EMEA News
Resurfacing Oil Freeze Rumours Boost Prices, Rekindle Debate Over Its Efficacy
No sooner did the market react to news that the Organization of the Petroleum Exporting Countries (OPEC) will discuss restraining production in September than the debate resumed about the efficacy of yet another round of discussions, with some experts concluding that oil's recent dip into the $30s and another possible price plunge may finally cause the cartel to act.
Crude benchmarks were up almost 3 percent Monday, bunkers were firm in the Primary ports "and will be going up more" according to one Ship & Bunker source, and the average IFO380 price across Singapore, Fujairah, Houston, and Rotterdam Monday was up $10 since last Wednesday to $211 per metric tonne (pmt).
A Little Bit More to it This Time
John Kilduff, founding partner with Again Capital, said, "There may be a little bit more to it this time: I'm still very skeptical, but it's just with Iran being where they are production-wise, they'll be more inclined to eventually go along with a deal."
To that end, Iran's state-owned PressTV Monday reported the country's oil exports had increased to as much as 2.5 million bpd, calling it "a landmark development that could mean the country has already regained a crucial global oil market share that it had lost as a result of multiple years of sanctions."
Kilduff also cited Saudi Arabia not wanting oil prices to be too low in advance of its planned IPO of Saudi Aramco as another possible motivation for OPEC to get serious: "The IPO is definitely a consideration: this next trip down (in price) could push them back into each other's arms."
Kilduff's opinions are fortified by the sentiment of policy makers such as Alexander Novak, energy minister for Russia, who recently stated that Moscow is willing to discuss a freeze if prices fall further.
The Skeptics
Holding a pessimistic view are people such as Giovanni Staunovo, an analyst at UBS, who told BloombergMarkets that, "We still haven't reached the moment when OPEC members will agree to a production agreement, as Iran has not yet recovered its pre-sanction production levels.
"Nigerian and Libyan oil output are also currently below capacity."
David Fyfe, the head of research at oil trading house Gunvor Group Ltd., regards the impending OPEC meeting as little more than opportunistic P.R.: "They're all going to be in the same place anyway towards the end of September, why not put out there that they're going to talk about production policy?"
To which Miswin Mahesh, commodities analyst at Barclays Plc., added: "The jaw bone worked the last time" by producing a price rally, and that OPEC is rekindling the notion of a freeze to "give time for markets to balance and to slow down the freefall in prices."
Fyfe and Mahesh have plenty of cause to be doubtful: the market ebbed and surged throughout the first half of 2016 on a daily stream of freeze rumours leading up to the failed Doha talks and even in its wake, despite level-headed observers such as Julian Lee, oil strategist for Bloomberg First Word, warning that the freeze was "an empty gesture" because none of the participating countries were expected to raise production anyway; and CNBC analyst Jim Cramer calling the proposal "a total hoax"
