The immediate outlook for oil prices remains bleak. The downturn in oil has caused pain across the energy supply chain, including to shippers, private oil drillers and oil-dependent countries from Venezuela and Russia to the Middle East.

Oil began falling in mid-2014 as surging output from OPEC, Russia and US shale producers outpaced demand. The downturn accelerated at the end of 2014 after a Saudi-led OPEC decision to keep production high to defend global market share rather than cut output to support prices.

 Iran in talks to invest in refineries abroad post-sanctions

Iran has started negotiations to buy shares in oil refineries in Europe, Latin America and Asia, Abbas Kazemi, the deputy oil minister said.

“Buying the oil refineries or their shares abroad is the policy of Iran after the lifting of sanctions,” he said.

Under a deal reached with six major powers in July, Iran agreed to curb its nuclear programme in exchange for an end to economic sanctions imposed on the country in 2012 over the programme.

Kazemi said that Tehran was in talks to buy a stake in India’s Essar Oil, although India’s second-largest private refiner denied this.

“Essar has signed a non-binding term sheet with (Russian refiner) Rosneft for exclusive negotiations in relation to sale of Essar Oil shares and there is no other discussion in this regard,” an Essar spokesman said.

In July, Rosneft signed a preliminary deal to acquire up to 49 percent of Essar. India is Iran’s second-largest customer after China.

Iran’s oil production has fallen to 2.7 million barrels per day (bpd), down by one million bpd since the start of 2012, depriving Tehran of billions of dollars in revenue.

Libya NOC to take action on unapproved oil sales

The National Oil Corp. based in Tripoli has the right to take legal action against any party that tries to export crude or products from Libya without its permission, according to a company statement.

“Any operations that are conducted outside the legal validity represented in the National Oil Corporation whose headquarters are located in Bashir Sadawai Street in Tripoli are considered an explicit breach of the law,” the NOC said. The company said it reserves “all rights to hold any party responsible for the entire legal liabilities and consequences arising thereof.”

Libya has two governments, one in the west and another in the east. While the eastern government has so far been recognized by the international community, the NOC with its headquarters in Tripoli is recognized by traders such as Glencore Plc and Vitol Group as the official marketer of Libyan oil. The eastern government has set up a separate NOC administration, led by Nagi Elmagrabi, which represents Libya in matters relating to oil including OPEC. Elmagrabi said on December 18 that six companies including Netoil Inc. will sell crude from the country’s Mesla and Sarir oil fields.

Global LNG surplus pushing producers, importers into spot market

Producers and importers of liquefied natural gas (LNG) are preparing to trade the fuel more actively on a spot basis as a looming supply surplus threatens to overwhelm decades-old bilateral contracts and pressure prices lower.

With the advent of 130 million tonnes of LNG capacity in Australia and North America by 2020, producers such as Woodside Petroleum and Chevron, and traditional buyers such as Japanese utilities, have expanded trading teams to handle excess cargo flows and navigate a more open market.

Australia, with investments of almost $200 billion in new production, is on track to overtake Qatar as the world’s biggest LNG exporter before the end of the decade.

In North America, US company Cheniere Energy plans to export its first LNG cargo in January, and Canada is also planning to start exports in the next few years.

Excess supply, along with rising demand, is key to establishing a liquid commodity market as in tight conditions producers and consumers tend to enter long-term fixed supply agreements rather than trade openly.

Arab oil producers watching Iranian re-entry into oil market

The re-entry of Iranian crude oil exports into an already well supplied market is being watched closely by Middle East oil producers, but their full re-entry is likely to take “years rather than months,” the Arab Petroleum Investment Corp. (APICORP) said.

The introduction of significant Iranian barrels could force OPEC to consider re-introducing supply management measures, but this will not be straightforward, the Al Khobar-based investment company said in a research note, “as Iran has repeatedly signaled its desire to re-capture market share and that other OPEC players should create the necessary space.”

Apicorp was created by the Organization of Arab Petroleum Exporting Countries as a commercially-focused financial institution to help provide financing options for the Arab energy industry.

Iran’s ability to deliver on its production and export targets will therefore be watched carefully by the oil producers on the other side of the Persian Gulf for its impact on oil prices.
Asia will drive oil demand

Oil demand will soon reflect the “attractiveness” of the current level of crude prices, and Asia will be a vital engine of economic expansion for decades, Saudi Oil Minister Ali al-Naimi said. OPEC’s chief joined him in seeing Asia as the main hub for growth.

Oil demand in Asia will rise by about 16 million barrels a day to almost 46 million by 2040, Abdalla Salem El-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said in an article posted on the International Energy Forum’s website. The region will need to import 40 million barrels a day of crude oil and refined products by then, he said.

Many Asian countries welcome the recent decline in oil, and demand “will soon reflect the attractiveness of the current prices,” al-Naimi said.

OPEC confidential report sees market share squeeze to 2019

Global demand for OPEC’s crude oil will remain under pressure in the next few years, the producer group said in an internal report, potentially fuelling a debate on its strategy of defending market share rather than prices.

The draft report of OPEC’s long-term strategy forecasts crude supply from OPEC – which has an output target of 30 million barrels per day (bpd) – falling slightly from 2015’s level until 2019, unless output slows faster than expected in rival producers.

The report sees only a gentle recovery over the next few years in oil prices, which have more than halved to $50 a barrel since June 2014 due to plentiful supply.

Iraqi oil selling at $30 as OPEC readies for new battles

Iraq may increase oil output further in 2016 intensifying a battle for market share between OPEC members and non-OPEC rivals which has forced Baghdad to sell some crude grades for as little as $30 a barrel.

Iraq’s output in 2015 has jumped almost 500,000 barrels per day (bpd), or 13 percent, according to the International Energy Agency (IEA). That has made Iraq the world’s fastest source of supply growth and a key driver of surging OPEC production.

At most, that growth is likely to give way to a modest rise next year, easing downward pressure on prices that are close to a 2009 low. But a lifting of sanctions on Iran or an easing of violence in Libya could further boost OPEC supplies, without cutbacks by Saudi Arabia or other members.

The southern fields produce most of Iraq’s oil. Located far from the fighting in other parts of the country, they have kept pumping and seen record exports, most recently in July, when 3.064 million bpd was sold abroad.

Frank Uzuegbunam