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Principale » Bear market in crude oil (Part 2)

Bear market in crude oil (Part 2)

03 Juillet 2017

Data this week, meanwhile, showed US crude oil production declined about 100,000 barrels per day for the biggest decline so far this year. Motor gasoline was down 900,000 barrels to 241 million barrels. Of course, that is entirely due to the decline of oil prices.

OPEC and other major oil producers such as Russia, Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan reached an agreement in December 2016 to remove 1.8 million barrels a day from the market.

"To get there, we will need to see the continued joint efforts of the OPEC and participating non-OPEC nations, which, thus far, have proven to be effective and have led to signs of market rebalancing and a generally more positive mood in terms of market sentiment".

Based on the analysis, the Energy Select Sector SPDR (ARCA:XLE) posted an average return of 6.7 percent as compared to the average return of 7.8 percent posted by S&P 500 (INDEXSP:.INX) during the same six-month period.

"The question is whether Opec will respond with further cuts or whether it needs to look again at its macro strategy for addressing low prices".

A marginal cut in USA drilling for new production was met by a rise in output from OPEC in June, up by 280,000 barrels per day (bpd) to an estimated 2017 high of 32.72 million bpd. The bank is now expecting a price of around US$47.50 a barrel in the coming three months, down from a more optimistic US$55 a barrel.

However, US reserves data is no longer moving the market.

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Kapoor also said that the leaders of the two countries will also discuss defence and counter-terrorism cooperation. Today when you talk about cyber or advanced technology, it is an advantage to say we are an Israeli company.

Crude oil prices were pulled out of the long retraction that began in mid June in response to a slight decline in US crude oil production levels. For instance, we see U.S. shale oil supply grow on a year-on-year (YoY) basis by 1.1 million b/d at $55/bbl but see growth of just 200,000 b/d at $45.

Kevin Birn, senior director at IHS Markit, says that over the next few years Canadian growth "will only be surpassed by the United States and its tight oil machine", referring to the USA industry's unlocking of tightly packed oil deposits in shale and similar rocks.

The Saudi crown prince needs to achieve a higher oil price to successfully float Saudi Aramco - the world's most valuable company - in order to pay for proposed reforms in the country. Nevertheless, we will continue to keep a close watch on these numbers. Mr. Sycip is a valuable member of Philequity's board.

In one of our board meetings years ago, we were discussing the U.S. shale oil revolution and benefits of lower oil prices to our country. He warned us on the impact this may have on the job security and employment prospects of our OFWs in the Middle East.

Philequity Management is the fund manager of the leading mutual funds in the Philippines.

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Bear market in crude oil (Part 2)