In the first 6 months of 2015, US gasoline consumption rose at the fastest rate since 1985 – another occasion on which the real price of oil halved over 12 months and stimulated demand. Not surprisingly, prime supplier gasoline sales/deliveries into US local markets are up the most over the prior year since 1988 as well. Source: Thomson Reuters.
Don’t expect oil prices to rise much next year and developing markets dependent on commodities are feeling the pinch of falling prices.
Iranian Supply Will Keep Oil Low
Global oversupply and more Iranian production are likely to keep a lid on oil prices next year, offsetting any slowdown in US shale output due to low prices, a Reuters poll showed on Wednesday. Benchmark North Sea Brent crude is expected to average $58.60 a barrel in 2016, slightly above the $56.63 seen so far this year, but well below the forecast of $62.30 in last month’s poll, the Reuters survey of 31 analysts showed.
“Iranian production is likely to pick up pace next year once the country has been certified to have complied with the terms and conditions in the nuclear agreement by the International Atomic Energy Agency,” Vyanne Lai of National Australia Bank said.
Commodity Prices Hit Developing Economies Hard
Slumping commodity prices pose a serious challenge to economic and political stability in developing economies across Latin America, Africa, the Middle East and Asia. According to the United Nations Conference on Trade and Development, 94 developing countries depended on commodities for more than 60 percent of their merchandise export revenues in 2012/13.
As many expected, the Federal Reserve is keeping interest rates at record lows, due to, it says, a weak global economy, low inflation and instability in international financial markets.
“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Federal Open Market Committee said in a statement released at the conclusion of its two-day meeting this week.
Thanks A Lot, Global Equity Meltdown
In a press conference following the statement’s release, Fed Chair Janet Yellen said “the situation abroad bears close watching.”
I’ll say. We’ve been closely watching bears abroad (particularly in China) for some time now. Will this mean a continuation of the low metals prices we’ve seen lately? Only time will tell, but the Fed’s reticence comes after another week of falling metals and other commodities prices. Since the recovery here in the US has always seemed fragile, many say there is no sense in raising interest rates now that global equities markets have fallen sharply in the last month.
One Less LME Ring Trader
BHP Billliton has revised its prediction of “peak steel” in China and an inner-OPEC oil price fight has broken out.
BHP Changes Peak Steel Forecast
BHP Billiton last month revised downwards its forecast of “peak steel” production in China, the world’s largest producer of the stuff. Reuters’ Andy Home writes that It will happen, BHP said, some time in the mid-2020s and the peak will be between 935 and 985 million metric tons, or 960 million in the middle of that range.
Rio Tinto, by contrast, is sticking with its call that the peak will come around 2030 and will be around 1 billion mt.
Kuwait, Iran Undercutting Saudi Oil Price
Kuwait and Iran have cut their crude oil prices to Asia to multi-year lows against top exporter Saudi Arabia as the battle for market share among producers pits members of the Organization of the Petroleum Exporting Countries against each other.
Kuwait, one of the lowest-cost producers, cut its October price to Asia by 60 cents compared with the previous month, undercutting a reduction for a similar Saudi grade. This pulled Kuwaiti oil to its biggest discount to Saudi crude in over a decade, at 65 cents a barrel.
Today in MetalCrawler, can a shake-up of the Saudi royal family mean a change in oil prices? A major Canadian miner is cutting production estimates, as well.
A shake-up of Saudi Arabia’s oil leadership by King Salman has introduced a new element of unpredictability to its energy policymaking at a moment when Riyadh is grappling with slumping crude prices and its war in neighboring Yemen, Reuters reported.
State-run oil giant Aramco has been without a permanent chief executive since April, when Khalid al-Falih was made health minister, and the old Supreme Petroleum Council, where energy policy was historically made, was abolished in January.
Goldcorp Cuts Mine Forecast
Goldcorp Inc. on Tuesday cut its 2015 production forecast for its newest mine, the Eleonore gold mine in Quebec, because higher-than-expected “folding” in the underground rock has resulted in lower gold grades. Goldcorp, the world’s biggest gold producer measured by market value, said it now expected Eleonore to produce between 250,000 and 270,000 ounces of gold this year.
The Energy Information Administration, in August, cut its US crude production outlook for this year and next, as lower prices reduce the number of drilling rigs.
The agency reduced its forecast by 1.2% to 9.36 million barrels a day this year, according to the monthly Short-Term Energy Outlook released August 11. Production will still be up 650,000 barrels a day from 2014, but the EIA reduced its 2016 forecast to 8.96 million barrels a day from 9.32 million.
The September Short-Term Energy Outlook will come out later today but many are already predicting that the EIA will again predict that oil production began to decline in May and will continue falling into early 2016.
Rig Count Falling
The US oil-rig count fell by 13 to 662 last week, breaking six consecutive weeks of increases, according to Baker Hughes Inc. Read more
Indian steel companies are asking for safeguards and some US hedge funds are placing big bear bets on domestic oil prices.
Tata, SAIL Want Safeguard Duties
Indian steel companies reeling under mounting imports from China, South Korea and Japan have urged the government to impose safeguard duties, to protect the domestic industry from the onslaught of cheaper imports, the Economic Times reports. Safeguards are measures designed specifically to protect local industry that go beyond anti-dumping or countervailing duties as outlined by the World Trade Organization.
Safeguard duties are levied on imports as a temporary measure by the government to protect the local industry when they perceive a threat from a sudden surge in imports. State-owned Steel Authority of India (SAIL) and private steel makers such as Tata Steel have jointly filed a petition with the Director General of Safeguards (DGS) seeking the duties.
Hedge Funds Betting Against Oil
A relatively small group of hedge fund managers has placed a record bet on US oil prices declining further in the months ahead.
Hedge funds and other money managers had accumulated gross short futures and options positions totaling 163 million barrels in the main NYMEX light sweet crude contract by Aug. 11, according to data released by the Commodity Futures Trading Commission.
Welcome to crazy MetalMiner’s low, low price week of falling metal prices, oil prices and devalued currency.
EVERYTHING MUST GO! Or Not…
…maybe prices will be lower next week? Who can tell in this crazy market? Check out our Metal Price Outlook for MetalMiner’s expert opinion. Free sample in the link.
Our August MMI Report shows that nine of the 10 metals we track have hit an all-time low since we started tracking them in January 2012. It’s been a gradual fall for sub-indexes such as raw steels and renewables, whereas aluminum and copper suffered big drops this month that coincided with historic London Metal Exchange lows.
The strong dollar continues to drag down all commodities, shunting investment dollars elsewhere and depressing prices of investment metals such as gold, which hit a six-year low last quarter, according to the World Gold Council. Guess what else hit a six-year low? Oil, of course! Read more
Two massive explosions damaged a major port in China and with oil prices falling again, US shale producers are looking to make a deal.
Tianjin Explosions Damage Port Terminal
Two massive explosions at the Chinese port of Tianjin that ripped through parts of the terminal have disrupted iron ore import operations, as well as disrupting oil tanker arrivals and departures at this gateway to northeast China.
The blasts killed at least 44 people and injured more than 500, officials and state-run media said on Thursday.
Crude Oil Prices Bring Shale Extractors Back to the Table
A renewed slide in crude oil prices is having the effect US energy sector dealmakers and private equity managers have been looking for: oil companies are now returning calls from potential buyers. Throughout much of the crude market rout that started in mid-2014 oil firms could rely on generous capital markets investors betting on a quick recovery in prices, which made any asset sales look unattractive.