, Ed Morse, predicted in a Barron’s article in March that oil prices could fall to $US75 a barrel in the next five years, a price target that looks far more feasible now than it did then. But even Citi didn’t anticipate that prices this northern summer could fall so far so fast.

The price revisions have been embarrassing for banks, whose customers, including energy companies and traders, rely on these forecasts for their own deals.

The US Energy Information Administration was also caught out. The agency, which releases month-by-month forecasts, called for Brent to average $US102 a barrel this month in the forecast released last December. By July, the EIA was saying that Brent would average $US110 a barrel by this month. In its latest forecast, released on October 7, the EIA settled on a $US97 a barrel average for this month.

But as EIA administrator and former Deutsche Bank analyst Adam Sieminski joked in a presentation in New York last week, his forecasts have been right only about 60 per cent of the time.

Brent is currently trading about $US86 a barrel and has averaged $US88.42 a barrel so far this month, according to Factset.

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Russian, Iranian, Libyan and even ISIS supplies still hitting the markets... who are the buyers... conspiracy theory...

Russian supply underpins global oil glut
DOW JONES NEWSWIRES NOVEMBER 03, 2014 11:45PM

Figures showing that Russian oil and gas production hasn't been affected by Western sanctions underpins the oversupply in global oil markets, keeping prices under pressure.

"The continued high level of oil production in Russia is playing its part in the oversupply on the world-wide oil market," Commerzbank said.

Commerzbank reported that, according to the Russian Ministry of Energy, Russia produced 10.6 million barrels a day of crude oil and condensates in October, only slightly down from September and only just short of the record post-Soviet Union era high.

The oversupply continues to put pressure on the Organisation of the Petroleum Exporting Countries, which has so far confounded the market by refusing to rein in production. Many had expected OPEC members to slash production to shore up prices.

On Friday, OPEC Secretary-General Abdalla Salem el-Badri said the group's production volumes are likely to be similar in 2015 to what they were this year.

"A lack of a cut in November doesn't preclude a cut in 2015, and stricter enforcement of the quota is always possible. In fact, we see some signs of a modest decrease through year-end," said analysts at Morgan Stanley.

Some see some hope in lower oil prices. Consumers may start to use more fuel.

"The outlook [for oil prices] is gloomy but we may not be far away from price levels that will stop the oil demand decline and even reverse it," Tamas Varga of research firm PVM, said.

Crude oil prices diverged in London trading Monday morning. Brent crude for December delivery fell 15 cents to $US85.72 a barrel on ICE Futures Europe. West Texas Intermediate crude for delivery in December was up 7c to $US80.61 a barrel on the New York Mercantile Exchange.

ICE gasoil for delivery in November was up $US8.75 at $US750.50 a metric ton, while gasoline was down 48 points at $US2.1430 a gallon.

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Oil prices hit fresh two-year lows
DOW JONES NEWSWIRES NOVEMBER 04, 2014 8:00AM

US oil prices have tumbled to a fresh two-year low on news that Saudi Arabia cut its selling price for oil to the US, suggesting that the kingdom is trying to compete with US shale oil.

Saudi Arabia raised the prices for its oil in other locations, including Asia, where the country has cut its prices for four straight months.

When the Saudis sharply cut their November selling prices at the beginning of October, oil prices weakened, as the market interpreted the lower prices as a signal that Saudi Arabia was more concerned with maintaining market share than with cutting production to keep prices high.

Saudi Arabia's December prices suggest that while the country isn't trying to undercut its competitors in every region, the Saudis want to maintain market share in the US, according to some analysts.

Once the Saudi prices were reported, the structure of the US oil contract shifted to indicate that traders see the market as oversupplied.

Light, sweet oil for December delivery fell $US1.76, or 2.2 per cent, to settle at $US78.78 a barrel on the New York Mercantile Exchange, the lowest settlement since June 28, 2012.

Brent initially rose on the Saudi prices but then tumbled alongside the US contract to settle down $US1.08, or 1.3 per cent, at $US84.78 a barrel on ICE Futures Europe.

Oil prices have plunged in recent months on expectations that a global oversupply would persist and that the Organization of the Petroleum Exporting Countries wouldn't cut output to keep prices high. OPEC's next meeting is November 27.

The coming meeting "was being talked [about] as if it was a price war situation, and I think that talk has loosened up a little bit" based on the new Saudi prices, Bob Yawger, director of the futures division at Mizuho Securities US, said. However, he said it remains to be seen whether other OPEC members will follow suit when they release their own December prices.

The US imported 27.7 million barrels of crude oil from Saudi Arabia in August, the lowest level since February 2010, according to the most recent available data from the US Energy Information Administration.

The new prices "will definitely entice some Gulf Coast refiners to at least contemplate going to Saudi barrels, instead of midcontinent barrels," Mr Yawger said.

However, other analysts said the Saudi prices were more based on supply-and-demand expectations.

"They're betting that winter will come and demand will rise and prices will recover to some extent," Bill O'Grady, chief market strategist at Confluence Investment Management, said. "What they did today, I wouldn't read too much into that."

On Monday, the front-month US oil contract settled below the second-month contract for the first time since January, indicating that traders think the market is currently oversupplied and prices could be higher in the future.

"The assumption is, I think, that there's going to be a lot of crude lying about" in the US, Mr Yawger said.

In the Brent market, the front-month contract has traded below the second-month contract since early July.

Traders are also waiting for weekly US inventory data, to be released Wednesday, and the US employment data coming out Friday.

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http://www.cnbc.com/id/102152020

Look out below! Oil is not done falling
Patti Domm | @pattidomm


Oil prices could have a hard time finding a floor after Saudi Arabia trimmed prices in the face of growing North American oil production.

The market took the price cut this week as another sign the kingdom is willing to use pricing as a lever to preserve its market share, rather than cut production in what is now an oversupplied market. Even if it was not the intention, some traders took the Saudi move as a sign the kingdom would like falling prices to slow U.S. shale production.

U.S. West Texas Intermediate fell sharply on Tuesday, dipping close to the psychologically key $75-a-barrel level, before closing at a three-year low of $77.19, off $1.59 per barrel. Brent fell along with it to $82.82 a barrel, the lowest settle since October 2010, after Saudi Arabia set a new price in the U.S. 45 cents lower than November's level.

Workers at an oil facility near Riyadh, Saudi Arabia.
Hasan Jamali | AP
Workers at an oil facility near Riyadh, Saudi Arabia.
Tradition Energy analyst Gene McGillian said the next technical level he's watching for WTI is $74 a barrel, and it's not clear how much further it will fall.

"The managed money longs still outnumber shorts 3½-to-1. If this isn't a heavy exodus of the money manager longs, we could still have a significant drop, especially if all these factors that are driving us lower continue to weigh on the markets," he said. "The dollar strength and also fears of slowing economic conditions in Europe and China are still continuing to play a role."

Read MorePro: Energy investors should prepare for $60 oil

There was initially a muted reaction to the Saudi announcement Tuesday as the market focused on dollar strength and other factors.

"I don't think the probability is we're looking at a meltdown or collapse. If there was a global price war, it could go between $30 and $50 a barrel but more realistically, we're within 10 percent of the bottom," said Tom Kloza, senior oil analyst at Gasbuddy.com.

"What the Saudis are doing is business as usual. They change the price formula each month. The problem is there's an implication that it's business as usual in terms of production. The problem is if they continue to produce what they've been producing in the last two months, the market is headed for trouble, and downward pressure will be more significant than upward pressure," said Kloza.

Read MoreWhy cheap oil may not help the US as much anymore

Some analysts said the Saudis were motivated by market fundamentals. "In our view, it's not a direct attempt by Saudi Arabia to grab market share," said Dominic Haywood, crude and products analyst at Energy Aspects. "We think it's more a move by them to stimulate some demand from Gulf Coast refineries that are coming back from maintenance in November and December. By cutting to the U.S., you allow more exports to the U.S."

Haywood also did not think the Saudis were attempting to curb shale production. "In any case, you need crude below $70 a barrel for much longer than a month to limit U.S. production," he said.


Saudi Arabia's price setting was a market mover for a second month. For November, Saudi cut prices to Asian customers, and for December, it raised them for Asian and European customers while cutting U.S. prices. What the market sees as bearish is the lack of discussion of production cuts, analysts said.
"It's really the first time we are in this kind of era," said Max Denery, commodities strategist at Bank of America Merrill Lynch. "I think the OPEC meeting will be very interesting Nov. 27, and there is no real consensus about if they're going to cut or how much they're going to cut. They have a total ceiling of 30 million barrels. My thinking is if they cut between 300,000 and 500,000 barrels a day, it would not have an impact and might be bearish for the market because it's not enough to reduce the oversupply. If they cut 700,000 to 1 million, that would make a difference."

Denery said he sees the West Texas price stabilizing around $75 per barrel though it's possible the price could fall through that level first. He said prolonged prices of $70 would ultimately trigger a slowdown of production by some U.S. producers, and there could be less investment in new wells.

Read MoreWhite House provides no comment on SPR refill
But he expects $75 to ultimately be the floor. "As soon as you see headlines about producers saying we need to cut some production or even close some wells, I think the market would react," he said.


The nature of the U.S. shale industry makes it flexible, serving as an economically driven swing producer that can brake or speed up production based on prices. Wells are most productive when they are first drilled, and production can be cut in half after the first year, so Denery said it is easier to slow production but not drilling new wells.

"We think that we need to have even lower prices to get some reaction from the shale industry. It's true that the supply response is much higher in shale than in other areas. In order to have significant reduction in growth, we would need to have WTI in the $70 area," Denery said.

Because U.S. breakeven costs for drilling vary dramatically by region and within regions, Denery said it would be the smaller producers with the highest costs that will be the first to slow down. "Those will be the first companies that will be hurt. Those companies do not hedge, and they try to produce as much as they can because they are on the edge," he said.

In the Permian Basin, in Texas and Oklahoma, companies' breakeven averages $55 to $60, while at Eagle Ford, they average $45 to $50, he said. In the Bakken in North Dakota, there is an area with $40 breakevens, but another area averages about $55 per barrel.

Watch: Read MoreSaudi Arabia's oil fight

The levels can fluctuate within each area, and some of the higher-cost production could be as much as $70 or $75 a barrel.

Oppenheimer energy analyst Fadel Gheit said the type of oil companies most vulnerable to lower prices are those with the highest debt loads.

"Not one company so far admitted or denied that they are canceling projects, but the question is not how many producers will say they are canceling projects but the question is how many projects and which are the companies. Every company will slow down. The question is, is it 5 percent or 50 percent. It will depend on the financial flexibility and the nature of the investment," he said.

Denery has already projected growth in shale drilling will slow next year. "For this year, shale growth was about 1 million barrels. Next year, we believe a little less. From the combination of an efficiency gain and slightly lower prices, we think growth in shale will be about 700,000. If prices drop to $70 a barrel, then you might see a growth in shale of just 300,000 to 400,000 barrels a day," Denery said. "We're still going to get growth but there's going to be a reduction in growth."

Denery said demand has not yet responded to the lower prices, and he expects to see demand improve in 2015. "The demand reaction takes much longer than the U.S. shale supply elasticity. If we have a lower price in 2014 then you're going to see another maybe 300,000 barrels a day of growth," he said.

Weekly U.S. government data, due Wednesday, should show that the world is well supplied with crude and U.S. production continues to approach 9 million barrels a day, a million barrel a day more than last year. Oil inventory data is released Wednesday at 10:30 a.m. ET.

"We're looking for another big build in inventories, another 2 million plus barrels," said John Kilduff of Again Capital. "It's been massive in the last couple of weeks. It's really what flipped the term structure into contango." Contango is when futures for coming months show higher prices than the nearby prices, a bearish sign.

"I think these prices are going to remain under significant pressure into the OPEC meeting, and I think it's going to go very badly. It's going to set us up for another leg lower, possibly into the 50s in the first quarter," Kilduff said.

Patti Domm
Patti Domm
CNBC Executive News Editor

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http://www.valuebuddies.com/thread-5864-...l#pid99039

BHP Billiton tests US oil export ban

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OPEC to act if oil hits $US70 a barrel
DOW JONES NOVEMBER 07, 2014 7:13AM

OPEC would likely lower the ceiling on its collective production if oil prices fall to $US70 a barrel, a level most of the group’s members don’t expect to see this year, according to several of the group’s officials.

“At $US70 a barrel, there will be panic in OPEC. We have become used to living with $US100 a barrel,” one OPEC official said on the sidelines of a meeting of governors and other officials from the 12 members of the Organisation of the Petroleum Exporting Countries.

OPEC governors are senior officials from member countries involved in formulating the group’s policy. They are meeting ahead of a full OPEC ministerial meeting on November 27. OPEC ministers have so far failed to agree on a unified response to the roughly 25 per cent slide in oil prices since the summer.

If oil prices were to fall to $US70 a barrel it would put severe pressure on the budgets of some OPEC member countries. Venezuela, for example, would need crude to average around $US117.5 a barrel next year to balance its budget, according to Deutsche Bank.

Were prices to fall to “$US70 a barrel, there will be action from OPEC,” according to another OPEC official.

Brent crude was trading at around $US83 a barrel on Thursday morning.