Crude prices started moving downward in November this year. Perhaps, this is the most exciting period for investors who bet on the oil and gas stocks. American President Donald Trump has managed to bring some good news for oil-consuming nations around the world. Here’re details about the recent happenings that influenced the crude prices.
Trump’s pressure is working in consumer interest
Reuters recently reported that Saudi Arabia increased its oil production to an all-time high in November under pressure from the Trump administration. Experts were surprised due to this move as the OPEC had recently signaled that top global oil-producing nations intend to find ways for dealing with falling crude prices.
American sanctions on Iran had put India in a tight spot as it gets most of its supplies from Iran. Thus, along with the United States, India also called the Saudis to help in cooling down oil prices last month.
Industry insiders believe Saudi’s oil production has increased by around 0.5 million barrels per day this year compared to 2017. Even Russia has indicated an increase in their oil production compared to their last year’s number. However, everyone believes these countries would soon declare production cuts. Goldman Sachs analysts have expressed the same opinion.
Jamal Khashoggi’s murder has increased the trouble for the kingdom
Saudi’s energy minister shared his opinion that the OPEC needs to act as the crude supply in the market is set to exceed the demand by next year. Due to the fall in orders, the country’s oil giant ‘Saudi Aramco’ plans to ship lesser crude during the coming months.
Political analysts believe that journalist Jamal Khashoggi’s murder case has made things complicated for Saudi. The US lawmakers demanded imposition of strict sanctions on the kingdom. But, President Trump stood in support of Prince Mohammed. Thus, the Prince won’t appreciate indulging in any confrontation with the US. No matter if it’s about oil prices, cutting crude production, or anything else. Perhaps, this is the reason Saudi won’t call OPEC to take any extreme step. They would probably declare smaller production cuts.
Thanks to all these actions, the cost for each oil barrel moved downward from $85 to $60 between September and November. President Trump recently took credit for the reduction in crude prices and even thanked Saudis for their support in controlling the same.
Oil production at the US North Sea megaproject has begun
Some parts of the project are to be developed in a joint venture between ConocoPhillips, Chevron, Shell, and BP. It is often referred to as the British oil major’s most substantial offshore investment.
The company recently issued a statement suggesting it has started oil extraction from the North Sea based hydrocarbon field (Clair Ridge project).
According to the details made available to the press, BP intends to extract 640 million barrels, roughly around 120,000 barrels each day. The project may remain functional for 40 years or more.
The oil field was first pointed out in 1977 and experts had estimated that it could offer 7 billion hydrocarbon barrels. But extraction was deemed complicated due to the rock formations around.
The capital investment is said to be more than £4.5 billion, and the project has generated 6,000 jobs. It also happens to be the largest project that the North Sea has witnessed during the last twenty years. As far as the stake is concerned, ConocoPhillips holds 7.5 percent; Chevron owns 19.4 percent, Shell keeps 28 percent, while BP holds 45.1 percent.
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Saudi does not intend to cut oil production by more than one million barrels each day
Saudi Arabia had set the harsh output cut target in November 2016. Now, according to a report published by CNBC, the Saudis do not wish to upset Trump. Thus, they would not prefer throttling crude production by more than one million barrels each day.
Crude prices are slowly coming down around the world due to the reports regarding ample supply. The 15 oil producing nations body OPEC believes that the supply in the market would overtake the demand by next year. So, the countries are already planning to pull back the production.
The US President Donald Trump has urged the OPEC nations to not to cut the supply and help in bringing the prices even lower. He also appreciated Saudi Arabia for increasing their output promptly to assist in easing oil prices.
Back in 2016, OPEC, as well as other oil producers like Russia together, agreed to cut overall oil production each day by 1.8 million barrels. This resulted in lower supply, and markets around the world witnessed a boost in oil prices. In June this year, oil producers agreed that they had reduced the output much more than intended and decided to increase the production again.
The union was also urged to push exploration due to the US’s sanctions on Iran. The country happens to be the third largest producer of oil. America’s decision to allow some nations to continue the oil trade with Iran resulted in a lesser than anticipated drop in production though.
The Brexit impact might not be immediate
The Brexit deal or agreement signed between Britain and the 27 EU countries has unfortunately failed to make things clear for the UK’s oil and gas sector. There is no clarity as far as the impact on oil and gas trade between the UK and other countries after Britain leaves the customs union.
Of course, as it is a global industry, the new EU regulations won’t impact the energy sector as much as they can influence the fishing industry.
Perhaps, the grace period of two years won’t affect the sector much. But after the movement of people between the UK and the EU nations is restricted, the industry would require careful management of skilled workforce in both the parts.