EMEA News
Friday Oil Markets: Russia Eyes Indefinite Liaison with OPEC as Bahrain Signals its Intent to Join the Shale Boom
The curious media spectacle of Organization of the Petroleum Exporting Countries (OPEC) supporters teasing of a long term liaison to keep the crude market in proper check, contrasted by oil producing countries doing their utmost to develop their output capabilities, continued Friday with news that Bahrain is seeking big oil's help to develop a new shale discovery.
Specifically, Bahrain, currently the smallest producer in the Persian Gulf, is inviting international oil companies to help develop its first major discovery in decades, in the hopes of commencing production within five years.
Halliburton Co. will drill two wells this year in the offshore Khaleej Al Bahrain Basin to appraise how much of the oil contained underground is actually recoverable; Shaikh Mohammed bin Khalifa Al Khalifa, oil minister for Bahrain, thinks the discovery could yield 200,000 barrels per day (bpd), out of an estimated 81.5 billion barrels of shale oil and 13.7 trillion cubic feet of natural gas of resources in the basin.
While minuscule from a global perspective, Bahrain is another example of a nation that seems not to be affected by the cartel's aim of curbing production to achieve a proper crude supply and demand balance, instead focusing exclusively on its long-term capabilities of pumping full out.
In this regard, Behrain shares not only the sentiment driving U.S. output, but the ambitions of OPEC members such as Iran, Libya, Nigeria, Iraq - which in turn strongly suggests that even if the cartel achieves the goal of its crude cutbacks, it's questionable if any long-term liaison would be able to curb these ambitious producers.
However, the prospect of a liaison makes for upbeat headlines, and on Friday Reuters reported once again Russia's seeming willingness to stand alongside OPEC long after its cutback initiative expires.
Alexander Novak, that country's energy minister, said Moscow cooperating with OPEC "could be an indefinite agreement" once the cutbacks are over: "In essence, this could be some international organization, which could gather once every half a year and discuss the situation on the oil market; both OPEC and non-OPEC countries."
He also said other large oil producers may also join the organization but stopped short of saying the U.S. could join the body.
Novak's comments unfortunately didn't do much for oil prices on Friday: West Texas Intermediate fell 2.3 percent to $62.06 and Brent traded 1.8 percent lower at $67.07 per barrel, with both benchmarks heading for their biggest weekly fall since early March.
Traders were apparently more concerned over U.S. President Donald Trump's latest threat of new tariffs on China than Russia's feel-good statements: "Oil's taking the latest trade war stuff pretty hard: it sold off immediately last night when Trump announced the tariffs," said John Kilduff, founding partner at Again Capital.
If nothing else, OPEC members are working overtime to declare their support for both the current cutbacks and an extended relationship: earlier this week Qatar declared that it was vital to maintain the cuts in order to guarantee healthy crude price levels and industry investment.
