West Texas Intermediate (WTI) oil prices rose slightly on September 10 on the widely anticipated news that OPEC ministers in Vienna would not changed their oil production quotas, writes Tina Vital, integrated oil and gas equity analyst for Standard &Poors Equity Research. "The strengthening of global oil prices so far this year was welcomed by the ministers as providing support for the energy industry's investment plans, but they remained concerned about price volatility, which persisted despite high global levels of crude and refined product inventories in the market," she wrote. Vital said it appeared to the ministers that global oil prices have become very sensitive to external economic signals, such as the dollar exchange rate fluctuations, stock market movements and unemployment trends. The cartel is expected to reassess the market situation at their next extraordinary meeting to be held in Luanda, Angola, on December 22, 2009. A key issue for OPEC has been high global oil and refined product inventory levels, she reports, and notes that "the overhang might be reduced by stricter OPEC compliance to its output targets and/or improved economic growth and oil consumption." OPEC's discipline to its production targets is one of the most important factors determining global oil prices in 2009, according to S&P. "However, the rise in oil prices has made it more difficult for the cartel to maintain supply discipline," reports Vital. "The IEA had reported OPEC's compliance to its volume cuts at 66% in August (when WTI oil prices averaged around $71), which is down from 83% in March (when WTI oil prices averaged $48). Still, global economies are showing signs of stabilization, and global oil demand forecasts are being revised upward," she wrote. According to Vital's findings, in August, IHS Global Insight looked for global oil demand to contract 2.09 million b/d to 84.19 million b/d in 2009 (vs. its prior forecast of a 2.21 million b/d cut to 84.01 million b/d), driven by an upward revision to China's oil consumption to growth of 0.28 million b/d to 8.47 million b/d. Meanwhile, S&P Asia estimates this pickup in Chinese oil demand is due to a combination of domestic factors, including an economic pickup, commercial inventory builds, and a new pricing policy, she wrote.
Recommended Reading
Utica Oil E&P Infinity Natural Resources Latest to File for IPO
2024-10-04 - Utica Shale E&P Infinity Natural Resources has not yet set a price or disclosed the number of shares it intends to offer.
Private Equity Gears Up for Big Opportunities
2024-10-04 - The private equity sector is having a moment in the upstream space.
After BKV’s IPO, Is Market Open to More Public SMID Caps?
2024-10-03 - The market for new E&P and energy IPOs has been tepid since the COVID-19 pandemic. But investor appetite is growing for new small- and mid-sized energy IPOs, says Citigroup Managing Director Dylan Tornay.
Sheffield: E&Ps’ Capital Starvation Not All Bad, But M&A Needs Work
2024-10-04 - Bryan Sheffield, managing partner of Formentera Partners and founder of Parsley Energy, discussed E&P capital, M&A barriers and how longer laterals could spur a “growth mode” at Hart Energy’s Energy Capital Conference.
SandRidge Recasts Management with New Chairman, CFO
2024-10-03 - SandRidge Energy has appointed Vincent Intrieri as chairman to succeed Jonathan Frates, who will transition to the role of executive vice president and CFO.