RE:RE:Extremely Doubtful that Iran Will Freeze ProductionFerret, my feeling is that the PoO will stay around the $50.00 level going into Stella first oil, hence no need for management to hedge at this level and potentially handcuff themselves. Here's my reasoning and as the article that I posted states, we've seen this scenario play out again and again and again with Opec over the past year. If Opec does not agree on a production freeze at the end of September (which is, without a doubt, the most likely outcome) then the PoO will dip. BUT, and this is important, the next meeting with OPEC, which is their annual meeting, takes place in December, just three months after the September meeting, and you can bet your first born that the Iranians and the rest of OPEC will play the exact set of cards that they have been playing all year. They will hint that a deal may be done in December and lo and behold, the price of oil will move north of $50. And as the players say, Rince and Repeat. OPEC and the Iranians can keep the PoO at $50 by playing this game and they will going forward until demand outstrips supply and the price begins to move up on its own.
Now for Stella. I don't see Stella starting production until the middle of November at the earliest and probably closer to December. And I think you can see where I am going with this. The new normal is $50 Brent until the market legitimately rebalances and the PoO moves upward, which I agree, is probably 6 - 9 months out. Its unfortunate for IAE that the initial flush of oil on start-up will take place in a $50 Brent environment, but it is certainly not the end of the world and is very managable until such time as the market readjusts.
Cheers