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Saturday, December 3, 2016

For the increased cost of oil, there are no preconditions, says wall street


According to the Russian Federal TV channels, the agreement, which reached Russia and Saudi Arabia to stabilize oil prices, will inevitably lead to higher prices of “black gold”. In the West I see the situation quite differently: investors do not believe that the coming of the freezing of oil production. And without this, all the talk about stabilization will talk, as it has repeatedly happened in the past. A rising oil price, which is observed today, many Western experts believe a short-term phenomenon.


photo: Kirill Iskoldsky

We will remind, at the G20 summit, which recently took place in China, Saudi Arabia and Russia have agreed to unite efforts to stabilize prices on the world market. Since these two States are the largest producers and exporters of oil, and given the fact that their’s aim was supported by some other oil-producing countries, there is the prospect of higher oil prices.

In anticipation of a Russian-Saudi agreement to price oil on the commodity exchange jumped as much as 5%, but was only made public the text of this document, oil prices went down. The agreement between Saudi Arabia and Russia are missing the point – the ceiling on oil production. According to Michael Ingram, market analyst, BGC Partners, “the market has reason to be skeptical: in August, the OPEC countries gave a record amount of crude oil – 33.7 million barrels a day.” Russia, too, was rocked in August oil at a record pace – an average of 10.71 million barrels a day. Added to this is U.S. oil production of 8.5 MBD), Iran (to 3.6 MBD), and other countries. In total, it is overproduction, in the world there is demand for such a quantity of oil, because there is no sustainable growth of the world economy.

French investment Bank Natixis believes that by the end of this year the price of a barrel of oil will stay below $50. English Bank Barclays predicts the drop in oil prices to $40 per barrel due to an overabundance of oil on the world market and the consequences of the decision to withdraw Britain from the EU. The American Agency energy information (Energy Information Administration, or EIA) also said that this year the average price of oil in Europe and in America is barely above $41 per barrel. In 2017, the EIA predicts a slight rise in price to $while 51.58 per barrel.

News Agency Reuters reports that OPEC countries are not included in the United States, primarily Russia, will hold talks in Algiers on 26-28 September of this year., “but many market participants are skeptical about the possibility of reaching agreement” (freezing levels of oil production).

Some, however, looking at the situation more optimistically. Previously the stumbling block was the position of Iran, which, out from under sanctions, wants to reach the pre-sanctions level of oil production (MBD 4 million), not freeze it. Now, however, Iran expressed willingness to negotiate with Saudi Arabia and Russia about the ceiling of production. Suddenly changed temper justice with mercy” Iraq (current oil production of 4.48 MBD), whose leaders were initially opposed to the idea of freezing, and then supported it, but then added a caveat: freeze when we get to 6 million barrels a day.

According to Peter, Cardillo, chief market economist at a wall street company First Standard Financial, “the fact that the Saudis speaking on the subject of common purpose, represents a real shift”; his company sees the possibility of achieving concrete agreements aimed at stabilizing prices.” If not in Algeria in October, the next Saudi-Russian meeting in November in Vienna.

And yet… The Wall Street Journal reminds us that “meeting of major oil producers in the last two years has not led to any coordinated agreements” and that such countries as Iran, Nigeria and Libya aim to increase production of oil and, most likely, do not want to freeze”. And most importantly – that “the market is saturated,” what contributes to America: “inventory of crude oil and petroleum products in the United States are at a record high level.”

The key to the answer to the puzzle about the future of oil prices, says a well-informed online resource http://oilprice.com is the question: will Saudi Arabia continue to Deplete its foreign exchange reserves (which, however, is still very high), trading cheap oil, so as not to cede market share to Iran and Russia? Riyadh has tried to fight this way with the U.S. “oil”, and the results of this “war of attrition” is not impressive – the prices remain low.

If this year agreement on the “oil moratorium” will not, the market will cease to take seriously any talk of freezing production, analysts say.

New York

Sanctions . Chronicle of events
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