Storage plays will help keep oil price low globally

2015 ◽  
Keyword(s):  
Storage Capacity ◽  
Oil Production ◽  
Futures Market ◽  
Oil Price ◽  
Content Type ◽  
Oil Storage ◽  
Oil Markets ◽  
The Us ◽  
Internal Storage

Subject Current opportunities for oil storage plays. Significance Oil markets are now in their third month in contango -- when prices for future delivery exceed spot rates. The collapse in the price of crude under the weight of the US production surplus has made it profitable for traders to buy oil now and sell it forward on the futures market even after accounting for the costs of storage and insurance. However, the speed with which shale production can be taken off- and online makes storage plays uncertain. Impacts Contango will open opportunities for trading houses to leverage their internal storage capacity. A 3% drop in global oil production will be enough to erase the current opportunities in storage plays. Despite remaining negligible, the return of Libyan exports would add to the surplus, adding to the profitability of storage plays. Rising future prices could attract new investment to shale production, bringing it back online and perpetuating the supply glut.

Politically divided Iraq faces a massive economic hit

2020 ◽  
Keyword(s):  
Social Impact ◽  
External Environment ◽  
Oil Production ◽  
High Potential ◽  
The Political ◽  
Regional Government ◽  
Content Type ◽  
Oil Markets ◽  
The Us ◽  
Global Threat

Significance The economic and social impact of COVID-19 -- and especially the crushing effect on global oil markets -- comes amid worsening US-Iran tensions. Internally, political deadlock and rising poverty are exacerbating discontent. Impacts Iraq has high potential to raise oil production, but the current internal and external environment prohibits this. Economic meltdown could compound the political chaos in Iraq and worsen the US-Iran proxy conflict there. In the longer term, a weak Iraq could potentially allow IS to regroup and pose a renewed global threat. The fiscal crunch threatens central transfers to the Kurdistan Regional Government; this could devastate the region's economy.

Global oil stock overhang will not abate soon

2016 ◽  
Keyword(s):  
Storage Capacity ◽  
Oil Price ◽  
Limiting Factor ◽  
Content Type ◽  
Spot Prices ◽  
Oil Market ◽  
Internal Storage ◽  
Forward Prices ◽  
Oil Inventories

Subject Oil inventories and price swings. Significance Growth in oil inventories has slowed markedly, indicating that the supply-demand balance in the oil market is changing from a position of oversupply to one of shortage. However, any rise in spot prices will close the gap with forward prices ('flatten the contango'), making storage uneconomic. This will release stocks to the market, acting as a self-limiting factor on any oil price recovery. Impacts By encouraging the return of shuttered production and stored oil, rising prices will trigger a dampening effect. Excess crude will head to refineries, turning surplus crude into surplus products. Contango will open opportunities for trading houses to leverage their internal storage capacity.

Exploring the inflationary effect of oil price in the US

2019 ◽  
Vol 13 (1) ◽  
pp. 60-76 ◽  
Author(s):  
Amine Lahiani
Keyword(s):  
Growth Rate ◽  
Structural Breaks ◽  
Oil Prices ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Content Type ◽  
The Us ◽  
The Relationship

PurposeThe purpose of this paper is to explore the effect of oil price shocks on the US Consumer Price Index over the monthly period from 1876:01 to 2014:04.Design/methodology/approachThe author uses the Bai and Perron (2003) structural break test to split the data sample into sub-periods delimited by the computed break dates. Afterwards, the author uses the quantile treatment effects over the full sample and then, by including sub-periods dummies to accommodate the selected structural breaks that drive the relationship between inflation and oil price growth.FindingsThe findings include a decreased transmission effect of oil price changes on inflation in recent years; a varied elasticity of inflation to the growth rate of oil prices across the distribution; and, finally, evidence of asymmetry in the relationship between the growth rate of oil prices and inflation, with a higher transmission mechanism for decreasing rather than increasing oil prices.Practical implicationsPolicymakers should remain alert to monitoring potential inflation increases and should take precautionary measures to anchor inflation expectations, because inflation reacts differently to positive and negative oil price shocks. Moreover, authorities should consider the asymmetric reaction of inflation to oil price shocks to adopt an appropriate monetary policy strategy to achieve the price stability target.Originality/valueThe paper used a quantile regression model with structural breaks, which has not yet been used in the literature.

Financing shortfall will push Oman to uneasy austerity

2021 ◽  
Keyword(s):  
Public Sector ◽  
Oil Production ◽  
Oil Price ◽  
Project Financing ◽  
Wage Bill ◽  
Content Type ◽  
One Year ◽  
Gas Fields

Significance A fiscal crunch exacerbated by the pandemic and associated oil-price crash has forced the authorities to step up long-term ‘Omanisation’ efforts, ultimately taking pressure off the bloated public sector wage bill. This comes as Sultan Haitham bin Tariq Al Said, one year into his reign, launches a raft of new political, military and economic initiatives. Impacts Oman will remain compliant with OPEC+ oil production cuts. The sultanate will boost output at its competitive giant Ghazeer and Khazzan gas fields in Block 61 to benefit from high prices. Muscat will prioritise agriculture, fisheries and logistics for non-oil growth but struggle to secure project financing post-pandemic.

Oil price uncertainty and equity returns

2016 ◽  
Vol 8 (1) ◽  
pp. 64-79 ◽  
Author(s):  
Aktham Maghyereh ◽  
Basel Awartani
Keyword(s):  
Stock Returns ◽  
Oil Production ◽  
Equity Returns ◽  
Oil Price ◽  
Policy Implications ◽  
Price Uncertainty ◽  
Mena Region ◽  
Stock Market Returns ◽  
Content Type ◽  
The Impact

Purpose This paper aims to examine the impact of oil price uncertainty on the stock market returns of ten oil importing and exporting countries in the Middle East and North Africa (MENA) region. The sample contains both oil importing and oil exporting countries that depend heavily on oil production and exports. Design/methodology/approach This paper intuitively applies the generalized autoregressive conditional heteroskedasticity (GARCH)-in-mean vector autoregression (VAR) model using weekly data over the period January 2001-February 2014. Findings The findings indicate that oil uncertainty matters in the determination of real stock returns. There is a negative and significant relationship between oil price uncertainty and real stock returns in all countries in the sample. The influence of oil price risk is more serious in those economies that depend heavily on oil revenues to grow. Practical implications The findings have important implications. For instance, managers should be aware of the linkages between oil price uncertainty and equity returns when they use oil to hedge and diversify equities, particularly in economies where oil is important for economic growth. The policymakers in oil importing countries should encourage companies to improve efficiency in the usage of energy and to resort to alternative sources to avoid fluctuations in earnings and equity prices. In the countries that heavily depend on oil efforts should focus on diversifying the domestic economy away from oil to protect against oil price fluctuations. Originality/value To the best of our knowledge, this is the first attempt to study the influence of oil price uncertainty in the MENA region. The sample contains both oil importing and oil exporting countries that depend heavily on oil production and exports. The empirical findings of the paper have valuable policy implications for investors, market participants and policymakers.

US energy high-yield bonds spur default risk

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Default Risk ◽  
Oil Price ◽  
High Yield ◽  
Content Type ◽  
The Past ◽  
The Us ◽  
Low Interest Rates ◽  
Investment Grade ◽  
Energy Companies

Subject Impact of the oil price drop on energy high-yield bonds. Significance The over 50% oil price drop since June 2014 is hitting bonds issued by energy companies, particularly those issued by sub-investment grade corporates. The US high-yield bond market has been growing rapidly over the past five years. The shale boom has generated considerable investment, mainly funded through the issuance of these bonds which benefit from historically low interest rates. As the oil price has plunged, the spread over Treasury yields paid by the average issuer in the energy subsector has more than doubled between July and the December 2014 peak. Impacts Yields currently offered by the energy subsector are not far from pricing in a default scenario. Persistently low oil prices will further darken the outlook for the energy subsector and the high-yield market generally. A possible default cycle in the energy sector could accelerate outflows, overstretching the sector further.

OPEC quotas may have small impact

2016 ◽  
Keyword(s):  
Saudi Arabia ◽  
Oil Production ◽  
Change Strategy ◽  
Content Type ◽  
Small Impact ◽  
Future Action ◽  
The Us ◽  
Policy Direction ◽  
The Impact

Significance OPEC's decision to try to agree new quotas for its members, albeit with key exemptions, suggests a fragile consensus is growing around a change in policy direction towards cooperation. Impacts Perceptions will strengthen that Saudi Arabia is prepared to change strategy. A framework and platform for future action should allow OPEC to reassert its cartel position. Agreement on quotas is unlikely to reduce export volumes much, limiting the impact on prices. The prospect of a deal will see further additions to the US rig count, with implications for US oil production in 2017. If prices rise, encouraging more investment, and Libyan and Nigerian output recovers, OPEC output could rise even if quotas are imposed.

OPEC deal would encourage US shale producer rally

2016 ◽  
Keyword(s):  
Gulf Of Mexico ◽  
Oil Prices ◽  
Oil Price ◽  
Eagle Ford Shale ◽  
Eagle Ford ◽  
Content Type ◽  
Service Companies ◽  
West Texas ◽  
The Us ◽  
Shale Recovery

Significance The US shale industry has emerged from the worst of the crude price downturn battered, but also leaner and more efficient. Many shale producers are eager to return to growth, buoyed by a more stable oil price at around 50 dollars per barrel. However, oil prices need to rise somewhat higher still to give enough of a jolt to the industry to see US oil production return to meaningful growth. Impacts Oilfield service companies, especially fracking specialists, stand to gain if shale drilling activity picks up on the back of higher prices. The Permian shale in West Texas will lead any US shale recovery, due to its lower costs and large reserves, boosting the region’s economy. The Bakken and Eagle Ford shale plays will follow the Permian shale in a price recovery. Prices above 70 dollars per barrel would probably be required for investment to return to Gulf of Mexico deepwater projects.

Oil outlook could challenge Guyana's policy capacity

2018 ◽  
Keyword(s):  
Foreign Investment ◽  
Oil Production ◽  
Oil Price ◽  
Economic Management ◽  
Content Type ◽  
Policy Capacity ◽  
Oil Development ◽  
Potential Impact ◽  
Offshore Oil

Subject Oil development in Guyana. Significance In 2017 ExxonMobil announced the development of a major offshore oil find in Guyana. The news has been welcomed in Guyana, but there are concerns about the potential impact that developing significant oil production will have on the country’s economy, society and environment. Impacts This development and future oil advances could attract foreign investment if the international oil price remains near current levels. The prospect of Guyana becoming a successful oil producer/exporter will be a source of tension with Venezuela. Transparency and effective economic management may prove difficult to achieve. The fluctuating oil price will affect governments’ ability to budget effectively.

Relief of looser US monetary policy cannot mask risks

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Emerging Market ◽  
Futures Market ◽  
Oil Price ◽  
Content Type ◽  
European Elections ◽  
Economic Information ◽  
Equity Funds ◽  
Succession Process ◽  
The Interest Rate

Significance Following the meal, the Fed said Powell did not discuss monetary policy "except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook". The futures market now sees a 75% chance that the interest rate will be unchanged in twelve months’ time, a substantial shift from late last year when at least two rate hikes were widely predicted for 2019. This shift is helping US equities to regain momentum. Impacts The flatter dollar this year is helping net inflows to emerging market bond and equity funds build momentum after large outflows in 2018. Further oil price upside may be limited; Venezuela’s small share of global output means sanctions will not greatly alter market dynamics. Mario Draghi’s ECB presidency ends in October; policy could be disrupted if European elections in May delay the succession process. US economic momentum is firmer than in the euro-area or Japan but less monetary policy divergence between them may help the euro and yen.

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