Posts Tagged: brent prices

 

 Iran’s crude oil exports in December leapt to their highest level since European Union sanctions took effect last July, analysts and shipping sources said, as strong Chinese demand and tanker fleet expansion helped the OPEC member dodge sanctions.

Exports rose to around 1.4 million barrels per day (bpd) in December, according to two industry sources and shipping and customs data compiled by Reuters on a country-by-country basis and corroborated by other sources and consultants.

The sources said they expected exports to dip in January from the December peak ahead of new U.S. sanctions.

Western sanctions aimed at curbing Iran’s disputed nuclear program halved Iran’s oil exports in 2012 from 2.2 million bpd in late 2011, leading to billions of dollars in lost revenue and a plunge in the Iranian currency.

But continuous robust demand from top buyer China and others such as India and Japan, as well as the purchase of new tankers, allowed the Islamic Republic to unexpectedly boost exports late last year. >> Read More

Beware The Coming Bear Market In Oil

24 September 2012 - 10:44 am
 

The crude oil price chart for the past year resembles a roller-coaster ride. After climbing through the late fall and winter, prices peaked earlier this spring, dropped precipitously through May and June, and then rebounded during the summer.

Volatility continued last week, beginning with a mini “flash crash” on Monday afternoon, as oil prices dropped by nearly $4 in just a few minutes. Prices dropped further on Tuesday based on news that Saudi Arabia was pumping more than 10 million bpd in order to bring down prices. Sources claim that the Saudi government would like to see Brent prices near $100 (more than 10% below current levels). Bearish data on oil inventories pushed prices down even further on Wednesday. In total, oil prices dropped nearly $10/barrel from the Monday high to the Wednesday low. However, oil recouped several dollars of its losses on Thursday and Friday, due in part to supply outages in the North Sea.

Oil’s trading action last week could be indicative of a small correction to establish a new trading range, or it could be the beginning of a more sustained drop in oil prices. I am inclined to believe that oil prices will continue to drop through the fall. There are three primary reasons for this: 1) growing U.S. oil production; 2) seasonally lower demand; and 3) global economic weakness.

Domestic oil production has grown by over 500,000 bpd year over year (nearly 10%) according to recent EIA statistics. While production in Alaska is decreasing, this is far outweighed by growing output in the lower 48 states, most notably from the Bakken formation in North Dakota. Due to a lack of pipeline capacity, much of the increased U.S. production has had trouble getting to market; this has caused WTI oil prices to lag Brent prices by nearly $20/barrel. However, railroads such as Berkshire Hathaway’s (BRK.B) BNSF are stepping in to fill the gaps by transporting inland crude to coastal refineries. There are also a number of pipeline projects in progress that will allow more inland oil to reach coastal markets cheaply, which will pull Brent prices down towards WTI prices over the medium term. >> Read More

 

The oil market has reacted to the recent imposition of sanctions by the US and European Union in ways none of the leaders on either side of the Atlantic apparently contemplated.

Efforts to deprive Iran of revenue may be reducing the volume of Iran’s oil sales, but higher prices are more than making up for reduced flows. Higher prices are also taxing consumers, jeopardising a precarious recovery.

This is an unexpected turn from expectations just two months ago. Then attention was focused on a potential closure of the Strait of Hormuz through which some 35 per cent of seaborne oil and 20 per cent of seaborne liquefied natural gas flow daily. Whether flows were to be interrupted by military attack initiated by Israel or the US, or from pre-emptive Iranian acts threatened by Tehran, concerns were around how high and for how long prices would spike. The US military convincingly argued that a closure of the strait could not last more than three weeks and analysts have estimated oil prices could spike by up to $50 a barrel, falling back within a month. >> Read More

Goldman Goes Long WTI

23 February 2012 - 9:52 am
 

Goldman’s David Greely is no Tom Stolper. In fact his recommendations have been correct more often than not. Which is why we believe that when the market learns that the Goldman commodities strategist just opened a long September WTI position at $107.55, it will merely provide that extra oomph to send WTI up, up and away. Or maybe not: this could be another one of the “fade Goldman” calls. Alas, with the real impact of the recent $2 trillion balance sheet expansion becomes truly felt we have a distinct feeling Goldman is quite right on this one. Evil, evil speculators.

From Goldman’s David Greely:

 Repositioning our trade recommendation as Brent crosses $120/bbl 

Brent crude oil prices have rallied $11.92/bbl this month, crossing our 3-month target of $120/bbl and reaching their highest levels since last spring. While we continue to see an upward trajectory for crude oil prices, we believe that with Brent prices having crossed our 3-month price target it is an opportune time to reassess our trading recommendation and we believe that the better trading opportunity may currently lie in WTI futures for the contract months following the scheduled June reversal of the Seaway pipeline to flow crude oil from Cushing to the US Gulf Coast. Brent prices have risen above our 3-month target, but we expect them to continue to rise to $127.50/bbl over the next 12 months >> Read More

 

Between the Chinese ‘surprise’ RRR and the Iran export halt to UK and France (and escalating tensions), Oil prices are off to the races this evening. WTI front-month futures have just broken $105 (now up more than 10% in the last two weeks), the highest levels in over nine months and just 8% shy of the 5/2/11 post-recession peak just under $115. Brent (priced in EUR) remains off last week’s intraday highs (as EUR strengthens) but still above the pre-recession peak but in USD it traded just shy of $121 – well above last week’s peak. Of course, this will be heralded as a sign of demand pressure from a ‘growing’ global economy rather than the margin-compressing, implicit-taxation, consumer-spending-crushing supply constraint for Europe and the US that it will become in the not too distant future. As we post, The Guardian is noting that US officials are commenting that “Sanctions are all we’ve got to throw at the problem. If they fail then it’s hard to see how we don’t move to the ‘in extremis’ option.” The impact of any escalation from here is gravely concerning with PIMCO’s $140 minimum and SocGen’s $150-and-beyond Brent prices rapidly coming into focus – and for those pinning their hopes on the Saudis coming to the rescue (and fill the Iranian output gap), perhaps the news that our Middle-East ‘allies’ cut both production and exports in December will stymie any euphoria.

From The Guardian: US officials believe Iran sanctions will fail, making military action likely

• Growing view that strike, by Israel or US, will happen
• ‘Sweet spot’ for Israeli action identified as September-October
• White House remains determined to give sanctions time

It’s not that the Israelis believe the Iranians are on the brink of a bomb. It’s that the Israelis may fear that the Iranian programme is on the brink of becoming out of reach of an Israeli military strike, which means it creates a ‘now-or-never’ moment,” he said.

That’s what’s actually driving the timeline by the middle of this year. But there’s a countervailing factor that [Ehud] Barak has mentioned – that they’re not very close to making a decision and that they’re also trying to ramp up concerns of an Israeli strike to drive the international community towards putting more pressure on the Iranians.”

On 15th Feb ,We had written about WTI CRUDE : http://bit.ly/wWls2G

On 8th Feb ,We had written about BRENT CRUDE :http://bit.ly/xL0EAC

 

Between the Chinese ‘surprise’ RRR and the Iran export halt to UK and France (and escalating tensions), Oil prices are off to the races this evening. WTI front-month futures have just broken $105 (now up more than 10% in the last two weeks), the highest levels in over nine months and just 8% shy of the 5/2/11 post-recession peak just under $115. Brent (priced in EUR) remains off last week’s intraday highs (as EUR strengthens) but still above the pre-recession peak but in USD it traded just shy of $121 – well above last week’s peak. Of course, this will be heralded as a sign of demand pressure from a ‘growing’ global economy rather than the margin-compressing, implicit-taxation, consumer-spending-crushing supply constraint for Europe and the US that it will become in the not too distant future. As we post, The Guardian is noting that US officials are commenting that “Sanctions are all we’ve got to throw at the problem. If they fail then it’s hard to see how we don’t move to the ‘in extremis’ option.” The impact of any escalation from here is gravely concerning with PIMCO’s $140 minimum and SocGen’s $150-and-beyond Brent prices rapidly coming into focus – and for those pinning their hopes on the Saudis coming to the rescue (and fill the Iranian output gap), perhaps the news that our Middle-East ‘allies’ cut both production and exports in December will stymie any euphoria.

From The Guardian: US officials believe Iran sanctions will fail, making military action likely

• Growing view that strike, by Israel or US, will happen
• ‘Sweet spot’ for Israeli action identified as September-October
• White House remains determined to give sanctions time

It’s not that the Israelis believe the Iranians are on the brink of a bomb. It’s that the Israelis may fear that the Iranian programme is on the brink of becoming out of reach of an Israeli military strike, which means it creates a ‘now-or-never’ moment,” he said.

That’s what’s actually driving the timeline by the middle of this year. But there’s a countervailing factor that [Ehud] Barak has mentioned – that they’re not very close to making a decision and that they’re also trying to ramp up concerns of an Israeli strike to drive the international community towards putting more pressure on the Iranians.”

On 15th Feb ,We had written about WTI CRUDE : http://bit.ly/wWls2G

On 8th Feb ,We had written about BRENT CRUDE :http://bit.ly/xL0EAC

 

SocGen’s Michael Wittner to take a more nuanced approach adapting to the times, with an analysis of what happens under two scenarios – 1) a full blown EU embargo (which contrary to what some may think is coming far sooner than generally expected), and the logical aftermath: 2) a complete closure of the Straits. The forecast is as follows: 1) “Scenario 1: EU enacts a full ban on 0.6 Mb/d of imports of Iranian crude. In this scenario, we would expect Brent crude prices to surge into the $125-150 range.” 2) “Scenario 2: Iran shuts down the Straits of Hormuz, disrupting 15 Mb/d of crude flows. In this scenario, we would expect Brent prices to spike into the $150-200 range for a limited time period.” The consequences of even just scenario 1 is rather dramatic: while the adverse impact on the US economy will be substantial, it would be the debt-funded wealth transfer out of Europe into Saudi Arabia that would be the most notable aftermath. And if there is one thing an already austere Europe will be crippled by, is the price of a gallon of gas entering the double digits. And then there are the considerations of who benefits from an Iranian supply deterioration: because Europe’s loss is someone else’s gain. And with 1.5 million of the 2.4 Mb/d in output already going to Asia (China, India, Japan and South Korea) it is pretty clear that China will be more than glad to take away all the production that Europe decides it does not need (which would amount to just 0.8 Mb/d anyway).

SocGen’s situation summary:

  • Scenario 1: EU enacts a full ban on 0.6 Mb/d of imports of Iranian crude.
  • In this scenario, we would expect Brent crude prices to surge into the $125-150 range.
  • The extent of the bullish impact will depend on the terms of the actual EU embargo, including how quickly it will be phased in. Another important variable will be how much Iranian crude is cut by non-EU countries, such as Japan and S. Korea, as a result of US pressure. This will determine how much Iranian crude has to be replaced by Saudi Arabia, and how much spare capacity Saudi Arabia has remaining after it increases output. Lower Saudi spare capacity equals higher prices. An EU embargo would possibly prompt an IEA strategic release. The price surge would dampen economic and oil demand growth.
  • An EU embargo is considered likely, especially after the EU reached an agreement in principle on an embargo on 4 January. When it is announced, depending on the timing and details, we may revise our base case oil price forecast upward. Our current Brent crude price forecast for 2012 is $110.
  • Scenario 2: Iran shuts down the Straits of Hormuz, disrupting 15 Mb/d of crude flows.
  • In this scenario, we would expect Brent prices to spike into the $150-200 range for a limited time period.
  • We believe it would be relatively easy for Iran to shut down the Straits of Hormuz. A credible threat from missiles, mines, or fast attack boats is all it would take for tanker insurers to stop coverage, which would halt tanker traffic. However, we believe that Iran would not be able to keep the Straits shut for longer than two weeks, due to a US-led military response. The disruption would definitely result in an IEA strategic release. The severe price spike would sharply hurt economic and oil demand growth, and from that standpoint, be self-correcting.
  • A Straits of Hormuz shutdown is not likely. We estimate the probability of this very high impact event at 5%. Although Iran may like the idea of retaliation in order to hurt its enemies, by halting its oil export revenues, it would hurt itself even more. Moreover, Iran would do this at the cost of provoking a military response that could destroy much of its military and perhaps even its nuclear program.

A quick summary of who are the main export partners of Iran crude:

 
 

Since early November, geopolitical risk related to Iran has re-emerged as one of the factors supporting prices in the oil complex. More to the point, the markets have become concerned about the possibility of a partial disruption to Iran’s 2.4 Mb/d of medium and heavy sour crude exports (as detailed in the table below). In addition, the markets are also thinking about the small probability but very high impact scenario where Iran shuts down the Straits of Hormuz, which would halt flows of 15 Mb/d of crude and a significant amount of NGLs, refined products and LNG. >> Read More

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Technically Yours,
Team ASR,
Baroda, India.