Consider this chart from Charles Robertson at Renaissance Capital. Click to enlarge…
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As we alluded to earlier, there is a battle taking place in the oil markets at the moment.
On one side there are conventional oil producers like Opec members desperate to stop oil prices from following the declining trajectory of the wider commodity complex. On the other side there are the new US shale oil producers, who — due to the US export ban — are unable to capture the full earnings potential of their production (on account of an inability to tap foreign bids directly).
The problem for Opec types is that the break-even rates they seek to defend are now too high to prevent the new class of producer from being incentivised to keep producing. This despite the fact that the export bottleneck only ends up transferring much of the profitability to the refining sector instead of the US producer. Read more
Okay, a bunch of anecdotal data points and stories bundled together doesn’t necessarily make a trend, but…. lacking the power of Lisa Pollack-level data-analytics, that’s not going to stop us from trying to suggest as much now.
So, having already noted BP’s observation that energy is decoupling from economic growth, we present some more datapoints to build the case that something relatively remarkable is beginning to happen to energy consumption. Read more
Take yourself back to the heady oil price days of early 2008. Imagine a rogue voice reassuring the market to “fear not, one day soon the US will be saturated in the black oozey stuff”.
What would the market have made of such a concept? Would such a voice have been dismissed as a loon? Very possibly.
And yet, less than six years later comes the following warning from Goldman Sachs: Read more