Heroes of Ukraine

«Market Leader» - news and previews making you rich.

Saturday, 24 February 17:40 (GMT -05:00)



Stock and commodities markets

Don't Dream About Oil Renaissance, Shelin Says


While watching oil prices grow a little bit, oil exporters start hoping that oil prices will recover to the levels the used to be in the past. However, Russian market observer Sergey Shelin thinks that, given the existing state of affairs around the globe, this can only be possible in a dangerous world.
 

 

 

 

In one of his articles, he says that Russia and other economies dependent on the export of crude oil are dreaming about $100 per barrel – the price they used to enjoy a couple of years ago. Yet, Russian and some other media keep on publishing positive forecasts and saying that the end of the American shale oil industry is near, especially as investors are supposedly reluctant to continue investing money in energy carriers without a future.
 

 

NordFX analysts report that oil prices have been recovering for a while, driven by a number of factors.

s_2017_10_19_at_11_05_45.jpg

At the same time those who believe in higher oil prices (pro-Putin analysts in particular) say that the current price level of $58/b is one of the signs indicating that an oil renaissance is coming. At the same time, having analyzed last year’s market picture, we can definitely say that the highest oil prices of the year were seen in June 2016, and the rally was driven by a decline in the American shale oil production. The thing is, when the price was around $30/b, most of the shale oil production in the USA got unprofitable. Back then, Russian experts predicted that no investor would ever invest in the U.S. shale oil industry again.
 
However, in the second half of 2016, the American shale oil industry revived and started growing again. Later on, the so-called OPEC+ agreement was signed, which made Brent oil go up in price. History shows that the American shale oil industry influences the entire global market of crude oil much more seriously that any agreement between major oil exporters.
 
The OPEC+ agreement is still active, and the participants seem to follow it. At the same time, American shale oil companies have been pumping more and more oil up until recently. The thing is that natural disasters made oil refineries suspend most of their refining capacities. Apparently, this pushed oil prices slightly higher. However, those pro-Putin experts caught at the chances and started predicting an oil renaissance. This month alone, oil prices have gone up by 10% to $58/b.
 
They say that thanks to OPEC+ suspended the downtrend, and this let oil producers make extra billions of dollars. However, we cannot say that oil prices have been growing a lot since then. It would be more correct to say that the prices have been fluctuating around the level barely profitable for shale oil producers.
 
The expert says that a major price rally in the global market of crude oil is possible only if the world is in big trouble. Well, the prices could and did change by $10/b or more thanks to the big-scale OPEC+ agreement designed to cap oil production.
 
Under such circumstances American oil production could have continued declining slowly but surely as the conventional oil exporters could have enjoyed their unbeatable status. However, in this case oil prices would have been lower but the negative impact could have been partially made up for by higher supply.
 
However, the Vienna Accord (OPEC+) indicated that the old-school oil exporters had retreated from the global market. Apparently, the spare market share was immediately occupied by new-school oil exporters like American shale oil companies.
 
At this point, the USA has turned into a major oil exporter. China has been the biggest consumer of American oil this year. Mr. Shelin reminds us that crude oil is the only Russian product China is really interested in. Under such circumstances, the conventional oil exporters like Russia has been losing their market share and their outlets this year.  Oil in all, by September 2017, the American export of crude oil had already boosted all the way up to 2 million barrels a day. This is still 2,5 and 3,5 as little as the export of Russia and Saudi Arabia respectively.  At this point, the USA is the 7th biggest exporter of crude oil in the world – between Venezuela (above) and Iran (below).
 
Up until recently, the market situation has been unfavorable for the participants of the OPEC+ agreement. The 10% price rally and the oil agreement can be either a short-term victory or a long-term renaissance. If this is all about hurricanes, this is going to be a short-term victory. At the same time, we should keep in mind that several new factors have come into play now.
 
There is a threat of the nuclear agreement between Iran and the Western world to be disrupted. For those of you who don’t know, Iran is a major exporter of crude oil. The situation in the Korean peninsula has escalated as well. These and some other factors is raising concerns among international traders and investors, which in turn is pushing oil prices higher.
 

 

Anyways, despite all the dreams and efforts made by the OPEC and their partners, oil prices haven’t gone above $60/b yet. This means, that much serious concerns and much worse situation around the world are need to push oil prices closer to $100/b. That’s why there is no reason to dream about higher oil prices if the world is fine.

 

You are free to discuss this article here:   forum for traders and investors

 

Add to blog
Got a question? – Ask it here »
 

Is crude oil really expensive today?

Oil expert Sergei Shelin decided to share with us his thoughts on the processes currently going on in the global oil market. In particular he thinks that crude oil has been struggling to consolidate around 70 dollars per barrel but the thing is that even the world's biggest oil producers and exporters don't believe in high oil prices in the future.


Publication date: 01 February 10:38 AM

Three Big Questions Related to Oil Prices

Oil prices has been continuously moving up and down over the last few decades, and this is something that keeps worrying millions of traders of investors all over the world. The most difficult thing is to figure out why exactly crude oil prices reach a certain level at any given point, especially these days. 

Publication date: 30 January 02:12 AM

Cryptocurrencies Won't Help Dictators Get Around Sanctions

According to Bloomberg, all the attempts made by authoritarian governments and dictators to get around Western sanction are vain. 

Publication date: 23 January 05:44 AM

U.S. DoE Predicts Oil Market Oversupply over the Next 2 Year

The United States Department of Energy doesn't believe in the OPEC+ deal and expects excessive supply in the global market over the next 2 years. In particular, the January short-term report released by the DoE confirms that. They say this is going to be long-term oversupply. 

Publication date: 16 January 11:46 AM

Brent Oil Is Getting Closer to $70/b, Provoking a Shale Storm

Brent oil has come close to $70/b. It’s interesting to note that Brent oil has reached this level for the first time since 2014. At the same time, international experts now seem to be overwhelmed by mixed feeling about that.

 
According to NordFX, ICE Brent futures (London) for March delivery cost $62,2/b after gaining 0,5% on that day and 3,1% since the start of the trading week. WTI futures cost $63,5/b after gaining 0,8% on that day.
Publication date: 11 January 11:59 AM

OPEC Nations Don’t Want $60/b

The OPEC doesn't seem to be interested in oil prices above $60/b. At least this is what the Iranian Minister of Oil said the other day. By the way, Iran is the OPEC’s third-biggest producer of crude oil.

Publication date: 10 January 03:45 AM

Investment Banks Make Controversial Oil Forecast for 2018

After the OPEC+ deal was extended not so long ago, several investment banks changed their predictions for the global oil prices in 2018. Bloomberg tried to compile those prediction into a single article. 

Publication date: 02 January 11:44 AM

CBOE Launches World’s First Bitcoin Futures

As promised, the CBOE launched the world's first Bitcoin futures on December 10th at 15 p.m. Central Standard Time (CST). The first BTC futures trading session started at 15000 USD/BTC. Within the first couple of minutes, there were 150 transactions processed. Over the first 20 minutes, the exchange rate increased up to 15940 USD/BTC. Lateronitwenttemporarilyupto 16600 USD/BTC.

Publication date: 11 December 02:26 AM

American Shale Oil Producers Enjoy OPEC+ Deal Extension

On the last day of November, the OPEC and several non-OPEC oil exporters met in Vienna to discuss the future of the global oil market during the OPEC summit. The summit ended with extending the OPEC+ deal until the end of 2018. Experts say this decision means the OPEC+ participants have lost the long-term oil war with American shale oil companies.

Publication date: 03 December 11:03 PM

OPEC Is Worried About U.S. Shale Oil Production Prospects

The OPEC is concerned that their American rivals producing shale oil may catch at the chance given them by the OPEC+ deal. The deal is aimed to cap oil production and restore the market balance in favor of higher oil prices. The OPEC+ agreement is likely to be extended during the forthcoming OPEC summit on November 30th in Vienna, Austria.

 
Publication date: 29 November 11:49 AM