BofA – OPEC: Extend and Pretend

00096c2a-1600The last time OPEC (and Non-OPEC) member nations sat down to attempt a coordinated increase in oil prices by cutting production they succeeded… for about three months. Ever since then, oil has been on a gradual declining path, boosted by a surge in US shale output and declining global demand, with WTI recently even sliding sliding below OPEC’s implicit price floor of $50/barrel. Which is why on 25 May, after the failure of the first 6 month production cut, the same nations will try the same exercise, this time looking to cut output for 9 months, and hoping for a different outcome. At least that is the general expectation.

Bank of America’s Francisco Blanch has released a note previewing this week’s OPEC meeting titled “OPEC: extend and pretend“, and which boils down to the 3 choices faced by OPEC: maintain, curb, or hike output.

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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

PortfolioMetrix Market Update

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September was again dominated by will-they/won’t they speculation around the US Federal Reserve raising rates at their meeting during the month, although fears over Deutsche Bank’s viability and an OPEC agreed production cut were also significant events.

Meanwhile, PortfolioMetrix’s model portfolios’ relative performance was again strong over the month, with the 10 balanced funds they regularly track up on average 0.3% over the month with the highest performing up 1.0% and the weakest down 0.5%.

Overall, Core Active 6 outperformed 9 of these 10 competitors.

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Weekly Market Update

News this past week

  • Oil prices rise as OPEC agrees to curb production
  • US Q2 GDP revised upwards
  • UK PM announces deadline for triggering Article 50
  • Eurozone see encouraging economic data releases
  • Japanese markets fall as deflation continues

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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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