The drop in oil prices – with WTI now drifting down towards $46 a barrel – has been nothing short of stunning.
On that note, here’s an interesting thought from Chris Flanagan, head of US mortgages and other structured finance research at Bank of America Merrill Lynch. When this securitisation veteran sees the fall in oil prices he thinks of one thing – the ABX index. Read more
The latest movement in Brent and WTI crude…
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, in the event of an Iran-related affair). Read more
Most of Janet Yellen’s speech today about commodity prices and the economic outlook was about what you would expect, and we covered many of the same issues in our long discussion last week about inflation expectations.
To summarise, Yellen made the following points: Read more
For all the talk of operation Odyssey Dawn, it was Wednesday’s Budget that tried to navigate between two monsters: rising inflation and slowing growth.
Guest editor Gavyn Davies made this point during FT Alphaville’s special Markets Live session this afternoon: Read more
Oil prices are slipping from recent highs, helping stock indices recovery some of the sharp losses of the past few sessions as energy prices hit new highs, the FT reports. Brent crude is down 2.1 per cent to $112.68, about $6 off Monday’s high, after Kuwait said it was in talks with other Opec members to boost production in order to make up lost supply out of Libya, where fighting continues. The pullback in oil is lending some support to stocks. The FTSE All-World is up 0.3 per cent – but investors remain wary that potential Middle East flashpoints could occur this week, particularly in Saudi Arabia where a day of protest on Friday has been called by some activists. In addition, traders are concerned that Wall Street’s 0.8 per cent fall on Monday came in spite of oil prices easing during the US session, a signal perhaps that the market is using the energy shock as an excuse to deliver the long-anticipated risk asset correction. The S&P 500 index is up 0.9 per cent on Tuesday, and the Nasdaq Composite index, weighted heavily toward tech, is up 0.7 per cent, now well above the 50-day moving average line that it dipped below on Monday.
Comments on Thursday’s FT Alphaville post on James Bullard pointed out that while he was happy to show the correlation between QE2, inflation expectations and real interest rates, there was little on what it may have done to oil prices.
Fortunately, the ever-alert Reuters columnist John Kemp has provided the ‘missing slide’ which adds Brent spot prices to the St Louis Fed president’s data: Read more
Oil prices surged by more than $6 a barrel as violence in Libya knocked out at least half the country’s production, according to industry executives, reports the FT. Brent oil futures, the global pricing benchmark, jumped 5 per cent to more than $111 a barrel – a 2½-year peak, while Nymex West Texas Intermediate, the US benchmark, hit $100 a barrel for the first time since October 2008. “It is increasingly looking as if this is the real deal in terms of a supply shock,” said JBC Energy, a Vienna-based consultancy.
Oil prices will rise modestly towards $85 a barrel next year despite market expectations that they will return to above $100 a barrel, the world’s largest oil trading house has forecast, the FT reports. Ian Taylor, chief executive of Switzerland-based Vitol, said a price band between $70 and $85 a barrel was “widely viewed as meeting producers’ needs while being simultaneously ‘acceptable’ to consumers”. “We see prices progressing to the higher end of this range over 2011,” he writes in the Financial Times. But he warned that surpluses in production and refining capacity would keep prices “in a relatively narrow band” next year. “The concept of a price ceiling exists today in a way that it simply didn’t when prices rose to $150 in the middle of 2008.”
Royal Dutch Shell has posted a 60 per cent rise in post-tax profits, beating analyst predictions, the FT reports. Earnings were up 49 per cent in 2010′s first quarter, relative to Shell’s performance in the first quarter of 2009 — even controlling for commodity price movements.
The energy giant has nevertheless benefited from a sharp rise in oil prices, the WSJ reports, while oil production has increased 5.8 per cent on the year with new projects opened in Brazil and Russia.
UK natural gas prices have traditionally followed oil prices due to the practice of linking long-term contracts to crude in Europe.
Analysts in the market, however, are getting excited because of a nascent disconnect in that relationship, one which could be about to make their lives a little more interesting. Read more
Oil prices may threaten the recovery in the United States and Europe as they reach an eighteen-month high, the International Energy Agency warned on Tuesday. The IEA said prices could have a dampening effect even despite plenty of oil being available for demand, the WSJ reports. The IEA has been calm about price rises before, the FT’s Energy Source blog observes – so its caution is worth paying heed.