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Anas Alhajji

1 Jul, 11 tweets, 5 min read

🔥Thread on why #OPEC+ meeting was delayed. Please feel free to quote.

1- The baseline for the calculation of the adjustments agreement of April 2020 was the oil production of October 2018. It has been used in all adjustments since then, including today's proposal
#OOTT #oil

2- Today's proposal consists of two parts:

a- Increase production by 2 mb/d between August & December in 400 kbd monthly installments.

b- Extend the production cut agreement from April 2022 to December 2022.

The objective is to bring order, stability & clarity to the market

3- The above are based on OPEC+ agreement to use October 2018 production as a base. All OPEC+ members appear to agree on it except the UAE

Some oil industry leaders in the UAE believe the UAE made a mistake by agreeing to a bad deal that used October 2018 as a base.
#OPEC #Oil

4- They wanted to change the base to April 2020 when the production cut was agreed on.

Why?
UAE crude oil production in October 2018 was 3.160 mb/d. But it increased to 3.841 mb/d in April 2020. By changing the base, UAE can increase its production drastically & immediately.

5- Adnoc has been aggressive in its efforts to increase its production capacity & production. It created several joint ventures with international oil companies and plans to continue increasing production. Then Murban futures were introduced in order to make it a global marker.

6- That is why the push to change the base to April 2020. They do not want OPEC+ agreement to limit their production and potential.

There are two problems here:

7- Problem 1: Moving the base to April 2020 hurts other producers who have the opposite problem: higher production in October 2018 and lower production in April 2020. Those members will NOT agree to the change in the base. So you can see now why they did not reach an agreement.

8- Problem 2: Any change to the base month would create confusion in the market & nullify the objectives of creating stability and clarity in the market. This explains why Saudi Arabia and Russia objected to the Emarati proposal.

#OPEC #OOTT #oil

9- While it is clear from the UAE point of view that it might have signed a bad deal without considering future increases in production, it is also clear that other OPEC+ members will not agree to the UAE proposal.

What can be done tomorrow to avoid another delay?
#OPEC #OOTT

10- The history of OPEC meetings shows that OPEC ministers will most likely pull a rabbit out of the hat! There are no benefits to the UAE from walking out of OPEC nor OPEC+ agreement. It is exactly the opposite: the results are disastrous.

11- The ultimate outcome from a game theory point of view is to increase production above 400 kbd while increasing the share of the UAE slightly or turning the blind eye to the above-quota production.

Never a dull moment in the oil market! I hope you liked the thread! #OOTT

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Anas Alhajji

@anasalhajji

19 Jun

Thread.. Friday night rant
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2- This explains the push by Europeans to integrate the militias into the army, despite their war crimes against humanity. Also, they do not want to pay to rescue these countries from being failed states. So militias are serving local and foreign interests at once

3- Now add Venezuela into the mix! Who has interest in dismantling the militias? Biden? No.
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17 Jun

Get this:
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Fact from BP itself: OECD consumption between 2010 and 2019 was double the predicted growth: 12%
#OOTT

As for oil, it predicted the percentage of oil consumption in the global energy mix to decline from around 33% to 29% by 2020. Well, it remains at around 33%! That means all the expected decline to 2030 is now in the next decade.

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Anas Alhajji

@anasalhajji

2 Jun

Thread on #oil
1-6 Over the years, I have done a lot of work on the optimal price of oil

OPEC leaders will operate in the sweet spot. Where is the sweet spot now?

Based on my mode, we are already in it. Things start getting sour when Brent is above $75, bitter below $68. #OOTT

2-6 The above are rounded numbers. Of course, the actual results are not rounded. The model is based on several assumptions. The main one is that major producers focus on the long run. Their objective is to prolong the demand for oil as much as they can. #SaudiArabia #OPEC #OOTT

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#Oil #OOTT #OPEC

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Anas Alhajji

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But will this cost increase limit their growth?

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