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Russia and Saudi Arabia support tapering oil cuts in August

Bloomberg report

This doesn’t come as a shock but it’s going to be a very delicate balance in the oil market in the months ahead. OPEC+ wants to claim the market shares as demand comes back online but private producers are going to open the taps as well. We could very easily end up in a price war.

OPEC and its partners will consider increasing oil output at a meeting this week

Saudi Arabia and most others in the OPEC+ alliance support increasing output by around 2 million barrels a day say reports ahead of this week’s meeting.

  • Key members of the Organization of the Petroleum Exporting Countries and its Russia-led allies will hold a virtual meeting on Wednesday 15 July
There is no further detail on this, link here
The increased optimism comes as hopes are up that demand is beginning to recover and will continue to do so. Its not going to be smooth sailing though.
Saudi Arabia and most others in the OPEC+ alliance support increasing output by around 2 million barrels a day say reports ahead of this week's meeting.

Saudi sovereign wealth fund has bought a big stake Boeing

Saudi Arabia’s $300 billion sovereign-wealth fund has invested further into US corporations.

Q1 figures from the Public Investment Fund show fresh stakes taken in:
  • Facebook, Disney , Marriott, Cisco Systems, Citigroup, Bank of America, & Boeing
(and others). The stake in Boeing was circa $714 million.
With oil prices weaker Saudi is accelerating diversification, buying in during Q1:
  • “We actively seek strategic opportunities both in Saudi Arabia and globally that have strong potential to generate significant long-term returns while further benefiting the people of Saudi Arabia and driving the country’s economic growth” 
From filings with the US SEC, via a WSJ report, link is here for more (the Journal may be gated)
Saudi Arabia's $300 billion sovereign-wealth fund buys Boeing

Trump/Saudi Arabia’s king agreed on importance of stability in global energy

Trump, Saudi Arabia King speak: White House

A White House spokesman is out saying that
  • Pres. Trump and Saudi Arabia’s king in a conversation agreed on importance of stability in global energy markets
  • The leaders reaffirmed strong US – Saudi defense partnership
The tumble in crude oil prices has had to strong catalysts. One was Saudi Arabia flooding the market with supply after failing to reach an agreement with Russia on production cuts. The next was the impact from the global coronavirus. 1 influenced supply in a bearish way. The other influenced demand in a bearish way.
The price of WTI crude oil futures for the July contract is trading up $1.16 or 4.67% at just below’s $26 a barrel. Brent crude oil prices moved above the 30 level today after rising $1.38 to $30.84.

Saudi Arabia’s sovereign-wealth fund pours $1bn into stakes in 4 European oil firms

WSJ citing “according to people familiar with the matter
  • Saudi Arabia’s sovereign-wealth fund has amassed stakes worth roughly $1 billion in four major European oil companies
  • buying assets it perceives as undervalued in a market depressed by the coronavirus pandemic and low oil prices
  • stakes in Equinor AS A, Royal Dutch Shell PLC, Total SA and Eni SpA
  • bought in recent weeks
  • the fund may continue to make stock purchases
That “buying assets it perceives as undervalued in a market depressed by the coronavirus pandemic and low oil prices“. You might recall from a few weeks ago OPEC+ failed to agree on maintaining output cuts and Saudi Arabia ramping production higher and thus sending the price of oil plummeting. The cynical amongst us might even suggest this was all part of a plan?

Saudi Arabia energy minister: WSJ story on cuts of output is “absurd and utter nonsense”

WSJ report suggested a potential 300K cut.

Saudi Arabia’s energy minister Prince Abdulaziz is on the wires in reaction to an earlier Wall Street Journal article saying that they were mulling over a proposed 300K cut in output, says:
  • Media report on Saudi Arabia considering break from OPEC+ alliance “absurd and utter nonsense”
  • We will continue to act in a collective manner
  • Saudi Arabia is in continuous communication and dialogue with all  OPEC and OPEC+ partners
Crude oil futures are currently trading down $0.94 or -1.73% at $52.93. The low for the day reached $52.55. The high for the day was up at $53.86

Saudi Arabia’s head says attacks on oil facilities were an act of war by Iran

Saudi Arabia’s Crown prince in an interview on US TV

  • Said oil prices could spike to “unimaginably high numbers” if the world does not come together to deter Iran
  • said he would prefer a political solution to a military one
  • agreed with U.S. Secretary of State Mike Pompeo that the attacks were an act of war by Iran
  • a war between Saudi Arabia and Iran would collapse the global economy
US Sunday evening futures trade in oil is open, a little higher to begin the week.

Markets eventually need to deal with the China reality

The situation in Saudi Arabia and focus on the Fed has took the spotlight away from China’s economic worries to start the week

China
  • China’s Premier Li says maintaining economic growth of 6% or more is very difficult
  • China Industrial Production in August 4.4% y/y (expected +5.2%)
  • China Retail sales for August: 7.5% y/y (expected +7.9%)
I still don’t think markets are paying much attention to the message emanating from China to start the new week, and that may be a sign of complacency.
Industrial production slowed to its weakest in 17 ½ years while retail sales slumped more than expected and the PBOC is still showing no signs of easing its lending rates just yet – as evident by today’s MLF operations.
Prospects of a trade deal may sound attractive for risk sentiment but it isn’t going to be a massive game changer to the slowing Chinese economy in my view. Domestic demand is weakening and that will continue to eat away at global economic growth.
Markets may be a bit distracted for the time being amid oil news, central bank focus, and hopeful optimism surrounding trade talks. But don’t expect that to stay the course for too long. The longer the ramifications of the above go unnoticed, the greater the hit it will have on markets when reality snaps back in.

Weekend oil news – Russia & Saudi Arabia agree to extend OPEC+ oil output curbs

Russian President Vladimir Putin, over the weekend, said Russia has agreed with Saudi Arabia to extend the deal with OPEC on reducing oil output.

  • For 6 to 9 months
  • “We will support the extension, both Russia and Saudi Arabia. As far as the length of the extension is concerned, we have yet to decide whether it will be six or nine months. Maybe it will be nine months,”
Saudi Energy Minister Khalid al-Falih also said deal would likely be extended.
The output agreement is expected to be extended in its current form and with the same volumes.
OPEC plus (OPEC plus key oil producing allies) begin their meeting today, Monday 1 July
Russian President Vladimir Putin, over the weekend, said Russia has agreed with Saudi Arabia to extend the deal with OPEC on reducing oil output.

15 Facts About China That Will Blow Your Mind

1.) By 2025, China will build TEN New York-sized cities.

2.) By 2030, China will add more new city-dwellers than the entire U.S. population.

3.) China already consumes twice as much steel as the US, Europe and Japan combined.

4.) If the Chinese, one day, use as much oil per person as Americans, then the world will need seven more Saudi Arabia’s to meet their demand.

5.) There are already more Christians in China than Italy, and China is on track to become the largest center of Christianity in the world.

6.) Chinese are far more likely to believe in evolution than Americans.

7.) Chinese internet users are five times as likely to have blogs as Americans.

8.) China has 150% more soldiers than America does, plus a high tech ‘Kill Weapon’ the U.S. can’t deal with.

9.) China still hasn’t rid itself of Europe’s medieval plague.

10.) 40% of Chinese small businesses went bust or almost went bust during the world financial crisis.

11.) China executes three times as many people as the rest of the world COMBINED… and uses mobile execution vans for efficiency.

12.) China averages 274 protests PER DAY.

13.) When you buy Chinese stocks, you are basically financing the Chinese government. Eight of Shanghai’s top ten stocks are state-controlled arms of the government.

14.) 50% of counterfeit goods come from China.

15.) The majority of Chinese drink polluted water.

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