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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.
[Explaining backwardation] Are index funds the new swing producers?
FT Alphaville’s three-part series attempting to explain the current backwardation in the market…
…continued.
Index funds the new swing producers?
In many ways, Saudi Arabia’s position as the ultimate swing producer in the oil markets is key.
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,
The Gaddafi effect on oil
It looks like a potential Libyan regime change is already beginning to affect oil prices on Monday:
It’s only 2.2 per cent down at pixel time, and there are many other factors to consider in these economic times.
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.
Backstop Bahrain
Thursday’s political risk datapoint:
DIFC – Dubai, May 26, 2011 — Moody’s Investors Service has today downgraded Bahrain’s government bond ratings by one notch to Baa1 from A3, and assigned a negative outlook to the rating.
Further further reading
For the commute home, enjoy the long weekend with some short pickings,
- The US has already had a lost decade.
- Beware muni derivatives.
- “Apropos of everything”.
- What is going on with Saudi Arabia’s oil production?
- Game theory and the budget.
Further further reading
For the commute home, where budget decisions are made for rather than by children,
- Corn goes pop! Reaches a 33-month high.
- “Expendability”: what the Saudi king has learned from Libya.
- Greg Ip on Paul Ryan’s budget proposal.
Settling in (or not) for a long-term Libyan oil swap
Monday — a dramatic day in the story of Libyan rebels’ bid to get their country’s crude to the outside world.
It is getting out one end, at least. The Equator, a Liberian-flagged tanker, is in Egyptian waters heading for Tubruq,
What price Saudi Arabia’s new special ‘blend’?
Answer: We just don’t know.
But it’s all very intriguing nonetheless.
FT Alphaville has reported at length (here, here and here for example) how the Libya crisis has resulted in a large deficit of light sweet crude in the European market place,
Sorry – you still can’t buy OR swap Libyan oil easily, at all
Conversely: ‘sorry rebels – you still can’t get cash to fight the brutal dictator easily, at all’.
Oh dear: one great big flaw has emerged in any plan to buy oil from Libya’s rebels, despite them forming a parallel oil infrastructure.
Further further reading
For the commute home, or while wondering if expedia also does tax holidays,
- Do not gloss over munis’ frailties.
- Gulf SWFs (unsurprisingly) are revisiting their investment strategies.
- A tax holiday for MNCs is a very bad idea.
Yemen matters
Yemen continues to crumble on Tuesday, Reuters reports:
Yemeni President Ali Abdullah Saleh’s 32-year rule seems near collapse. His exit would spell uncertainty for his broken country and discomfiture for U.S.
Beware the simple sectarian story in Bahrain
In Bahrain, 5-year CDS spreads are widening as the violent crackdown continues. Sheikh Ali Salman, the leader of Al-Wefaq (the largest of the protest groups), called for the withdrawal of the 1,000 or so Saudi Arabian security forces that arrived on Monday.
UN (finally) to vote on Libya no-fly zone
It’s taken a while, but Thursday afternoon should see a UN Security Council resolution (click here to read the draft) to endorse a no-fly zone over Libya and to “take all necessary measures to protect civilians and civilian objects in the Libyan Arab Jamahiriya”.
Bahrain: Saudis in, violence up and capital out
Further crackdowns took place in Bahrain on Wednesday with the army calling a curfew in parts of Manama and banning gatherings until the situation was “back to normal”, reports the FT on Wednesday.
Sovereign wealth, a Gulf ‘supply chain’ risk
As the jackboot comes down hard in Bahrain on Wednesday, it’s worth asking what happened to the ‘modern’ ambitions of the Gulf monarchies who are providing military, financial and political support to the ruling Khalifa family.
Meanwhile, in Bahrain…
Call it the first response to the Abdullah-Brehznev doctrine.
The FT reports Tuesday that Bahrain has declared a state of emergency and asked the military to reassert its control over the capital, Manama,
Day of raging tranquility
After Thursday’s reports that Saudi Arabian security forces had shot at protesters in the country’s eastern region, there was a good chance the long-anticipated Day of Rage would be one of today’s big market stories.
Further further reading
For the commute home, or while worrying about what Friday may bring,
- ‘What if the stock market was a bond?’
- One hundred ways to reduce the federal deficit.
- A good, basic summary of Saudi Arabia’s importance.
GCC launches a Sovereign Health Fund for Bahrain and Oman
You’re familiar with SWFs — and the damage they can cause in the wrong hands — but on Thursday Bloomberg carried news of what we’ll call a Sovereign Health Fund (SHF):
The Gulf Cooperation Council plans to set up a fund worth more than $10 billion,
Hedging the Sauds
How to hedge the Saudi monarchy?
We’ve asked it before on FT Alphaville, given how unrest would throw the oil market into extreme volatility. We’re sceptical you could even try, but we’re sure there’s more to it than the ‘all bets are off’ line we often hear about the prospect of Saudi protests.
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 crude easily, at all
It’s not just about finding enough quality crude to replace Libya — it’s about the not insubstantial political risks hanging over those supplies, too.
Fighting in Libya worsened on Wednesday, as rebels counter-attacked an offensive by Gaddafi forces into the country’s east — which is where much of the oil production is (was),
Bahrain’s strategic importance, graph du jour
Wondering why Saudi Arabia is so fussed about Bahrain?
JBC Energy encapsulates the reason in one helpful chart:
Most of Saudi Arabia’s chief producing fields are right around the corner.
As the analysts noted on Wednesday (our emphasis):
Saudi contagion shivers
This is Saudi Arabia’s benchmark stock index on Tuesday:
It’s own some 6.6 per cent — its lowest since September 2009 — on ongoing rumours that Saudi Arabia is sending tanks to Bahrain to support its ruling regime.
Libyan oil supply, and short-term whiplash
A confusing picture at the moment on measures to address the Libyan supply shortfall in the short term — even as Gaddafi’s end seems to be nearing, at last.
And it really is the short term that matters for those exposed to Libya.
Scrambling to swap Libyan crude for Saudi
Hitting the wires at pixel time — an astonishing promise:
RIYADH, Feb 24 (Reuters) – Saudi Arabia is willing and able to supply high quality, light oil to replace any lost Libyan crude, senior Saudi sources said on Thursday.