• Home
  • Photo News
  • News
    • NGO/CSO
    • Photo News
    • OrientalNews 7th Anniversary
    • Press Releases
    • World News
    • Nigeria News
    • Politics
    • Opinion
    • Sports
  • Interviews
  • SMEs
  • Law
    • Crime
  • Travel & Tours
    • Aviation
    • Tourism
  • Energy
    • Oil & Gas
    • Power
  • Business
    • Banking & Finance
      • Capital Market
      • Money Market
    • Pension
    • Insurance
    • Brands & Marketing
    • IT & Telecoms
    • Labour
    • Agriculture
    • Maritime
    • Property
    • Manufacturing
  • Regulators
    • Nigeria Bureu of Statistics
    • PENCOM
    • NAICOM
    • SEC
    • NSE
    • CBN
Facebook X (Twitter) Instagram
Wednesday, July 9
  • About us
  • Terms of use
  • Privacy Policy
  • Disclaimer
  • Advertize here
  • Contact us
Facebook X (Twitter) Instagram
Oriental News Nigeria
  • Home
  • Photo News
  • News
    • NGO/CSO
    • Photo News
    • OrientalNews 7th Anniversary
    • Press Releases
    • World News
    • Nigeria News
    • Politics
    • Opinion
    • Sports
  • Interviews
  • SMEs
  • Law
    • Crime
  • Travel & Tours
    • Aviation
    • Tourism
  • Energy
    • Oil & Gas
    • Power
  • Business
    • Banking & Finance
      • Capital Market
      • Money Market
    • Pension
    • Insurance
    • Brands & Marketing
    • IT & Telecoms
    • Labour
    • Agriculture
    • Maritime
    • Property
    • Manufacturing
  • Regulators
    • Nigeria Bureu of Statistics
    • PENCOM
    • NAICOM
    • SEC
    • NSE
    • CBN
Oriental News Nigeria
Home»Energy»Oil & Gas»OPEC’s Future Seen in Mining Slump as Oil Price Pummeled
Oil & Gas

OPEC’s Future Seen in Mining Slump as Oil Price Pummeled

By orientalnewsngJanuary 19, 2015No Comments6 Mins Read
Facebook Twitter Pinterest LinkedIn Tumblr Email
Share
Facebook Twitter LinkedIn Pinterest Email

Source-OPEC

rp_OPEC1-150x150-150x150.jpg

Oil producers reluctant to curb output even as prices tumble to five-and-a-half year lows don’t need to guess what the future holds. They can ask a miner.

In coal to iron ore markets, suppliers have raised volumes even as prices slumped, boosting global gluts and jeopardizing profits as the most dominant players seek to maintain revenue and squeeze out higher cost rivals.

Prices of thermal coal, used to generate electricity, and metallurgical coal, a key ingredient in steel, have tumbled more than half since 2011 on supply additions and slowing demand in China, the biggest commodities consumer. With OPEC insistent that it won’t curb crude output, and U.S. production rising to its fastest weekly pace in more than 30 years, oil markets may be in line for similar prolonged pain.

“If OPEC every now and again looks over their shoulder at what is happening in other commodities you’d think it would be a warning,” said David Lennox, a Sydney-based resource analyst at Fat Prophets.

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, agreed to maintain its production target at 30 million barrels a day at a Nov. 27 meeting in Vienna. The group is wagering that U.S. shale drillers will be first to curb output as prices drop, echoing a strategy played out by the largest miners.

“The current prices are not sustainable,” Suhail Al Mazrouei, energy minister of OPEC member the United Arab Emirates said Jan. 14 in Abu Dhabi. “Not for us but for the others.”

Iron Ore Pain

Iron ore producers who predicted a swift exit by higher cost suppliers as their commodity entered a bear market last March were caught out as curbs to global output proved slower than anticipated, Nev Power, the chief executive officer of Australian iron ore producer Fortescue Metals Group Ltd. said in October.

Coal exporters, too, have kept increasing supply as prices slid. Global output rose about 3 percent between 2011 and 2013 as prices declined, according to World Coal Association data. In Australia, the biggest exporter of metallurgical coal, production is forecast to rise again in the year to July, according to the nation’s government.

“Oil will have more similarities to both thermal and metallurgical coal,” Melbourne-based Morgan Stanley analyst Joel Crane said by phone. “Those prices have been weakening for more than three years now, yet we’ve seen very little in terms of shutdowns.”

Worse to Come

Slow implementation of cuts to production mean coal prices probably won’t recover until 2016, according to Moody’s Investors Service. The price of iron ore, down 47 percent last year, will remain low through 2016 amid supply additions from Australia and Brazil. UBS AG expects the global iron ore surplus to jump about sixfold to more than 200 million tons by 2018.

For the oil sector, “the lesson is that there’s more oversupply to come,” said Crane. “People are going to crank out more to sell for a lower price and keep that revenue up.”

U.S. crude output surged to 9.19 million barrels a day in the week to Jan. 9, the fastest pace in weekly records dating back to January 1983. That’s amid a global supply surplus estimated by the United Arab Emirates and Qatar at 2 million barrels a day.

Output from OPEC’s 12 members increased by 140,000 barrels a day in December, led by a jump of 285,100 a day in Iraq, which plans to double exports within weeks from its northern Kirkuk oil fields. In the U.S., an oil boom has been prompted by the implementation of horizontal drilling and hydraulic fracturing that’s unlocked shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

Absolute Drop

Brent for March settlement was down 37 cents at $49.80 a barrel on the London-based ICE Futures Europe exchange at 4:35 p.m. Sydney time.

The surge in supply of oil to iron ore comes as China’s transition toward consumer-led growth brings to a close a period of booming demand for metals to energy. The result may be an absolute drop in commodities demand, not simply slower growth, according to Credit Suisse Group AG.

“We’re now close to the end of this big oil cycle and entering the next 10 to 15 years cycle of a more balanced and stable market,” Oslo-based Nordea Markets analyst Thina Saltvedt said by phone.

Expectations that U.S. shale drillers will be most exposed to tumbling prices as demand falls may prove incorrect, according to Fat Prophets’s Lennox. Onshore operations are trimming capital spending and able to cut jobs, while the importance of oil revenue to national budgets of some OPEC member nations may make those suppliers less able to adapt, he said.

Country Risk

“We’ll see the structure of shale costs coming down, whereas it’s probably more difficult for Saudi Arabia to restructure their political spending, for example,” Lennox said. “There are greater consequence for the leaders of that country say, than for the managing director of a small company in Texas.”

To be sure, the process of shale oil production means drillers can respond quickly to declining prices and also are better positioned to react than counterparts in the mining sector, according to Sydney-based Justin Smirk, a senior economist at Westpac Banking Corp.

Market Share

“It’s very, very expensive to shut a mine because of the costs of getting it up and running again,” Smirk said by phone. “With fracked oil, you stop drilling and you stop spending and the supply dries up quite quickly.”

A “war” for market share is poised to weigh further on oil prices, Australia & New Zealand Banking Group said Jan. 15 as it forecast Brent crude will average $50 a barrel this year, 27 percent lower than a previous estimate.

Yet just as in the iron and coal sectors, oil producers may be ready to endure weak prices for the next two to three years in the belief it will force competitors to shutter and eventually spur gains, according to Lennox.

“The big guys who are still getting a margin will say you want to punish the little guys,” said Morgan Stanley’s Crane.

Share this:

  • Share
  • Click to email a link to a friend (Opens in new window) Email
  • Tweet
  • Click to share on Reddit (Opens in new window) Reddit
featured OPEC’s Future Seen in Mining Slump as Oil Price Pummeled
orientalnewsng

Related Posts

Dangote Slashes Petrol Price Again, Set To Refine Only Nigerian Crude 

July 9, 2025

Exxon May Report Major Financial $1.5Bn Drop As Oil And Gas Prices Falters 

July 9, 2025

Saudi Arabia Report Crude Export Rise By 412,000 Barrels A Day In April

July 9, 2025

Leave A Reply Cancel Reply

2025 OrientalNews Conference

0
Years
:
0
Months
:
0
Days
:
0
Hrs
:
0
Mins
:
0
Secs
The latest
  • Fidelity Bank Attends To Internally Displaced Persons Needs In Benue
  • Stanbic IBTC Holdings Meets Achieves 21.9% Oversubscription In Rights Issue
  • Integrity Testing For Public Officers Key To Curb Corruption- EFCC
  •  N654m Worth Of Foreign Currency Intercepted At Kano Airport By Customs 
  • Access Bank UK Charity Polo Day 2025 To Drive Global Support For Inclusive Education
  • Nigerian Considers Cost-Reflective Tariff Structure To Address Power Sector Liquidity 
  • Dangote Slashes Petrol Price Again, Set To Refine Only Nigerian Crude 
  • Exxon May Report Major Financial $1.5Bn Drop As Oil And Gas Prices Falters 
  • Saudi Arabia Report Crude Export Rise By 412,000 Barrels A Day In April
  • Nigeria To Record Additional 2,500 Barrels Per Day Oil Production From Dawes Island Field
Categories
Quick Links
  • About us
  • Terms of use
  • Privacy Policy
  • Disclaimer
  • Advertize here
  • Contact us
Facebook X (Twitter) Instagram YouTube LinkedIn
Copyright © 2025 Oriental News Nigeria. All right reserved.

Type above and press Enter to search. Press Esc to cancel.