Oil rises over 1% on hopes for deeper OPEC cuts, Chinese factory growth

The OPEC+ group has coordinated output for three years to balance the market and support prices. (Reuters)
Updated 02 December 2019

Oil rises over 1% on hopes for deeper OPEC cuts, Chinese factory growth

  • Prices were also supported after Iraq’s oil minister said on Sunday that OPEC and allied producers will consider deepening their existing oil output cuts
  • The OPEC+ group has coordinated output for three years to balance the market and support prices

TOKYO: Oil prices rose more than 1 percent on Monday as signs of rising manufacturing activity in China pointed to increasing fuel demand, and hints that OPEC may deepen output cuts at its meeting this week indicated supply may tighten next year.
Brent crude futures rose 76 cents, or 1.3 percent, to $61.25 a barrel by 0415 GMT. West Texas Intermediate (WTI) futures rose 91 cents, or 1.7 percent, to $56.08 a barrel, having risen by more than $1 earlier.
On Friday, WTI futures settled 5.1 percent lower while Brent plunged 4.4 percent on concerns that talks to end the trade war between the United States and China, the world’s two biggest oil users, would be disrupted by US support for protesters in Hong Kong.
But oil rose on Monday after factory activity in November in China, the world’s biggest oil importer, increased for the first time in seven months because of rising domestic demand amid government stimulus measures.
“At the open, prices remain supported by the surprising resilient China factory activity with the forward-looking PMI’s beating expectations,” said Stephen Innes, chief Asia market strategist at AxiTrader.
Prices were also supported after Iraq’s oil minister said on Sunday that OPEC and allied producers will consider deepening their existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, are expected to at least extend existing output cuts to June 2020 when they meet this week.
The OPEC+ group has coordinated output for three years to balance the market and support prices. Their current deal to cut supply by 1.2 million bpd that started from January expires at the end of March 2020.
OPEC’s ministers will meet in Vienna on Dec. 5 and the wider OPEC+ group will meet on Dec. 6.
Ministers will either take no action, extend the cuts without change, or deepen them, ING Economics said in a note.
“We believe that only the final scenario would be constructive for oil prices,” ING said.
OPEC oil output fell in November as Angolan production slipped due to maintenance and Saudi Arabia kept a lid on supply to support prices before the initial public offering of state-owned Saudi Aramco, a Reuters survey found.
On average, OPEC pumped 29.57 million bpd last month, according to the survey, down 110,000 bpd from October’s revised figure.
But US production keeps rising, filling the gaps left by OPEC, with output in September increasing to a new record of 12.46 million barrels per day (bpd), the US government said in a monthly report on Friday.


BP said to be considering sale of Mideast ‘stranded assets’

Updated 08 August 2020

BP said to be considering sale of Mideast ‘stranded assets’

  • Major oil companies typically hold assets for the long term

LONDON: BP is preparing to sell a large chunk of its oil and gas assets even if crude prices bounce back from the COVID-19 crash because it wants to invest more in renewable energy, three sources familiar with BP’s thinking said.

The strategy was discussed at a BP executives meeting in July, the sources said, soon after the oil major lowered its long-term oil price forecast to $55 a barrel, meaning that $17.5 billion worth of its assets are no longer economically viable.

But even if crude prices bounce back to $65-$70 a barrel, BP is unlikely to put those assets back into its exploration plans and would instead use the better market conditions as an opportunity to sell them, the three sources said.

Major oil companies typically hold assets for the long term, even when crude prices plunge, with a view to start bringing more marginal production online when market conditions improve.

However, BP’s new divestment strategy, which has not previously been reported, means there will be no way back for the British energy company once it has offloaded its so-called stranded oil and gas assets.

BP did not respond to requests for comment.

The new strategy also sheds more light on chief executive Bernard Looney’s plan to reduce BP’s oil and gas production by 40 percent, or at least 1 million barrels per day, by 2030 while expanding into renewable energy.

“It is a simple calculation of natural production decline and planned divestment,” said a BP source, explaining how BP became the first big oil company to pledge a large cut in its oil output.

For decades, BP and rivals such as Royal Dutch Shell and Exxon Mobil have promised investors that production would continue to rise. But as climate activists, investors, banks and some governments raise pressure on the industry to reduce emissions to help cool the planet, European oil firms are changing tack and pledging to invest more in renewable energy sources.

US rivals are under less government pressure and have not made similar commitments on renewables.

“As we look at the outlook for BP over the next few years and as we see production declining by 40 percent it is clear we no longer need exploration to fund new growth,” Looney said this week. “We will not enter new countries to explore.”

He said that BP would continue to explore for oil near its existing production infrastructure as those barrels would be low cost — and help boost BP’s cash flow to fund its transition to cleaner energy.

BP also raised its target this week for returns from asset sales to $25 billion between 2020 and 2025, of which about $12 billion has already been lined up.

Parul Chopra, analyst at Rystad Energy, said in addition to Angola, he expected BP to move out of Azerbaijan, Oman, the UAE and Iraq.

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