Helping you navigate the new normal
2 major events shocked oil markets last week. They marked the start of (a) the endgame for the Age of Oil and (b) the paradigm shift to the Circular Economy and the new Age of Energy Abundance. The new ‘Net Zero by 2050’ report from the International Energy Agency (IEA) was the first shock: It
The post Oil markets, OPEC, enter the endgame for the Age of Oil appeared first on Chemicals and the Economy.
Everyone who has ever played the Beer Distribution Game on a training course knows what is happening in supply chains today. A small increase in underlying demand is rapidly leading to a massive increase in ‘apparent demand’. As the New York Times reports, “the pandemic has disrupted every stage of the (supply chain) journey.” And
The post Rising US interest rates, US$ and oil prices set to pressure financial markets appeared first on Chemicals and the Economy.
Saying you “won’t do something” may stop you digging a bigger hole for yourself. But it doesn’t help in deciding what you should do instead. That’s OPEC’s dilemma today on raising oil output. Everything seemed simple enough a year ago, as the pandemic took hold: Saudi Arabia’s first reaction was to assume it would have
The post Iran highlights OPEC’s dilemma on output cuts appeared first on Chemicals and the Economy.
Former Saudi Oil Minister Sheikh Yamani’s warning in 2000 looks increasingly prophetic today: “30 years from now, there will be a huge amount of oil – and no buyers. 30 years from now, there is no problem with oil. The Stone Age did not end because the world ran out of stones, and the Oil
Oil markets can’t quite make up their mind as to what they want to do, as the chart confirms. The are trapped in a major ‘flag shape’. Every time they want to move sharply lower, the bulls jump in to buy on hopes of a major US-China trade deal and a strong economy. But when
Oil markets remain poised between fear of recession and fear of a US attack on Iran. But gradually it seems that fears about a war are reducing, whilst President Trump’s decision to ramp up the trade war with China makes recession far more likely. The chart of Brent prices captures the current uncertainties: It shows
Back in 2015, veteran Saudi Oil Minister Ali Naimi was very clear about Saudi’s need to adopt a market share-based pricing policy: “Saudi Arabia cut output in 1980s to support prices. I was responsible for production at Aramco at that time, and I saw how prices fell, so we lost on output and on prices
Today, we have “lies, fake news and statistics” rather than the old phrase “lies, damned lies and statistics”. But the general principle is still the same. Cynical players simply focus on the numbers that promote their argument, and ignore or challenge everything else. The easiest way for them to manipulate the statistics is to ignore […]
The post Oil prices flag recession risk as Iranian geopolitical tensions rise appeared first on Chemicals & The Economy.
Saudi Arabia’s U-turn to revive oil output quotas is not working and fails to address the changing future of oil demand, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Saudi Arabia’s move into recession comes at an unfortunate time for its new Crown Prince, Mohammed bin Salman […]
The post Saudi Arabia’s ‘Vision 2030’ is looking a lot less clear appeared first on Chemicals & The Economy.
On Monday, I discussed how OPEC abandoned Saudi Oil Minister Naimi’s market share strategy during H2 last year. Naimi’s strategy had stopped the necessary investment being made to properly exploit the new US shale discoveries. But this changed as the OPEC/non-OPEC countries began to talk prices up to $50/bbl. As CNN reported last week: “Cash is pouring […]
OPEC and Russia made a massive mistake last November when when they decided to try and establish a $50/bbl floor for world oil prices. And now they have doubled down on their mistake by extending the deal to March 2018. They have ignored 4 absolutely critical facts: Major US shale oil producers were already […]
The myth of oil market rebalancing has been a great money-maker for financial markets. Hedge funds were the first to benefit in H2 last year, as Reuters has reported, when: “OPEC and some of the most important hedge funds active in commodities reached an understanding on oil market rebalancing during informal briefings held in the […]
Trading oil markets used to be hard work. You had to talk to all the major players all the time (not just message them), and learn to judge whether they were telling the truth or inventing a version of it. You had to watch for breaking economic and political news. And you needed your own […]
Last year it was the oil price fall. This year, there is no doubt that the US dollar has taken centre stage, alongside the major rise underway in benchmark 10-year interest rates. As 2016′s Chart of the Year shows: The US$ Index (black) has risen 12% since May against other major currencies (euro, yen, […]
There were only two winners from the past 3 months of OPEC’s “Will they?, Won’t they?” debate on output cutbacks. Iran wasn’t one of them – although the talks did emphasise its renewed ability to control the OPEC agenda. Nor was Saudi Arabia, forced to accept the lion’s share of the proposed cutbacks. Instead, the […]
If asked about the outlook for prices, oil company CEOs normally duck the question. And they certainly never disagree in public with Saudi Arabia, the world’s leading oil producer. This is what makes the recent speech by ExxonMobil CEO, Rex Tillerson, so interesting: “I don’t quite share the same view that others have that we are somehow […]
There was never any fundamental reason why oil prices should have doubled between January and June this year. There were no physical shortages of product, or long-term outages at key producers. But of course, there was never any fundamental reason for prices to treble between 2009 – 2011 in the Stimulus rally, or to jump […]
81-year olds are allowed to retire, even if they have to wait a year for final permission to be given. But it seems a simple headline saying “Saudi Oil Minister retires after 69 year career” is not “exciting” enough in today’s media world? So perhaps we can’t be too surprised to find some of the world’s […]
“Within 20 years, we will be an economy that doesn’t depend mainly on oil“. With that one statement, deputy Crown Prince Mohammed bin Salman (pictured above), changed the outlook for oil and energy markets. The world’s major oil producer, with the lowest cost, was signalling that the kingdom will no longer be supply-driven, focused on […]
Both the US and Iran are likely to be moving oil into world markets early in the New Year. The lifting of the US export ban has led to early announcements of oil sales: Vitol will move the first cargo via the Enterprise terminal in Houston in early January. Iran is expecting to have sanctions lifted around the same […]
Oil market traders have been having fun in recent weeks, as they have managed to create guaranteed price movements every week: US oil inventory data is published on Tuesday and Wednesday This gives traders the chance to push prices lower as the inventories continue to rise US oil rig data is published on Friday This creates the chance to […]
I was kindly invited last week to give a keynote address at the annual ME-TECH conference in Dubai. Naturally, there was intense interest in my argument that oil prices were most unlikely to recover to the $100/bbl level. Instead, I suggested they would likely return to their long-term historical average of $33/bbl (in $2014). And I argued that this would be good news […]
I imagine a version of this chart has been keeping ministers awake at nights in Riyadh and the other Gulf Co-Operation Countries (GCC) in recent months. “How did we ever allow Canada to supply more oil than OPEC to the US?” they must be worrying. ”What did we think we were doing?” This might not be quite […]
Does OPEC have a future? Or has it already disappeared as an effective force in oil markets? I am not the only one now asking this question. Saudi Oil Minister Ali al-Naimi asked the same question in the summer, suggesting OPEC Ministers should instead meet once a year, and have occasional videoconferences, adding: “We don’t need a meeting. […]
Yesterday’s post described how OPEC oil producers are seeing their export sales to the US start to disappear. But this, of course, is only one side of the story. As the chart from the Wall Street Journal shows, Saudi needs a $93/bbl oil price to balance its budget. Most of OPEC needs a higher price. Only Kuwait, UAE and Qatar need […]
Oil markets have weakened significantly since they fell out of their major ‘triangle’ formation earlier this month. WTI is already within the forecast $60-80/bbl range although, as the chart shows, Brent still maintains a $10/bbl premium at $90/bbl.
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Remarkably, crude oil prices are continuing to trade in their triangle formation. As the chart shows, they tried to break out higher in recent weeks. But there was no follow-through.
The high-frequency traders were clearly hoping the US Federal Rese…
