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[waldron] 21/2/2019 06:32

Barclays: Head-Spinning Volatility In Oil Will End
By Nick Cunningham - Feb 20, 2019, 6:00 PM CST
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Two separate reports from major investment banks over the past week put forward this argument. Bank of America Merrill Lynch predicts that medium-term oil prices will be “anchored̶1; around $60 per barrel, explored in an article a few days ago. Barclays added its voice, largely coming to a similar conclusion.

The prediction of lower volatility may come as a surprise since the oil market is still reeling from the wild swings in 2018. As recently as the fourth quarter, Brent jumped to nearly $90 per barrel only to crash to around $50 per barrel in a matter of weeks.

But that doesn’t mean that head-spinning levels of volatility will continue. “Changes in the structure of supply and demand mean these gyrations in market prices will become less frequent, less intense, and less long lasting,” according to Barclays.

The investment bank says that this comes down to two underlying reasons. First, there probably won’t be any major imbalance in supply for the foreseeable future, at least not like before. Second, the elasticity of supply has increased significantly.

Let’s take the first point. The massive increases in production from U.S. shale, Barclays argues, has left the market with ample supply, and growth is expected to continue. Saudi Arabia has restored some spare capacity after the OPEC+ cuts. Brazil is expected to bring new pre-salt production online.

“Based on the number of projects started over the past few years, and our forecast for production coming from future projects, we think supply will easily meet demand,” Barclays said. “So, one reason prices should be more stable in the future, is that we just don’t see an upward surge in prices due to insufficient supply alone.” Prices should rise, but only modestly and slowly over time, the bank says.
Related: Oil Prices Nearing Breakout Levels

That doesn’t mean that prices won’t rise at all. A few factors will drive prices higher in the years ahead. First, U.S. shale growth is expected to slow. Second, even though proven oil reserves have jumped by 50 percent over the past 20 years, from 683 billion barrels to 1,696 billion barrels, more than half of those are in “at-risk”; areas, Barclays argues, “where extraction will likely become more expensive.” Finally, electric vehicles are set to set to eat into oil demand over time, but the investment bank doesn’t see that happening until the mid-2020s.

Ultimately, prices will rise in the years ahead, Barclays says, but not in a dramatic way. The gains are modest and not as volatile as in the past.

The second underlying factor for why volatility may diminish is because not only is supply rising, but the elasticity of supply is also increasing. This argument is not new. U.S. shale growth has exploded over the past decade and the one defining feature of shale is that projects are short-cycle, able to reach completion in a matter of weeks in most cases. Conventional projects, particularly large-scale projects, can take years to develop.

The short-cycle nature of shale means that output is much more responsive to price swings. When prices crash shale drilling slows pretty quickly, while the opposite is also true. Moreover, because shale continues to capture a larger and larger proportion of total supply, its characteristics have become much more influential. Much of the oil industry, to some degree, has had to abandon long-term projects and favor short-cycle projects as well.

On top of that, Saudi Arabia is much more concerned about losing market share than it was, say, a decade ago. That means it has an incentive to keep prices from rising too much. But Riyadh also needs prices from falling too low due to budgetary pressure. So, Saudi Arabia wants prices within a relatively narrow range, evidenced by the two OPEC+ deals it helped engineer.

In other words, much of the oil market itself is more elastic, responding to market forces in order to push prices back within a tolerable range.
Related: New Sanctions Threat Puts Russian Energy Sector On Edge

Demand, too, is more elastic. Emerging markets have trimmed fossil fuel subsidies since the market crash in 2014, which exposes them to the swings in prices. In the past, hefty subsidies would keep consumption humming along even if global prices spiked. Now, emerging markets see demand accelerate or fall back in response to prices. This helps smooth out volatility.

Finally, Barclays argues that the negative correlation between the U.S. dollar and oil prices has broken down. That also means that emerging markets will feel volatility more. If the dollar strengthens and oil prices no longer fall in response, then the price effect in emerging market currencies is more pronounced. As such, demand dips, which ultimately reduces the harshness of price swings as well.

Major investment banks may be sanguine about volatility, but there is no guarantee that their predictions are spot on. If anything is true about the oil market, it is that the one constant is volatility. Wars, recessions and technological change have a long track record of upended even the most carefully crafted forecast.

By Nick Cunningham of Oilprice.com

[waldron] 20/2/2019 17:33

FTSE 100
7,228.62 +0.69%
Dow Jones
25,925.57 +0.13%
CAC 40
5,195.95 +0.69%

Brent Crude Oil NYMEX 67.18 +1.10%
Gasoline NYMEX 1.76 +1.52%
Natural Gas NYMEX 2.68 -0.74%


WTI (WTI)
- 20/02 18:05:01
57.41 USD +2.03%


Eni
15.252 +0.36%

Total
49.63 +0.24%


Engie
14.11 +0.18%

Orange
13.645 -0.07%

BP
539.4 +0.48%

Shell A
2,428 +0.71%


Shell B
2,440.5 +0.74%

[maywillow] 20/2/2019 11:26

Natural Gas 20 Feb 2019 | 10:14 UTC Dubai

Oman, Shell sign interim upstream gas deal

Author Miriam Malek Editor Jonathan Fox Commodity Natural Gas

Dubai — Oman and supermajor Shell have signed an interim deal to develop gas acreage in block 6 in 2019, according to an emailed statement from Shell.
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The agreement covers investments in oil and gas and resources are to be used for domestic Omani projects. Petroleum Development Oman, Oman Oil Company and Total also signed the deal as partners.

The deal will integrate Shell and Oman Oil's upstream project with a planned gas-to-liquids plant that Shell and Oman Oil will also co-develop.

Shell last year signed a memorandum of understanding with the Omani government to develop a GTL plant in Duqm.

"We hope that the development of gas resources destined for the integrated projects will play an important role in generating in-country value and diversifying Oman's economy," Chris Breeze, chairman of Shell in Oman said.

Oman's gas resources are rapidly depleting and new resources will need to be exploited to meet rising domestic electricity demand. Oman in January signed new exploration and production deals with BP and Eni to shore up fresh reserves.

At the moment, Oman is a gas exporter and sells domestic resources through its Oman LNG export arm. But it has also mulled plans to import the fuel.

-- Miriam Malek, [e-mail]

-- Edited by Jonathan Fox, [e-mail]

[waldron] 20/2/2019 08:12

European markets open slightly higher amid US-China trade talks

The pan-European Stoxx 600 was up around 0.2 percent shortly after the opening bell, with most sectors and major bourses in positive territory.
Market focus is largely attuned to global trade developments, after officials from the U.S. and China launched a new round of negotiations on Tuesday.

Sam Meredith | @smeredith19
Published 1 Hour Ago Updated 8 Mins Ago

[adrian j boris] 19/2/2019 22:04

Tuesday, February 19, 2019

Oil nearing a breakout? Some analysts see higher prices ahead, as the OPEC+ cuts create a tighter backdrop. Any unexpected outage could send prices much higher, while a breakthrough in the trade war could remove one of the largest downside risks. “Brent and WTI are both now seriously testing a major resistance zone, around $65 and $55, respectively, the break of which could be the catalyst for another rally,” Craig Erlam, senior market analyst at brokerage OANDA, wrote in a morning market briefing.

Saudi Arabia cutting deep. Saudi Arabia is going above and beyond in its production cuts, but it’s unclear how long Riyadh will be willing to shoulder the burden alone. “Saudi Arabia’s production cuts by more than the required level also serve to offset the lack of compliance shown by countries like Iraq. It is doubtful whether Saudi Arabia will be willing to do so long-term, however. After all, the Saudis are losing market shares to US shale oil producers,” Commerzbank wrote in a note.

[adrian j boris] 19/2/2019 19:48

Stocks extend gains after Trump says March 1 trade deadline is not a 'magical date'
Fred Imbert | @foimbert
Published 10 Hours Ago Updated 2 Mins Ago CNBC.com










Stocks rose on Tuesday after President Donald Trump hinted once again he may push back a key trade deadline. Equities also got a boost following strong quarterly numbers from Walmart.

The Dow Jones Industrial Average climbed 58 points as Walmart outperformed. The S&P 500 gained 0.37 percent as the materials sector rose 0.9 percent. The Nasdaq Composite traded 0.4 percent higher as Amazon and Netflix both rose more than 1 percent.

Trump said Tuesday that trade talks with China are going well, adding the current March 1 deadline is not a "magical date." Both countries have until then to come up with a deal. Otherwise, additional U.S. tariffs on Chinese products could take effect. Trump indicated last week, however, he would be willing to push back the deadline.

"While it seems probable that Trump will extend that deadline to avoid derailing the substantive negotiations now in progress, this cannot be taken for granted," said Christopher Granville, managing director of global political research at TS Lombard. "The second round of talks in Beijing at the end of last week produced no breakthrough, but equally — and perhaps more important — no breakdown either."

"On balance, then, trade war risks remain skewed to the upside," Granville added.
Traders work on the floor at the opening bell of the Dow Industrial Average at the New York Stock Exchange on September 28, 2018 in New York.
Bryan R. Smith | AFP | Getty Images
Traders work on the floor at the opening bell of the Dow Industrial Average at the New York Stock Exchange on September 28, 2018 in New York.

Equities rose last week amid growing optimism that the U.S. and China will be able to reach a permanent trade deal. A U.S. trade delegation led by Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer was in China last week for talks with Chinese officials. Mnuchin said of the talks: "So far, so good." Talks between the two countries are continuing this week in Washington.

The major indexes fell earlier in the day as investors took a breather following solid gains last week. The major indexes all rose at least 0.6 percent on Friday. The Dow also gained more than 400 points. Those moves helped the Dow and Nasdaq notch their eighth straight weekly gain, while the S&P 500 rose for the seventh week in eight.

"Major US Equities Indices have started to regain their longer-term price average," JC O'Hara, chief market technician at MKM Partners, wrote in a note, adding the S&P 500 is trading above its 200-day moving average. He also said more than 50 percent of S&P 500 stocks are above their 200-day moving average.

"History shows that when the S&P 500 regained trend (both Bottom Up and Top Down) after exiting deep oversold conditions, equity markets experienced continued upside," O'Hara added.

Walmart shares rose more than 3 percent after the company reported better-than-expected earnings. The retailer also said e-commerce sales grew by 43 percent in the previous quarter.

—CNBC's Ryan Browne contributed to this report.

[waldron] 19/2/2019 17:15

FTSE 100
7,179.17 -0.56%
Dow Jones
25,878.88 -0.02%
CAC 40
5,160.52 -0.16%

Brent Crude Oil NYMEX 66.14 -0.54%
Gasoline NYMEX 1.73 -0.14%
Natural Gas NYMEX 2.64 +0.38%

WTI - 19/02 17:51:58
55.95 USD +0.16%

Eni
15.198 +0.14%

Total
49.51 +0.00%

Engie
14.085 +0.07%

Orange
13.655 +0.44%

BP
536.8 -0.22%


Shell A
2,411 -0.14%


Shell B
2,422.5 -0.10%

[the grumpy old men] 19/2/2019 10:37

Stocks set for a weak open amid US-China trade talks

On the earnings front, Walmart is due to report its latest results at 7 a.m. ET.
Traders will be on the lookout for the NAHB housing market index on Tuesday, and are anticipating minutes from the Federal Reserve's latest policy meeting and other economic data later in the week.

Ryan Browne | @Ryan_Browne_
Published 1 Hour Ago Updated 32 Mins Ago

CNBC

[the grumpy old men] 19/2/2019 08:28

European markets open slightly lower amid US-China trade talks

The pan-European Stoxx 600 was down around 0.2 percent shortly after the opening bell, with most sectors and major bourses in negative territory.
Market focus is largely attuned to trade developments between the world's two largest economies, with a new round of negotiations expected in Washington on Tuesday.

Sam Meredith | @smeredith19
Published 1 Hour Ago Updated 24 Mins Ago CNBC.com










European stocks opened slightly lower Tuesday morning, as market participants anxiously waited for details from the latest round of U.S.-China trade talks.

The pan-European Stoxx 600 was down around 0.2 percent shortly after the opening bell, with most sectors and major bourses in negative territory.
Symbol

Name

Price

Change

%Change

Volume
FTSE FTSE 100 7201.40
-18.07 -0.25% 21666437
DAX DAX 11287.65
-11.55 -0.10% 2793074
CAC CAC 5161.59
-6.95 -0.13% 2292997

Market focus is largely attuned to trade developments between the world's two largest economies, with a new round of negotiations expected in Washington on Tuesday.

A follow-up session of higher-level talks is expected later in the week, as both sides look to resolve their protracted dispute before a March 1 deadline.

Last week, President Donald Trump suggested he might extend the deadline for a deal, which would stop an immediate increase in tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent.

MSCI's broadest index of Asia-Pacific shares, excluding Japan, edged down 0.1 percent.

Back in Europe, investors are likely to monitor a flurry of corporate earnings. Danone, HSBC and BHP Billiton are all expected to publish quarterly results Tuesday morning.

In the U.K., Japanese carmaker Honda is reportedly set to announce the closure of its Swindon car plant on Tuesday, risking the loss of 3,500 jobs.

The company is set to hold a news conference at 0800 GMT to announce further details.
Sam Meredith

[la forge] 18/2/2019 20:53

PARIS (Agefi-Dow Jones) - Total announced Monday the creation of an industrial consortium with the Danish Orsted and the Belgian Elicio to respond to the call for tenders for the construction of an offshore wind farm. from Dunkirk.


This is Total's first project in offshore wind power. "Our recognized expertise in offshore oil and gas, combined with expertise across the offshore wind energy value chain of the world leader in the sector, Orsted, as well as that of Elicio, an experienced developer qualified from the outset of the call for tenders, are the keys to the success of a safe and competitive project, "said Philippe Sauquet, General Manager of Total's Gas, Renewables & Power business.


The call for tenders, launched in 2016 by the French State, has entered its last phase. It puts in competition a dozen international consortia, in particular EDF associated with the German Innogy, Engie and the Portuguese EDPR, or the Shell oil company with Quadrans Energies Marines.


Candidates have until March 15th to submit their projects. The choice of the winner will take place in the second quarter of 2019. The commissioning of the park, with an estimated capacity of 500 megawatts, is scheduled for 2022.


-Francois Schott, Agefi-Dow Jones; 01 41 27 47 92; [e-mail] ed:


-Agefi-Dow Jones; [phone]; [e-mail] ed: ECH

[waldron] 18/2/2019 18:23

FTSE 100
7,219.47 -0.24%
Dow Jones
25,883.25 CLOSED
CAC 40
5,168.54 +0.30%


Brent Crude Oil NYMEX 66.50 +0.38%
Gasoline NYMEX 1.74 -0.17%
Natural Gas NYMEX 2.63 +0.19%

WTI (WTI)
- 18/02 18:59:12
56.04 USD +0.29%

Eni
15.176 +0.37%


Total
49.51 -0.37%


Engie
14.075 -0.32%

Orange
13.595 +1.27%


BP
538 -1.01%

Shell A
2,414.5 -0.39%

Shell B
2,425 -0.76%

[ariane] 18/2/2019 12:43

The oil price has soared this year – and it’s nothing to do with supply or demand
By: John Stepek
18/02/2019
Oil wells in Russia © Getty Images
Russia and Saudi Arabia would quite like oil to trade at higher prices

This article is taken from our FREE daily investment email Money Morning.

Every day, MoneyWeek's executive editor John Stepek and guest contributors explain how current economic and political developments are affecting the markets and your wealth, and give you pointers on how you can profit.

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After a grim 2018, stockmarkets have had a pretty decent start to this year.

For example, the S&P 500 is up around 10%. The FTSE 100 is up about 7%. Even Germany’s DAX index – for all the talk of eurozone gloom – is up nearly 7%.

Yet there’s one asset that has blown them all away.

Oil.
Oil has been a better bet than stocks so far this year

The oil price (as measured by Brent crude, the European benchmark) is up by around 20% so far this year, far outstripping the gains seen by developed world stock markets. Oil is now trading near a three-month high.

After last year’s steady decline, it’s good news for the oil bulls. And there are plenty of fundamental reasons to justify it, it seems.

Firstly, we have the ongoing collapse of the Venezuelan economy. That plus new sanctions on the country have hit the supply of oil coming from that direction.

Secondly, Russia and Saudi Arabia apparently would rather have oil trade at higher prices rather than sell more barrels. The cartel known as Opec+ has decided to cut output by 1.2 million barrels of oil per day. Production in January fell to 30.8 million barrels of oil a day, from 31.6 million in December. And Saudi Arabia says it will cut even more in March.

Goldman Sachs has, in typical hyperbolic fashion, described these as “shock and awe” cuts that look set to drive the oil price higher this quarter.

Third, on the demand side, data showed that China’s imports of oil rose by more than expected. And investors are feeling upbeat again about the outcome on the China-US trade talks.

All positive for the oil bull arguments.

That said, there are also plenty of ways to make a bearish case right now. And if the oil price had gone down, then maybe those are the facts I’d be highlighting today instead.

For example, Chinese demand might have been higher than expected. But at this price, US shale-oil producers are pumping as fast as they can and, as a result, US crude oil stocks are at their highest since November 2017.

As for optimism on trade talks – the markets are apparently optimistic today, but last week the pessimists had the upper hand. My view is that the trade talks will be a bit like Brexit – full of fudge and brinksmanship, and very prolonged indeed. So the market is going to be experiencing highs and lows like this for a long while, with the actual economic impact probably very hard to judge.

And don’t get us started on the longer term bear arguments. Plastic use is being cut back aggressively now that straws are public enemy number one. Electric cars are just around the corner. If you want to tell a compelling story about stranded assets, it’s really not that difficult.
The stories that we tell ourselves

I’m not saying that fundamentals don’t matter – of course they do. But on a day-to-day basis, the oil price is not typically reacting to the actual number of barrels being produced and consumed. And on different days, different factors will matter more or less.

For a start, being priced in US dollars means that the oil price will tend to slip when the US dollar is strong and vice versa. (This is not a cast-iron correlation – few are – but it’s always worth remembering about any commodity priced in dollars).

Secondly – and I think, most importantly to the environment right now – oil is a “risk-on” asset. When investors are worried about growth, they sell oil. And this process works in reverse too (it’s “reflexive” as George Soros might put it) – when investors see oil fall, they get worried about growth.

Last year, the oil price started to slide hard in October. At that point Brent Crude was trading above $86 a barrel. At the time, the reason seemed pretty simple: at $80-plus, no one had any reason to moderate supply. Everyone from Opec producers to shale explorers was working as hard as they could. In effect, there were plenty of relatively benign reasons for the oil price to fall.

But stockmarkets began to fall at the same time. This was just a week or so after the US central bank, the Federal Reserve, had lauded the strength of the US economy.

What gives? Put simply, oil and stockmarkets were spooked by the same thing – the idea that the Fed really wasn’t going to stop raising interest rates, and also had no plans to end quantitative tightening (QT).

That set up a fresh narrative arc (“narratives” are all the rage at the moment – it’s simply the recognition that humans like stories, and at any given moment, one story about the markets is more dominant than all the rest).

In this particular story, Fed policy was already too tight. The economy must be due a recession. We were heading into a post-tax-cuts earnings downturn. In short, investors decided it was time to pay more attention to bad news than to good news.

And all of that is primarily about the fear of the Fed.

What’s happened this year so far is that the Fed story has changed. Markets are no longer as concerned about the indomitable Jerome Powell, because he has thrown in his hand already.

The big issue now is that – as is often the case in the first quarter of the year – the economic data is looking ropey. We’ve had some weak jobs data. China is opaque as ever, but we know it’s been slowing down.

However, conditions are ripe. The market is already no longer afraid of the Fed. Now you just need some half-decent economic or political data, and we could easily get back to “fear of missing out” (FOMO) mode.

Fundamentals? When you have central banks in charge of credit allocation, they only matter so much I’m afraid.
• This article is taken from our free daily investment email, Money Morning. Sign up to Money Morning here.

[ariane] 18/2/2019 12:04

SPDC is the operator of a Joint Venture involving NNPC, which holds 55%; Shell 30%; Total Exploration and Production Nigeria Limited (TEPNG)10%; and Nigeria Agip Oil Company Limited (NAOC) 5%.

[ariane] 18/2/2019 11:59

UK government backs Shell’s plan to leave some North Sea installations in place, despite German concerns

Leaked official letter from German environment minister to Michael Gove expresses reservations about oil giant’s proposals as UK government backs move

[adrian j boris] 18/2/2019 11:31

Home » Reports » Broker Ratings » Royal Dutch Shell Plc Class B 8.3% Potential Upside Indicated by Deutsche Bank
Analyst Broker Ratings
Royal Dutch Shell Plc Class B 8.3% Potential Upside Indicated by Deutsche Bank

Posted by: Charlotte Edwards 18th February 2019

Royal Dutch Shell Plc Class B with EPIC/TICKER (LON:RDSB) had its stock rating noted as ‘Downgrades217; with the recommendation being set at ‘HOLD’ today by analysts at Deutsche Bank. Royal Dutch Shell Plc Class B are listed in the Oil & Gas sector within UK Main Market. Deutsche Bank have set their target price at 2650 GBX on its stock.

[wbecki] 18/2/2019 11:16

@FJG

Indeed.

Conservative Remoaners will soon follow no doubt.

If any of these MPS were honourable they'd re-stand for election in their constituencies for their ne party - just as Carswell & Reckless did for UKIP.

Doubt this crop of snakes though have any honour whatsoever so I wont hold my breath.

[fjgooner] 18/2/2019 10:27

I see the Labour Party has just hit the self-destruct button.

Interesting to see the fall-out and any effect on the forthcoming Brexit votes.



Seven MPs leave Labour Party in protest at Jeremy Corbyn's leadership

Seven MPs have resigned from the Labour Party in protest at Jeremy Corbyn's approach to Brexit and anti-Semitism.

The seven - who are calling themselves the Independent group are: Chuka Umunna, Luciana Berger, Chris Leslie, Angela Smith, Mike Gapes, Gavin Shuker and Ann Coffey.

Ms Berger said Labour had become institutionally anti-Semitic and she was "embarrassed and ashamed" to stay in the party.

Mr Leslie said the party had been "hijacked" by the far left.

[adrian j boris] 18/2/2019 08:36

The NYSE and Nasdaq will be closed on Monday 19TH FEBRUARY to observe Presidents Day.


hat eating on presidents day not allowed

[yertiz] 18/2/2019 08:32

Was your hat a little chewy, stewart64?