Analys

Iraqi oil production and exports at stake

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5 år sedan

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6 januari, 2020

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The Brent crude oil price spiked 3.6% on Friday to $68.6/bl on the back of the US killing of the Iranian general Qassem Soleimani. This morning it jumps 2.3% to $70.2/bl. Though so far not a single drop of oil supply has been lost.

Iranian retaliation and then US re-retaliation are however imminent. The US has already pre-selected 52 Iranian targets. Eventual loss of supply in the Middle East may however be in Iraq down the road and not so much due to near term retaliations.

Bjarne Schieldrop, Chief analyst commodities at SEB — Bjarne Schieldrop, Chief analyst commodities, SEB

US forces in Iraq now seem likely to be kicked out of the country and Iraq will then most likely “fall into the arms of Iran”. As former acting head of the CIA, Michael Morell, put it: “I think we’ve now ended any hope of keeping Iraq out of Iran’s arms.”

If Iran and Iraq become one large Shia Muslim centre of gravity in the Middle East, then US sanctions towards Iran would naturally be extended also to Iraq leading to a decline in Iraqi oil production and exports. This now looks very much like the way it is moving. The U.S. president on Sunday threatened to impose sanctions on Iraq if the Iraqi parliament voted to expel US troops from the country.

It is very clear that if it wasn’t for the fact that the oil market lost more than 3 m bl/d of crude oil supply from Iran and Venezuela since the end of 2016 it would not have been possible for the US to grow its crude oil production by more than 4 m bl/d over the same period and thus become oil independent and still have an oil price today of more than $60/bl. It is also quite clear that the lost supply from Iran and Venezuela to a large degree is the result of US sanctions towards these two nations and that these sanctions basically have paved the way for US oil production growth and oil independence.

It would of course be very bearish for the oil market if supplies from Iran and Venezuela came back into the market. That will probably happen at some point in time. However, we do not think that this will happen any time soon (years). Production and exports from these two countries will most likely be kept out of the market as long as the US needs room to grow its oil production and exports. The more correct focus may instead be to ask who is next in line to be kicked out of the oil market in order to make room for growing US oil production and exports? Right now, it seems likely to be Iraq.

It might be a tall order to accuse Donald Trump of such simple mercantile motives. But we need look no further than to the Russian gas pipeline Nord Stream 2 which stretches from Ust-Luga in Russia through the Baltic Sea and to Greifswald in Germany. In December the U.S. Senate imposed sanctions on companies working on the pipeline in order to prevent it from being completed. Their explanation was that they did it to protect Europe from becoming too dependent on Russian gas exports. But the sanctions are against the will of the EU. As such this looks bluntly as a move by the U.S. to prevent Russian gas flowing to the EU thus making room for growing U.S. gas exports to Europe instead.

The situation for Iran is of course extremely difficult. Donald Trump basically killed on of its highest-ranking generals with a precision drone high in the sky while he was playing golf at his resort in Florida (or at least he was at his resort there). The feeling of helplessness must be pervasive. If Iran now retaliates and kills U.S. armed forces (which seems likely) they will just see more devastating retaliations in return. The only real hope for Iran it seems is if they could get China fully over to their side and ramp up oil exports to China. While China wants its oil it most likely won’t go in the face of the U.S. doing so in large volumes. But if Iranian sanctions are extended also to Iraq it could be different.

Our general view for 2020 is that there will be involuntary losses of supply in the middle east in the year to come. Either through military action like the one in September when Saudi Arabian oil production was cut in half by the drone strike at its Abqaiq oil reprocessing plant or increased U.S. sanctions for example towards Iraq. The Iranian situation was probably the key source of the disruptive events in the middle east in 2019. This “source problem” has now just become much worse. The consequence of these “most likely losses of supply to come” in the middle east will be that the oil price will be elevated, global oil surplus will be avoided, and U.S. oil production growth and exports can re-accelerate again.

Ch1: Cumulative oil production change in the U.S. versus Iran + Venezuela. U.S. production growth would not have been possible without the losses of supplies from Iran and Venezuela and those losses were largely due to sanctions from the U.S.

Ch2: Crude oil production in m bl/d in the US, Iran, Iraq and Venezuela

Ch3: Iraq and Iran might be a large Shia Muslim force if Iraq now votes to expel U.S. troops. The U.S. on Sunday threatened Iraq with sanctions if U.S. troops are expelled.

Distribution of Shia and Sunni muslims in the middle east

Ch4: The EU wants gas from Russia via the new Nord Stream 2 pipeline. The U.S. doesn’t want it. It want’s to export gas to the EU

Relaterade ämnen:bjarne schieldrop seb analys

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Very little middle east risk premium in Brent crude

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US shale oil production growth slowing sharply

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A deliberate measure to push oil price lower but it is not the opening of the floodgates

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4 timmar sedan

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4 mars, 2025

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Hurt by US tariffs and more oil from OPEC+. Brent crude fell 2.1% yesterday to USD 71.62/b and is down an additional 0.9% this morning to USD 71/b. New tariff-announcements by Donald Trump and a decision by OPEC+ to lift production by 138 kb/d in April is driving the oil price lower.

Bjarne Schieldrop, Chief analyst commodities, SEB

The decision by OPEC+ to lift production is a deliberate decision to get a lower oil price. All the members in OPEC+ wants to produce more as a general rule. Their plan and hope for a long time has been that they could gradually revive production back to a more normal level without pushing the oil price lower. As such they have postponed the planned production increases time and time again. Opting for price over volume. Waiting for the opportunity to lift production without pushing the price lower. And now it has suddenly changed. They start to lift production by 138 kb/d in April even if they know that the oil market this year then will run a surplus. Donald Trump is the reason.

Putin, Muhammed bin Salman (MBS) and Trump all met in Riyadh recently to discuss the war in Ukraine. They naturally discussed politics and energy and what is most important for each and one of them. Putin wants a favorable deal in Ukraine, MBS may want harsher measures towards Iran while Trump amongst other things want a lower oil price. The latter is to appease US consumers to which he has promised a lower oil price. A lower oil price over the coming two years could be good for Trump and the Republicans in the mid-term elections if a lower oil price makes US consumers happy. And a powerful Trump for a full four years is also good for Putin and MBS.

This is not the opening of the floodgates. It is not the start of blindly lifting production each month. It is still highly measured and controlled. It is about lowering the oil price to a level that is acceptable for Putin, MBS, Trump, US oil companies and the US consumers. Such an imagined ”target price” or common denominator is clearly not USD 50-55/b. US production would in that case fall markedly and the finances of Saudi Arabia and Russia would hurt too badly. The price is probably somewhere in the USD 60ies/b.

Brent crude averaged USD 99.5/b, USD 82/b and USD 80/b in 2022, 2023 and 2024 respectively. An oil price of USD 65/b is markedly lower in the sense that it probably would be positively felt by US consumers. The five-year Brent crude oil contract is USD 67/b. In a laxed oil market with little strain and a gradual rise in oil inventories we would see a lowering of the front-end of the Brent crude curve so that the front-end comes down to the level of the longer dated prices. The longer-dated prices usually soften a little bit as well when this happens. The five-year Brent contract could easily slide a couple of dollars down to USD 65/b versus USD 67/b.

Brent crude 1 month contract in USD/b. USD 68.68/b is the level to watch out for. It was the lowpoint in September last year. Breaking below that will bring us to lowest level since December 2021.

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Analys

Brent whacked down yet again by negative Trump-fallout

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6 dagar sedan

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26 februari, 2025

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Sharply lower yesterday with negative US consumer confidence. Brent crude fell like a rock to USD 73.02/b (-2.4%) yesterday following the publishing of US consumer confidence which fell to 98.3 in February from 105.3 in January (100 is neutral). Intraday Brent fell as low as USD 72.7/b. The closing yesterday was the lowest since late December and at a level where Brent frequently crossed over from September to the end of last year. Brent has now lost both the late December, early January Trump-optimism gains as well as the Biden-spike in mid-Jan and is back in the range from this Autumn. This morning it is staging a small rebound to USD 73.2/b but with little conviction it seems. The US sentiment readings since Friday last week is damaging evidence of the negative fallout Trump is creating.

Evidence growing that Trump-turmoil are having negative effects on the US economy. The US consumer confidence index has been in a seesaw pattern since mid-2022 and the reading yesterday was reached twice in 2024 and close to it also in 2023. But the reading yesterday needs to be seen in the context of Donald Trump being inaugurated as president again on 20 January. The reading must thus be interpreted as direct response by US consumers to what Trump has been doing since he became president and all the uncertainty it has created. The negative reading yesterday also falls into line with the negative readings on Friday, amplifying the message that Trump action will indeed have a negative fallout. At least the first-round effects of it. The market is staging a small rebound this morning to USD 73.3/b. But the genie is out of the bottle: Trump actions is having a negative effect on US consumers and businesses and thus the US economy. Likely effects will be reduced spending by consumers and reduced capex spending by businesses.

Brent crude falling lowest since late December and a level it frequently crossed during autumn.

White: US Conference Board Consumer Confidence (published yesterday). Blue: US Services PMI Business activity (published last Friday). Red: US University of Michigan Consumer Sentiment (published last Friday). All three falling sharply in February. Indexed 100 on Feb-2022.

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Crude oil comment: Price reaction driven by intensified sanctions on Iran

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1 vecka sedan

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25 februari, 2025

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Brent crude prices bottomed out at USD 74.20 per barrel at the close of trading on Friday, following a steep decline from USD 77.15 per barrel on Thursday evening (February 20th). During yesterday’s trading session, prices steadily climbed by roughly USD 1 per barrel (1.20%), reaching the current level of USD 75 per barrel.

Ole R. Hvalbye, Analyst Commodities, SEB

Yesterday’s price rebound, which has continued into today, is primarily driven by recent U.S. actions aimed at intensifying pressure on Iran. These moves were formalized in the second round of sanctions since the presidential shift, specifically targeting Iranian oil exports. Notably, the U.S. Treasury Department has sanctioned several Iran-related oil companies, added 13 new tankers to the OFAC (Office of Foreign Assets Control) sanctions list, and sanctioned individuals, oil brokers, and terminals connected to Iran’s oil trade.

The National Security Presidential Memorandum 2 now calls for the U.S. to ”drive Iran’s oil exports to zero,” further asserting that Iran ”can never be allowed to acquire or develop nuclear weapons.” This intensified focus on Iran’s oil exports is naturally fueling market expectations of tighter supply. Yet, OPEC+ spare capacity remains robust, standing at 5.3 million barrels per day, with Saudi Arabia holding 3.1 million, the UAE 1.1 million, Iraq 600k, and Kuwait 400k. As such, any significant price spirals are not expected, given the current OPEC+ supply buffer.

Further contributing to recent price movements, OPEC has yet to decide on its stance regarding production cuts for Q2 2025. The group remains in control of the market, evaluating global supply and demand dynamics on a monthly basis. Given the current state of the market, we believe there is limited capacity for additional OPEC production without risking further price declines.

On a more bullish note, Iraq reaffirmed its commitment to the OPEC+ agreement yesterday, signaling that it would present an updated plan to compensate for any overproduction, which supports ongoing market stability.

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