The Energy Report 11/26/19
The Right Call
Oil prices are on the rebound on increased trade truce hopes as well as speculation that OPEC may try to engineer not only an extension of the current production cut but even an extension. What OPEC decides may be critical for oil prices and an accounting for the International Energy Agency, “it is important that they make the right call”.
Reuters reports that the head of the International Energy Agency, Fatih Birol, said in an interview on the sidelines of an energy conference in Oslo, “that It is up to OPEC countries to decide, but what I see is that the pressure is strong on the OPEC plus Russia, as a result of the strong growth coming from the non-OPEC countries – the U.S., Brazil, Norway, Guyana, and others. “There will be lots of oil in the markets. I hope they will make the right decision for themselves and for the global economy, which is still very fragile.”
So it sounds like the head of the IEA that normally is in favor of consuming nations, is calling on OPEC to cut production. Maybe it is because some consuming nations are now producing more, like the U.S.. Or maybe it is because the IEA wants to help stoke anemic inflation. Boy, has the world and the International Energy Agency changed.
On the trade front, the Chinese government seems to be saying things are getting close. The Wall Street Journal reports that, “China offered its most positive message in recent weeks that trade talks with the U.S. are going smoothly after a phone call Tuesday between the countries’ top negotiators, raising the prospects for a limited deal. China’s Commerce Ministry said the two sides had, “reached a consensus on properly resolving related issues.” The message, though short and formulaic, followed a phone call between China’s chief trade negotiator, Liu He, and his U.S. counterparts, Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The upbeat language comes over the weekend after the Chinese Communist Party’s top policy-making body and the state’s cabinet issued guidelines for stronger protection of intellectual property rights, a core concern for Washington in the long-running trade dispute.
We get the American Petroleum Institute report tonight and many are wondering whether or not it will be inline with the Energy Information Administration (EIA) version. Well according to my old friend from the API, Hazem Arafa, the two reports are closer than you might think if you just look at the weekly changes. Mr. Arafa says that like the EIA the API gets a 90% response rate from respondents to their report and believes that their data is mostly accurate. The total number is not estimating but based purely on statistics. He says that the report they get from respondents equals the statistics and that most of the time, on average, the API and EIA are within percentage points. He also has offered to answer any additional question that Energy Report Readers might have. Thanks!
Reuters reports that Iran’s Supreme Leader Ayatollah Ali Khamenei approved the attack on Saudi Arabia’s major oil processing facility but did so with strict conditions: Iranian forces must avoid hitting any civilians or Americans. Reuters says that the group that planned and carried out the attack included the top echelon of the Islamic Revolutionary Guard Corps, an elite branch of the Iranian military whose portfolio includes missile development and covert operations. Reuters said that Major General Hossein Salami, leader of the Revolutionary Guard said, “It is time to take out our swords and teach them a lesson”.
Reuters says that, “Hard-liners in the meeting talked of attacking high-value targets, including American military bases. Yet, what ultimately emerged was a plan that stopped short of direct confrontation that could trigger a devastating U.S. response. Iran opted instead to target oil installations of America’s ally, Saudi Arabia, a proposal discussed by top Iranian military officials in that May meeting and at least four that followed.
Natural gas gets an early PR Thanksgiving Day snapshot of supply as the EIA releases its report on Wednesday, a day early due to the holiday. Natural gas sold off hard as we saw record production and warming temperatures.
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Senior Market Analyst & Author of The Energy Report
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