Houston, we have problem: super-sized plates and menus that keep oil barons’ secrets
Houston, we have problem: super-sized plates and menus that keep oil barons’ secrets
It was at The Grove last Tuesday night that a dinner took place between representatives of the Organization of Petroleum Exporting Countries and executives from some of the leading US shale oil companies.
That meeting — between the two big adversaries of the oil world — was heralded by such mystery and intrigue that there would surely have been evidence, or witnesses, to the dark deals that had been done there.
If skulduggery had actually taken place, by Thursday all the signs had evaporated, and all that was left at the Grove was a busy, buzzy Bayou City night, and the lovely Ashley, who served me and my friend at the glass-topped bar.
“Is it just the two of y’all,” asked Ashley when we arrived. I assured her that indeed we’all were just two, and sat down to look at the menu.
I could not help wondering: What did the oil peacemakers have to eat? Maybe Mohammed Barkindo, the general secretary of OPEC, who had extended the invitation to the shale men for the second successive year, had gone for the “local catch ceviche (served raw)” with a side of “cauliflower koshary (V GF avail)”?
Perhaps Tim Dove, chief executive of Pioneer Natural Resources and the leader of the shale men, had selected the “cowboy ribeye 18oz” with a side of “Gulf shrimp and grits? Whichever, I would never know, because Ashley had not been working that night, and anyway all the big power-broking dinners took place in the more discreet banqueting facilities of the first floor.
So we just sat down to a simple Houston supper. Neither I, nor my friend, were especially hungry, so we went for what The Grove calls “small plates”. I ordered “blue crab mac and cheese,” while my friend asked for “Jefferson County fried rice.” And some bread and butter as starters.
This is Texas, of course, so you expect everything to be just a little bigger than anywhere else in the US, and therefore in the whole world, but when the bread arrived I knew we were facing a serious challenge. It was a whole, huge loaf, with a small churn of butter beside it, and it would have fed a deprived family for many days.
Then arrived the “small plates.” Mine was comparatively modest in size but you just knew it held latent filling power. After only the first couple of mouthfuls, I knew I would be defeated, but would enjoy being vanquished.
My friend’s dish was aptly named, because I swear the plate itself was the size of Jefferson County. Marinated beef, fried egg, broccoli, baby bok choy, chile (sic) oil and peanuts all wrestled with each other for space on the enormous dish.
My friend joked that it was like a socio-demographic map of the southwestern part of the US, charted out in food. Being from that part of the world herself, she would know.
I got two-thirds of the way through mine, my friend did rather better with hers. We slumped into a post-prandial glow before we said goodbye to Ashley and headed out into the night, all happy, sated and contented. (I don’t know why the English use the phrase “fed up” as a pejorative.)
I wondered if that’s how Barkindo and Dove felt as they left The Grove a couple of nights before? If so, there must be a big friendly transaction coming any time soon.
Saudi Arabia seeks stable, not soaring, oil prices
- Due to market tightness, Brent rose to nearly $80 per barrel but deteriorated to $78.80 on Friday.
- The average price for Brent crude per barrel over the past five months has been between $72.11 and $76.98
RIYADH: Oil prices rose this week on continuing market tightness. With the price rise, some Saudi-bashing has begun. Bloomberg reported that increasing prices were due to Saudi Arabia’s comfort with Brent crude above $80 per barrel. Such “analysis” is hogwash.
Due to market tightness, Brent rose to nearly $80 per barrel but deteriorated to $78.80 on Friday. WTI rose above $70 per barrel for the first time in three months and settled at $70.78 per barrel by the week closing.
The average price for Brent crude per barrel over the past five months has been between $72.11 and $76.98. As may be noted in those numbers, the Brent crude price has been resisting the psychological barrier of $80 per barrel. The fact is that, since October 2014, the Brent monthly average has never gone above $80.
The oil price outlook might be raised as a result of this upward tendency and the continuing tight oil market. For instance, with the latest numbers in hand, HSBC has revised its oil price forecast upward with Brent to average $80 per barrel in 2019 and $85 in 2020, before settling at about $75 in 2021.
Bloomberg was inaccurate about Saudi Arabia’s comfort with a Brent price above $80 per barrel. The Kingdom has never been among the bulls when it comes to oil prices. Again and again, Saudi Arabia has been a major advocate for stable oil prices, not increasing oil prices, which it views as unsustainable and damaging to the global economy. Bloomberg is also predicting that Saudi Arabia will follow its allegedly bullish nature and refrain from ramping up production to compensate for the oil lost once the US sanctions on Iran come into effect.
US Secretary of Energy Rick Perry has confirmed that Saudi Arabia, Russia and the US are well able to add enough crude oil supply into the market to compensate for Iran. Indeed, the Kingdom has begun to increase output to adjust for market needs, from 9.87 million barrels per day (bpd) in April to 10.42 million bpd in August.
The upward movement in oil prices came after strong fundamentals showed market tightness that spurred record levels of speculative traders, with nearly all betting on higher prices. The price rise also recognized that total US inventories are below the five-year average for the first time since May 2014. Oil prices have been gradually trending upward with gentle fluctuations. There have not been any steep surges or declines. There is nothing artificial about the trend. In reality, it is boringly predictable.
Last month, the International Energy Agency (IEA) reported OECD commercial crude oil inventories at 32 million barrels below the five-year average. Stocks at the end of Q2 2018 were up 6.6 million barrels versus the end of 1Q 2018, the first quarterly increase since 1Q 2017. The IEA also noted that global refinery throughputs in the second half of 2018 are expected to be 2 million barrels higher than in the first half of the year. These refined products stocks will draw down before building again in 4Q 2018.
Global crude oil inventories peaked in 2016. The OPEC+ agreement that worked for market balance was the reason for a fall in inventories. Since May 2017, global oil stocks have been on the decline and now global crude oil stocks are below the five-year average. Product stocks are also below that level, with strong demand and healthy refining margins.
Inventories have kept falling despite American producers pumping at all-time highs last month. It is only the massive flood of oil from the US which has kept crude oil prices at low levels from early 2015 to the end of 2017 — along with a resulting lack of upstream investment in the oil industry. Therefore, the IEA predicts that in 2022 spare production capacity will fall to a 14-year low.
Global oil markets are rebalancing. Oil prices started their upward momentum from the end of October 2017. They went above the psychological barrier $60 a barrel after 10 consecutive months of tireless efforts by OPEC and non-OPEC nations that started on January 2017. The market rebalancing will continue through the end of 2018, and beyond.
Such upward momentum in oil prices isn’t artificial movement because it came after many months without steep price fluctuations. In 2016, the Brent price average was $43. The 2017 Brent price average was $54, and prices just surpassed $60 in October 2017. The Brent average surpassed $70 in late March 2018 and has been hovering between $72 and $78 since. There is no evidence of a steep fluctuation or an artificial movement.
The claims of an artificial price movement have come just at the time when OPEC and the world are reaping the positive outcomes of 24 nations collaborating in output cuts that managed to successfully rebalance the oil market in a situation where global oil inventories were running at record highs. Also, these false claims came when the oil industry needs capital inflows to reactivate upstream investments for major international oil companies. Such investments are essential for the price stability that benefits oil producers and consumers globally. Low oil prices result in low investment in discovery and production of petroleum resources, which damages various industry sectors and energy needs. That leads to a vicious cycle of up-and-down price fluctuations.