Posts

Showing posts from 2022

Saudi Aramco's profit surges by 81% in Q1

Image
  Saudi Aramco, the state-owned oil company, reported a massive 81% increase in profit during the first quarter this year, thanks to the high oil prices. It went past another milestone last week by dethroning Apple as the most valuable company in the world - for a brief period. Despite the obvious sensitivity over the issue, when the whole world suffers from high crude oil prices, Saudis showed elation over the ; if criticism over pursuing profits at the expense of global economic growth as a whole gets intense, Saudis may defend the achievement by pointing to the losses that the oil giant suffered in the aftermath of the great oil price crash in April, 2020. Saudi Arabia and the UAE have been under pressure by the main oil consuming nations in the world for months; the latter demand increased output something that the former resist,  citing lack of investment in the sector as the main reason to elevate the output.   Of course, the Kingdom - along with the UAE -  did not buckle under p

High energy prices and inflation: will the onset of the hurricane season make things worse?

Image
  The impact of the surging crude oil prices, exacerbated by the steep rise in the price  of the LNG, liquified natural gas, on the global economy is now all too clear and the policymakers are scrambling for solutions before it reaches the point of no-return. In inverse proportion to the skyrocketing inflation, the spending power of the Western consumers in particular, and global consumers in general, is steadily shrinking and the major economies are already feeling the pinch: the economy of the United Kingdom, for instance, has shrunk by 0.1% in March, clearly signalling the struggling service sector due to high energy prices; analysts fear the worst for the same during April that is yet to be released. The picture in the rest of Europe is far from cosy as well, especially when the latter has been forced to look for substitutes for Russian commodities.  The first clear signal of an impending disaster came, when the stocks of the retail giant, Amazon, fell almost by 24% last month as a

Volatility in Crude Oil Markets: is concern over the Chinese economy, a major factor?

Image
The volatility in the energy markets continues amidst growing uncertainty over the global economic growth, despite the catastrophic impact on the world from the Covid-19 virus clearly behind us.   As far as the crude oil markets are concerned, there was a significant fall in the prices on Tuesday, when the API, American Petroleum Institute, said in its weekly report that there was a crude build during the past week; it was much bigger than its own estimate for the same period. According to the API, there was a crude build of 1.618 million barrels, when the estimate was 1.2 million barrels. The EIA, US Energy Information Administration, meanwhile, reported on Wednesday even a larger crude build - 8.5 million barrels during the last week. As expected, a sizeable build of this kind triggers off a fall in oil price and that's exactly what happened on Tuesday - in the run-up to the release of the report and in its aftermath. On Wednesday, however, the prices have recovered temporarily:

Russian Victory Day Parade did not push the crude oil price

Image
  The price of crude oil did not spike in the wake of the Russian Victory Day parade on Monday, in stark contrast to media speculations about declaring all-out-war against Ukraine. The combination of the impressive military marches and display of the latest military hardware, including the dreaded ICBMs is nothing new; Russians have been sticking to this theme for decades. As the theatrics of the parade died down, in the absence of any factor that could potentially exacerbate the current crisis, especially in the energy sector, the crude oil prices subsided slightly, leaving it at the usual fulcrum of supply and demand. Although the West wants to send a clear signal to Russia with an outright ban of oil and gas, there are effective currents that hinder the progress on this front: the latter stem neither from emotional sentiments nor ideological loyalties; there are genuine grievances over the supply of oil and gas, if a total ban comes into effect. Japan, for instance, admitted at the

High crude oil prices: perfect catalyst- exponential rise in gas prices

Image
  The price of LNG,  liquefied natural gas, has gone up by over 100% since February this year and in the presence of such an increase, any hope of oil prices coming down at pumps just remains a distant dream. We have been told, both by irrefutable statistics and reliable analysts, that a recession is more or less cyclic - almost like the seasons in the northern and southern hemispheres; it comes about at fairly regular intervals, not necessarily being associated with human activities - good, bad or outright crazy. No expert, however, does say that the frequency of recession is entirely free from human activities; the recent forecasts of global economy as a whole grinding to a halt with a growth closer to zero is a case in point; in the realm of economics, two successive negative growths define a recession.  In a matter of 3 months, the gas prices have gone up by almost 100%. The invasion of Ukraine by Russia has made the situation worse with no end - politically, economically or milita

Oil Price: API reports a significant US crude inventory draw - exceeding its own estimate

Image
  Amidst mushrooming uncertainties, the API, American Petroleum Institute, reported a significant draw of the US crude inventories during the last week, exceeding its own estimate for the period - 1.167 million barrels. Analysts hope that the data from the EIA, US Energy Information Administration, will confirm the trend by its own report due to be released on Wednesday.  The sudden escalation of the war between Russia and Ukraine made the energy forecasts by experts up until then, at best completely irrelevant and at worst, a statistical maze that can only make those who follow them leaving in a dizzy spell. Without credible substitutes, the West dragged the energy sector into the conflict in the hope of expediting the achievement of its political goals at the expense of the collective global economy and experts now do not talk about just the slow growth, but recessions  in the major economies.  The GDP forecasts for the Q1 2022 do not make good reading for any decision maker. The war

Crude oil prices: factors beyond producers' grasp

Image
As the price of crude oil shows no sign of abating, the risk of a global recession has increased alarmingly, according to economists. With the conflict between Russia and Ukraine showing no sign of coming to an end soon, the supply side of the oil equation is not going to improve at all in the current circumstances.  On the contrary, in the absence of a major global producer, Russia, the price of crude oil is going to remain at the current level for the foreseeable future, especially when the rest of the OPEC+ sticks to a modest increase in daily production. As  the EIA, the US Energy Information Administration, clearly explains in the above image, contrary to the popular notion, producers are not the only key factor, when it comes to determining the crude oil prices at pump. In short, nearly 50% of the cost is beyond the producers' realm and in the current economic circumstances, taxes and production costs are not going to decline at all, when the rampant inflation starts to bite.

Oil price: no sign of falling below $100

Image
  Despite the crude build in the US, consistently confirmed by two reports in the past two days, the price of crude oil shows no sign of losing momentum in its upward trend. Both API, American Petroleum Institute, and the EIA, US Energy Information Administration, released data that shows a crude build during the past week.  The API estimated a crude build of 2.167 million barrels; on Tuesday, however, the actual build turned out to be 4.78 million barrels - a significant statistic.   The figures from the EIA, meanwhile, depicts the same picture, but not as large as that of the API. The crude build of this magnitude did surprise the analysts; because, data for last week, based on the data from the previous week, there was a considerable crude draw. Although some analysts anticipate what they call, a demand destruction, due to high oil and gas prices, they could not account for the crude draw that we witnessed last week. In China, the world's second largest consumer, meanwhile, ther

Is Russian rouble defying sanctions - after all?

Image
  The unexpected recovery of the Russian rouble by more than 42% in one month has, undoubtedly,  left the decision makers in the West in an uncomfortable lurch, especially when the expected outcome was the exact inverse.  Making matters worse for the policymakers, the anticipated oil and gas revenue by Russia in 2022, much to the dismay of the former, has gone up significantly too;  some analysts estimate it to be more than a third of its revenue in 2021. As for the recovery of rouble, President Putin's calculated gamble seems to be paying off: a few weeks ago, he wanted the countries in the EU and other 'hostile nations' to pay for the Russian fuel in rouble, if they wanted an uninterrupted supply. Initially, the countries in question just ignored Russian decision in unison, branding it 'blackmailing'; they went on to say that the decree violates the contractual agreements. No sooner had the EU responded collectively than the cracks started appearing in the allianc

US crude oil stocks drop - unexpectedly!

Image
  The US crude oil stocks fell by 4.496 million barrels, defying the prediction of a crude oil build of 2.233 barrels, according to the API, American Petroleum Institute.  Analysts anticipated yet another build, in line with the huge crude build reported last week - 7.757 million barrels, while taking into account global uncertainties on many fronts.  The rising Covid-19 infections in China - and the alleged heavy-handed measures to curb the spreading - worried the analysts and investors, in anticipation of a significant drop in demand in the world's biggest consumer of the crude oil. Although the situation is far from over, the Chinese authorities are determined not to let their guard down. The lockdowns, especially in commercially-important city, Shanghai, could spell an economic setback for China that already feels economic headwinds.  In addition, there are rising Covid-19 infections in India, the world's third largest consumer, as well. The authorities in New Delhi have ma

What drives the oil and gas prices down - against all odds?

Image
  The price of crude oil and LNG, liquefied natural gas, started falling on Tuesday - quite unexpectedly. In fact, the crude oil market braced themselves for the polar opposite, especially in light of the new major offensive by Russia in the east of Ukraine. As of 16:30 GMT, the price of WTI, Brent and LNG were $102.79, $107.69 and $6.99 respectively, recording a steep fall relative to what they had been the previous day. Last week, there was a huge US crude inventory build, confirmed by both the API, American Petroleum Institute and EIA, US Energy Information Administration; the API indicated the figure as 7.757 million barrels; their own estimate for the same was 1.367 million barrels. For the last week, the API estimated a crude build of 2.533 million barrels; the actual data is yet to be released, perhaps later during the day. The significant drop of the prices of crude oil and gases, in this context, may be due an estimated yet another significant US crude build during the past we

Crude oil prices: no sign of coming down - any time soon!

Image
  It is now clear that the release of SPRs, strategic petroleum reserves, is not a magic wand in reversing the steep rise in crude oil prices; the movers and shakers of the markets simply know that the release is just a drop in the ocean, just to earn a psychological victory for political reasons before the beleaguered masses. In short, without a substantial increase in supply, the strategy is just a square plug in the round hall. If analysts see this as the only strategy that the Western leaders can think of at present, the very move will lose its shine and relevance  in due course, when policy makers scrambled to bang on heads, metaphorically speaking, are confined to places where there is very little room to manoeuvre.  On Monday, the price of crude oil fell sharply, when the IEA, International Energy Agency, grabbed headlines with its share of release of crude oil. When the numbers sank in, however, price of crude oil started going up again;  the quantity released was nowhere near

Rising gas prices and falling oil prices: a scary tale of two contrasts

Image
  The prices of crude oil fell sharply on Monday, something that analysts attributed to the release of SPRs, strategic petroleum reserves, by the IEA, the International Energy Agency. The IEA, according to Bloomberg, has released 120 million barrels of crude oil in line with the major fuel consuming nations that collectively released 180 million barrels.  The drop of the prices of crude oil at the beginning of the new week can be partly explained by the arrival of the fuel from the SPRs; in addition, there was a sentiment that the military conflict in Ukraine, that appeared to had been 'stalled' by then, may turn in Ukraine's favour. In stark contrast, meanwhile, the price of LNG, liquified natural gas, was on the rise, hitting above $6.50, simultaneously that in turn implied the supply of the commodity to the markets in the absence of Russian input is far short of the normal levels. The EU as a block was considering a blanket ban of Russian gas, despite it being highly con