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Showing posts from 2020

The logic behind strong oil rally: US oil inventories down again

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Exactly as some analysts anticipated, the EIA, the US Energy Information Administration, released its much-awaited data yesterday while confirming that US oil inventories were down again for the week ending December 25. The drop was much more than what was expected - 6.06 million barrels. The value was significantly larger than the number predicted by the API, the American Petroleum Institute, just a day earlier on December 29; the predicted drop was 4.8 million barrels. There is more encouraging news on the crude oil front: the exports grew by 3.6 million barrels a day, especially to Asia, buckling the previous trend that used to be associated with the pandemic. More interactive charts that matter in when it comes to determining the oil price are here: Oil price charts

Steady oil price: is another drop in US crude oil inventories in the offing?

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  Oil price is on the rise and the EIA, the US Energy Information Administration, has not released its latest US oil inventory report yet – a reliable factor that influences the current crude oil price. The confidence of investors, however, indicates the inventories may have been down during the Christmas week too. The American Petroleum Institute, API, meanwhile, predicted a draw in crude oil inventories of 4.785 million barrels for the week ending December 25; the prediction of the same by analysts, however, was 43% of that figure for the same period. Although yet another vaccine was approved by the health authorities in the United Kingdom, the national mood could easily be eclipsed by the surging infections and the struggles faced by the NHS, the National Health Service, to cope with the patients. That means there is a strong possibility of elevating the current tier, to a notch above, seriously restricting the movement of the public – and traffic too. A development of tha

Why are investors still fond oil markets? There is a reason!

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  We are, in more than one way, living in the greatest crisis since the Second World War. Yet, our lives go on, at a relatively slow pace, of course, with no danger of a hunger, a famine or chaos breaking out on a global scale or at national level. That’s the difference. In addition, unlike in the Second World War, our infrastructure remains intact and in some parts of the world, it is even improving on many fronts. In a further sign of overcoming the negative impact of the Coronavirus, innovation is on the rise at an exponential rate, especially in technological sector – across the world. The steady growth of crude oil markets reflects the combined positive impact of these developments on the sector, defying doomsday predictions about the markets. We live in an era with the buzzword being ‘going electric’, when it comes to transportation, without giving a proportional attention to the source of it. At the extreme end of the energy conversion chain, however, fossil fuels stil

Oil price outlook in 2021: encouraging signs of a stable recovery

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  Oil price recovery continued on Monday when markets opened for business after a very quiet Christmas. Despite the absence of usual Boxing Day sales and corresponding gloom in the retail sector, oil price rally continues defying some analysts and the forecasts on the same wavelength. The markets may have got a boost from President Trump’s approval of the Coronavirus air package that had been a bone of contention between the two major political camps in the US. In addition, the news that the European countries are about to embark on an ambitious vaccination drive, may have boosted the sentiment in the oil market too. A new variant of the Coronavirus, meanwhile, has emerged in South Korea, leaving the scientists in the medical field in yet another lurch while adding more stumbling blocks in their path to find a solution. South Korea is a country that managed the first two waves well, becoming the envy of the world for the sheer efficiency and planning; it’s a country with stri

Russia supports OPEC+ production hike in February: signs of oil price recovery

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  Russia says it will support the move by the OPEC+ - OPEC + Russia – to increase the production of oil by 500,000 barrels per day, most probably to cash in on the steady increase in demand. The group plans to increase the production from February, after a crucial summit scheduled in January. Alexander Novak, the deputy Russian prime minister, said that his government would support the move as the current oil price range, $40 - $50, is conducive for oil industry to recover from months of mounting losses. Mr Novak sees the current price range of crude oil is optimum for the growth of the oil industry. The industry, as a whole, can breathe a sigh of relief from the fact that the emergence of new variants of the Coronavirus did not send the crude oil price on a downward spiral, as it did in April. Russia supported an earlier move by the OPEC+ to cut down on the production during the early stages of the pandemic in proportion to the decline in demand, despite not seeing eye to ey

Oil price remains strong: clear signs of Coronavirus fatigue

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  Oil price does not seem to be dependent on the Coronavirus news any more whether the latter comes in the form of spikes, waves or even the formulation of new vaccines. The price remains strong defying the factors that could otherwise have brought it down significantly. The investors have finally realized that the world will deal with the pandemic at some point - or new variants will be less deadly than what we saw at the beginning of the year. A stable oil price close to $50.00 a barrel is good both for the consumers and oil producers for several seasons. The consumers can keep their fuel bill at a manageable level at a very difficult time when uncertainty looms on many fronts. As for producers, especially in the Middle East, they can just balance the books and minimize the social unrest in the hope things will improve; there is already unrest in Iraq, the country with massive oil reserves, next to Saudi Arabia, over its currency devaluation – the worst ever. In addition,

Oil price forecast from models: not a substitute for an investor's instinct

  Change Weekly Data: Data Source: EIA   "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ." - Warrent Buffett     The crude oil price recorded its lowest ever value on April 20 this year, when it went negative for the first time in its history. What it meant in practice, despite being relatively brief, the oil producers had to pay their buyers to store oil! A few countries cashed in on the opportunity, including China, the US and India; for some, the lack of storage facilities and corresponding transport challenges got in the way, when the new-found fortune amplified the enthusiasm for going on a buying spree. On one hand, as far as buyers were concerned, it was like discovering a fountain of fresh water in an arid land. On the other hand, for investors and oil producers, it was their worst nightmare. The investors and producers have been relying on model-based forecasts for d

Why does oil price remain high despite uncertainties? EIA data sheds ligh on the development

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  Oil price remains fairly buoyant despite the ripple effect of the new variant of the Coronavirus that almost drowned the hopes of the efficacy of the vaccines that grab headlines. The latest data released by the EIA, the US Energy Information Administration, sheds light on the unexpected phenomenon. In fact, as far as oil markets are concerned, the data is pretty encouraging. Both crude oil inventories and distillate fuel inventories are down for two successive weeks, up until December, 18. Gasoline production, meanwhile, is up too against the odds. The other encouraging news is that the US refineries work at 78% of their usual capacity. The latest data from the EIA comes in the wake of positive news about the steady demand in Asia for the commodity. In addition, the discoveries of new oil fields, especially in Africa, further enhances the investor confidence that in turn makes the sector grow with an irreversible emphasis on the need of cutting down on the pollution. Inv

Cairn Energy wins an arbitration in its favour in India

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  Cairn Energy PLC, an independent, UK-based oil and gas exploration, development and production company, has won arbitration against the Indian government on Wednesday. It was over levying Rs 10,247 crore - in Indian currency - or $1.2 billion in retrospective taxes, that the Indian government had claimed during the period, 2006-07, followed by a reorganization of the company’s Indian arm. A tribunal ruled that the Indian government must release the funds withheld along with the interest to Cairn Energy PLC, the Scottish oil exploring company. Cairn Energy PLC claims the role it played over a long period of time in exploring, discovering, developing and producing oil and gas in a variety of locations in the world, while involving itself as an avid operator and partner in all stages of the oil and gas life cycle. The share price of the company surged exponentially at  the news, before falling moderately for an adjustment.

Coronavirus New Strain: Oil price remains fairly stable

  Change Period: Data Source: EIA The news about the new Coronavirus strain, quite unfairly, stigmatized the United Kingdom with some countries banning any physical contacts with its inhabitants.   The evolution of a virus in nothing new; the seasonal flu viruses do it all the time, while staying a step ahead of vaccine available at a given time.   In this context, Coronavirus will evolve too and pose a challenge to the few vaccines in the public domain at present.   Although the new strain of the virus is said to be much more contagious than its predecessor that almost brought the entire world to its knees in spring this year, how ferocious the former remains to be seen.   The initial indications are, encouragingly, it is not that deadly.   If that is the case, this virus – or any other virus for that matter – seems to be conscious of what it is doing without the organs that we possess in biological sense.   Since medical science has no explanation why they mush

Oil prices extend gains and rig count shows a healthy growth

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There is plenty of bad news on the Coronavirus front, especially in Europe, owing to the discovery of a new strain that has the potential to spread fast.  The oil price, much to analysts' surprise, maintained the upward momentum, though, defying the gloomy news on the new infections. Things may change slightly in the coming days as we enter the muted festive season. The oil price, however, will bounce back proving the critics wrong - once again. In Western Europe where the lockdown measures are tough, there will be a decline in motor traffic - and air travel too - and it may reflect on the demand. As a result, the oil price will be affected to some extent in the coming weeks - something to be expected. The fact of the matter, however, is that it is not something irreversible; nor has it reached the point of no-return. It's just an adjustment, due to the combination of seasonal impact and low traffic on roads. The effect on oil price will gradually be eased in proporti

Oil price boom continues despite the gloomy forecasts

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Oil price rise continued throughout the week despite worrying economic activities due to increased virus infections - across the world. It's the third wave that is yet to reach its peak and policy makers are collectively scratching their heads to find solutions to mitigate the inevitable impact. The only solution at present is the news about the effectiveness of a few vaccines. Their efficacy, however, remains to be seen. Adding insult to injury, the virus is evolving and we can only hope that it will not a few steps ahead of vaccine manufactures, as it often happens with winter flue vaccines. Perhaps, the hope of the potential of the vaccines and the Coronavirus-fatigue keep investors put their faith in buying stocks; they instinctively know, perhaps, the dark days in April, 2020, when oil price hit below zero, may not repeat in a cyclic way. Since geopolitical developments are fairly stable in the Middle East, there are no signs of supply disruptions in the region in th

Electric Vehicle Boom: Toyota CEO talks about the elephant in the room

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  Electric charging points are mushrooming in the Western world and so is the visibility of electric vehicles on our roads with an ever increasing frequency. Of course, electric cars do not pollute the environment with carbon emissions; there is no sound pollution either, as their presence on roads is hardly audible. The question that comes to my mind – and of course, to many minds on the same wavelength too - however, is about the way these charging points get electricity when the EV market booms. Then all of a sudden, I heard a mild outburst from someone at the top of the motor industry by complete coincidence that fully resonated with my curiosity – and that of many. The well-admired American philosopher, Ralph Waldo Emerson, in one of his famous essays, Self-Reliance, shed light on the mysterious psychic phenomenon like this about 200 year ago: “To believe your own thought, to believe that what is true for you in your private heart is true for all … That is genius,” he wr

Oil price goes up as EIA forecasts a decline in oil inventories

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    The EIA, the Energy Information Administration of the US, once again proved its undisputed influence in determining the trend of crude oil price by announcing that the US crude oil stocks has declined. In inverse proportion to the forecast, the oil price is on the increase significantly relative to what it was a few months ago. Although there are plenty of factors to worry about that stem from the third wave of the pandemic, the recovery of oil price did not show any sign of being dampened by the bad news. It is true that the hope of vaccines against the pandemic is rising across the world. Simultaneously, people are aware of the logistical challenges faced by the governments when it comes to distribution. Besides, it will take months before subjecting the whole population to a vaccination drive en masse and measure the combined success. In this context, it may not just be the progress made on vaccination front that boosted the oil price; the most likely factor could be t

Bitcoin smashes through $20k barrier

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In a further sign of economic recovery, the value of Bitcoin moved above $20,000 for the first time since its inception, taking the cryptocurrency enthusiasts to a new level of excitement.  Invented in 2008 by a Japanese inventor, whose true identity is still shouded in mystery, it made a remarkable jouney defying its critics and doom-mongers. More on that is here: Bitcoint above $20,000

Oil price shows remakable resilience despite negative factors

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Despite the usual negative factors weighing heavily on the price of crude oil, we haven’t seen a price crash, forecast by some analysts in the energy realm. The OPEC+ - at least some members – have second thoughts about the production cuts; the US oil inventories have increased, according to the EIA, the Energy Information Administration; the US and most of the Western Europe are on the brink of yet another major lockdown; oil demand, even in Asia where it used to remain relatively strong, has weakened recently; there are hopes that Iran and the US will start talking again with the former making preparations for oil export in the near future; the demand for jet fuel shows no sign of recovering. In short, the supply side of the equation, in all probability, is going to go up while demand may remain at the current level – at least, up until the spring, next year. Of course, Brent crude hit above $50.00 recently, before falling back; WTI has been rising too. The prices remain above

Oil prices show signs of recovery despite strict lockdowns

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  The oil price shows signs of recovery despite the obvious impact on it due to new lockdowns in Europe. The lockdown are relatively strict and there are reports of new variants of the Coronavirus; whether it’s a milder form of the same virus remains to be seen. On a positive note, the Asian demand for oil continues unabated, apart from insignificant fluctuations from time to time. Hopes of both vaccines and the evolution of the virus for a milder form, perhaps, will keep the oil price in the present range, without plunging into the levels that we saw at the beginning of the year.

European lockdowns: the need of innovative ideas for the airline industry

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  As major European nations stare into the abyss of yet another lockdown, the ghost of economic consequences creates disturbing ripples in every sector. The demand for oil – and to some extent, gas too – will definitely suffer and in inverse proportion to the decline, the crude oil stocks will go up in the coming weeks. The US crude oil stocks rose by over 1.6 million last week and it dampened somewhat the oil price rally that we had been witnessing up until then. The hope of the silver bullet, an effective vaccine, however, raised the veil of gloom, while giving oil price a boost to counter the negative effect of inventory build-up. What worries investors is not the onset of yet another lockdown; it’s the alarming news that the scientists have found a new strain of the virus. “Will the existing vaccines work against a new strain?” is the key question that arises in the wake of this news. We know that viruses evolve – perhaps, in order not to kill its habitat, the host. In this

US oil rig count falls - oil price dropped too!

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  The US rig count, a reliable indicator to reflect the scale of demand of crude oil, went down during the last few days, despite showing a recovery since the peak of the first wave of the pandemic. It has gone down from 323 to 258, according to Baker Hughes rig count data – a significant drop. During the same period, the US inventories also signalled a significant build-up.   This may indicate a global decline in demand of oil. Even in India, there is a drop in demand, despite the trend being the exact opposite a few months ago. As a consequence, the oil price that showed signs of strong recovery became static again, after hitting above $45 a barrel. Oil producing countries that rely on the commodity to balance their books finally breathed a sigh of relief with the rising crude oil prices. Qatar, the tiny Gulf state, for instance, estimated $9.4 billion budget deficit next year – the largest since 2017, when its neighbours fell out with it and imposed travel restrictions – e

US Oil Inventories: sudden hike may affect oil price

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The US crude stocks, according to the EIA, the Energy Information Administration data, have gone up by a few million barrels, bucking the trend that was downward for months. Since this is a major factor in determining the crude oil price, its effect will be felt in the oil markets in the coming days. It means the oil rallies that we witnessed so far may become relatively static. It doesn’t mean yet another crash; on the contrary, it will be back on upward trend in a few weeks. The uncontrollable Coronavirus infection rate in the US may be a contributing factor for inventory-build up in the US. Apart from that, no global factor, significant enough for causing a major impact, is not at play at present. Since the US health regulator gave the green light for the Pfizer vaccines, the mood, both among the general public and the investors, will change in proportion to the promised results of vaccination campaign. There are, meanwhile, some countries in the world that do not show any

Energy from Renewable Sources: it's still just 11% in the US

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The above graph shows that the energy obtained from renewable sources in the US was just 11% in 2019, despite the growing enthusiasm for going green. It's almost a three-fold increase since what it was in 2000; however, it was not impressive enough to see the end of the usage of fossil fuels. As of 2019, the energy from fossil fuels was a staggering 69%. Bringing it down, even down to 50%, in a matter of few years is just wishful thinking; it will take decades to change the status quo. Of course, measures are in place in the US to cut down on CO 2 emissions. As the above data shows, turning its back on the fossil fuels is still just a distant dream. That's why a report-after-report indicates that fossil fuels are here to stay for decades to come.  Since the emission of CO 2 and its impact on the environment is undeniable, the fossil fuels producers will be compelled to take the concept of minimizing the damage much more seriously in order to stay relevant - in this context

Challenges against the Green Energy: wind turbines

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  Wind turbines are propping up along certain shore lines – off-shore as well – in proportion to our Green ambitions. They do make some contribution to the national grid of the country in question. Of course, there is sizeable opposition to the project on aesthetic grounds; they just spoil the landscape. In addition, they make lots of noise, unless they are off-shore. If the blades are very long, accidents may happen too. Even if you overcome the human opposition, nature has its own limitation in place to keep our ambitions in check. A wind turbine turns the energy of wind, known as kinetic energy, into electric energy with the aid of a generator fixed at the top of the monument. We, however, can only get less than 59% of the energy carried by wind, known as Betz’ Limit. Albert Betz, the German physicist, observed in 1919 that there is a upper limit to the change of energy from kinetic to electric, which became known as Betz’ Limit. That means the waste of energy of a wind

WTI Crude in Irreversible Recovery - finally!

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Defying some analysts, crude oil price has stabilized despite the second wave of the Coronavirus pandemic.  For over three successive weeks, WTI crude price remains above $40.00 and there are no signs of yet another nose-dive that we saw at the beginning of the first wave of the pandemic. Not only is it encouraging news for the countries which heavily rely on powering up their economic engines, but also for millions of human being whose livelihood entirely depends on it. The forthcoming change in the US administration, possibility of relaxing international sanction on Iran, warming relations between Israel and its powerful Middle Eastern neighbours and the signs of a lasting solution to Libya’s political crisis are some of the factors, among many, that made their individual contribution to the rally. Although irresponsible behaviour of some individuals, especially young shoppers who flock near major department stores may, trigger off even a third wave of the pandemic, oil price recove

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