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’How will the world live with $100 oil?
For the long haul, that is.
So, Saudi Arabia is now effectively targeting $100/barrel crude oil, instead of the $70 – $80 price range of the past several years. This is significant because Saudi Arabia is the only country that can (in theory at least) ramp up its oil production quickly if prices spike (say,
The Saudi production puzzle
Last week it transpired that Saudi Arabian oil production had hit its highest level in three years.
As Bloomberg reported at the time:
Saudi Arabia, the world’s biggest crude exporter, boosted output last month to the most in more than three decades to meet customer demand.
China and the commodities bears
The China Flash PMI for August of 49.8 was met with relief today, even though it’s the second negative month in a row.
It’s that kind of scene now, however, when equity markets seem to be hoping for some kind of QE3 announcement at Jackson Hole on Friday even though a) it’s not an FOMC meeting,
What modern oil market intervention looks like
Is this the reason why the rest of Opec were miffed at Saudi Arabia last week?
Reuters reports on Wednesday (H/T John Kemp):
EXCLUSIVE-SAUDI, US DISCUSSED PROPOSAL TO SWAP LIGHT SPR CRUDE FOR SAUDI OIL AHEAD OF OPEC MEETING-SOURCES
SAUDI,
Re-inventing Opec
Wednesday’s Opec meeting may have resulted in a no-change decision on production targets, but as more and more people are noticing, its importance lay elsewhere — in signalling some significant turmoil within the organisation itself.
And now Goldman says the commodities correction is over [updated]
Having been proven right about their prediction of a rather substantial correction in commodities earlier this month, Goldman Sachs is now out with a new view.
A bullish view.
As Jeffrey Currie and team wrote on Tuesday:
The Saudi capacity puzzle
Could Saudi Arabia be telling porkies when it comes to its spare capacity capabilities?
It’s something Goldman Sachs analysts are wondering on Tuesday.
For example, they’ve deduced — from reverse-engineering the kingdom’s production levels — that Saudi may have raised output before the crisis in Libya ever broke out.
Why you really can’t swap Libyan oil for Saudi
Apart from the prospect of $220 a barrel…
Much discussion on Wednesday of whether Opec could pump more oil from the Arabian peninsula to make up for Libya going offline — so we thought these pointers from Barclays Capital’s Amrita Sen might help:
Nomura’s $220-a-barrel crisis oil call
Talk about an oil shock.
Nomura’s commodity analysts, led by Michael Lo, are calling for oil at $220 a barrel, if both Libya and Algeria were to stop oil production. Oil’s currently around $108.
Here’s the summary:
Life in the Gaddafi oil market
Breaking at pixel time — Reuters quoting an Italian government source that ‘informal’ Opec talks have begun on raising output if Libyan supply collapses (only for the Saudi oil minister to deny that Opec will consider extraordinary talks.)
Which is precisely what the supply has been doing (the country’s gas exports aren’t looking too hot either).
Oil spikes, shocks and stocks
With oil on the rise, what next for equity markets?
That’s the question KBW try to answer in a note out on Monday. The analysts look for correlations over the last 50 years between big (ten and 20 per cent quarter on quarter) WTI rises and changes in the S&P500 and the Keefe Bank Index.
Oil shock 2.0, or, the benchmark wars
Concerns are mounting that $100 oil prices, if hit, could be enough to dislodge the precarious global recovery — thrusting the world economy back into recession, or even worse, into another global financial crisis.
China, 1789 and potash
What caused the 1973 spike in oil prices? The Opec embargo?
Wrong, according to SocGen’s Dylan Grice — who reckons it was merely the trigger. The cause was actually structural: a rapid surge in the import needs of the USA:
The central oil bank of Saudi Arabia
Opec’s March meeting came and went this week, with hardly a bat of an eyelid from the global marketplace.
The oil ministers, who met in Vienna, opted to keep output targets unchanged on the presumption demand should pick up later in the year,
Opec eyes OECD demand
The Organisation of Petroleum Exporting Countries meeting in Luanda, Angola, agreed on Tuesday to leave oil output curbs unchanged, while calling for greater compliance with existing output targets — a signal the cartel currently believes the market to be well supplied.
That Opec effect on fuel cracks
When Opec first started cutting crude production back in October, one of the immediate effects on the market was a pullback in the supply of heavy sour crudes.
As we noted before, this is because Saudi Arabia, Opec’s largest and most proficient swing producer,
In defence of energy speculators
The FT reports on Wednesday that:
An unsigned paper opposing trading limits circulating in Houston’s natural gas hedge fund community warns that “domestic liquidity will suffer terribly” as CFTC rules grow more onerous.
A non-event Opec leaves output unchanged
In line with consensus, the Organisation of Petroleum Exporting Countries (Opec) decided on Thursday to keep current production quotas unchanged. The decision was a speedy one coming just two hours after ministers sat down,
Saudis back oil price increase
The world economy has strengthened enough to weather oil prices at $75-$80 a barrel, the Saudi oil minister, Ali Naimi, said on Wednesday, suggesting that Opec, which meets Thursday in Vienna, no longer sees a need to support the global recovery with low oil prices.
Opec may not cut output
Opec’s resolve to cut production to boost prices is weakening after production cuts helped boost oil prices back to about $60 a barrel, up from their $32-low in February, says the International Energy Agency.
Crude inventories still a problem
At the beginning of March there was a lot of talk in the crude market about an end to the contango coming soon, mostly due to some destocking of floating inventory. FT Alphaville was not convinced. In fact we reminded:
Opec rules out supply cuts
Opec decided on Sunday against more supply cuts, signalling that it would delay its goal of boosting oil prices to $75 a barrel at least until next year. The decision marks a significant shift in the policy of the oil cartel,
Opec back in the driving seat
Anyone superstitious should beware: not only is today Friday the 13, but the ides of March falls this coming Sunday. So it’s the perfect weekend for arguably two of the world’s most important leadership groups to be meeting to decide on tackling the financial crisis.
Contango smashing
The contango between the front-month April contract and the second-month May contract has been severely smashed over the last day.
Having averaged a difference of about $2 per barrel over the last couple of weeks,
Price isn’t right for Opec, or BP
We’ve all become accustomed to hearing what Opec may or may not think is a fair price for oil (even though officially they do not comment). But, when it comes to the oil majors – traditionally – they have skirted the question.
Oil speculator debate resurfaces
It was the hot topic of last summer (when oil prices were racing to record highs), but the debate over whether speculators are really to blame for oil’s volatily has somewhat fallen off the agenda since the price of crude came crashing down.
Crunching the Opec quotas
For anyone still confused after Opec’s meeting yesterday, Barclays Capital has pieced together a good estimate of the current production target quotas for the Opec 11 members.
Getting the exact quotas per country always involves a bit of calculation as Opec doesn’t necessarily always break it down.
Oil’s falling
Oh dear, we’ve just had a larger than expected cut from Opec and Nymex futures are tanking somewhat.
WTI had a brief flurry of strength in the immediate aftermath of the decision, but at the last look it was down more than 6 per cent.
Opec cuts…
But don’t be misled — the headline reduction in output of 4.2m barrels sounds huge, but this cut is based on September production levels – and Opec countries are pumping rather less of the black stuff right now.