MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JUNE 14, 1998 (3)
OIL & GAS
The following six press releases follow Iranian minister Bijan Namdar Zanganeh over the weekend in his quest of finding support for further production cuts. The Iranian minister declined to say by how much OPEC states were expected to reduce their production at the Vienna meeting but a senior Kuwaiti oil official said on Friday nothing less than a million bpd cut would convince the market and boost prices. Ministers from the Organisation of the Petroleum Exporting Countries are due to meet in Vienna on June 24 to discuss a second round of production cuts. On June 16, OPEC members Saudi Arabia, United Arab Emirates, Kuwait and Qatar will meet in Riyadh along with independent small producers Oman and Bahrain. At a secret meeting in Amsterdam earlier this month, Saudi Arabia, Venezuela and non-OPEC Mexico agreed to trim their output by 450,000 bpd to try to improve weak oil prices.
Zanganeh said current cuts where not sufficient to boost world oil prices while some OPEC members failed to fully abide by pledges to cut production as of April 1. "Producers should have already started to make the sacrifice as we are now in the summer season," the former minister said of the need for producers to cut oil supplies to the market.
Oil prices took another beating on Friday as international benchmark crude Brent closed down 47 cents at $12.40 a barrel. The markets have shrugged off pledges by some producers, including Saudi Arabia and Iran to cut output. Traders argue that the cuts promised are not deep enough to offset the impact of the Asian financial crisis on demand.
Following the barnstorming press releases of Iranian minister Bijan Namdar Zanganeh, you will find my normal up to date coverage of oil and natural gas pricing which include World Oil (IPE Brent), NYMEX Crude, NYMEX Natural Gas, U.S. Spot Natural Gas and Canadian Spot Gas.
Iran ready to make "huge" oil output cut
KUWAIT, June 13 - OPEC heavyweight Iran said on Saturday it was ready to reduce "huge" amounts of its oil production if other exporters agreed to larger output cuts.
"We are ready to reduce by more than 100,000 bpd if there is an agreement with other OPEC and non-OPEC (countries)," Iranian Oil Minister Bijan Namdar Zanganeh told reporters.
His country had already said it would take a 100,000 barrel per day (bpd) cut as of July 1 as part of a collective effort to boost sagging world prices but Zanganeh said Iran was open to even a larger cut.
Tehran "is ready and willing to cut a huge amount of Iranian production" provided that other exporters agree to cut their outputs further than amounts already pledged, he said.
He was speaking to reporters in Kuwait before flying to Qatar as part of a tour of Gulf Arab OPEC heavyweights.
He will also visit the United Arab Emirates (UAE) on Sunday amid a series of high-level contacts between producers whose economies are suffering due to the drop in oil prices.
Zanganeh said he had "very good discussions" with his Kuwaiti counterpart Sheikh Saud Nasser al-Sabah about a new round of production cuts which "we will approve in the next meeting of OPEC" in Vienna on June 24.
Like Kuwait, Iran, the second largest OPEC producer after Saudi Arabia, controls about 10 percent of proven world oil reserves. It has an Organisation of Petroleum Exporting Countries (OPEC) quota of 3.942 million bpd and had pledged to cut its production by 140,000 as of April 1.
Kuwait, which has an OPEC quota of 2.19 million bpd, pledged a cut of 125,000 bpd as of April 1 and is currently considering a further reduction of between 50,000 and 100,000 bpd.
The Iranian minister declined to say by how much OPEC states were expected to reduce their production at the Vienna meeting but a senior Kuwaiti oil official told Reuters on Friday nothing less than a million bpd cut would convince the market and boost prices.
"It is necessary that all of us, the oil exporting countries, realise that we are passing through the most critical economic circumstance," Sheikh Saud said on Saturday when asked if Kuwait could cut of more than 100,000 bpd.
He said it was a "true crisis" which required sacrifices by all producers.
"We are passing through a very difficult period...the situation is very dangerous...and we must all rise to the responsibility" and defend the economies of oil exporters.
Despite the flurry of high level contacts and pledges to further cut oil production, prices have remained low. On Friday world benchmark Brent closed at $12.40 a barrel after climbing towards $13 dollars.
At a secret meeting in Amsterdam this month, Saudi Arabia, Venezuela and non-OPEC Mexico agreed to trim their output by 450,000 bpd to try to improve weak oil prices.
But Kuwaiti crudes closed on Friday at between $7.61 and $10.48 a barrel compared with a budgeted oil revenue of $12 a barrel for a two million bpd production.
"We all (exporters) have a responsibility towards this issue...and we must rise to this responsibility," Sheikh Saud said.
Iran oil minister in Kuwait
KUWAIT, June 13 - Iranian Oil Minister Bijan Zanganeh arrived in Kuwait on Saturday at the start of a tour of OPEC heavyweights to discuss weak prices and possible production cuts.
The Iranian minister is due to fly to Qatar after a four-hour visit to Kuwait, which is considering a 50,000 to 100,000 barrels per day (bpd) production cut as part of collective efforts to boost oil prices.
Zanganeh is due to leave Doha on Sunday for Abu Dhabi.
A senior Kuwaiti official, who asked not to be identified, told Reuters on Friday:
"The market is bad despite statements pledging production cuts. OPEC must cut at least one million bpd and less than that will have no rewards...That is the minimum level for cuts."
Kuwait's former Oil Minister Issa al-Mazidi who in March ordered a 125,000 bpd cut in Kuwait's output told Reuters on Saturday:
"There is no credibility in the market due to the behaviour by some OPEC members."
He said current cuts where not sufficient to boost world oil prices while some OPEC members failed to fully abide by pledges to cut production as of April 1.
"Producers should have already started to make the sacrifice as we are now in the summer season," the former minister said of the need for producers to cut oil supplies to the market.
Ministers from the Organisation of the Petroleum Exporting Countries are due to meet in Vienna on June 24 to discuss a second round of production cuts. On June 16, OPEC members Saudi Arabia, United Arab Emirates, Kuwait and Qatar will meet in Riyadh along with independent small producers Oman and Bahrain.
But despite the flurry of high level contacts and efforts to cut oil production, prices have remained low. On Friday world benchmark Brent closed at $12.40 a barrel after climbing towards $13 dollars.
The Iranian oil minister's trip follows a similar tour of Gulf states by Saudi Oil Minister Ali Naimi over the past week to gain support for a further round of oil production cuts to lift sagging prices.
At a secret meeting in Amsterdam this month, Saudi Arabia, Venezuela and Mexico agreed to trim their output by 450,000 barrels per day (bpd) to try to improve weak oil prices.
Iran Oil Minister Holds Talks in Qatar
DOHA, June 13 - Iranian Oil Minister Bijan Zanganeh arrived in Qatar on Saturday on the second leg of a tour of Gulf Arab oil producing states whose economies are suffering from a drop in oil prices to near nine-year lows.
Zanganeh, who arrived in Doha from Kuwait, held talks with his Qatari counterpart Abdullah bin Hamad al-Attiyah who said the talks focused on the agenda of the June 24 meeting of the Organisation of Petroleum Exporting Countries (OPEC) meeting.
OPEC countries are due to meet in Vienna to discuss a second round of production cuts in an attempt to thwart the oil price decline. OPEC members Saudi Arabia, United Arab Emirates, Kuwait and Qatar will meet in Riyadh along with independent small producers Oman and Bahrain on June 16 to discuss the bleak oil market outlook.
''We hope that the meeting will be successful, we are working very hard,'' Attiyah said. Oil prices took another beating on Friday as international benchmark crude Brent closed down 47 cents at $12.40 a barrel. The markets have shrugged off pledges by some producers, including Saudi Arabia and Iran to cut output. Traders argue that the cuts promised are not deep enough to offset the impact of the Asian financial crisis on demand.
Zanganeh said in Kuwait his country was ready to cut more than the 100,000 barrels per day (bpd) it had promised if others take larger cuts.
He is due to leave Doha on Sunday for Abu Dhabi. The Iranian oil minister's trip follows a similar tour of Gulf states by Saudi Oil Minister Ali Naimi over the past week to get more producers to restrain output.
Iran Oil Minister in UAE for Output Talks
ABU DHABI, June 14 - Iranian Oil Minister Bijan Zanganeh arrived in Abu Dhabi on Sunday, the final leg of a tour of three Gulf Arab oil states.
Zanganeh will meet Obeid bin Saif al-Nasseri, the United Arab Emirates oil minister and president of the Organisation of Petroleum Exporting Countries, and is expected to discuss chances for a further round of output cuts aimed at giving a boost to sagging world oil prices.
Zanganeh's trip to Abu Dhabi follows talks in fellow OPEC states Qatar and Kuwait on Saturday which centred on OPEC's ministerial meeting in Vienna on June 24 and a meeting of Gulf Cooperation Council oil ministers in the Saudi capital Riyadh on June 16, OPEC sources said.
Oil prices have slumped to their lowest level in real terms in 25 years despite two producers' pacts aimed at reducing world supplies by nearly two million barrels per day (bpd), or roughly 1.5 percent of global flows.
Zanganeh said during his visit to Kuwait that Iran was willing to cut output by more than the 100,000 bpd it announced on June 10.
Kuwait and UAE have yet to announce specific output cuts in addition to those pledged under OPEC's last agreement in March.
Gulf oil states hesitant on more output cuts
DUBAI, June 14 - Iranian Oil Minister Bijan Zanganeh finished a sweep of Gulf Arab states on Sunday with little to spark a rally in world prices when markets reopen on Monday.
Zanganeh, who heads the second largest producer in the Organisation of Petroleum Exporting Countries (OPEC), left the United Arab Emirates on Sunday for Tehran after earlier meeting his counterparts in Kuwait and Qatar.
Despite Zanganeh's whirlwind visit, key OPEC states Kuwait and UAE fell short of publicly pledging actual production cuts before a meeting of OPEC ministers on June 24 in Vienna.
"We must discuss this (the issue of cuts) in the next meeting in Vienna," Zanganeh told reporters.
Oil markets have been looking for evidence of production cuts to boost oil prices which have fallen to their lowest level in real terms for 25 years on the back on brimming petroleum inventories and Asia's economic downturn.
North Sea Brent crude futures for July delivery closed on Friday at $12.40, nearly $7 a barrel below last year's average.
Kuwait Oil Minister Sheikh Saud Nasser al-Sabah on Saturday warned producers faced a "true crisis" that needed "sacrifices."
Kuwait has said it is looking at cutting output between 50,000 barrels per day (bpd) and 100,000 bpd.
"There is agreement between us and our friends in Iran that the oil market needs some kind of correction," UAE Oil Minister and OPEC president Obeid bin Saif al-Nasseri told reporters after meeting Zanganeh.
"Current prices are very low and there must be a response from the producers, whether from OPEC or outside OPEC, to correct the cause of prices," Nasseri said.
UAE would announce the size of its cut at the Vienna meeting, the official WAM news agency reported.
Zanganeh's trip to the Gulf followed the "Amsterdam Pact" of June 4 under which Saudi Arabia, Venezuela and Mexico agreed to cut output by a further 450,000 bpd and called for additional cuts to help firm prices.
Saudi Arabia's Oil Minister Ali Naimi this month also visited the UAE, Kuwait, Qatar as well as Iran and non-OPEC member Oman to try and drum up backing for the Amsterdam deal.
Iran has pledged to cut output by 100,000 bpd from July 1 to support the deal, adding on to an earlier commitment made at OPEC's last meeting in March to cut by 140,000 bpd.
Producers would have to cut their output by more than a million bpd to rescue prices, an Iranian newspaper said.
"The reduction of 500,000 bpd or even a million bpd will not bring the desired results. The production cut should be enough to shake the oil market," the English-language Tehran Times said on Sunday.
Key producers UAE and Kuwait have said they support the Amsterdam deal as a way to lift prices but both have fallen short of promising additional output cuts.
Oil ministers from the two states will meet their Saudi, Omani, Bahraini and Qatari counterparts in the Gulf Cooperation Council (GCC) in Riyadh on June 16.
Gulf Arab oil ministers to meet in Riyadh June 16
MANAMA, June 14 - Gulf Arab oil ministers are to meet in Riyadh on Tuesday to review recent moves by producers to cut output in an attempt to lift oil prices, the Gulf Cooperation Council (GCC) said in a statement on Sunday.
Ministers from four OPEC states -- Saudi Arabia, Kuwait, the United Arab Emirates, Qatar -- and two non-OPEC states Bahrain and Oman will meet against a backdrop of Asia's economic downturn which has helped push oil prices to their lowest level in real terms for 25 years.
"The ministerial committee will discuss the current and future development of the world oil market in the wake of the latest agreement between oil producers inside and outside OPEC to cut their crude oil production," the statement said.
"The effect of the financial crisis in some southeast Asian countries on OPEC's oil... and ways of boosting cooperation between GCC and other oil producers and consumers to maintain stability the world market" will also be discussed, the statement from the Riyadh-based secretariat said.
GCC states were behind the "Riyadh Pact" of March 22 and the "Amsterdam Pact" of June 4 which secured promises from leading OPEC and non-OPEC states to remove more than a million bpd from the market.
The GCC oil ministers meeting is ahead of a full OPEC gathering in Vienna on June 24.
Sagging Oil Market Delivers OPEC Fresh Blow
LONDON, June 12 - OPEC oil producers on Friday could only watch in stunned disbelief as creaking crude markets dealt their vital export revenues another savage blow.
Oil fell to below $13 a barrel for bellwether Brent blend, its lowest price since the March Riyadh pact when OPEC and other producers clubbed together to agree 1.5 million barrels a day of output cuts.
Brent blend futures sank to a low of $12.87 a barrel on Friday morning, down $1.7 a barrel from the high on Monday.
Prices in the world's biggest consumer the United States, where oil tanks are close to capacity, are even weaker.
The market is inundated with oil and it will take months of producer abstinence before it returns to balance,'' said Leo Drollas, chief economist at the Centre for Global Energy Studies (CGES) in London.
Members of the Organisation of the Petroleum Exporting Countries members have seen oil prices plunge despite unprecedented efforts to slash supplies from the bloated market.
''We can hardly believe this market,'' said an OPEC official. ''Everybody thought the cuts would do the trick.''
Analysts said the cartel's export revenues were running a third lower than last year, putting fresh pressure on national budgets which already have been sliced to the bone.
Drollas estimated OPEC oil revenues so far this year were running more than 30 percent down on 1997.
He has projected OPEC revenues this year at $104 billion versus $148 billion in 1997.
Saudi Arabia alone was likely to see a shortfall of $14 billion in 1998 from the $50 billion earned last year, Drollas added.
Saudi Arabia, Venezuela and Mexico have attempted to shore up prices with a second round of cuts, trimming a further 450,000 bpd from the 75 million barrel-a-day market.
Other OPEC producers are expected to swell those cuts to about 800,000 bpd when they meet in Vienna on June 24 but analysts say reductions so far have proved too small to shrink mammoth inventories in western markets.
''The problem with OPEC right now is that it over-promises and under-delivers,'' said Lawrence Goldstein of Washington's Petroleum Industry Research Foundation.
Estimates are that less than a million barrels daily has so far been cut since the March Riyadh agreement. Question marks have been raised about the contribution of non-OPEC giants like Norway and Russia where analysts said no significant supplies had been withdrawn.
Analysts said petroleum producers had little choice other than to ride out the oil market storm and hope for better times.
''They can only grit their teeth and bear it,'' said Geoff Pyne at finance house UBS. ''Eventually the market will return to equilibrium.''
''There is no prospect of a recovery until stocks start to fall,'' said Drollas at the CGES.
''At least they're laying the foundations for a recovery, but we might not see much evidence of it until the fourth quarter,'' he added.
Meanwhile producers will have to suffer the double blow of lower prices and lower export volumes.
OPEC's problem is that while world demand is still rising, the rate of demand growth has slowed sharply this year.
Asia's financial crisis means producers can no longer count on any incremental demand from the region which in recent years has accounted for about 50 percent of the globe's extra oil consumption.
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