China and Russia Looking to Drop US Dollar for Oil Payments

yuan-vs-dollarJust days after Beijing officially launched Yuan-denominated crude oil futures (which are expected to quickly become the third global price benchmark along Brent and WTI), Reuters reports China has taken the next major step in the challenging the US dollar’s supremacy as global reserve currency (and internationalising the Yuan) by paying for crude oil imports in its own currency instead of US dollars.
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Real Reason Behind Qatar Crisis Is Natural Gas, as Saudis Issue 24 Hour Ultimatum

Gulf CrisisIn the latest escalation of the Gulf crisis in which a coalition of Saudi-led states cut off diplomatic and economic ties with Qatar, Saudi Arabia has now given Qatar a 24 hour ultimatum to fulfil 10 conditions, that have been conveyed to Kuwait, which is currently involved in the role of a mediator between Saudi and Qatar.

Whilst the official narrative for the diplomatic fallout is because – to everyone’s ‘stunned amazement’ – Qatar was funding terrorists, including a report by the FT that Qatar has directly provided $1 billion in funding to Iran and al-Qaeda spinoffs, could the real reason behind the diplomatic fallout be far simpler, and once again has to do with a long-running and controversial topic, namely Qatar’s regional natural gas dominance. Learn more

US dollar on the back foot

dollarsAs Trump voiced his concerns over the apparent ‘bunch of bad hombres down’ in Mexico, the less sensational Fed voted unanimously to keep rates on hold and gave little indication of a hike at the next meeting in March. Comments included ‘some further strengthening’ in the labour market, increasing inflation, albeit still below the central bank’s target, and ‘soft’ business sentiment.

One thing you cannot say about Trump is, unlike many politicians globally, he has followed through with some of his main campaign promises, albeit some more recent actions are deemed controversial by many. We suspect the broadly dovish Fed members will act on a wait-and-see basis, as there has been little to no guidance from the Trump administration with respect to fiscal policy deployment and the consequent effects on US growth. The futures market is pricing in over a 70% chance of a hike in June.

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Oil Jumps Most in Nine Months After OPEC Agrees to Output Cuts, But Will It Work?

opec-production-cut-announcementOil soared as much as 10% after OPEC approved the first supply cuts in eight years in an effort to ease a record glut and stabilise global markets, but how effective will the proposed cuts be in raising oil prices?
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IMF Cuts Saudi 2016 Growth Forecast as Oil Stays Low

IMF cuts Saudi Forecast.jpgThe International Monetary Fund has cut its economic growth forecast for Saudi Arabia’s non-oil sector this year to 0.3 per cent, underlining the depth of the slowdown in the oil-dependent kingdom following a two-year slump in crude prices.

The new numbers, released ahead of Saudi Arabia’s first-ever international bond sale, suggest that the government’s efforts to cut costs and diversify its economy away from petroleum are having less of an effect than the IMF forecast previously. Saudi Arabia generates more than 80 per cent of its official revenue from oil, according to a World Bank report in July.

The impact is cascading through the broader economy and knocking consumer confidence, causing the non-oil sector to slide into a technical recession in the last quarter of 2015 and the first three months of this year. Learn more

Oil Slides As Iran Turns Down Saudi Offer

iran-rejects-saudi-cut-offerThe Saudi “cut” offer that rallied crude yesterday was nothing but a strawman to enable them to pinpoint blame on Iran for the failure of talks. Unwilling to freeze its output – even based on the ‘offer’ of Saudi cuts – Iran’s Bijan Zanganeh exclaimed “it’s not our agenda to reach agreement in these two days,” blowing a hole in the hope train for crude’s recovery.

Iran wants to raise its crude production to 4 million barrels a day, Bijan Namdar Zanganeh said in an interview Tuesday. OPEC’s third-largest producer – with daily output of 3.6 million barrels last month – will talk to other members at the International Energy Forum in the Algerian capital and it’s possible the group could reach a formal supply deal at its November meeting in Vienna, he said.

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Where Does The US Get Its Oil?

Howmuch.net came out with some infographics to show that from 2000 to 2015. Interestingly there is a notable shift from the US depending heavily on Middle East countries and Mexico, to depending more on America’s neighbor to the north, Canada.

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