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5 Reasons Oil Is Climbing (Hint: It's Not The Saudi Crackdown)

By Ellen R. Wald, Ph.D.CommoditiesNov 07, 2017 05:03AM ET
www.investing.com/analysis/4-reasons-oil-is-moving-higher-and-its-not-the-saudi-power-shift-200261371
5 Reasons Oil Is Climbing (Hint: It's Not The Saudi Crackdown)
By Ellen R. Wald, Ph.D.   |  Nov 07, 2017 05:03AM ET
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Oil prices continue to climb this week as OPEC seeks further consensus on an extension of the production cut deal. Both the Brent and WTI benchmarks reached two-year highs in futures trading even before markets officially opened on Monday.

Some of the new developments include the following:

1. The Nigerian oil minister said on Monday that Nigeria is willing to cap oil production between 1.8 million bpd and 1.9 million bpd. According to S&P Global Platts, Nigeria’s September production was 1.84 million bpd and their October production was 1.78 million bpd.

2. Iraq has also come out in support of an extension of the production cut deal, but its oil exports are currently in flux. It was reported that oil exports from Kurdish regions that traveled via pipeline to the Turkish port of Ceyhan were cut off briefly on Monday. Iraq is also increasing oil exports from its southern oil fields. According to TankerTrackers.com, oil exports out of Basra, increased 15% since October 22nd.

3. The Russian Energy Ministry also announced that Turkmenistan will be joining the OPEC meeting in November as an observer. Turkmenistan also joined the last OPEC meeting as an observer but did not commit to joining the deal. Turkmenistan produces about 261,000 bpd of oil, but it is a much more significant player in the natural gas markets of Central Asia and currently supplies natural gas to China and Iran. It is likely that Turkmenistan is more interested in attracting investment for its energy industry, because it could produce at much higher rates with better infrastructure.

4. Khalid al Falih, Saudi Arabia’s oil minister, also announced that Uzbekistan will join the OPEC meeting in November. Uzbekistan is a small producer, averaging about 78,000 bpd, but OPEC officials say Uzbekistan’s commitment to attend the meeting as an observer is an indication of further willingness by other producing countries to support the OPEC-Non-OPEC production cut deal.

5. OPEC and its non-OPEC partners will clearly be looking to capitalize on the recent gains in Brent and WTI as evidence that their production cut plan is working. On the other hand, some of the recent gains can be traced to a drop in exports (not production) from Saudi Arabia, especially exports to the United States. However, satellite imagery and analysis from TankerTrackers.com indicates that Saudi exports are picking up. Depending on where the Saudi oil is going, the data may or may not make an increase in exports evident prior to the OPEC meeting at the end of this month.

Note: It is questionable whether the weekend of news out of Saudi Arabia will have a prolonged impact on oil prices. Oil prices did not seriously spike until midday Monday New York time, so it is unknown how much can be attributed to these political events. Other rumors are that oil prices are rising as institutional investors are entering the oil market.

5 Reasons Oil Is Climbing (Hint: It's Not The Saudi Crackdown)
 

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5 Reasons Oil Is Climbing (Hint: It's Not The Saudi Crackdown)

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Kỳ Anh Hoang
Kỳ Anh Hoang Nov 10, 2017 1:05PM GMT
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Ok
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Arda Gulcil
Arda Gulcil Nov 07, 2017 9:15PM GMT
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What a clear and explanatory article. Thank you.
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tony ooh
tony ooh Nov 07, 2017 4:15PM GMT
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dr wald: might be an idea for readers to print your column today and pin it to their office wall. would save them money and anxiety going forward. thank you for your knowledge and efforts.
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Rob Cashman
Rob Cashman Nov 09, 2017 10:45PM GMT
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Hah. Totally agree.
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Nov 07, 2017 2:59PM GMT
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API and EIA results this week are kind of important as well. As is Venezuela, as noted below.
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tony ooh
tony ooh Nov 07, 2017 4:52PM GMT
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govt reports are always revised. follow the market. i do. in other words, the reports are not always to be taken at face value. sometimes doc, it takes a bit more reading. take the time. south america is a bust. was a bust before energy market. imagine you're thinking the reason poor in venezuela have to travel for food and mine bitcoin rests on energy market's shoulders. you're not up to date at all and at market risk. or, you may not even be invested, just post drivel.
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Do Deikins
DoRight Nov 07, 2017 7:02PM GMT
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Certainly generalized reports do not precisely reflect a point in time, but they are data points.  Dr. Wald herself has talked of the sometimes erroneous assumptions made by the statisticians involved.  Statistics is difficult, as any honest practitioner will admit.. BTW, the API is most definitely not part of the govt.
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Abhiahek yadav
Abhiahek yadav Nov 07, 2017 2:35PM GMT
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hello mam I'm Abhishek Yadav I'm first time invest my money in share market. so can u help me
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Do Deikins
DoRight Nov 07, 2017 6:40AM GMT
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Are not the problems in Venezuela affecting the market also?
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tony ooh
tony ooh Nov 07, 2017 4:14PM GMT
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read the news objectively. review comprehension. issues in south america have nothing to do with oil or energy markets. south america voters are not the sharpest folks. learn.
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Do Deikins
DoRight Nov 07, 2017 6:53PM GMT
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While I am concerned deeply about the condition of the sweet people of Venezuela, I was speaking more specifically of the continued problems in the oil patch there.  It is getting more difficult for PDVSA to buy light crude to mix with their heavy Orinoco and other heavy oils they produce as few will sell it any longer with just a promise of remuneration. They are running out of places to deliver the reduced quantities of oil that they are producing, because no one wants to process it or store it for them, because their quality is deteriorating and because their promised payments are in arrears.  And their equipment is deteriorating because those who would maintain it have left for elsewhere.  Surprisingly there are still people who think that they should receive compensation for that of which they have worked hard and that it should not be confiscated by those who feel they deserve that for which others have worked.. Do you know what percentage of the world's oil comes from A. Latina?
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