----Russia Ready to Help Boost Oil Prices
Energy ministers from Russia and Qatar along with OPEC's secretary general discussed possible joint action to stabilize the oil market, Russian Energy Minister Alexander Novak said ahead of OPEC's meeting next month aiming to cement a deal agreed in Algiers.
Russia is the world's largest oil producer but not a member of the Organization of the Petroleum Exporting Countries and its budget has been hit by low oil prices, the same as for many OPEC nations.
Novak, in Vienna after visiting Saudi Arabia over the weekend for talks with Saudi Energy Minister Khalid al-Falih, said sharp falls in the price of crude threatened to trigger an oil deficit and unpredictable volatility in prices.
"That's why ... (an oil output) freeze or even a cut for a certain period of time is a right decision for global energy ... Being a short-term measure, an oil output cap may help to lower volatility in the market and make it more stable," Novak said.
Last month in Algiers, OPEC agreed modest output cuts that are due to be set in stone in the coming weeks. The goal is to trim production to a range of 32.50-33.0 million barrels per day (bpd).
"We have in detail discussed ... current situation (on oil market) and different mechanisms and options of joint actions," Novak told a briefing after talks with his Qatari counterpart Mohammed al-Sada and OPEC Secretary General Mohammed Barkindo.
Russia is ramping up its oil output amid weak oil prices, as weak rouble and investments made in previous years are helping its oil sector. In September, Russian oil output hit another post-Soviet high of 11.1 million barrels per day (bpd).
Novak repeated that an oil output freeze is "an effective tool Russia is ready for (in a move) to balance the market". Yet he said that Moscow was considering "different options," but declined to provide details.
Russia plans to bring another oilfield on stream this month, Lukoil'sPyakyakhinskoye in the Yamal Arctic region, in addition to Messoyakha launched by Gazprom Neft(SIBN.MM) and Rosneftlast month.
Rosneft, the world's top listed oil producer by output, plans to launch its Suzun field in Siberia this year as well, with Lukoil planning to put its Caspian Filanovsky field in operation by the end of 2016, adding more to the global glut.
Novak declined to say at which levels Russia would be ready to cap its output, adding that lower-tier officials from OPEC and non-OPEC countries, including Russia, will be working on terms of a possible deal on Oct. 28-29 in Vienna.
OPEC's Barkindo said in opening remarks to the meeting that Russia and OPEC were "committed to stable and predictable markets".
"While there are signs that the rebalancing of the fundamentals is under way with overall non-OPEC supply contracting this year and demand ... at healthy levels, the large stock overhang continues to be a major concern," Barkindo said.
2---- U.S. Crude Drops Further Below $50
Oil settled down on, then U.S. crude slid further below $50 a barrel in post-settlement trade after an industry group reported that U.S. oil inventories grew nearly three times as much as forecast.
The American Petroleum Institute (API) reported that U.S. crude stocks rose by 4.8 million barrels in the week ended Oct. 21 versus a 1.7-million barrel build forecast by analysts polled by Reuters.
The U.S. Energy Information Administration (EIA) reports official inventory numbers. The EIA surprised the market, reporting an unexpected drawdown of 5.2 million barrels for the Oct. 14 week as a storm delayed shipments of imported oil.
"Basically, the glut continues and demand is not coming back," Phil Davis, a trader at PSW Investments in Woodland Park, New Jersey, said, referring to the API data.
"I don't want to read too much into it but the fact of the matter is it certainly doesn't support $50 oil."
U.S. West Texas Intermediate (WTI) crude settled down 56 cents, or 1.1 percent, at $49.96. After the API report, it fell as much as $1.25, or 2.5 percent, to $49.27.
Brent, the international benchmark for crude, settled down 67 cents, or 1.3 percent, at $50.79. In post-settlement trade, it sank as much as $1.24, or 2.4 percent, to $50.22.
Oil prices were also depressed by producers' verbal jockeying over planned output cuts by the Organization of the Petroleum Exporting Countries. Iraq, OPEC's second largest producer, reiterated its resistance to contributing to the cuts while data showed it had higher output for October.
Some technical analysts pegged WTI's next support at $49.15, its bottom on Oct. 10 before it rallied to a 15-month high of $51.93 on Oct. 19.
"If we snap that, in very short order we could be back down to $47," said David Thompson, technical analyst and executive vice-president at commodities-focused broker Powerhouse in Washington.
oil prices had surged about 13 percent in three weeks since OPEC announced on Sept. 27 its first planned output cut in eight years to combat the steep slump in crude prices from 2014 highs above $100 a barrel.
The production curbs are expected be finalized at OPEC's policy meeting in Vienna on Nov. 30. The group has been holding talks with members and outside producers led by Russia for weeks now to try and sustain the market's interest in its plan.
---Iraq to Offer Oil Fields Directly to Foreign Firms
The Iraqi oil ministry will negotiate directly with international oil companies (IOCs) and consortiums in the upcoming bidding of a dozen small- to medium-sized fields located in the provinces of Central, Basra and Misan.
According to a tender document on the ministry's website and cited by Reuters, firms will be permitted to “submit their own proposals for contractual, commercial and financial terms and conditions.”
Officials pre-qualified nineteen firms from around the world to participate in the bidding process, including six from Japan and others from countries such as Russia, Italy, and the United Arab Emirates.
In addition, firms that have not been prequalified may also participate in the process after paying a US$15,000 fee as well as submitting proof of their technical and financial capabilities. To help with that process, the ministry has offered a data package with the price tag of US$50,000.
The Iraqi government’s appeal to deal directly with oil companies signaled a shift in its strategy away from prior contract offers for the country’s huge southern fields such as Rumaila and Majnoun. The oil ministry pays IOCs a fixed dollar-denominated fee for every barrel of oil produced as part of the service-based agreements reached between the parties.
The slump in the price of oil since 2014 forced Iraq to receive less revenue from the commodity while paying the same pre-2014 fees to the likes of BP, Shell, and Lukoil. Thus, the ministry has sought to renegotiate these deals to allow fees that are flexible with market fluctuations and to force IOCs to pay a greater share when prices sink.
Futures fell to their lowest point in a week over the Iraqi government’s desire to be exempt from planned Organization of the Petroleum Exporting Countries (OPEC) production limits. Oil Minister Jabbar Al-Luaibi said Iraq continues to be embroiled in clashes with extremist militants; thus, the country should not be subjected to whatever OPEC output conditions are agreed upon on Novemb
Oil InvestorsPreparing for Higher Prices
The chance of an agreement to freeze or cut crude output when OPEC members meet next month might appear more distant now Iraq has joined those asking for an exemption, but investors are ramping up their bets that oil prices will rally.
The price of oil has this month risen to its highest so far this year, having gained more than 10 percent in the four weeks since the Organization of the Petroleum Exporting Countries agreed to cut production and rein excess global supply.
Since the decision at a meeting in Algiers on Sept. 28, at which OPEC said it would seek to cut output to output to a range of 32.5-33.0 million barrels per day, from its current estimate of 33.24 million bpd.
Although there are questions hanging over how much each country will cut and whether all countries will agree to it, investors have raised their bets in both futures and options at breakneck speed that oil prices will continue to rise.
Data from the U.S. Commodity Futures Trading Commission (CFTC) and the InterContinental Exchange shows money managers have added to their bets on a rising crude price at the fastest monthly pace on record in October.
Fund managers have bought nearly 218,000 lots of crude futures and options contracts in October alone, the largest monthly rise to date, as investors have taken heart from falling stockpiles.
"While much of the oil market paints a picture of a commodity struggling under the weight of a huge surplus, statistical balances suggest that conditions have improved markedly," Barclays commodities analyst Kevin Norrish said in a note."If OPEC comes up with a meaningful cut to output in November and the northern hemisphere has a reasonably cold winter, then in our view, crude oil price risk will return very much to the upside."
Total net long holdings of U.S. and Brent crude oil futures and options now stands at nearly 688,000 lots, equivalent to around 688 million barrels of oil, nearly a week's worth of total global consumption.
This position has doubled since the start of August, when Saudi Arabia first signaled the possibility of an agreement between the group and non-member Russia to temper output.