HAVE OIL PRICES TURNED DOWN?

DAILY BASKET – NEWS COMMENTARY

HAVE OIL PRICES TURNED DOWN?

MARSAL COMMENTS: Last week was horrible for oil. Prices fell approx. 8% with WTI breaking below US$ 50 and Brent below US$ 53. Speculators seem to have become pessimistic and liquidated their long positions. Will they now turn bearish and short oil? Continue reading “HAVE OIL PRICES TURNED DOWN?”

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The Oil Wolves are at the Gates

wolf-725380_640The Oil Wolves are at the Gates

Before the ink was dry on the OPEC production accord, the Shale oil producers pounced on the futures market, selling forward all or a big part of their 2017 and 2018 production. The prices they sold at were above US 55 per barrel, and possibly near $ 60. (Actually, they had started selling Continue reading “The Oil Wolves are at the Gates”

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OIL PRICE PLAYING ON A SEE-SAW – IGNORING INVESTMENT IN OIL

OIL PRICE PLAYING ON A SEE-SAW – IGNORING INVESTMENT IN OIL

There is now a consensus that the 20% oil price rally in August wasn’t sustainable. It was a purely technical issue with the short sellers scrambling to cover their positions. The fundamentals of oil supply and demand remain imbalanced and could remain so until the end of 2016 or probably well into 2017.

Of course, an agreement between the major oil producers to freeze production, will put an immediate stop to this lose-lose situation and raise prices to levels more acceptable to the deficit laden producers. The OPEC September meeting is scheduled, theoretically, to do that, and the Saudi oil minister has alluded as much. Continue reading “OIL PRICE PLAYING ON A SEE-SAW – IGNORING INVESTMENT IN OIL”

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OPEC not very optimistic for 2017?

DAILY BASKET OF COMMENTARIES

OPEC not very optimistic for 2017?

Summary:
OPEC doesn’t seem overly optimistic on oil prices in 2017. While it sees demand rising slightly, but to a record of 95.41 million barrels per day (MBPD), it is worried that this Summer’s expected demand didn’t materialize and that refineries are overstocked and may not increase their demand for the rest of 2016.

Likely Beneficiaries:
Oil Refineries: theoretically, they can continue to get cheap crude and sell refined products at relatively much higher prices.
General Consumers: They will not see rise in driving cost or utilities costs, at least for some time.
Oil Importing Countries: Such as China, India, Europe and other countries dependent of imported oil.

Likely losers:
Oil Producers: Especially to whom oil export is their bread & Butter. The oil companies in general as well as countries such as Venezuela, Mexico, Nigeria and Iraq would be biggest losers. To a lesser extent, Iran and Russia would be hurt. As for the Gulf oil countries, they are still flush with cash and need a longer period of low oil prices to really feel the pain.

Timing:
Announcing a semi pessimistic forecast would not normally have been expected from OPEC. One would have expected them to try and talk-up the price through bullish forecasts. But, if they really wanted to raise prices, they would have cut back a little on their production, or announced that they intend to do so.

So what is a possible reason for such an announcement?

Around now is the time when the oil hedging for future 2017 prices takes place. Such announcements could have a dampening effect on the hedged prices, which would be negative to such countries, as Mexico, that rely substantially on hedging a big chunk of their annual oil production. Also, it would have a dampening effect on the Shale Oil producers who have used hedging to stay alive during the past two years.

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OIL WARS – The Coming New Disaster?

OIL WARS – The Coming New Disaster?
By: Marwan Salamah*
Dec 25, 2014

If protecting market share is OPEC’s primary objective in not reducing oil production, and if oil prices remain depressed or continue their downward journey over the next few months, then it becomes only a matter of time before OPEC members begin to pounce on each other’s market shares and on non-OPEC shares.

In such a scenario, the outcome is likely to be in favor of whoever has the lowest cash production costs and the highest surplus funds to weather the oil revenues squeeze. Of the big producers, Saudi Arabia and Kuwait are the best positioned to win such a price war and Venezuela and Nigeria are likely to be the biggest losers followed at some distance by Iran, Iraq and then Russia.

There are many possible outcomes. One is where Venezuela goes bankrupt and implodes politically. This could lead to government change, which probably is not an unwelcome outcome for the USA. Continue reading “OIL WARS – The Coming New Disaster?”

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THE OIL PRICE CRASH WAS INEVITABLE

THE OIL PRICE CRASH WAS INEVITABLE
Marwan Salamah*
Dec 23, 2014

Four years ago, we published in www.asmainfo.com, the Arab Stock Market Analysis website, a technical analysis forecast of crude oil prices which indicated the likelihood of oil prices dropping in 2014 towards US$ 33 per barrel ! Technical Analysis is a mathematical statistical tool to identify trends and possible future prices and as such sees what the naked eye, used to empirical evidence, does not see.

Even a non-expert in technical analysis can see from the attached graph that the oil price rise between 2003 and 2008 was very high and steep thus inviting a steep downward correction. Another steep rise occurred in the period between 2008 and 2014.

oil price techincal chart
oil price techincal chart

However, there is a sunny side to this storm. The same analysis indicated the possibility of oil prices rebounding up towards the US$ 200 – 250 range in a few years. But, such a rebound would be conditional on the World’s presently weak economies regaining their vitality, no alternative to oil is discovered and no devastating regional or world wars occur.

As for the direct causes of the recent crash of oil prices, a number of negative events came into play in close proximity of each other. The first was the rapid commercial development of Shale oil production and Fracking, which elevated the U.S. to become the world’s largest oil producer and dramatically shrinking its dependence on oil imports (It is now forecast to become a net exporter of oil in a couple of years). The second was the inability of the European economies to shake off their post 2008 recessions in addition to the slowdown in the Chinese, Indian and the Third World economies. Thirdly, the oil producers continued their pre-recessions production levels throughout this period. Continue reading “THE OIL PRICE CRASH WAS INEVITABLE”

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