King Salman Sends Message to Bouteflika

A soldier patrols in front of the OPEC headquarters in Vienna

Kuwait- Prime Minister of the Republic of Algeria Ahmed Ouyahia received a message sent by Custodian of the Two Holy Mosques King Salman bin Abdulaziz Al Saud to President Abdelaziz Bouteflika of the People’s Democratic Republic of Algeria. It was conveyed by Minister of Energy, Industry and Mineral Resources Khalid al-Falih who was received in Algiers.

Falih reviewed with the Prime Minister areas of cooperation and joint work between the two countries, including cooperation in the efforts to rebalance the oil markets.

He and his accompanying delegation also met with Algerian Minister of Energy Mustapha Qaitouni. During the meeting, they discussed the latest developments in the world oil markets – the two countries stressed the need for adhering to oil production cuts.

They also discussed preparations related to the scheduled meeting between OPEC and non-OPEC producing countries in November in Vienna, as well as possible ways to make the meeting a success and emphasize trust in producers’ efforts.

Further, reliable sources revealed to Asharq Al-Awsat that Falih will visit three oil producing countries besides Algeria.

Last month, Falih visited Kazakhstan and discussed with his UAE and Kazakhstan counterparts the possibility of keeping the extension of oil output cut deal an option to be discussed in the upcoming meeting in November.

UAE Energy Minister Suhail bin Mohammed al-Mazroui said on Wednesday he was hopeful that the meeting will help re-balance the market in 2018. OPEC Secretariat will present a couple of suggestions to be evaluated under the framework of reaching balance in the market.

Saudi-Russian Scenario to Extend OPEC Agreement till End of 2018

Saudi Arabian Energy Minister Khalid al-Falih attends a meeting of the 4th OPEC-Non-OPEC Ministerial Monitoring Committee in St. Petersburg, Russia July 24, 2017.

Kuwait- Russia and Saudi Arabia’s remarks Thursday have revived oil markets and hopes of another year of trying to rebalance the oil market after the Kingdom showed its support for the Russian proposal to extend the current global agreement between oil-producers until the end of 2018.

Oil rose above $56 a barrel on Thursday, supported by expectations Saudi Arabia and non-OPEC member Russia would extend the curbs, but prices are still half their mid-2014 levels.

Saudi Energy Minister Khalid al-Falih was speaking in a television interview a day after Russian President Vladimir Putin said the supply reduction deal that is due to expire in March could run to the end of next year.

“In the kingdom, we have to keep all options open, President Putin agreed with us on this and expressed his readiness to extend until the end of 2018 if this is agreed, and if this is the best option,” Falih told Al Arabiya television.

Saudi Arabia and Russia helped secure a deal between the Organization of the Petroleum Exporting Countries (OPEC) and 10 rival suppliers to cut output until the end of March 2018 in an effort to reduce a glut.

Falih said he welcomed the “flexibility” shown by Russia on the issue and added the Saudi government aimed to “be flexible in leading the producing countries in and outside of OPEC to a consensus that takes the market to where we want it to be.”

Bloomberg quoted last month sources as saying that OPEC and non-OPEC producers and countries are studying the extension of the agreement for at least three months, and it is expected to extend for six months or until the end of the year.

Falih, who is also Aramco’s chairman, said on Thursday that the IPO would happen in the second half of 2018, adding that the listing would be used as a “catalyst” for opening up the Saudi economy.

“Work is ongoing to list Saudi Aramco in 2018,” Aramco’s Chief Executive Amin Nasser said at an energy forum in Moscow.

We will be looking at evaluating investors as we continue to make progress related to timing and location.”

Nasser said the Saudi government would decide on the listing venue and that there were no current talks with Russian companies on them taking part in the IPO.

The plan to float around 5 percent of Aramco in an initial public offering (IPO) is a centerpiece of Vision 2030, a wide-ranging reform plan to diversify the Saudi economy beyond oil which is being championed by Saudi Crown Prince Mohammed bin Salman.

The Saudi Crown Prince said that the IPO, which could be the world’s biggest, will value Aramco at a minimum of $2 trillion and could raise as much as $100 billion.

When talking about Shale oil, Falih said inventories were still falling despite the fact that climbing US shale production has kept a lid on price gains.

“Shale coming in and happening again in 2018 doesn’t bother me at all. The market can absorb it,” Falih said, speaking alongside Russian Energy Minister Alexander Novak on a panel at an energy forum in Moscow.

“We have seen a steady reduction in inventories. We see as we enter the fourth quarter that supply is less than demand and inventories are declining around the world,” Falih said.

Novak said he was satisfied with oil prices and Moscow would welcome other producers joining the deal to curb output.

Aramco in Talks with Russia’s Biggest Petrochemical Producer

Logo of Saudi Aramco is seen at the 20th Middle East Oil & Gas Show and Conference (MOES 2017) in Manama

Kuwait- Saudi Arabian Oil Co. Aramco is in talks with Sibur Holding PJSC, Russia’s largest petrochemical producer, about forming a joint venture in the kingdom. Saudi Aramco and Sibur are expected to sign a memorandum of understanding for the project next month when Saudi King Salman Bin Abdulaziz visits Russia.

This would be the second rubber-producing venture with a foreign firm. In 2015, Aramco announced acquiring a stake of 50 percent in a joint venture to produce rubber with the Dutch company Lanxess.

Aramco and Sibur aspire to expand in the petrochemical field since Aramco is willing to diversify income sources through introducing several projects in the refining and petrochemical fields. Sibur has been expanding in markets outside Russia since 2011 when the company reached an agreement with Sinopec to set up two rubber joint ventures.

Sinopec and Silk Road Fund bought 10 percent each in the Russian company. Aramco is linked with Sinopec in oilfield project in China while the kingdom is holding talks with China to discuss investment opportunities in the Silk Road, supported by China.

In May, the official magazine of Aramco The Arabian Sun revealed that the giant government oil company plans to establish a new unit for chemicals. The weekly magazine added that the board of directors approved to establish a new unit that handles chemical activities of the company.

Kuwait, Venezuela Deny Existence of a ‘Current Agreement’ to Extend Oil Cut

Kuwait- Each of Kuwait and Venezuela confirmed that the Organization of the Petroleum Exporting Countries (OPEC) is not nearly close to extending the current cut in production agreement, saying onlookers are trying to introduce the idea into the market.

Kuwait Oil Minister Essam al-Marzouq holds a press conference with Venezuelan Oil Minister Eulogio Del Pino in Kuwait city on Wednesday.

Oil Minister Marzouq said OPEC could hold an extraordinary meeting in mid-March if it did not reach a decision on extending oil production cuts when it meets in November.

The two ministers explained that they are against speculation in the market and false broadcasts are core to negatively affecting price rates at the moment.

OPEC and other major producers, including Russia, agreed at the end of last year to cut oil production by 1.8 million bpd to support rebalancing the market. In May they agreed to extend the agreement until March 2018.

The Venezuelan oil minister said that every time ministers hold any meetings, speculators try to create an environment that suggests there is “confirmation” of a decision to extend the agreement.

Ministers were aiming for oil prices to be at $60 or more a barrel when they first agreed last year to cut output, but crude is trading at $10 less than what they had expected, Del Pino said.

Kuwait and Venezuela are both on the joint ministerial monitoring committee, known as the JMMC, that reviews compliance with the agreed cuts. The committee will meet on Sept. 22 in Vienna, and Marzouq and Del Pino said there will be no serious discussions of an extension then.

“The JMMC meeting next week is to review the agreement and not take any decision,” Del Pino said. “Speculators are trying to create an environment that we will be taking a decision next week.”

Marzouq said the committee is currently considering six scenarios and may discuss a recommendation to ease production targets for countries that aren’t complying fully with the cuts accord. Ecuador announced in July that it won’t be able to meet its target because it needs to boost its revenue.

Nigeria, which together with Libya is exempt from OPEC’s cuts deal due to internal strife, has agreed to join the agreement if it reaches and sustains crude production at 1.8 million barrels day, Kuwait’s Marzouq said.

Nigeria’s oil minister has assured that he will attend the next JMMC meeting, while Libya will send a senior official, probably the head of its national oil company, Marzouq said.

Saudi Arabia Seems Open to Expanding Products’ Cut

Kuwait- Saudi Minister of Energy, Industry, and Mineral Resources Khaled al-Faleh discussed with his counterparts in Venezuela, UAE and Kazakhstan the possibility to consider expanding production cuts as an options in the next meeting of producers in November.

The Saudi ministry sent three separate press statements on Sunday and Monday reporting that Faleh and the three ministers agreed on keeping the expansion an option given the market’s need and circumstances.

Faleh and his Kazakhstani counterpart agreed that the option to expand efforts to re-balance the market will be studied on the right time – they also stressed continuous cooperation in the energy field especially relating the two potential projects in Kazakhstan, stated the Saudi ministry.

In a separate statement on Monday, the ministry stated that Faleh agreed with the Emirati counterpart on possibility of expanding the products cut after March 2018, based on basic factors in the market.

In a related matter, reliable sources reported on Monday that Saudi Arabia will supply full contracted volumes of crude oil to at least five north Asian term buyers in October, while a sixth regional refiner was notified of cuts to its October Arab Extra Light supplies.

The October allocations are in contrast to the steep cuts in the September allotments and reaffirms Saudi Arabia’s desire to maintain its Asian market share. Saudi Arabia is the world’s biggest crude exporter.

Saudi Arabia is likely taking advantage of the lower refinery run rates and ample crude inventories in the United States, a trader who specializes in Middle East crude supplies said.

A source from the sixth Asian refiner said that its October supply of Arab Extra Light crude was cut by 10 percent, likely because of repair work in September at Saudi Arabia’s Abqaiq oilfield, which produces the grade.

Goldman Sachs: 50% of Harvey-Affected Refineries Could Return Thursday

Goldman Sachs: 50% of Harvey-Affected Refineries Could Return Thursday

Kuwait- Reconstruction in the aftermath of Hurricane Harvey’s deadly gash through Texas could prove positive for the oil market in a few months, according to Goldman Sachs Group Inc.

“More than half of the US oil refining capacity that was shut because of Harvey’s winds and rain will be back online by Thursday,” Goldman analysts said in a Sept. 5 report.

Dry post-storm weather should help minimize the loss of demand for gasoline and diesel, according to the bank.

As refineries along the Gulf Coast restart, about 2 million barrels a day of capacity will remain offline by Thursday, down from a peak of 4.6 million, Goldman estimated; about 1.4 million could remain offline through mid-September.

While fast recovering, the refining outages heavily outweigh production losses, which are about 320,000 barrels a day between the Gulf of Mexico and south Texas’s Eagle Ford shale formation, Goldman said. In total, the storm will have added about 40 million barrels to US crude stockpiles in the month following Harvey’s landfall, according to the bank. The storm will reduce gasoline supplies by 16 million and diesel by 13 million.

The Organization of the Petroleum Exporting Countries (OPEC) and producers seek to reduce world oil stocks, especially in the industrialized countries, to five-year average; Hurricane Harvey may, however, hinder this and increase the time needed to balance the market.

Harvey hurricane damage has been on the US refining sector after Saudi Aramco’s wholly-owned subsidiary, Motiva Enterprise, announced last week it would completely suspend work at the US-based Port Arthur refinery because of the hurricane.

The 603,000 barrel per day (bpd) Port Arthur Refinery was shut on Wednesday due to flooding from Tropical Storm Harvey.

In a statement last week, Motiva said it “cannot provide a timeline for restart at this time.” The oil company said it will begin assessing the refinery “as soon as the local area flooding has receded,” although Motive is uncertain about how long it will take for floodwaters to diminish.

After Harvey, Aramco Shuts Down Biggest Refinery in US

Kuwait- Damages resulting from Harvey storm on the US refining sector mounted as Motiva Enterprises – owned by Aramco – announced that it would completely halt operating in Port Arthur refinery because of the flood.

“At 5 a.m. on Wednesday, Motiva began a controlled shutdown of the Port Arthur refinery in response to increasing local flood conditions,” the company said – it added that restarting the refinery would depend on flood waters receding.

Barclays clarified in a research memorandum that the US stocks data this week and the next one won’t be accurate, which means that the data won’t be clear for a period of time. This would affect oil prices that are influenced by stocks’ data.

Goldman Sachs estimated in its statement issued on Monday that the storm would increase domestic crude oil availability by about 1.4 million barrels a day if the case remained the same. The bank added that until August 27, refineries of 3 million barrels per day capacity were shut down, knowing that they represent 16.5 percent of the overall refining capacity in the US.

Bloomberg revealed on Tuesday that the capacity of refineries that shut down is 2.35 million barrels a day. Some refineries haven’t been shut down yet (by the time Bloomberg published its report) but some units were and refining was curbed. Among them is the 605,000 barrel-per-day (bpd) Port Arthur, Texas, plant, Motiva Enterprises.

Goldman Sachs stated that 4.4 million barrels of US refining capacity has been shut by Harvey on Tuesday, that represents nearly 23 percent of US refining production. Restarting plants under even the best conditions can take a week or more.

The Energy Information Administration in US issued a report on Wednesday, revealing a sharp drop in crude stocks in the US last week despite the increase of refineries’ product.

Dow, Aramco Possible Equity Equalization of Sadara

Kuwait – It might be difficult to put shares of Sadara Chemicals in a public offering after US company Dow Chemical signed an agreement with Saudi Aramco to boost its interest to 50 percent.

Dow owns a 35 percent stake in Sadara Chemical and said it had signed the agreement of $20 billion joint venture with Aramco.

Sadara is Chemical Company of a joint venture developed by the two companies. The current equity ownership split is 65 percent Saudi Aramco and 35 percent Dow. If the potential transaction is concluded as presently proposed, Dow and Saudi Aramco would each hold a 50 percent equity stake in Sadara.

The announcement on Monday was a surprise especially after Sadara’s chief executive Ziad al-Labban made remarks earlier this year in which he said Saudi Aramco sought to cut its share in the venture.

Saudi Aramco currently owns 65 per cent of the company and they want to equalize it with Dow’s share of 35 per cent.

A statement gave no update on the listing of Sadara and did not disclose any financial terms.

Aramco was planning on selling its 30 percent share of Satorp refinery project with Total but after Sadara’s announcement on Monday seems that Aramco won’t go ahead with its plans to sell its joint ventures in the kingdom to Saudis.

Sadara said this month it had commissioned the last plant at its petrochemicals complex in Jubail, in eastern Saudi Arabia.

Also on Monday, Dow and Aramco announced a non-binding Memorandum of Understanding (MOU) that sets forth a process for Dow to acquire an additional 15 percent ownership interest from Saudi Aramco in Sadara.

The Sadara chemical complex, the largest of its kind ever built in a single phase, is currently operating all of its 26 world-scale units that manufacture a portfolio of valued-added performance plastics and specialty chemicals.

The complex produces more than three million metric tons of performance-focused products serving Packaging, Transportation, Infrastructure and Consumer markets, which will add new value chains to Saudi Arabia’s vast hydrocarbon reserves, resulting in the diversification of the economy and region.

Saudi Aramco President and CEO Amin Nasser said that Aramco is proud of the partnership with Dow given its preeminent stature among the world’s leading chemical companies.

“Dow’s larger stake in Sadara is an endorsement of the Kingdom’s vibrant ecosystem, and signals Dow’s confidence in our partnership as a model of mutually beneficial foreign direct investment. The time is right to fully leverage Dow’s global leadership to further contribute to the Kingdom’s economic transformation in line with Vision 2030,” Nasser added.

Dow’s chairman and CEO Andrew Liverisn announced that Sadara is the result of a game-changing partnership between Saudi Aramco and Dow by delivering market-driven solutions that support the diversification of the country’s economy.

“Increasing our equity stake in this iconic joint venture is a powerful example of our strategic partnership with Saudi Aramco and is yet another accelerator in Dow’s long-term growth strategy designed to capture growing consumer-led demand in our key end-markets of transportation, infrastructure, packaging, and consumer products in developing regions,” according to Liverisn.

The potential equity equalization would occur following the later of two events the intended separation of the Materials Science Company, within 18 months after the close of the merger of equals between Dow and DuPont on August 31.

It is also completed once Sadara completed the Creditors’ Reliability Test, which is part of the limited-recourse financing used to fund the Sadara project development.

The anticipated financial impact of the potential transaction is not being disclosed as there is no change in Sadara’s financial structure and governance.

OPEC Invites Iraq, the UAE to Vienna this Month

Khobar – The Secretariat of the Organization of the Petroleum Exporting Countries (OPEC) has extended invitations to four OPEC and non-OPEC countries to attend a technical meeting to be held in Vienna this month, to monitor the commitment to an agreement to reduce global oil production, well-informed sources told Asharq Al-Awsat newspaper.

The sources said that the invitation to attend the OPEC Technical Committee meeting on August 21 was sent to Iraq and the United Arab Emirates from OPEC, and to Kazakhstan and Malaysia from outside the Organization.

Earlier this week, the four countries attended a two-day meeting in Abu Dhabi with representatives of the Technical Committee to discuss reasons behind their low rate of commitment to the agreement.

The Organization of the Petroleum Exporting Countries, Russia and other producers are cutting output by about 1.8 million barrels per day (bpd) until March 2018 to get rid of an excess and support prices.

A panel comprising Russia, Kuwait and Saudi Arabia, plus officials from OPEC’s Vienna headquarters, met individually with officials from Iraq, the UAE, Kazakhstan and Malaysia.

“Discussions were conducted in a constructive atmosphere and proved fruitful,” OPEC said in a statement.

Saudi Energy Minister Khaled al-Falih said on Wednesday he discussed efforts to stabilize oil markets with Iraqi Oil Minister Jabbar al-Luaibi during a meeting in Saudi Arabia.

In a statement, the Saudi Energy Ministry said that the meeting touched on several issues, including investment opportunities between the two countries.

Photos posted by Al-Falih on Twitter showed that a number of vice presidents of Aramco attended the meeting.

Sources told Asharq Al-Awsat that some of the countries attending the Abu Dhabi meeting expressed dissatisfaction with the inaccuracy of the sources used by OPEC to measure the commitment to the production reduction agreement.

The sources added that representatives of Iraq and the UAE were alarmed by the figures provided by the secondary sources of the technical committee responsible for monitoring oil production, while the official figures show that the level of their commitment was in line with the agreement.

“The UAE, Iraq, Kazakhstan, and Malaysia all expressed their full support for the existing monitoring mechanism and their willingness to fully cooperate with the JTC and JMMC in the months ahead in order to achieve the goal of reaching full conformity,” OPEC said in its statement.

Saudi Arabia to Turn Table on Oil Producers in Second Half

Saudi Arabian Energy Minister Khalid al-Falih attends a meeting of the 4th OPEC-Non-OPEC Ministerial Monitoring Committee in St. Petersburg, Russia July 24, 2017.

Kuwait- Saudi Energy Minister Khalid al-Falih seems to be frustrated with the current situation in the oil market, according to his latest statement in the Joint OPEC-Non-OPEC Ministerial Monitoring Committee meeting in St Petersburg.

Falih has the right to be dismayed because some countries are only partially complying with the oil output cut agreement while others are complying with more than the required percentage, such as Saudi Arabia.

Further, prices remain under USD50 since the last ministerial meeting of OPEC in May, despite exerted efforts to reduce production.

Falih said that Saudi Arabia announced it would go further than cutting its production and would also limit its exports at 6.6 million barrels a day in August compared to 6.54 million barrels in March. This announcement boosted prices that rose above USD50 in Tuesday’s session.

Iraq’s Weak Compliance

Iraq’s compliance with the oil output cut is still weak, reaching 30 percent in June as revealed by secondary sources adopted by OPEC although official figures announced by Iraq show a percentage exceeding 90 percent.

Falih has exerted tremendous efforts with Iraq, traveling in May for the purpose of persuading officials of the importance of extending the agreement to next March after it ended in December.

But Baghdad doesn’t seem to interact with any attempt to reduce oil output because it is planning to increase production energy to 5 million barrels per day by the end of 2017. For this, Iraq is among first countries that don’t wish that the agreement be extended after March, similar to Kazakhstan.

Libya and Nigeria

Falih faces challenges not only with weak-complying countries but also with states exempted from the reduction agreement: Libya and Nigeria. He stated that OPEC supports restoring production in Libya and Nigeria but at the same time the Ministerial Monitoring Committee should follow up effects of increasing production on the market.

Nigeria has agreed to limit its production to 1.8 million barrels a day – Libya has a target of 1.25 million barrels a day and has announced that it won’t join the agreement until reaching it.

Sole Recommendation

Russia shows more frustration than Saudi Arabia when it comes to weak compliance of countries. Russian Energy Minister Alexander Novak told reporters that an additional 200,000 bpd could be removed from the market if compliance with a global deal to cut output was 100 percent.

In conclusion, the committee agreed upon a sole recommendation. Kuwait, chairing the committee, stated that OPEC might call for an extraordinary meeting to add Nigeria to the agreement and might extend it after March if markets failed to re-balance.