Iraq hopes oil prices will rebound in 2016, Assabah reports

20 Jan 2016 | Author: | No comments yet »

Brent Oil Falls to 11-Year Low in London as Global Glut Persists.

HONG KONG– Brent oil prices plummeted to levels not seen since 2004 in Asia on Monday, as an expanding global surplus due to high-paced production output sparked fears that prices will fall further.SINGAPORE — Brent crude oil prices fell to levels last seen in 2004 on Monday, dropping below the lows hit during the 2008 financial crisis on renewed concern over a global oil glut, with production around the world remaining at or near record highs and new supplies looming from Iran and the US.

Crude prices are set to rise from current “very low” levels that are hurting producers, Iraq’s Oil Minister Adel Abdul Mahdi said after a meeting of Arab petroleum-exporting nations.But the world’s No. 3 producer has been pumping at the fastest pace since the collapse of the Soviet Union, adding to the flood on an already-swamped market and helping push prices to the lowest levels since 2009. Brent prices for front-month February LCOG6, -1.79% delivery hit $36.17 a barrel on the London-based ICE Futures Europe Exchange, the lowest intraday level since the middle of July in 2004. Brent futures fell almost 2% and dropped as low as $36.17 per barrel at about 5am GMT, the weakest since 2004 and below the $36.20 low reached on Christmas eve 2008. Abdul Mahdi, whose country is the second-biggest producer in OPEC, didn’t forecast when prices would rebound from an almost seven-year low for Brent, the benchmark for more than half of the world’s oil.

Russia’s unexpected oil bounty this year is the result not of a new Kremlin campaign but of dozens of modest productivity improvements across the sprawling sector. Analysts said a strong dollar following last week’s US interest rate increase, which makes oil consumption more expensive for countries using different currencies, as well as a renewed increase in US oil rig counts, were weighing on crude prices. Qatar’s Energy Minister Mohammed Al Sada told reporters before the meeting in Cairo there was no need to be pessimistic about prices. “There is no doubt that oil prices will rebound,” Abdul Mahdi told reporters Sunday after the meeting of the Organization of Arab Petroleum Exporting Countries. “This current level is too low, and it’s affecting oil producers. I think economic factors and fundamentals are still strong.” A global oversupply of crude has triggered the worst slump in the energy business since the 2008 world financial crisis.

With a rise of 0.5 percent in the first nine months of 2015, Russia hasn’t boosted production as much as its larger rivals, the U.S. (up 1.3 percent) and Saudi Arabia (up 5.8 percent), according to Citigroup Inc. Last week, the U.S. active oil rig count rose by 17 to 541, underscoring the strong resilience of U.S. shale producers to keep pumping despite low prices. But having ignored OPEC’s calls earlier this year to join efforts to support prices by pumping less, Russia is keeping up with the cartel. “I know of no one who had predicted that Russian production would rise in 2015, let alone to new record levels,” said Edward Morse, Citigroup’s global head of commodities research. Iran will export most of its enriched uranium to Russia in coming days as it rushes to implement a nuclear deal and secure relief from international sanctions, Tehran’s nuclear chief was quoted as saying at the weekend. This comes only days after the US voted to lift a 40-year-old ban on crude exports that could lead to some of its excess production being dumped on the global market.

A veteran of the oilfields of Siberia who’s now head of upstream at Bashneft PJSC, he said his engineers have managed to find more oil in some of the fields where he worked summers as a student in the early 1980s. The demand side offers bearish factors too, as most of the northern hemisphere is experiencing an unusually mild start to the winter, due in part to the El Nino weather phenomenon, denting demand for heating oil. OAPEC was established in 1968 to foster the development of the petroleum industry in member states as part of an economic integration plan among Arab countries.

Tax hikes and lack of financing have cut deeply into exploration drilling, which is down 21 percent this year, and handicap the larger new projects that are needed to replace the country’s older fields as they run dry. “There is, however, only so far such efficiency gains can go and we are probably near the peak of output today,” said Chris Weafer, a partner at consultants Macro Advisory. Stavskiy’s Bashneft also benefited from some special tax breaks for older fields, although he said the savings wasn’t decisive for the company’s investment choices. “We’re up 3 percent since the beginning of the year at our mature fields in Bashkiria, the oldest of which has been in production for 83 years and already produced 1.7 billion tons (12.5 billion barrels) of oil,” Stavskiy said. Bashneft, working with Schlumberger Ltd., set up a high-tech geology center in its headquarters near the fields, allowing engineers to model deposits in real time and drillers to target where the remaining oil is.

Though only about 0.7 percent of total Russian oil output, that gain is likely to be enough to keep the record pace going, said Alexander Nazarov, an oil and gas analyst at Gazprombank.

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