Tag Archive for: #RUSIA

Oil prices are poised for a pullback after OPEC announces its output cut decision

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From CNBC / Tom DiChristopher / 28 de noviembre de 2017

 

Market watchers see few opportunities for oil prices to rally — but plenty of room for them to fall — after a critical meeting of energy ministers later this week.

About two dozen oil exporters, including top producers Saudi Arabiaand Russia, meet on Thursday in Vienna to discuss extending a deal to keep 1.8 million barrels a day off the market. The historic agreement has helped to reverse a three-year oil price downturn that wiped out hundreds of thousands of energy jobs and piled financial pressure on both free market American drillers and countries dependent on oil revenue.

The market largely expects the 14-member OPEC cartel and a group of other producers led by Russia to extend the deal, which began in January and expires in March, through the end of 2018.

But just days before meeting, Russia has not committed to the nine-month extension, raising concerns that OPEC could settle for a shorter extension or push off a decision altogether. Either of those scenarios would spark a sell-off, analysts say, but oil prices will probably struggle to grind higher from recent 2½-year highs even if OPEC lives up to expectations.

Here’s how analysts expect markets to move under three scenarios.
OPEC extends by nine months
Andy Lipow, president of Lipow Oil Associates, expects OPEC to lock down the nine-month extension. But he also expects a pullback on the news.

The reason: Hedge funds have recently increased their long positions in oil futures, or bets that prices will keep rising. That makes prices vulnerable to a slide because traders often book profits by selling high. At the same time, the number of oil rigs operating in U.S. oil fields crept up in November, a trend that tends to weigh on prices.

“The market has gotten very, very long and as a result you can have some profit-taking triggered by the increase in the rig count on Friday,” Lipow said.

Tom Kloza, global head of energy analysis at Oil Price Information Service, also thinks a nine-month extension has been baked into prices, making it hard for U.S. West Texas Intermediate crude to rally beyond Friday’s 2017 intraday high of $59.05.

“We may look back at Black Friday as the as-good-as-it-gets number for U.S. producers,” he said.

U.S. crude could take another run at the $59 per barrel level, but OPEC would have to get the messaging just right, said John Kilduff, founding partner at energy hedge fund Again Capital. That includes a show of unity among regional geopolitical rivals Saudi Arabia and Iran and a clear signal that OPEC will force member countries Libya and Nigeria to cap their output after giving them a pass this year.
OPEC settles for six months
However, Kilduff thinks OPEC will only be able to commit Russia to a six-month extension.

He said the country’s energy companies have pushed back on Russian Energy Minister Alexander Novak and President Vladimir Putin as U.S. producers pick up market share in Asia, an important oil growth market. Russian energy giants are concerned that extending the cuts prematurely could leave the market undersupplied, causing a spike in prices that leads to another crash.

“If they do go six months I would expect them to spin it and say they’re going to review it next year,” Kilduff said. “That’s going to be seen as a disappointment.”

In that scenario, Kilduff sees oil prices falling back to the mid-$50 range.
Barclays expects either a six- or nine-month extension but says the market is asking the wrong question. Michael Cohen, the investment bank’s head of energy markets research, says traders should be asking whether exporters will be held to the same production caps they agreed to last year.

“It would be a misguided assumption in our view to expect the group’s production quotas to remain set in stone in 2018,” Cohen said in a research note Monday. “The sustainability of the deal depends on how much longer Saudi Arabia, Russia, Iran and Kuwait are willing to sacrifice market share in the pursuit of revenue and market stability.”

 

From CNBC / Tom DiChristopher / 28 de noviembre de 2017

Why Cheap Oil Prices Could Be Bad for the Global Economy

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Drivers are rejoicing over historically low prices at the pump.Yet while cheap gas prices are great for household budgets, they could indicate big trouble for the global economy, some economists say.

Markets around the world rely heavily on emerging economies—which, with the exception of China and India, are rich in oil and commodities, Bloomberg explained. These countries make up about 40 percent of global gross domestic product, double that in 1990.

Some of these markets, including oil-rich Russia and Saudi Arabia, are experiencing slow, and even shrinking, economic growth due to plunging oil prices. (Low oil prices are what’s responsible for low consumer gas prices.) Other markets, such as Nigeria, Suriname and Azerbaijan, have a high risk of default. Venezuela, one of the top 10 oil exporters, is considered one of the most likely default candidates. Its bonds maturing in 2022 are supposed to yield more than 40%, while in 2013, the yield was less than 10%, Bloomberg reported.

The slowdown has also extended to other industries, with Apple blaming weaker sales in the fourth quarter of 2015 on lagging economic growth in some emerging oil-rich nations. At the same time, however, consumers around the globe should have more disposable income because of what they’re saving thanks to cheaper fuel, heating, and energy costs. Some analysts maintain that this increase in disposable income should boost spending in other areas and keep the economy humming along.

Still, the changing demographics of oil production could hurt the global economy. While in the past the loss to exporters was bolstered by importers’ gains, the U.S. now competes with Saudi Arabia and Russia for the title of the world’s largest oil producer.

“Many oil exporters face very difficult circumstances,” Gian Maria Milesi-Ferretti, the IMF’s deputy director of research, told Bloomberg. “So now they have to cut spending significantly, and this will have an impact on economic growth.”

OIL PRICE ECONOMY

Copyright: Time

No Decision Yet on OPEC, Non-OPEC Meeting, Some in OPEC Skeptical: Delegates

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OPEC has not yet scheduled any talks with Russia and other non-OPEC countries aimed at supporting oil prices, two OPEC delegates said on Tuesday after Russian officials talked up potential cooperation with the exporter group.

Russian Foreign Minister Sergei Lavrov said Moscow was open to further cooperation in the oil market with OPEC and non-OPEC countries.

The prospect of supply restraint by the Organization of the Petroleum Exporting Countries and rivals has helped oil prices rise above $32 a barrel from a 12-year low close to $27 last month, despite widespread scepticism that a deal will happen.

OPEC delegates have previously suggested OPEC and non-OPEC could hold talks in February or March. But no date has been scheduled, and one delegate said OPEC did not have a common view on the aim of such a meeting.

“There is nothing from OPEC yet. It is not fixed,” an OPEC delegate said, who added that expert-level OPEC meetings with non-members held in 2015 did not result in supply cuts.

“We had two meetings before. The two sides discussed the market, but there were no concrete steps.”

A second OPEC delegate said there was little point in OPEC holding a meeting with non-OPEC until OPEC itself had agreed a common position. For example, Iran, after the lifting of Western sanctions, wants to recover market share, a source familiar with the matter said last week, not cut output.

“Some of them, OPEC member-countries, are not sure what we are going to do in this meeting with non-OPEC,” the delegate said. “If the meeting takes place without results, we’ll have a big problem with the market, the price will go down.”

Venezuela has called for a standalone meeting of OPEC to discuss steps to prop up prices. But a number of OPEC members have reacted coolly to the idea, suggesting no meeting will take place.

opec

Copyright: New York Times