New base 16 may energy news issue 1030 by khaled al awadi

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NewBase 16 May 2017 - Issue No. 1030 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Saudi Arabia, Russia Ggree on Extending Oil Cuts
Through Next March 2018
Bloomberg News + NewBase
Saudi Arabian Energy Minister Khalid Al-Falih discusses the OPEC oil production cuts, the
success they've seen in the agreement and being in favor of extending the cuts. (Source:
Bloomberg)
Saudi Arabia and Russia said they favor prolonging oil-output cuts by global producers through
the first quarter of 2018, setting a firmer timeframe for a likely extension of the curbs. Crude prices
jumped.
Longer cuts at already agreed-upon volumes are needed to reduce global inventories to the five-
year average, the energy ministers of the world’s biggest crude producers said at a joint press
briefing in Beijing on Monday. They will present their position to other countries ahead of a
meeting between OPEC and other producing nations later this month in Vienna.
Russia and Saudi Arabia, the largest of the 24 producers that agreed to cut output for six months
starting in January, are reaffirming their commitment to the deal amid growing doubts about its
effectiveness. Surging U.S. production has raised concern that the Organization of Petroleum
Exporting Countries and its partners are failing to reduce an oversupply. Oil has surrendered
about half its gains since their accord late last year.
“The agreement needs to be extended as we will not reach the desired inventory level by end of
June,” Saudi Arabia’s Khalid Al-Falih said during the event with Russia’s Alexander Novak.

“Therefore, we came to the conclusion that ending will probably be better by the end of first
quarter 2018.”
Oil futures rose after the ministers spoke. West Texas Intermediate climbed as much as 3.4
percent to $49.45 a barrel on the New York Mercantile Exchange, while global benchmark Brent
increased as much as 3.3 percent to $52.52 on ICE Futures Europe. Both remain more than 50
percent below their 2014 peak.
“It’s right that the decision was made not for two, three, four months but for nine months,” Russian
President Vladimir Putin said later Monday. “That is the most important condition for stability,” he
said at a separate press conference in Beijing. There’s a “good chance” that Russia, a non-OPEC
nation, will extend its cooperation with the organization because Saudi Arabia wants price stability
and is complying with its obligations in the deal, he said.
OPEC members agreed in November to cut 1.2 million barrels a day of oil production. Several
non-members, including Russia, agreed in December to contribute a combined 600,000 barrels a
day of output reductions.
Amid the cutbacks, production in the U.S., which isn’t part of the agreement, has risen to the
highest level since August 2015. But American crude inventories are finally showing some signs of
shrinking, falling for the past five weeks from record levels at the end of March.

Kazakhstan, the biggest producer in the former Soviet Union after Russia, isn’t ready to join an
extended accord automatically, its Energy Minister Kanat Bozumbayev said Monday, according to
Interfax. The Central Asian nation will discuss its level of participation at the Vienna gatherings on
May 24 and 25, the news service reported, citing the minister.
“Preliminary consultations show that everybody is committed” to the output agreement and no
nation is willing to quit, Russia’s Novak said. The country’s Energy Ministry has held initial
discussions with Russian companies on the matter, he said.
While the curbs by producers are working, “we are not where we want to be” in bringing global
inventories down “gently” below the five-year average, Al-Falih said. “We have, before coming to
this announcement today, reached out to many of our colleagues within and outside OPEC, and I
think there is general consensus that this is the right approach.”
The deliberations come as two OPEC members exempt from the cuts boost output. Libya’s crude
production has risen to more than 800,000 barrels a day, the most since 2014, while Nigeria’s
200,000-barrel-a-day Forcados pipeline is ready to export again after almost continuous halts
since February 2016. It’s unclear whether the countries would still be exempt if the deal is
prolonged.

Libyan Oil Output Creeps Higher Ahead of OPEC Decision on Cuts
by Salma El Wardany
Libya is ratcheting up oil output with less than two weeks to go before the world’s biggest
exporters decide whether to extend production cuts to clear a supply glut.
The OPEC member with Africa’s largest crude reserves is pumping more than 814,000 barrels a
day, thanks partly to rising output from two fields that re-started last month, Jadalla Alaokali, a
board member at the National Oil Corp., said Sunday by phone.
Libya was producing about
700,000 barrels a day at the
end of April, he said at that
time. Output from the
politically divided country is
at its highest since October
2014 when it pumped
850,000 barrels a day, data
compiled by Bloomberg
show.
The revival in Libyan
production coincides with
efforts by the Organization of
Petroleum Exporting
Countries and allied
suppliers to curtail output.
OPEC ministers plan to meet on May 25 to decide whether to extend cuts in their production
beyond June.
The recent increase in Libyan output, together with a surge in North American shale production
and signs of recovery in Nigeria, may undercut OPEC’s strategy to re-balance the market and
prop up prices.
Libya pumped as much as 1.6 million barrels a day before an uprising in 2011, and it was
exempted from OPEC’s cuts due to internal strife. It’s targeting production of 1.32 million barrels a
day by the end of this year, the NOC said last week in a statement.
Crude from Sharara, Libya’s biggest field, started flowing in late April to the Zawiya refinery
following a three-week closure. El Feel, a field also known as Elephant, re-started last month as
well, after having been halted since April 2015.
OPEC and other major producers have reached a preliminary agreement to extend limits on
output, the state-run Kuwait News Agency reported on Sunday, citing a statement by Oman’s Oil
Minister Mohammed Al Rumhy. Oman is a member of a committee monitoring compliance with
the cuts.
Al Rumhy’s counterparts from Iraq and Algeria said Thursday in Baghdad that OPEC and its allies
support extending the cuts for another six months. The two biggest producers participating in the
curbs, OPEC’s Saudi Arabia and non-member Russia, both signaled willingness on May 8 to
prolong the deal.

Gulf states grid interconnection to deliver $33 billion in savings
Oman Observer - Conrad Prabhu –
Grid interconnectivity between the Gulf states, including the Sultanate of Oman, will generate a
staggering $33 billion in investment, economic and energy savings for the six member bloc over
the next 25 years, according to the GCC Interconnection Authority (GCCIA) — the entity that owns
and administers the super grid interconnecting the national grids of individual member states.
A stock company subscribed by the six GCC states, the GCCIA was established in 2001 initially
with a modest mandate to come to the aid of members facing blackouts such as supply
contingencies. Its remit has grown to include facilitation of commercial electricity exchanges,
energy trading and potential interconnections with countries outside of the bloc.
“The (GCCIA) board aims to save more $33 billion for the GCC countries during the next 25 years
by reducing the costs of building power plants, reducing operation and maintenance costs,
reducing operational reserves, avoiding interruptions during emergencies, and reducing carbon
emissions,” commented Dr Matar al Neyadi, Chairman — GCCIA.
Savings accruing to the GCC states as a result of interconnection amounted to around $404
million in 2016 alone, he noted in the Authority’s newly published annual report for the year.
According to the report, grid interconnection contributed in excess of $1 billion in savings to the
Gulf states over the past three years. Most notably, the supergrid responded with emergency

supplies in all 157 instances of blackouts and “system incidents” that were recorded across the
bloc in 2016. Of this total, the Sultanate accounted for 15 of these emergencies during the past
year.
Kuwait logged a total of 50 system incidents — the highest last year, followed by the United Arab
Emirates (37) and Qatar and Saudi Arabia (25 each). The interconnected supergrid’s response to
each of these contingencies was seamless, swift and effective, the Authority noted.
Buoyed by the initial success of the interconnection initiative, the Authority has since kicked off
plans for a further expansion of the project. To this end, an Interconnection Expansion Study was
launched last year.
The aim of the study is three-fold: to assess the technical and economic feasibility of developing
the interconnector between the GCC states, expand it beyond the GCC to other nations, and to
have in place generation capacity connected to the interconnector to feed all member states.
Further, with a view to delivering on its fundamental commitment to securing the emergency
electricity requirements of the bloc, the Authority has approved the framework governing the
Installed Capacity Obligation (ICO). The ICO affixes an obligation upon member states to satisfy
demand growth over the April 1, 2021- March 31, 2022 timeframe.
The ICO stipulates a combined requirement aggregating 92,184 MW of generation capacity with a
corresponding installed reserve margin of 4.9 per cent. “The coincident peak load is projected at
87,866 MW while the available capacity as per the capacity plans submitted by the member states
is 107,065 MW.
This means that GCC member states will have an extra capacity of 14,881 MW. This excess
capacity creates opportunity to exchange capacity between member states,” said the Authority in
its annual report.
The GCCIA’s longer-term vision is to interconnect with other grids and countries to form a “strong
international grid system” and to support the development of a strong energy market, it added.

Indonesia: Eni starts production from Jangkrik Project, deep
offshore Indonesia, ahead of schedule.. Source: Eni
Eni has started gas production from the Jangkrik Development Project, in deep water offshore
Indonesia, ahead of schedule. The Project comprises the gas fields Jangkrik and Jangkrik North
East, located in the Muara Bakau block, Kutei basin, in the deep water of Makassar Strait.
Production from ten deep-water subsea wells, connected to the newly built Floating Production
Unit (FPU) 'Jangkrik', will gradually reach 450 million standard cubic feet per day (mmscf/d),
equivalent to 83,000 barrels of oil equivalent per day (boed).
The gas, once processed onboard the FPU, will flow via a dedicated 79km pipeline to the
Onshore Receiving Facility, both built by Eni, and then through the East Kalimantan
Transportation System, finally reaching the Bontang gas liquefaction plant.
Gas volumes from Jangkrik will supply the local domestic market as well as the LNG export
market, providing a significant contribution to Indonesia’s current energy requirements and future
economic development.
Production start-up within three and a half years from the sanctioning of the project is further
confirming Eni's capabilities in fast-track developments. It is a benchmarking record in the industry
and a major step forward for Eni's activities in Indonesia.
'We are very proud of what we have achieved with the Jangkrik Development Project', said Eni
CEO Claudio Descalzi. 'The completion of the project and the start-up of production ahead of
schedule further confirm Eni’s strategy and global capabilities.
Furthermore, it provides the opportunity for the Jangkrik Floating Production Unit to become a hub
for the development of our nearby gas discovery Merakes (Eni 85%, Pertamina 15%), which could
start production within the next two years. We will consolidate our near field exploration strategy
and operating model and maximize the integrated development of our projects also in Indonesia'.
Eni is the operator with a 55% stake of the Muara Bakau PSC through its subsidiary Eni Muara
Bakau. The other partners are ENGIE E&P (through its subsidiary GDF SUEZ Exploration

Indonesia) with 33.334% and PT. Saka Energi Muara Bakau with 11.666%. All the activities are
carried out in coordination with SKKMigas, the entity representing the Government of Indonesia.
Eni has been operating in Indonesia since 2001 and currently has a large portfolio of assets in
exploration, production and development.
Production activities are located in the Mahakam River delta, East Kalimantan, through the
participated Company VICO Ltd (Eni 50%, Saka Energi 50%) operator of the Sanga Sanga PSC
that provides an average equity production of 14,000 barrels of oil equivalent per day.
Jangkrik fields are located in the Muara Bakau working area, in Makassar Straits
offshore Kalimantan, Indonesia, approximately 44 miles (70 kilometers) from
Balikpapan.
The natural gas reservoir lies by 2449 m depth in 425m of water depth.
o Jangkrik Complex o
o Operator: o Eni
o Water Depth: o 120 m / 396 ft
o Region: o Asia – SouthEast
o Country: o Indonesia
o WD @ FPU 120 m.
o WD @ Subsea 500m.
ENI Indonesia Limited is becoming “kontraktor kontrak kerja sama” (KKKS) or production sharing
contract (PSC). In the Muara Bakau natural gas field, the working interests within the joint venture
are shared between :
– Eni from Italy 55% who is the operator
– GDF-Suez from France 45%
Eni discovered hydrocarbons on Jangkrik on April 6, 2009, which was drilled in 1,312 feet (400
meter) of water by the Jack Bates semisub.
Development
During 2011, the gas development plan for the Jangkrik (55% Eni) operated project was approved
by the country’s competent authorities.
Operations for developing the offshore area of the Jangkrik field include
o drilling production wells,
o installing a floating production unit for treating the gas and condensates and
o constructing transportation facilities to connect the field to the existing onshore network in order to
transport gas to the Bontang gas plant, while the condensates will be transported to existing
treatment plants in the area.

Exploration
During 2011, exploration operations produced positive results with the Jangkrik North East gas
discovery in the Muara Bakau block (55% Eni, which is also the operator), in the Kutei Basin.
More specifically, in July 2011 Eni discovered new hydrocarbon deposits in the Indonesian
offshore area when it successfully drilled an exploration well in the Jangkrik North East area,
situated in the Muara Bakau block, approximately 15 kilometres from the Jangkrik field.
Deepwater EPCI Projects and Offshore Drilling
o EPCI-1, for the construction and installation of barge floating production unit (FPU),
o EPCI-2, to build onshore gas reception facilities, pipelines, and supporting equipment.
o EPCI-3, to build subsea production systems, control systems, and other equipment, (scope of supply
includes subsea trees, manifolds, jumpers and connection systems, umbilicals, tooling and associated
topside and subsea controls systems.)
In addition to implementing the above EPCI projects, ENI as PSC will also implement offshore
drilling for 11 development wells.
Investment and Expected Revenue
The projects have an estimated value of U.S. $ 4.13 billion.
The projects are expected to contribute up to U.S. $ 5 billion in state revenue.
Gas Production Targets
The Government of Indonesia through Indonesian oil and gas regulator SKK MIGAS targeting the
Jangkrik field and Jangkrik North East field can produce 450 million standard cubic feet of gas per
day (MMSCFD).
Start production in early 2017, and production peak 450 MMSCFD for 6 years. After peak
production, then these fields will decline naturally (decline rate). This field is expected to
produce for 14 years.
At present, the corresponding plan of development / POD agreed, about 70% of gas from the
block will be exported, while only 30% domestic allocation. SKK Migas will seek 47% of gas from
the block allocated for domestic needs.
Gas from the Jangkrik fields will be used to power sector and industry in
o East Kalimantan,
o Java,
o South Sumatra and central Sumatra,
o North Sumatra and
o Aceh
in the form of liquefied natural gas (LNG) and gas pipelines. (Pelaksana Tugas Kepala SKK
Migas, Johanes Widjonarko said to Bisnis Indonesia newspaper on 11 Feb 2014).

Japan oil firms lift annual spending on refineries, cut exploration
By Osamu Tsukimori | TOKYO
Some Japanese oil companies have raised their capital investment plans for the year that started
on April 1, putting money into refineries and other downstream projects, while others have focused
on cutting spending on exploration and production.
The offset of the refinery expenditures and some large upstream developments has lifted the
planned total investments by Japan's five refiners and developers to 1.24 trillion yen ($10.9 billion)
for the 2017/18 fiscal year, up 0.3 percent from the previous year, Reuters calculations showed.
That compares with a 15 percent drop the previous year as the companies continued to deal with
domestic oil consumption that has been in decline since a peak hit in 1999 due to a shrinking
population and adoption of other energy sources.
"With the decline in gasoline use due to hybrid vehicles and so on, the oil industry is in a tough
environment where they have to tackle supply surplus and face smaller margins," said Kaname
Gokon, strategist for commodities brokerage Okato Shoji.
Adjustments to oil plants to meet those domestic market realities look to be driving some of
investments. Idemitsu Kosan on Monday, for example, raised investment plans for the 2017/18
year by 38 percent to 98 billion yen because of a large scheduled plant maintenance.

And while Japan's biggest refiner, JXTG Holdings, is curbing investment by about 30 percent over
the next three fiscal years to around a total of 1 trillion-1.1 trillion yen, it is prioritizing the mid to
downstream, or refining, sectors.
JXTG, formed on April 1 by a merger of JX Holdings Inc and TonenGeneral Sekiyu KK, is cutting
its aggregate upstream investments roughly by half during the next three years to around 300
billion yen.
"In the upstream sector we will carry out investment in a limited number of low-risk projects,"
JXTG Holdings President Yukio Uchida said. Inpex Corp likewise is cutting its exploration
expenditures by 50 percent, while boosting development spending.
Globally, an oil price slump that began in mid-2014 has caused top oil companies to curb
upstream investments and drastically cut costs.
Cosmo Energy Holdings has said it will raise its capital investment by 6 percent, but Director
Kenichi Taki projected a steep decline in spending in the business year from April 2018 as main
investments such as for an offshore oilfield in Abu Dhabi, come to a breather.
Both Cosmo and JXTG said they expected investment figures to drop in the years following this
one after a temporary rise in spending for ongoing large projects.

South Africa reviewing five shale gas exploration applications
Source: Reuters
Recommendations for South Africa's first shale gas exploration licences in the semi-arid Karoo
basin will be finalised soon, after environmental objections delayed the process, a senior
government official said on Monday.
Environmentalists have strongly criticised exploration prospects in the sparsely populated Karoo,
renowned for its rugged scenery and which is home to species such as the mountain zebra and
riverine rabbit, one of the rarest mammals in the world.
Royal Dutch Shell, Falcon Oil and Gas and Bundu Gas & Oil are among five applications being
reviewed by the regulator, acting Petroleum Agency SA (PASA) Chief Executive Lindiwe Mekwe
told Reuters.
PASA will make recommendations to the ministry of mineral resources, which will take a final
decision on the licenses as South Africa looks to augment dwindling offshore gas reserves and
help diversify its energy mix away from coal-fired plants supplying most of it electricity needs.
'We anticipate that the minister will be in a position to make a determination during the second or
third quarter,' Mekwe said.
'If the decision is made this year the exploration rights will be valid for a period of three years,
exploration activities should commence within three years,' she said.

U.S. shale oil output to rise for sixth straight month in June
REUTERS + NewBase
U.S. shale production is expected to rise for the sixth consecutive month in June, government
data showed on Monday, as producers continued to increase drilling activity because of higher oil
prices.
June output is set to rise by 122,000 barrels per day to 5.4 million bpd, according to the U.S.
Energy Information Administration's drilling productivity report. That would be the highest
production since May 2015.
OPEC and non-OPEC members are expected to agree on an extension to a global supply cut
during a meeting in Vienna next week. On Monday, Saudi Arabia and Russia, the world's top two
oil producers, backed an extension for a further nine months until March 2018 to rein in a global
crude glut.
However, analysts have said that the higher U.S. shale production may be a challenge to global
rebalancing efforts. Back in the December forecast, released two weeks before OPEC members
reached the deal to first cut supply, the EIA expected that output would fall by some 20,000 bpd to
4.5 million bpd.
In the June figures, the EIA revised its December numbers up to 4.79 million bpd. That would
mean the December to June production in U.S. shale gained by nearly 617,000 bpd. In the
Permian play located in West Texas and New Mexico, oil production is expected to rise by 71,000
bpd to a record 2.49 million bpd.
In the Eagle Ford region, located in South Texas, output is set to rise by 36,000 bpd to 1.28 million
bpd, the most since April 2016. Production in the Bakken play in North Dakota is forecast to rise
5,800 bpd to 1.03 million bpd,
its second monthly rise.
The EIA projected gas output
would increase in all of the big
shale basins in June.
Output in the Marcellus
formation in Pennsylvania and
West Virginia, the biggest shale
gas play, was set to edge up to
a record high near 19.3 bcfd in
June, an eighth consecutive
increase. Production in the
Marcellus was 18.0 bcfd in the
same month a year ago.
EIA also said producers drilled 941 wells and completed 754 in the biggest shale basins in April,
leaving total drilled but uncompleted wells (DUCs) up 187 at a record high 5,721, according to
data going back to December 2013.

US Petroleum product exports from Central Atlantic states
reache a record high … Source: U.S. Energy Information Administration
Exports of finished petroleum products from the Central Atlantic region of the United States
(Petroleum Administration of Defense District, or PADD 1B) reached a record high in February
2017.
Increased exports were driven by lower prices for several petroleum products in the Central
Atlantic region compared with prices in other regions in the Atlantic Basin. Distillate fuel and total
motor gasoline, the two most-consumed petroleum products globally, were among the products
that showed an increase in exports.
Distillate exports from Central Atlantic states totaled more than 103,000 barrels per day (b/d) in
February, a record high for the month.
Distillate fuel is usually imported into the Northeast during the winter months because 22% of
households in the Northeast use distillate fuel for home heating, a higher proportion than in any
other U.S. region.
However, because temperatures were warmer than normal in February 2017, domestic demand
was relatively low.
Europe received 50% of the total distillate exported from Central Atlantic states in February 2017.
The remainder went to Central and South America (28%) and Africa (22%).
Total motor gasoline exports from Central Atlantic states totaled more than 31,000 b/d in
February, much more than the 1,000 b/d average of the previous five Februarys. Nearly all of the
gasoline exports from Central Atlantic states went to countries in Africa.

The atypical volume of petroleum product exports from Central Atlantic states in February 2017
occurred because the region’s prices of these petroleum products were more competitive than
normal compared with product prices in other regions in the Atlantic Basin.
Lower relative prices in the Central Atlantic made exports to countries in Africa, Central and
South America, and Europe more attractive.
In the beginning of 2017, gasoline and ultra-low sulfur diesel (ULSD) futures prices in New York
Harbor weakened against gasoline and ULSD spot prices in Northwest Europe, a major trading
hub in the Atlantic Basin market. Comparing futures prices with spot prices helps to account for
transit times associated with shipping products across oceans.
The Northwest Europe gasoline spot price exceeded the reformulated blendstock for oxygenate
blending (RBOB) front-month futures price on the New York Mercantile Exchange (NYMEX) in
February (Figure 3), the first such premium for that month since at least 2010.
The price spread between the NYMEX ULSD front-month futures price and the Northwest Europe
ULSD spot price declined to the lowest level for the month of February since the underlying
commodity of the NYMEX ULSD futures contract switched to a distillate with lower sulfur
specifications in May 2013.

Source: U.S. Energy Information Administration, based on Bloomberg L.P.
Note: ULSD is ultra-low sulfur diesel. RBOB is reformulated blendstock for oxygenate blending and
represents the petroleum component of gasoline used in many parts of the United States. NYMEX is the
New York Mercantile Exchange.
The gasoline price premium in Northwest Europe in February likely reflected differences between
inventory growth in Europe and in the United States during the first two months of the year.
Gasoline inventories at the trading hub of Amsterdam-Rotterdam-Antwerp (ARA) in northwest
Europe were lower than the previous year because of higher exports from Europe to Africa and
other regions.
In contrast, total gasoline stocks reached a record high on February 10, 2017, in the New
England and Central Atlantic states (PADDs 1A and 1B, respectively). The decline in U.S.
gasoline consumption in January and February kept gasoline inventories high.
Distillate stocks in the ARA region have been lower than last year’s level for several months. In
New England and Central Atlantic states, however, distillate stocks were higher than last year’s
level in February, likely because of decreased demand associated with warmer temperatures.
In Europe, colder-than-normal temperatures, higher distillate exports from the region, and an
accelerated expansion of the manufacturing sector in the Eurozone area may have contributed to
lower distillate inventories than last year and to higher northwest Europe ULSD spot prices
compared with NYMEX ULSD front-month futures prices than in recent years.

NewBase 16 May 2017 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices build on gains on expectation of extended crude supply cut
Reuters + NewBase
Oil prices rose on Tuesday, extending gains after a joint announcement by top producers Saudi
Arabia and Russia to push for an extension of supply cuts until the end of March 2018. Brent
crude futures were at $52.05 per barrel at 0129 GMT, up 23 cents, or 0.44 percent, from their last
close.
U.S. West Texas Intermediate (WTI) crude futures were at $49.10, up 25 cents, or 0.51 percent
from their last settlement.
In order to rein in a glut, Saudi Arabia and Russia said on Monday that they agreed the need for a
1.8 million barrels per day (bpd) crude supply cut to be extended for nine months, until the end of
March 2018.
However, there is no final deal yet despite the pledge by Saudi Arabia - the world's top exporter
and de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC) - and top
producer Russia, as the 12 remaining OPEC members and other producers participating in the
cuts have to agree to the extension during a meeting on May 25.
"The pressure is now on officials to deliver on these pledges," said James Woods, global
investment analyst at Australia's Rivkin Securities.
Woods also said that oil supplies would likely remain plentiful despite an extended cut.
"As we have seen over the past six months, rising U.S. production and record inventories have
kept upside limited and a nine month extension at this stage is unlikely to break that," he said.
U.S. bank Goldman Sachs said the deal "will likely further extend the oil price rebound... although
the rally so far... has remained modest compared to the move that occurred last year when the
OPEC cuts were first announced."
Oil price special
coverage

Prices are up by 2.3 percent since the announcement of the planned extension on Monday,
compared with an over 15 percent jump in the two days following the announcement of the initial
cut on November 30, 2016.
Goldman said that beyond the ongoing rise in U.S. oil production, which is up over 10 percent
since mid-2016 to 9.3 million bpd, there was also an increase in output from within OPEC by
members who were exempt from the cuts, or where forceful disruptions had ended, including
Libya and Nigeria.
Holding for longer
Oil held gains following the highest close in more than two weeks, after Saudi Arabia and Russia
stoked expectations OPEC-led production cuts might be extended for nine months.
Futures climbed in New York. Prices
jumped 2.1 percent Monday after
energy ministers from Saudi Arabia
and Russia said they favor prolonging
crude-output cuts by global producers
through the first quarter of 2018. U.S.
crude stockpiles probably have
decreased for a sixth week, according
to a Bloomberg survey before a
government report Wednesday.
The largest of the 24 producers that
agreed to cut supply for six months are
reaffirming their commitment to the
deal amid growing doubts over its effectiveness so far. Still, a surge in U.S. production, together
with an increase in Libyan output and signs of recovery in Nigeria, may undercut the Organization
of Petroleum Exporting Countries’ strategy to re-balance the market.
“The comments from Saudi Arabia and Russia are driving prices up but I’m skeptical that crude
will see a new level,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc., said by
phone in Seoul. “As producers in the U.S. are expected to increase output, prices will continue to
be restricted from rising.”
West Texas Intermediate for June delivery climbed 22 cents, or 0.5 percent, to $49.07 a barrel on
the New York Mercantile Exchange at 11 a.m. in Seoul. The contract rose $1.01 to close at
$48.85 a barrel on Monday, the highest since April 28. Total volume traded was about 25 percent
below the 100-day average.
U.S. Supplies
Brent for July settlement gained 26 cents to $52.08 a barrel on the London-based ICE Futures
Europe exchange. The contract added 98 cents, or 1.9 percent, to settle at $51.82 a barrel on
Monday. The global benchmark crude traded at a $2.65 premium to July WTI.
Nationwide crude stockpiles are forecast to have declined by 2.75 million barrels to 519.8 million
barrels in the week ended May 12, according to a Bloomberg survey of analysts. Supplies of
gasoline probably dropped 1 million to 240 million barrels while inventories of distillate fuel, a
category that includes diesel and heating oil, slipped 1.25 million to 147.5 million barrels last
week.

NewBase Special Coverage
News Agencies News Release 16 May 2017
The Oil Market Is Listening ... For Now
By Liam Denning
Earlier this year, Saudi Arabia's Minister of Energy and Industry echoed Alan Greenspan
in warning against "irrational exuberance" that his country, or OPEC, would support oil prices
simply so rivals could get a free ride. In the weeks since, Khalid Al-Falih has swapped out
Greenspan for another central banker: the European Central Bank's Mario "whatever it
takes"Draghi.
Just over a week ago, Al-Falih used that very phrase to emphasize OPEC's commitment to
draining the glut of oil inventories weighing on prices. And just this weekend, he apparently put
substance behind the rhetoric: He said Saudi Arabia and Russia -- which together produce more
than a fifth of the world's oil -- favor prolonging through the first quarter of 2018 supply cuts they
and other countries announced last November. As it stands, OPEC is due to meet on May 25 to
decide whether to extend the cuts to the end of the year. Oil prices duly jumped.
"Jumped" maybe the wrong metaphor in this case, though; "stepped back from the brink" could be
more apt:
Crisis Of Faith
There has been an exodus of speculative money from bets on rising oil prices in recent weeks
Note: Combined net position for managed money in Nymex WTI and ICE Brent crude oil futures and options.
The net long position of managed money in WTI and Brent crude oil futures shows the arc of
belief in OPEC's power from November to now. Like any good central banker, or aspiring one, Al-
Falih's verbal intervention was designed to revive flagging confidence in the power of his office.
Without it, prices might well have turned south again. The same weekend, it was reported that oil
production in Libya, exempt from production cuts due to its civil strife, hit its highest level since
October 2014, before the crash really hit its stride. This came after a report on Friday that Indian

oil demand -- a critical element of the bull case for prices -- had risen in April after three months of
declines, but was still lagging far behind the gains witnessed in 2016.
Saudi Arabia's ultimate aim, along with that of fellow producers, is to shift the futures curve for oil
to a point where it no longer makes sense for traders to put oil into storage and sell it for a higher
price down the line. Undermining this carry trade means reducing the discount at which physical
oil trades relative to longer-dated futures. You can see that this has moved somewhat in OPEC's
favor over the past week, helped by a drop in U.S. oil inventories reported last Wednesday and, of
course, this weekend's well-chosen words:
Flattery
The Brent crude oil futures curve has flattened out over the past week, as OPEC wants
With 10 days to go until OPEC's meeting, a combination of well-chosen words and the short
positions built up by hedge funds suggest prices could go higher.
Yet it would be a mistake to conclude the tide has shifted in favor of Saudi Arabia, Russia and the
rest.
That curve has flattened out before, almost flipping in February, only to dip again when it becomes
clear there is no quick fix to what ails oil exporting nations. Higher prices, regardless of their
foundation, encourage the rebound in U.S. shale development, which counteracts the supply cuts.
Above all, once the speculative heat around the May meeting dissipates, the reality of the situation
should re-emerge, with Al-Falih's own odyssey providing the essential narrative. In January, he
speculated the initial cuts probably wouldn't need to be extended beyond June. By March, he was
sounding that warning about irrational exuberance. Come early May, he let it slip the cuts might
extend into a vaguely defined "beyond." And now, not long after, the cuts look set to push into
2018.
For those encouraged by the minister's adoption of the Draghi doctrine, it is worth remembering
the ECB chief took that stance as a desperate measure -- and that, five years on, he is still playing
backstop and choosing his words very carefully.
This column does not necessarily reflect the opinion of NewBase & Bloomberg LP and its owners.

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Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
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Khaled Al Awadi is a UAE National with a total of 26 years of experience in
the Oil & Gas sector. Currently working as Technical Affairs Specialist for
Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy
consultation for the GCC area via Hawk Energy Service as a UAE
operations base , Most of the experience were spent as the Gas Operations
Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility &
gas compressor stations . Through the years, he has developed great
experiences in the designing & constructing of gas pipelines, gas metering &
regulating stations and in the engineering of supply routes. Many years were spent drafting, &
compiling gas transportation, operation & maintenance agreements along with many MOUs for the
local authorities. He has become a reference for many of the Oil & Gas Conferences held in the
UAE and Energy program broadcasted internationally, via GCC leading satellite Channels.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase May 2017 K. Al Awadi

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