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World OPEC+’s balancing act between crude optimism and pandemic risk

01:10  03 march  2021
01:10  03 march  2021 Source:   aljazeera.com

Iraq freezes the oil prepayment agreement in the face of rising prices

 Iraq freezes the oil prepayment agreement in the face of rising prices IRAQ-OIL: Iraq freezes the oil prepayment agreement in the face of rising prices © Reuters / ESSAM AL-SUDANI IRAQ FREEZES OIL PREPAYMENT AGREEMENT FACING RISE IN PRICES by Ahmed Rasheed BAGHDAD (Reuters) - Iraq has decided to freeze its first advance payment agreement for its crude oil, which was supposed to help the country to increase its public receipts, because of the increase of the courses, declared Sunday the Iraqi Minister of Oil in an interview with the regional antenna of the BBC in A

In recent weeks, optimism about the mass rollout of coronavirus vaccines appears to have been tempered by the resurgent rate of virus spread. It has resulted in oil producers trying to orchestrate a delicate balancing act between supply and demand as factors including the pace of the pandemic "These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism ." The 13-member group said it expected global oil demand in 2021 to increase by 5.9

www.investing.com/analysis/ balancing - pandemic -surge-with-vaccine- optimism -200545023. It is complicated by Chinese exporters able to hold on to their hard currency earnings and by financial engineering. On the other hand, China' s balance of payments shows elevated errors and omissions, suggesting savings overcoming the capital controls. In recent years, the errors and omissions have as large if not larger than the basic balance (current account plus net foreign direct investment).

OPEC and its allies have a tough decision to make when they meet on Thursday: Remain cautious and keep supplies tight, or take the current crude price rally as a sign that demand is back and healthy enough to loosen the taps.

“You almost have to be an epidemiologist to understand the markets these days,” Samantha Gross, director of the Energy Security and Climate Initiative at the Brookings Institution, told Al Jazeera.

While tightening supply and vaccine optimism have both helped drive crude prices to pre-COVID levels in recent weeks, coronavirus variants continue to threaten the global economic recovery and keep some suppliers wary of flooding the market with more than it can handle.

Oil prices mixed as Texas refineries reopen after deep freeze

  Oil prices mixed as Texas refineries reopen after deep freeze As refineries in Texas reopen after last week’s freeze, concerns over OPEC+’s willingness to continue output cuts grow.Earlier in the day, an assurance that US interest rates will stay low – along with a sharp drop in US crude output last week due to the winter storm in Texas – helped boost both US crude and Brent to their highest intraday prices since January 2020.

www.investing.com/analysis/ balancing - pandemic -surge-with- optimism -about-vaccine-200545023. It is complicated by Chinese exporters able to hold on to their hard currency earnings and by financial engineering. On the other hand, China' s balance of payments shows elevated errors and omissions, suggesting savings overcoming the capital controls. In recent years, the errors and omissions have as large if not larger than the basic balance (current account plus net foreign direct investment).

At rst glance, the historic Declaration of Cooperation between OPEC and non-OPEC oil producing countries to curb their output by 1.8 mb/d offered some encouragement ensuring that the balancing of the oil market is underway. 2017 ended on a positive note with the monthly Brent price stabilising Supply shocks driven by geopolitical disruptions (exogenous supply) The unexpected easing of the supply disruptions, particularly from Libya and Nigeria both of which are excluded from the OPEC+ deal, contributed to around /b decline in the Brent price. Supply shocks associated with output decisions

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, an alliance dubbed OPEC+, could discuss allowing as much as 1.5 million barrels per day (bpd) back onto the global market. Under the current agreement, OPEC+ is due to raise production by 500,000 bpd. Currently, seven million barrels still remain offline.

On Tuesday, global benchmark Brent hit $63.71 a barrel while United States West Texas Intermediate (WTI) reached $60.71.

That’s a far cry from last spring, when the coronavirus pandemic pummeled demand for oil, sending crude futures prices spiralling into negative territory for the first time and forcing OPEC+ to rein in output.

Since then, shuttered factories, particularly in China and India, have reopened and grounded flights have taken to the skies. Lockdowns and restrictions have lifted (although not for long in some places).

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Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the integration of Mylan and the Upjohn Business or the (Bloomberg) -- Oil’ s impressive 2021 rally is coming unstuck just days before OPEC+ meets to decide just how much crude it should return to the market.Futures in New York sank below a barrel, dropping for a third day to head for the longest losing run since December.

The coalition known as OPEC+ , which comprises some of the world' s largest crude producers, will begin a two-day meeting Monday to discuss the next phase of its production policy. It agreed to the largest single output cut in history back in April. But that reduction of 9.7 million barrels per day (bpd) was subsequently scaled back to 7.7 million in August. The price of U. S . oil plunged into negative territory during the first wave of the pandemic as Saudi Arabia and Russia stuttered over an output deal.

An unprecedented glut in supply drove prices down last year. But thanks to OPEC+’s production cuts and reviving demand, the market has stabilised. Supply has tightened significantly. And mass vaccination campaigns have boosted optimism about a global economic recovery.

But some analysts still remain a bit sceptical about the staying power of the recent bump in crude prices.

“Is demand coming back for sure? Are the lockdowns lifting for good? With all these new [coronavirus] variants, who knows how long we are going to be in it?” said Gross.

The million-barrel question

Oil output fell further last month after mega-producer Saudi Arabia decided to voluntarily hold back even more of its output than required under the OPEC+ agreement for February and March.

According to a Bloomberg survey, OPEC’s February output fell by the most in eight months after Riyadh slashed its production by almost one million barrels a day or 11 percent.

Asian shares rise as risk assets shine, Australian central bank eyed

  Asian shares rise as risk assets shine, Australian central bank eyed Asian shares rise as risk assets shine, Australian central bank eyedAustralian shares jumped 0.8% in early trade, while E-mini S&P futures climbed 0.15%. Japan's Nikkei opened 0.93% higher.

Bank of America (BofA) Global Research lifted its forecast for Brent crude oil prices for this year citing tighter supplies due to the Texas freeze and OPEC+ output curbs and unmatched global monetary stimulus, it said in a note last week, and Reuters reported. Furthermore, a couple of wildcards have entered the picture. They are rising Treasury yields that are driving up the U. S . Dollar and could dampen demand for dollar-denominated crude . And the possibility that Russia may ask for a bigger increase in OPEC+ ’ s attempt to ease supply cuts.

Brent crude gained 99 cents, or 2.6%, to settle at .72 a barrel. Prices rebounded from early losses after the energy minister of the United Arab Emirates voiced confidence that OPEC+ countries with poor compliance to agreed cuts would meet their commitments and reported signs oil demand was picking up. In Trump' s last few weeks in office, he has reportedly pivoted to targeting birthright citizenship again. Trump' s team has also used the pandemic to restrict the hiring of foreign workers and rapidly deport migrants and children who cross the southern border, and is rushing to add to his border wall.

“Saudi cuts came at a good time along with vaccine optimism, which is why we are seeing this mini oil rally at the moment,” Louise Dickson, an analyst at Rystad Energy, told Al Jazeera.

But the market, still wary of last year’s negative prices, is eagerly looking to see OPEC+’s game plan for bringing back Saudi Arabia’s one million barrels.

“We got here through ten months of very diligent cuts by Saudi Arabia. It’s very unlikely that OPEC+ will switch course on a campaign that has brought oil to $65 a barrel,” said Dickson.

But two of the world’s largest producers may not see eye to eye on what to do on Thursday.

Russia’s deputy prime minister said on Russian television last month that the oil market is rebalanced, signalling an eagerness to boost production. But Saudi Arabia remains cautious.

Riyadh and Moscow have diverged in the past. State budgets help explain why.

The International Monetary Fund reckons Saudi Arabia needs oil to fetch $67.90 to balance its books this year. Russia’s fiscal breakeven price for oil is much lower.

Some analysts say that the market can afford extra barrels at the moment.

“Things are so tight right now that even if OPEC+ brought back 1.3 million barrels per day they would not throw off the market,” said Dickson.

While the pandemic was the big disruptor of last year, the weather in 2021 has not been accommodating, either. Russia, given the green light to boost production, failed to pump enough due to freezing weather.

Winter storms also caused refineries in the US to shut down temporarily.

“The deep freeze in Texas took some oil off the market, and that lost production propped up Brent prices at least in the short term,” Gross told Al Jazeera.

Focused on balance sheets rather than double-digit growth, US shale is not as much of a threat to Brent as it once was, Gross added.

“Clearly they all want to bring back output, but the biggest question is how much of the coronavirus is behind us and that’s hard to say.” Gross said. “We’re not out of it yet.”

Asia markets mostly up on US jobs news but inflation fears linger .
A forecast-busting US jobs report and the Senate's approval of Joe Biden's huge stimulus package helped push most Asian equities higher Monday, while Brent crude broke past $70 for the first time in almost two years after an attack on energy facilities in Saudi Arabia at the weekend. Traders were given a stellar lead from Wall Street, where all three main indexes surged following news that the world's top economy created 379,000 jobs in February, reaffirming the view that it is on track for a strong recovery helped by the rollout of vaccines and easing of lockdowns. The report came just ahead of senators passing Biden's $1.

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