Oil is rebalancing but US shale will cap prices

2017 ◽  
Keyword(s):  
Market Structure ◽  
Oil Prices ◽  
Oil Price ◽  
Content Type ◽  
Oil Market

Subject Oil price outlook. Significance The emergence of a backwardated oil market structure, with prices for future delivery lower than spot rates, suggests the oil market is beginning to rebalance. However, whether it will be sustained is dependent on continued OPEC and non-OPEC compliance with agreed cuts. Impacts The price-responsive nature of US shale production creates a ceiling on oil prices between 50 and 60 dollars per barrel. OPEC's cuts mean it risks losing share to US shale if prices rise, but it cannot risk a retreat; this dilemma may undermine OPEC compliance. The next OPEC meeting will take place in Vienna on November 30 and whether the OPEC-non-OPEC cuts should be extended will be discussed.

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.

The macroeconomic effects of increase and decrease in oil prices: evidences of asymmetric effects from India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anver Chittangadan Sadath ◽  
Rajesh Herolli Acharya
Keyword(s):  
Negative Impact ◽  
Wholesale Price ◽  
Oil Prices ◽  
Petroleum Products ◽  
Oil Price ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Real Gdp ◽  
Oil Price Shock ◽  
Price Shock

Purpose The purpose of this paper is to assess whether oil price shocks emanating from oil price increase and decrease have a different impact on the macroeconomic activity. Design/methodology/approach This study conducts the empirical analysis using structural vector auto-regressive model on Indian data for the period from 1996 to 2017. This paper uses four key macroeconomic variables, namely, real gross domestic product (GDP), the real rate of interest, real money supply, wholesale price index inflation and various linear and non-linear measures of oil price shock. Findings Empirical results confirm that oil price shock has a significant impact on various macroeconomic variables used in the study. Specifically, shocks emanating from a decline in oil price have a stronger positive impact on real GDP, whereas, a shock due to the rise in oil price has a weaker negative impact on real GDP. Impulse responses confirm that shocks due to a decline in oil prices are long-lasting compared to similar shocks due to a rise in oil prices. Therefore, this study concludes that the macroeconomic impact of oil price shock is asymmetric in India. Originality/value This paper adds the following new insights: First, this paper presents a distinct relationship between the growth rate of oil price and GDP during increasing and decreasing phases of oil price to drive home the case for this study. Second, India has adopted crucial administrative initiatives such as deregulation of the market for petroleum products and the promotion of renewable energy during the study period. Finally, previous studies have revealed specific behavioral and economic features of people in India with respect to the demand for petroleum products. In light of these factors, this paper based on Indian experience would be justified.

scholarly journals Oil Price Forecasting Using a Time-Varying Approach

Energies ◽  
2020 ◽  
Vol 13 (6) ◽  
pp. 1403
Author(s):  
Lu-Tao Zhao ◽  
Shun-Gang Wang ◽  
Zhi-Gang Zhang
Keyword(s):  
Crude Oil ◽  
Time Window ◽  
Oil Prices ◽  
Oil Price ◽  
Price Forecasting ◽  
Time Varying ◽  
Crude Oil Price ◽  
Trend Prediction ◽  
Oil Market ◽  
Polynomial Decomposition

The international crude oil market plays an important role in the global economy. This paper uses a variable time window and the polynomial decomposition method to define the trend term of time series and proposes a crude oil price forecasting method based on time-varying trend decomposition to describe the changes in trends over time and forecast crude oil prices. First, to characterize the time-varying characteristics of crude oil price trends, the basic concepts of post-position intervals, pre-position intervals and time-varying windows are defined. Second, a crude oil price series is decomposed with a time-varying window to determine the best fitting results. The parameter vector is used as a time-varying trend. Then, to quantitatively describe the continuation of the time-varying trend, the concept of the trend threshold is defined, and a corresponding algorithm for selecting the trend threshold is given. Finally, through the predicted trend thresholds, the historical reference data are selected, and the time-varying trend is combined to complete the crude oil price forecast. Through empirical research, it is found that the time-varying trend prediction model proposed in this paper achieves a better prediction than several common models. These results can provide suggestions and references for investors in the international crude oil market to understand the trends of oil prices and improve their investment decisions.

The optimal thermal causal path analysis on the relationship between international crude oil price and stock market

Kybernetes ◽  
2018 ◽  
Vol 47 (6) ◽  
pp. 1242-1261 ◽  
Author(s):  
Can Zhong Yao ◽  
Peng Cheng Kuang ◽  
Ji Nan Lin
Keyword(s):  
Stock Market ◽  
Crude Oil ◽  
Stock Markets ◽  
Oil Prices ◽  
Oil Price ◽  
Chinese Stock Market ◽  
Crude Oil Price ◽  
Content Type ◽  
Crude Oil Prices ◽  
Causal Path

Purpose The purpose of this study is to reveal the lead–lag structure between international crude oil price and stock markets. Design/methodology/approach The methods used for this study are as follows: empirical mode decomposition; shift-window-based Pearson coefficient and thermal causal path method. Findings The fluctuation characteristic of Chinese stock market before 2010 is very similar to international crude oil prices. After 2010, their fluctuation patterns are significantly different from each other. The two stock markets significantly led international crude oil prices, revealing varying lead–lag orders among stock markets. During 2000 and 2004, the stock markets significantly led international crude oil prices but they are less distinct from the lead–lag orders. After 2004, the effects changed so that the leading effect of Shanghai composite index remains no longer significant, and after 2012, S&P index just significantly lagged behind the international crude oil prices. Originality/value China and the US stock markets develop different pattens to handle the crude oil prices fluctuation after finance crisis in 1998.

Oil prices and bank credit risk in MENA countries after the 2008 financial crisis

2020 ◽  
Vol 13 (2) ◽  
pp. 219-247
Author(s):  
Rui Wang ◽  
Hang (Robin) Luo
Keyword(s):  
Credit Risk ◽  
Deposit Insurance ◽  
Oil Prices ◽  
Oil Price ◽  
Bank Loan ◽  
Bank Credit ◽  
Bank Risk ◽  
Content Type ◽  
Mena Countries ◽  
Macroprudential Policies

Purpose The purpose of this paper is to investigate the oil price–bank risk nexus by considering the heterogeneity of bank characters. Design/methodology/approach This paper empirically tests the effect of oil price movements on bank credit risk by using a sample of 279 banks in the Middle East and North Africa countries from 2011 to 2017. Findings Authors find robust evidence that the credit risk of bank loan portfolios is negatively associated with increased oil prices. The heterogeneity analysis indicates that the effect of asset quality improvement brought about by rising oil prices is more salient in conventional banks, and banks with small size, low liquidity and whose funding source relies on customers’ deposits. Practical implications The results favor the diversification of bank funding sources, the improvement of a country’s financial development, the adoption of explicit deposit insurance and macroprudential policies, such as countercyclical liquidity buffers, to weaken the adverse impact of oil prices declines. Originality/value The present paper enriches the literature of oil price–bank risk nexus by analyzing the heterogeneity of bank characters and advances our knowledge on the determined factors of bank riskiness and vulnerability.

Africa's 'oil price winners' face mixed prospects

2015 ◽  
Keyword(s):  
Southern Africa ◽  
Oil Prices ◽  
Oil Price ◽  
Political Space ◽  
Medium Term ◽  
Short Term ◽  
Economic Diversification ◽  
Content Type ◽  
Civil Unrest ◽  
Sub Saharan

Subject Africa's oil price winners. Significance Despite traditionally being winners during periods of oil price decline, the medium-term outlook is mixed for sub-Saharan Africa's (SSA) oil importing countries -- reflected in the IMF's recent downgrade of its SSA outlook from 5.75% to 4.9%. Short-term gains reduce the fuel import bill, but uncertainty looms over energy investments in eastern African, while idiosyncratic risks cloud the outlook for southern Africa. While oil exporters may also reap some benefits, much will depend on the degree of oil dependency, political space to make the necessary policy retrenchments, and the extent of government financial buffers. Impacts If sustained, low oil prices could provoke civil unrest, rather than reforms, in oil exporting countries. Most oil exporters will struggle to maintain macroeconomic stability if oil remains low for more than a year. However, economic diversification to some degree helps to shield the region from sharp global slowdowns.

Russia spillover, low oil price will challenge Astana

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Oil Prices ◽  
Oil Price ◽  
National Currency ◽  
Public Confidence ◽  
Content Type ◽  
Slowing Down ◽  
Ukrainian Crisis ◽  
Domestic Products ◽  
Global Growth

Significance The slowing down of Kazakhstan's economy continues against a background of slow global growth, the turbulent economic situation in Russia and low oil prices. Lower-than-projected oil prices will reduce budget revenues and forecasts; on January 16, Astana said it was revising its budgets for 2015-17 to mirror an average oil price of 50 dollars/barrel, as current budgets were based on 80 dollars/barrel. The blow will be softened by substantial reserves, which are expected to be used to stimulate the economy. Dwindling demand for commodities will negatively affect the profitability of Kazakhstan's major producers. The cumulative spillover from the Russian-Ukrainian crisis is substantial, although manageable at present. Impacts Further devaluation of the tenge would undermine public confidence in Kazakhstan's national currency. Increased dollarisation of Kazakhstan's economy will make regulation difficult by monetary policy. Ruble depreciation will put pressure on the tenge and promote replacement of domestic products with Russian imports.

Prospects for the global oil market in 2016

2015 ◽  
Keyword(s):  
Oil Prices ◽  
Key Factors ◽  
Content Type ◽  
Oil Market

Subject Prospects for the global oil market in 2016. Significance A sustained revival in oil prices next year looks unlikely. Key factors will be the degree of oversupply, the resilience of US output and the financial resilience of shale companies.

Pressure will mount on Mexico's external sector

2016 ◽  
Keyword(s):  
Negative Impact ◽  
Oil Prices ◽  
Oil Price ◽  
Content Type ◽  
Credit Line ◽  
Growth Firms ◽  
Floating Exchange Rate ◽  
Fiscal Revenue ◽  
The Government ◽  
External Sector

Subject Mexico's external accounts. Significance The plunge in global oil prices represents a significant blow to the Mexican economy, particularly in terms of fiscal revenue. However, a negative impact is also showing in Mexico's external accounts. Moreover, manufacturing exports are contracting, partly due to problems in the automotive sector. Mexico's floating exchange rate is acting as an effective cushion, and its level of international reserves remains comfortable. Nonetheless, the growing external deficits may spark greater uncertainty about the economy's prospects. Impacts If market confidence deteriorates further, the government may activate the 65-billion-dollar Flexible Credit Line that it has with the IMF. The peso should rebound from the all-time nominal lows it has reached, but only after US growth firms up and the oil price stabilises. Despite the increasing external deficits, the government will not introduce protectionist measures and the opposition will not demand them.

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.

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