Live World Indices are powered by Investing.com
Tuesday, 15 March 2016
OIL Prices Promise Volatility for Months Ahead
EVEN BAD NEWS MAY DROP PRICES?
No terrible economic news has surfaced in recent weeks but that does not change the profound weakness of a global economy that is burdened with debt and weak demand. The announcement last week by the People’s Bank of China that it sees room for more quantitative easing may have comforted stock markets but it only added to my anxiety about reduced oil consumption and future downward shocks in oil prices....
Art Berman, Energy Specialist
Oil prices should fall, possibly hard, in coming weeks. That is because fundamentals do not support the present price.
Prices should fall to around $30 once the empty nature of an OPEC-plus-Russia production freeze is understood. A return to the grim reality of over-supply and the weakness of the world economy could push prices well into the $20s.
A Production Freeze Will Not Reduce The Supply Surplus
An OPEC-plus-Russia production cut would be a great step toward re-establishing oil-market balance. I believe that will happen later in 2016 but is not on the table today.
In late February, Saudi oil minister Ali Al-Naimi stated categorically, “There is no sense in wasting our time in seeking production cuts. That will not happen.”
Arabia or Russia have the spare capacity to increase production much beyond present levels making the proposal of a freeze cynical rather than helpful.
There is money to be made on vaccines and GM mosquitos, and money to be lost if sales of pesticides and other chemicals are reduced. It is clear in which direction the politics will lean.
The Zika virus should remind us of other strange activities in the financial world.
The local perspective was provided by UC Berkeley's Deborah Sunter, who works on modeling the future US electrical grid. Dr. Sunter argued that Assembly Bill 32, passed by California in 2007, was a key moment in the US' energy transition. With that legislation, California committed to cut emissions to 1990 levels. Soon after, a number of Northeast states formed the Regional Greenhouse Gas Initiative, the US' largest carbon emissions trading market.
The Organization of Petroleum Exporting Countries and non-members have intermittently held discussions since November 2014, when OPEC first signaled it was unwilling to cut production on it own to support prices. Saudi Arabia, Venezuela, Russia and Mexico assembled in Vienna that month without reaching any deal. A tour of oil capitals from Moscow to Riyadh last month by Venezuelan Energy Minister Eulogio Del Pino failed to produce an accord.
- Top Economist Says #Bernienomics Great for Americ...
- China's New "Solidarnosc" Hits Streets
- U.S. Drug Prices Out-of-Control; Doctors Demand Ac...
- GOOD NEWS: EV's Spelling Certain End to Oil-Age
- Rockefellers Dump Exxon Over #Climate Deceptions
- Drunken Sailor's Budget Should Start Canada's Down...
- Puerto Rico Digging Debts of Despair
- U.S. Existing Home Sales Plunge 7.1%
- China Dumping US T- Bonds Could Force FED Policy?
- Subprime Slime Sequel - The Return of Stupidity Ba...
- Heartland #Iowa Farmers Heading for Cleaners
- American Economic Anger Driving Elections - Mad as...
- OIL Prices Promise Volatility for Months Ahead
- China on Verge of Massive Labor Unrest - Protests...
- Reality Check: Saudi Arabia is Going Broke!
- BIG Oil Stocks Good Long-term #Investments?
- IMF Confirms Global #Economy Crashing
- New Generations Suffer Growing Wealth Gap
- Americans' Lousy #Jobs Grow - NO Raises?
- Korean Nuclear War Signals Rattles West
- Financial Advisors - What EVIL Lurks?
- Panic Grows as Moody's Cuts China's Rating Outlook...
- Top British Banker Dooms #EUROZONE
- ▼ March (23)
- ► 2015 (98)