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Showing posts from 2021

Oil Price: what really spooked the markets?

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  The crude oil markets had a rocky start on Monday, perhaps owing to a range of unexpected global developments. At the top of the list was the drone attack, attributed to Iran, on an Israeli-registered tanker off the coast of Oman. The serious attack that led to the death of the captain and a British security officer created a palpable tension in the volatile region, just less than a week away for the inauguration of the new Iranian president. The US, UK and Israel now say in unison that Iran is responsible for the attack. The US warned that there would be an appropriate response in the coming days, leaving the nature of it open to speculation. In addition, Israel vowed to deal with its own way; it did not specify or hint what form that response would be, either. Military analysts believe the response may be beyond imposing new sanctions; a military response, on the other hand, has the potential to escalate the crisis and even bring in more shadowy actors into the conflict are

Resistance Axis: is this a resurrected central line for evolving Middle Eastern troubles to move around?

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  In the State of the Union address in 2002, President George W Bush coined the phrase ‘axis of evil’, while associating it with three arch enemies of the US at that time – Iran, Iraq under Sadaam Hussain and North Korea. In response, Iran defined its own counter-axis and named it, the ‘Axis of Resistance’, then shortened to Resistance Axis and identified itself and the militant groups that it openly supported as the rest of the life members. Both the original phrase and its counter-version gradually lost its lustre in the sphere of global politics as the world faced more critical crises than mutual mud-slinging, coated in soundbites. In the wake of a drone attack, in the early hours on Friday, against Israeli-owned tanker near Oman that resulted in the death of two crew members, the Iranian version of the phrase has been resurrected by the Iranian media, as being responsible for the attack. The Iranian media, however, omitted Iran from the group, while identified just the mili

WTI Oil Price against EIA Crude Inventories: why my machine learning algorithm failed to find the ultimate formula?

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  The crude oil price, which took a dramatic fluctuation last week, finally got the ultimate market stabilizer – the fall of the US crude oil inventories. It boosted the volatile markets with much needed impetus for some sort of stability. The draw of over 4 million barrels for the week ending July, 23, did the trick; the oil price started going green again on investors’ screens. That, however, has not been the case always – at least recently; the fall of US oil inventories did not bring about the desired effect on the crude oil markets, especially when the hopes of reviving the JCPOA, 2015 Iranian nuclear deal, sea-sawed wildly in the past few months. Against this backdrop, I was tempted this week to check the feasibility of coming up with a model to predict the weekly WTI crude price against the US inventory stocks. I used JavaScript programming to write just 160 lines of code in order to make a Machine Learning algorithm.     You can get real data – the weekly oil price an

Oil Price: US inventory draw lifts the market mood up

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  The unsettled crude oil markets seem to have got a mood booster, having been through some chaotic market speculations - at last. With the release of the latest US inventory data by the EIA, US Energy Information Administration, the markets found some hope and the price of crude oil got back into the ‘green’ realm. The EIA disclosed that the US crude oil inventories dropped by 4.1 million barrels during the week ending July 23; the predicted draw for the same period by the API, American Petroleum Institute, was 4.728 million barrels. It was substantial, given the rising Coronavirus infections in the US. Its emotional impact on the crude oil markets was crucial and reaction was understandable.   The price has been rising, but at a slower rate, perhaps, due to the anxiety of the investors about the rising uncertainties in the Middle East. The looming departure of the US troops from Iraq and the prospect of new actors in the region filling in the vacuum thus created are causing

The withdrawl of American troops from Iraq and its direct impact on the crude oil markets

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The recent meeting between Mustafa al Kadhimi, the Iraqi prime minister and President Jo Biden at the White House came at a critical time for Iraq, in particular and the region, in general. In more than one way, the beleaguered Iraqi prime minister is stuck between a rock and a hard place at present: on one military front, the ISIS resurgence is real and alarming; on a diametrically opposite front, Iran backed militia groups are flexing their muscles; the grievances of ordinary Iraqis, meanwhile, grow exponentially even with daily survival at stake. Against this backdrop, the Iraqi government, time and again, demanded the departure of all foreign troops – most likely the Americans. That’s what exactly the US is going to do by the end of the year. Iraqis – and their prime minister – however, know very well that in the absence of foreign troops, Iraq will not descend into a military vacuum; on the contrary, it will be a haven for foreign elements without the legitimate zeal. The

Oil Price in 2021: evolving Middle Eastern politics still weighs heavily on it!

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  Global crude oil markets, which saw a highly tumultuous days during the week, finally reached an uneasy equilibrium by the weekend, with the price of WTI and Brent reaching $72.07 and $74.10 respectively. Exactly a week before to date, Prince Abdulaziz bin Salman, the Saudi energy minister, supported by the mediation of Russia, managed to reach a deal to overcome an impasse over a baseline,   with the UAE. While refusing to divulge the details, Prince Abdulaziz, the half-brother of Saudi Crown Prince, Mohamad bin Salman, said that consensus building was an art, referring to the success of repairing a major rift in the OPEC+; not only did it show the influence wielded by the Saudis in the OPEC+, but also their tendency to exercise flexibility when the need arose. Just after the deal, the Crown Prince of Saudi Arabia and his counterpart of the UAE met in Riyadh, the Saudi capital, perhaps, in order to iron out a catalogue of other burning issues that sprang up in the aftermath of

Heightend Activities in Iranian Oil Sector: a deal over the JCPOA may be in the offing!

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  With Goreh-Jask pipeline coming into operation on Thursday, Hassan Rouhani, the outgoing Iranian president could not hide his jubilation for the achievement. Mr Rouhani said during the inauguration that it was built purely by the indigenous talent, referring to the Iranian engineers, architects and the technicians who were instrumental in bringing the project into reality. Iran says the new pipeline provides the country with an alternative route for its oil exports; the Strat of Hormuz, which Iran has been using for its oil exports for decades, is often a flash point, when conflicts between Iran and the West, especially the United States, flares out. The pipeline opens a new gateway to the Indian Ocean for Iranian oil exports, according to the Iranian media; Iran hopes that it can increase its daily exports from the current 300,000 bpd to 1 million bpd in the near future – of course, if the sanctions no longer, exit. The new pipeline was opened on a direct order from the outg

Crude Oil Markets: voltality subsides with demand/supply back under spotlight

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  The volatility that we saw in the crude oil markets has subsided somewhat as we approach the weekend, preceded by a tumultuous few days. The oil price is back in the green for both WTI and Brent, gaining 0.55% and 0.51% respectively as of 15:20 GMT. The rate of both the rise and fall of the oil price has been modest and in that context, the latter never being truly branded as a crash. It’s clear that the spread of the Delta variant, despite the success of vaccine rollout in certain developed nations, has taken its toll on the crude oil markets. The crude oil inventory build-up in the US, which had been going down for seven successive weeks, clearly shows that the spread of the pandemic is serious in the country, although the death toll is significantly lower than what it was during the previous waves of the Coronavirus. On Tuesday, the API, American Petroleum Institute, forecast that there would be a build-up in the US oil inventories – just about 800,000 barrels for the we

Oil Supply Woes: Iraq is back under spotlight - for the wrong reasons!

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  As analysts in the oil sector keep their focus firmly on the spat between the two important Middle Eastern allies, they seemed to have inadvertently missed the attention on an equally important – and relevant – player in the Middle East – Iraq. Iraq has the world’s 5th largest oil reserves and is the sixth largest exporter of the commodity in the world, with India, the world’s third largest consumer, being a main buyer. Despite an increasing flow of oil revenue, the subjects in the main oil regions are often in the streets in protest against the lack of basics, not the luxuries; the absence of a steady power supply in the middle of sweltering, unbearable heat has been just one of the main grievances for months. Iran supplies a substantial amount of electricity needs of Iraq and recently suspended its supply for two reasons: Iraq owes Iran payments for the electricity; Iran has its own issues with power outages across the country, exacerbated by severe drought in some regions

Oil Price: the UAE managed to elevate its baseline; production rises by 400,000 bpd

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  The OPEC+ finally managed to overcome the weeks of uncertainty over the direction that the group is supposed to move in the post-pandemic world, on Sunday. Hailing the agreement, Prince Abdulaziz bin Salman, the Saudi Energy Minister, said “consensus building is an art,” having reached the collective agreement. The disagreement between the two Arab neighbours, the UAE and Saudi Arabia that spilled into the open shocked the nations beyond the OPEC+: they used to see eye to eye on many Middle Eastern issues; they are Sunni Muslim Arab nations; they were almost like inseparable twins. They may have had their differences before as well. More often than not, the UAE and Saudi Arabia managed to settle them amicably behind the closed doors – the palace walls; the military involvement in Yemen, lifting the embargo against Qatar and starting diplomatic ties with Israel, to name but a few. As a shadow of misplaced anxiety about the onset of a world-without-fossil fuels casts over the o

OPEC+ Meeting on Sunday: will the UAE get its way?

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  After two weeks of uncertainty, the OPEC+ is finally meeting on Sunday, the group announced yesterday. The bone of contention between the UAE and Russia that delayed the last meeting was the insistence of the UAE on increasing its baseline from 3.2 million bpd to 3.8 million bpd. If agreed, the UAE was prepared to toe the line of the OPEC+ with an increase in daily production – 400,000 bpd - from August to December 2021 and extend the capping of the output beyond April, 2022 up until December, 2022. After intense discussions between the two Middle Eastern neighbours, perhaps, with the collective mediation of the US and Russia as a catalyst, the two sides may have reached an agreement. The UAE may have won a partial victory over its ambition to raise the baseline. Whatever the outcome on the major issue, the output level will be increased by the OPEC+, sensing the mood of its customers across the globe at a very difficult time. The reaction of the oil markets at the develo

India and Saudi Arabia reset their relations amicably

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  The crude oil markets are in turmoil on many fronts and the price has been falling for the past few days, although the rate of fall gradually came down – an indication the values may turn green on the stock traders soon. In these circumstances, the last thing that any investor in the sector wants to hear is the infighting in the OPEC+ or conflicts involving buyers and producers. Against this backdrop, the talks between the new Indian Minister for Petroleum and Natural Gas, Hardeep Singh Puri, and his Saudi counterpart, Prince Abdulaziz bin Salman, was a good sign in boosting the positive sentiments in the crude oil markets. Since India is the world’s third largest importer of the crude oil, warming relations between the two old allies are good for both sides and the region. The relations between the two countries deteriorated in April over the production cuts by the OPEC+ and the Saudi minister and the former Indian Minister for Petroleum and Natural Gas publicly fell out tha

EIA shows a significant drop of US crude oil inventories in a week - almost 8 million barrels

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  The news, emerged in the late afternoon on Wednesday, which said that the UAE and Saudi Arabia had reached a deal to get past the OPEC+ impasse has already done the damage to the crude oil markets. The fall was so significant that even the encouraging report from the EIA, showing a drop of 8 million barrels from the US crude oil inventories for the weekly period ending July 9, could not reverse the trend. It was, in fact, twice as big as what was predicted by the API, American Petroleum Institute; the forecast by the latter was close to 4 million barrels for the same period. With a fall of this magnitude in the US inventories, usually, gloomy news gets drowned out: however, it did not do the trick this time; as of 14:00 GMT on Thursday, the fall in price of the WTI and Brent were 1.42% and 1.35% respectively. The energy minister of the UAE, meanwhile,   brushed aside the reported agreement between the UAE and Saudi Arabia. That means there is no possibility of the markets hav

Oil Price: API says US crude oil inventories dropped by over 4 million barrels last week

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  The price of crude oil that increased on Tuesday, but at a slower rate, fell again on Thursday by a modest amount. As of 09:30 GMT, the percentage fall of WTI and Brent were 0.55 and 0.44 respectively. The price of crude oil dropped on Wednesday despite the forecast of yet another fall in the US crude inventories. The API, American Petroleum Institute, in its latest forecast, says that the US oil inventories for the period ending July 9 have fallen by 4.079 million barrels. The same data from the EIA, US Energy Administration, is expected on Wednesday. The API predicted a fall of 7.983 million barrels for the week ending July 2. The EIA figure for the same period turned out to be 8.109 million barrels. If confirmed by the EIA, it is going to be the 8 th successive weekly drop of the US crude oil inventories – and indication that the traffic is back on the roads. Analysts attribute the surprise fall of crude oil price to a catalogue of factors that breed uncertainty in the

Reviving the Iran Nuclear Deal: Iranian official says what achived far outweigh what not achived

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  An Iranian spokesman of the Foreign Ministry admitted that talks are underway with the US on prisoner-swaps, confirming the reports in this regard in certain Middle Eastern news outlets. Referring to the talks on the JCPOA, 2015 Iranian nuclear deal, the same official said over 90% of progress has been made so far after six rounds of talks, while admitting the rest being the hardest. He, however, emphasized that what the discussions achieved far outweigh what was not achieved, without losing the optimism of an ultimate success. The thorny issue has been Iran’s insistence of having a guarantee from the US that a change in administration would not be led to yet another policy ‘U’ turn; the US is not keen on that, though. The Russian officials, meanwhile, echoes the same sentiment as do their Iranian counterparts. Although Iran wants the deal done on its terms, its oil sector cannot hide the hope of the revival of the JCPOA: it has been stepping up the production of oil even b

What triggered off the sudden fall of oil price on Monday?

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  The price of crude oil unexpectedly stumbled on Monday despite the evidence of tightening supply and rapidly falling inventories. Both benchmarks, WTI and Brent fell by over 1.2 %. As of 15:00 GMT on Monday, the price of WTI and Brent were at $73.50 and $74.64 respectively. The crude oil price had a particularly bumpy ride last week: on Monday, the anticipated OPEC+ meeting did not take place; with that the agreement to supply 400,000 bpd for the period from August to December did not materialise. The US crude oil inventories, meanwhile, fell by over 8 million barrels for the week ending, July 2.   The news of the substantial fall on Wednesday, understandably,   led to an increase in oil price on Thursday and Friday. Despite the encouraging news on the demand front, the oil price fell on Monday, this week. It looks like three factors are at play for the unexpected development: first, the predicted growth of the main global economies, according to the latest data, is far fro

Is the US gradually turning into a major Indian crude oil supplier?

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  The pendulum of the price of crude oil continues to oscillate in a path that defies the existing mathematical/statistical models. The surrounding uncertainty, meanwhile, seems to be pushing the major importers to look beyond the producers closer to home, as the rising oil price has already put many developing countries in danger of slipping into a spiral of inflationary whirlpool. The rise in India’s oil imports from the US in 2020 is a case in point: despite the great distance involved and shipping costs, India, the world’s third largest consumer of the crude oil, imported 10.7 million tonnes of crude oil from the US in 2020 – almost 5.4 % of its total imports, 204 million tonnes. On the eve of the ill-fated, latest OPEC+ meeting, Dharmendra Pradhan, the former energy and petroleum minster, had a meeting with the Secretary General of the OPEC+; although what they discussed was not disclosed in public – and in full – Mr Pradhan may have raised the need of increasing the product

Oil Price: big boost for markets with the fall of US crude oil inventories

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  Crude oil price began its upward movement again on Thursday, having been on decline for two  consecutive  days at the beginning of the week. The unexpected fall was attributed to the more-than-expected production of crude oil in the US, for the week ending on June, 25. On Wednesday, however, the EIA, US Energy Information Administration, released its weekly report on the US crude oil inventories, something that both analysts and investors eagerly waiting for. The report was really encouraging as far as the entire oil sector is concerned: there is a significant fall in the US crude oil inventories for the week ending July, 2; it was drop of 8.1 million barrels – 0.75%. It is not just the weekly drop that was significant for the crude oil markets; the consistent fall for seven successive weeks that boosts the confidence of investors, reflecting the recovery of the US economy. Since the US is the largest consumer of the crude oil in the world, its economic strength is undoubtedl

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