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Page added on July 27, 2014

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Oil Market Weighs Fear and Reality

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Earlier this week the wise oil-market watchers at PVM, a brokerage and consultancy, summed up the state of the market.

“Not a day goes by without a political, economic, international or data event that adds further color and often confusion to an already very complex scene,” said analyst David Hufton. “Who needs the distraction of fiction when real life constantly throws up twists and turns that would stretch credibility if written in any novel?”

Iraqi security forces are on high alert as the country braces for more violence in Baghdad.

Reuters

Too true. Life moves pretty fast. If you don’t stop to look around once in a while, you might miss it.

Investors in oil must have their wits about them in these fractious times if they are to avoid being burned.

Half an eye is being kept on Iraq, where the Sunni radical group Islamic State has vowed to increase its attacks around Baghdad as Ramadan ends. Iraq’s oil-production growth is already factored in to many supply-and-demand models. If it falls short, or dries up, everything changes.

The other half an eye is on Ukraine, where the Cold War has come out of cold storage. These days, mutually assured destruction is played out on national balance sheets not nuclear silos—the West is slowly tightening the fiscal thumbscrews on the Kremlin, but any interruption to Russian oil would be catastrophic for that market balance and would affect Germany, European’s economic powerhouse, more than most.

And the price of oil? It’s just ticking over. Because fundamentally there is no shortage of oil, only the fear of shortage. Libya is defying escalating violence to resume exports, The Wall Street Journal’s Benoit Faucon reports. The U.S. has turned its back on West African crude; OPEC is pumping full tilt.

Speculative money takes the oil price to giddy heights but the fundamentals—is there enough oil to meet demand, or enough demand for the oil?—have the greater say.

EARNINGS SEASON

Oil companies are beginning to report their second-quarter earnings. Spain’s Repsol and Norway’s Statoil kicked if off, with both reporting that the higher price of oil offset lower production.

As the Journal’s Ilan Brat reports, the former was affected by having operations in Libya. The latter was affected by an ongoing problem for many oil companies—a decline in mature fields—the Journal’s Kjetil Malkenes Hovland explains.

The bigger picture for the large, integrated oil companies is that their sway is no longer what it was. The Financial Times explains how things have changed since the so-called  seven sisters controlled 85% of global reserves in the 1950s. Now, according to the Economist, more than 90% of the world’s oil is in the hands of state-controlled national oil companies.

MARKETS

Brent crude has re-entered a trading range after spiking last month, when it shot up close to $116 a barrel on fears that Iraqi supplies could be affected by militant action. You can read the Journal’s latest oil-markets report here.

WSJ

6 Comments on "Oil Market Weighs Fear and Reality"

  1. Nony on Sun, 27th Jul 2014 12:35 pm 

    I’m going to try to stop posting here. I feel like posts and comments are repetitive, including from me. (If I fall off the wagon, feel free to remind me.)

  2. Northwest Resident on Sun, 27th Jul 2014 1:34 pm 

    Nony — Where else can you go that gives you an opportunity to expound on the bright future of fracking and a natural-gas driven world? Other than perhaps financial investment related forums where your ideas will be welcome?

  3. Avery on Sun, 27th Jul 2014 3:59 pm 

    If you want to get real independent reporting on this subject, you’re going to have to fund it yourself:

    https://www.beaconreader.com/projects/extreme-energy

    (I have no connection to this project, just think people here might want to know about it)

  4. Aire on Sun, 27th Jul 2014 5:06 pm 

    Nony nooo! But yeah this article says there’s no shortage of oil, only fear of shortage. How does the author figure that ? The problem is the production rate and the fear of lower production is what matters most at this point in modern society

  5. bobinget on Sun, 27th Jul 2014 7:39 pm 

    Iran, Iraq, KSA, at logger-heads (what exactly ARE logger-heads?) Nigeria needing to call in paid foreign military to combat Boko Haram. All the Nigerian Army is good for is collecting bribes, parades and getting aid money from the UK and US.

    (BH just kidnaped the wife of neighboring Cameroon vice PM.
    http://www.reuters.com/article/2014/07/27/us-cameroon-violence-boko-haram-idUSKBN0FW0CQ20140727

    Getting back at Cameroon for sending troops to Nigeria, no doubt. Looks like Boko Haram will be attempting a caliphate of their own.

    Only one spot on the wold is more densely populated, poorer then Nigeria. That would be Gaza.

    I had an idea yesterday. EVERY man, woman and child in Gaza should sew a Star of David on their clothing.

    I think most here over 60 will see the irony. If not;
    http://en.wikipedia.org/wiki/Yellow_badge

  6. Makati1 on Sun, 27th Jul 2014 8:23 pm 

    bobinget, we agree this time. And if you look under the curtain, you would see that most of these areas are weaponized by American companies and agitated by our own CIA.

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