Daily Basket of News Commentary – Sep 26, 2018
Iran Oil Exports?
India might continue buying Iranian oil via a Rupee payment scheme. India consumes 4.7 Million bpd (approx. 5% of world oil production) and is expected to reach 10 million bpd in 2040. It is difficult to see India putting its economy in jeopardy and taking sides in an unrelated problem i.e. the US/Iran quarrel – especially since the Iranian oil is cheaper than the competition.
Add to this the EU’s, seemingly determined plan to bypass the Dollar payment scheme, and the US may have a difficult time fully implementing its Iran sanctions plan.
Foreign Direct Investments (FDI) into the USA Negative!
For the first time, FDI into the US are negative (quarter II, 208). This seems to be a trend begun in 2017, which was down 40% on the Record high 2016. Not only China has reduced its investments but also many other countries.
The explanations are numerous, but most prominent are the US trade and international political polices, which are spooking outsiders. This may not be dangerous immediately, but if continues, it could have detrimental long term effects on the US economy.
UAE to Increase its Oil production Capacity
OPEC’s oil production spare capacity seems to be a real problem. Now the UAE is planning to increase its capacity by the end of 2018 (from 2.97 Mill bpd to 3.5 Mill bpd). (Kuwait, sometime ago announced plans to increase capacity from 3 to 4 Mill bpd over the next 10 years).
In the short term, this may be good to maintain market stability, especially in a turbulent political environment, but if the forecasts of “Peak Oil Demand by 2014” are correct, then these countries should be careful not to go overboard in their expansion, as it may become difficult to recoup the huge CAPEX investment outlays needed.
Maybe, increasing down stream projects would be a wise parallel policy. Petrochemicals and finished products and items may be a good long term hedge against “Peak Oil Demand”.