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Saudi oil policy risks creating perfect storm for Aramco flotation

Good business strategies generally create good investments over the longer term. And so Aramco needs to ensure it has the best possible strategies, if it wants to maximise the outcome from its planned $2tn flotation. Unfortunately, the current oil price strategy seems more likely to damage its valuation, by being based on 3 questionable assumptions: Oil […]

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Economy faces slowdown as oil/commodity prices slide

Oil and commodity markets long ago lost contact with the real world of supply and demand. Instead, they have been dominated by financial speculation, fuelled by the vast amounts of liquidity pumped out by the central banks.  The chart above from John Kemp at Reuters gives the speculative positioning in the oil complex as published […]

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Saudi Arabia’s ‘Vision 2030’ is looking a lot less clear

Saudi Arabia’s U-turn to revive oil output quotas is not working and fails to address the changing future of oil demand, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Saudi Arabia’s move into recession comes at an unfortunate time for its new Crown Prince, Mohammed bin Salman […]

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Oil market supply/demand finally begins to matter again as commodity funds withdraw

Its been a long time since oil market supply/demand was based on physical barrels rather than financial flows:   First there was the subprime period, when the Fed artificially boosted demand and caused Brent to hit $147/bbl   Then there was QE, where central banks gave free cash to commodity hedge funds and led Brent to hit […]

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Oil heads back below $30/bbl as hedge funds give up on OPEC

“Those who cannot remember the past are condemned to repeat it“. George Santayana 9 months ago, it must have seemed such a good idea.  Ed Morse of Citi and other oil market analysts were calling the hedge funds with a sure-fire winning strategy, as the Wall Street Journal reported in May: “Dozens of hedge-fund managers […]

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Oil price weakness will unmask reflation and recovery myth

Oil markets have been at the centre of the recent myth that economic recovery was finally underway.  The theory was that rising inflation, caused by rising oil prices, meant consumer demand was increasing.  In turn, this meant that the central banks had finally achieved their aim of restoring economic growth via their zero interest rate […]

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Oil prices under pressure as US oil/product exports ramp up

On Monday, I discussed how OPEC abandoned Saudi Oil Minister Naimi’s market share strategy during H2 last year. Naimi’s strategy had stopped the necessary investment being made to properly exploit the new US shale discoveries. But this changed as the OPEC/non-OPEC countries began to talk prices up to $50/bbl. As CNN reported last week: “Cash is pouring […]

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US Permian’s shale oil surge highlights OPEC’s failed strategy

OPEC and Russia made a massive mistake last November when when they decided to try and establish a $50/bbl floor for world oil prices.  And now they have doubled down on their mistake by extending the deal to March 2018. They have ignored 4 absolutely critical facts:   Major US shale oil producers were already […]

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Oil market rebalancing myth looks close to its sell-by date

The myth of oil market rebalancing has been a great money-maker for financial markets.  Hedge funds were the first to benefit in H2 last year, as Reuters has reported, when: “OPEC and some of the most important hedge funds active in commodities reached an understanding on oil market rebalancing during informal briefings held in the […]

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Oil prices could halve as the speculative bubble starts to burst

The past few weeks have been a nightmare for the many hedge funds who gambled on higher oil prices. They obviously hadn’t realised that OPEC’s November quota agreement was most unlikely to lead to a major rebalancing of today’s vastly over-supplied market.  But as I suggested in December: “The simple fact is that the arrival […]

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