Russian President Vladimir Putin, Eastern Economic Forum, 2018 elections, US General Election, Syria, OPEC, Rosneft sale, Japan, oil, Russian oil and gas companies, investment in energy, natural gas exports, 50 percent ownership, oil and gas revenue, structural changes, industrial production growth
OEF REVIEW:Crude could return to $100 a barrel because the two-year market downturn has curbed investment. Except during the financial crisis in 2008, average Brent prices increased every year from 2002 to 2012, and topped $100 a barrel from 2011 to 2014 and leading companies into higher-costs projects and capacity building that outstripped demand leading eventually to a collapse in prices.
One of the structural flaws driving China’s instability is the existance of a investment situation where profits of state-owned enterprises, known as SOEs, are largely privatised to SOE personnel and losses of SOEs are socialised on to the state budget. This is the cause of the large amount of excess capacity in China’s heavy industries today, and also of the serious non-performing loan problem in state-owned banks. The growing presence of “zombie” firms coincides with the downward trend in the growth of productivity. The social pain resulting from necessary economic adjustments will have to be addressed.
OEF REVIEW:Civilian planes landed on Subi reef and Mischief reef for the first time on July 12th giving China three operational runways in the disputed Spratly Islands in the South China Sea. A military transport plane visited Fiery Cross Reef earlier this year but there is no evidence that Beijing has deployed military aircraft to these outposts. The reefs can easily accommodate any fighter-jet in the People’s Liberation Army Air Force or Naval Aviation.
OEF REVIEW: Mid-August saw the longest period of rig expansion since the final days of the drilling boom in early 2014, according to World Oil, marking the longest period of oilfield expansion since April of that year when drillers added oil rigs nine weeks in a row, reported Baker Hughes Inc. Prompted by an oil price recovery from a 12-year low in February, producers have begun returning parked rigs to service after idling more than 1,000 rigs since the start of last year. The long-term decline in drilling expansion has led to a slowdown in production. Crude output fell by 15,000 barrels per day to 8.45 million barrels per day during the week ended August 5th. “I think it’s just a matter of time before we come into balance,” Paul Crovo, a Philadelphia-based oil and equity analyst at PNC Capital Advisors said. “We think the fundamentals will take care of themselves as we come into the third quarter and later into the fourth quarter and early 2017.”
OEF REVIEW:According to the U.S. Energy Information Administration (EIA) world tight oil production is expected to more than double between 2015 and 2040, increasing from 4.98 million barrels per day in 2015 to 10.36 million barrels per day in 2040. Most of the projected increase will come from the United States, with much of the rest coming from countries such as Russia, Canada, and Argentina. U.S. tight oil production is expected to reach 7.1 million barrels per day in 2040. Tight oil production in Canada will continue to decline until 2020, and then increase over the rest of the projection period, reaching 0.76 million barrels per day in 2040. Argentina is still in the early stages of commercial tight oil production, but projections are that production will double from 2015 to 2020 and will reach 0.69 million b/d in 2040. Russia, Mexico, Colombia, Australia, and other countries that hold large technically recoverable tight oil resources are expected to contribute 18% of the projected total world tight oil production by 2040.
Hillary Clinton is promising to revitalize Pennsylvania communities hurt by a downturn in the coal and steel industries. With regard to the coal industry she asked whether there was a technology that could create clean energy from coal, and stated that she would revitalize the coal producing areas. Earlier in the primaries, Donald Trump made his position clear on the coal industry saying that he wanted clean coal and that the country would, in his words, have an amazing mining business.
OEF REVIEW:Oil investors are buying contracts that will only pay out if crude oil rises well above US$100 a barrel over the next four years – a clear sign some believe today’s bust is sowing the seeds of the next boom. The options deals, which brokers said bear the hallmarks of trades made by hedge funds, appear to be based on the belief that current low prices will generate a supply crunch. Over the last month, investors have bought call options for late 2018, 2019 and 2020 at strike prices of US$80, US$100 and US$110 a barrel. Previously, some investors had already built super-bullish positions. The options deals suggest a concern about shortages as demand begins to outstrip production – the traditional boom and bust commodities cycle.
OEF REVIEW:India’s fuel markets could be a lucrative prize for the world’s oil majors as they seek outlets for their gasoline and diesel. India posted the fastest oil demand growth in the world in the first quarter of 2016 and is replacing China as the driver of growth globally, the International Energy Agency said in its latest report. Fuel marketing in India has turned profitable after the government ended decades-old control over the retail prices of gasoline and diesel, and local private oil refiners Reliance Industries and Essar Oil have started opening their mothballed fuel stations, adding new ones to expand business. India recently offered Saudi Aramco a stake in refineries and petrochemical projects; Total and Royal Dutch Shell are also keen to strengthen their presence in the fuel retailing business; BP could market jet fuel in the country; and Rosneft may take up a 49% stake in Essar Oil’s in a 49% 400,000 barrels per day Vadinar refinery in western Gujarat state.
OEF REVIEW:Technical analyst Clive P. Maund lists the reasons he believes oil prices, which recently peaked above $50 a barrel, are headed for a fall: “It still looks like oil is topping out here at about the $50 level after its substantial recovery uptrend from its February low. While we cannot be sure until it breaks down from its uptrend, the chances of its doing so soon look high for various reasons.”
OEF REVIEW:Coal is cheap but the challenge is how to harness coal as clean energy. The main technology being used is coal gasification where the coal is chemically transformed into synthetic natural gas, but its overall carbon intensity is worse than coal mining. Other methods are the coal-bed methane process and underground coal gasification. Underground coal gasification is now a feasible way of accessing the vast resources of coal that are too deep to mine, thus potentially increasing world clean energy supply.
OEF REVIEW:Ship tracking data, sourced from Bloomberg, shows that 83 supertankers carrying around 166 million barrels of oil are headed to China, which has stockpiled an impressive 787,000 barrels a day in the first quarter of 2016 – the highest Chinese oil stockpiling rate since 2014. Additionally, in January 2015 it was reported that China’s strategic petroleum reserve would be increased from 30 days to 90 days. Later in January 2016, it was revealed that China was building underground oil storage facilities to complement its above-ground storage tanks. So it could be considered in the light of this that in contrast to Saudi Arabia, which is a swing producer, China is acting like a swing consumer. Such increased demand from China has helped in lapping up excess oil production, and if If its imports drop, according to Oil Price, the world will return to the oil supply glut and oil prices will retrace back to the lower $30 a barrel.
