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Page added on September 4, 2015
Russia Energy Minister: ‘Fair’ Oil Price Seen at $50-$70 a Barrel
The global oil market is set to stabilize by the year end, with oil prices seen hovering at what seems to be “fair levels” between $50 and $70 per barrel, Russia’s Energy Minister Alexander Novak said Friday.
Speaking on state television channel Rossiya 24, Mr. Novak said oil prices won’t return to levels of $100 per barrel in the mid-term. He said though low oil prices have a negative impact on many countries, the world’s oil producers won’t cut production.
After years of buoyant commodity prices, Russia is now coping with a rapid slide in the price of oil, its key export. Volatility in the oil market is having an adverse impact on the Russian economy, as it causes sharp swings in the ruble rate, which, in turn, dents investment activity and consumer demand.
Presidential aide Andrey Belousov said earlier on Friday, he hopes oil prices will average $60 per barrel next year but the country’s budget will be based on the assumption oil prices will hover close to $50.
8 Comments on "Russia Energy Minister: ‘Fair’ Oil Price Seen at $50-$70 a Barrel"
BC on Fri, 4th Sep 2015 11:44 am
https://app.box.com/s/npygb8t139jm69yjcz5nhzm8ygibd5pd
https://app.box.com/s/0hroqkg7zym2us8em4k55a36affs4xmc
If the change rate pattern repeats, we could see the price of oil persisting in the $20s-$30s and US oil production at 5-6Mbd for the next 5-10 years.
Outcast_Searcher on Fri, 4th Sep 2015 12:10 pm
Funny how when the price is high, the sellers use what the market will bear as the price. However, if the price is weak, then they want the price to be at a level they consider “fair”, which is above the market price.
I’m all for markets, but then let the markets work. If the Russians think it’s “unfair” for oil to sell below $50, they should put a cork in their oil fields and wait for higher prices to return, and STFU in the mean time.
That’s the way markets work. Consumption will ramp up as people clamor for (on average) more inefficient cars burning “bargain” gasoline. Production will drop when producers decide to produce less at prices they find unpalatable to produce at. Eventually, prices will rise when the glut disappears or the production surplus becomes a meaningful production deficit.
It’s really not that complicated.
Outcast_Searcher on Fri, 4th Sep 2015 12:14 pm
BC, considering technical analysis has no meaningful value (after short term trading costs), so what?
In the real world, where things like growing Chindia demand and long term revenue needs by OPEC producers are actual data points, I wouldn’t bet a lot of money that $20ish oil will persist for two years, much less ten.
BC on Fri, 4th Sep 2015 1:12 pm
Outcast, you apparently aren’t familiar with the inherent rhythms (as opposed to fixed cycles) of the business cycle, credit, interest rates, prices, equities, investment, inventories, real GDP per capita, etc.; it’s fascinating stuff.
What you call “technical analysis” is rather different than what I am describing, although it reflects the inherent rhythms in many cases.
Also, technical analysis is extensively used by the energy traders employed by energy companies.
I have been a student and practitioner of macroeCONomics and “technical analysis” (TA) of financial and commodities markets for over 25 years, and I can personally attest to TA’s usefulness. Also, there is a self-fulfilling aspect to TA in that many who use it are motivated to do so because they know that many others use it because they know others use it; you get the point. We human apes are good at mimicry and emulation, consciously or otherwise. 🙂
TA is rather like when people claim that one cannot time the market successfully for profit. What they mean is that “they” can’t time the market because they don’t know how or that is not what they are paid to do (they are paid to accumulate assets and scalp fees). The most successful speculators/traders don’t talk publicly about their methods because they don’t want others to replicate them, which would render less effective their ability to trade profitably.
So, the most successful speculators are more than happy to hear people say that TA doesn’t work or that one cannot time the markets. 😀
India imports 100% of her oil consumption with global net oil exports continuing to fall. India will never become an industrialized (or post-industrialized) economy.
China’s secular potential real GDP per capita trend growth hereafter is less than 1% to close to 0% (same as the US, EZ, and Japan since 2007-08) based on productivity, debt, and contracting labor force growth. China has been overstating growth for years, and only recently have eCONomists begun to catch on to the obvious.
Were China to depreciate and account for inventories and import prices the way western national income accounting does, China might not have had any real value-added output since 2008-09.
Finally, the spike in the price of oil to the $100s in recent years was driven incrementally by the result of commodities becoming an “asset class” and increasingly levered speculators disproportionately affecting price, requiring energy companies to become futures traders more so than ever before. QE and ZIRP only exacerbated the effect of outsized leverage in the markets for oil and other commodities.
With global trade per capita having peaked and the drag effects of demographics, Peak Oil, resource depletion per capita, and colossal debt and debt service costs as a share of GDP like to persist indefinitely hereafter, there will be a significant differential loss of liquidity and profits, incomes, and gov’t receipts to sustain global demand for commodities hereafter.
If one understands Peak Oil, overshoot, resource depletion per capita, the debt cycle, short’s Etp/falling net energy from increasing energy cost of energy extraction, and demographics, then one understand “Limits to Growth” (LTG) and the implications hereafter.
And one need not understand “technical analysis” to understand Peak Oil and LTG. 😀
FWIW.
BobInget on Fri, 4th Sep 2015 1:47 pm
Saudi hirelings get snuffed.
DUBAI, United Arab Emirates — Twenty-seven soldiers from the United Arab Emirates and Bahrain were reported killed on Friday while taking part in the military campaign led by Saudi Arabia against Yemen’s Houthi insurgent group. It appeared to be the deadliest day for the Saudi-led forces since their offensive began six months ago.
Saudi Arabia and a coalition of other Sunni Muslim Persian Gulf states have been fighting since March to restore Yemen’s exiled government and repel the Houthis, who are aligned with Iran. The Houthis took control of Yemen’s capital, Sana, last September.
The state news agency of the United Arab Emirates said on Friday that 22 Emirati soldiers were killed in Yemen, while Bahrain’s official news agency said five soldiers were killed while protecting the southern borders of neighboring Saudi Arabia.
“A rocket and an explosion at a weapons cache has targeted the martyrs,” Anwar Gargash, the Emirati minister of state for foreign affairs, said on Twitter on Friday.
The Houthis said they fired a rocket at a weapons cache in a camp used by gulf coalition forces in the central Marib area, killing dozens of Emirati and Yemeni soldiers and destroying a number of Apache helicopters and armed vehicles.
Residents in Marib said they saw fire raging at the camp and plumes of smoke.
Before the latest casualties, at least five Emirati soldiers had been killed in Yemen since the offensive began.
Militias and army units loyal to President Abdu Rabbu Mansour Hadi, who is taking refuge in Saudi Arabia, have made advances toward the Houthi-controlled capital in the past two months. But the group remains ensconced in Yemen’s north, and military and civilian casualties mount daily.
The coalition has been supporting anti-Houthi fighters with airstrikes, military training and the delivery of tanks and heavy artillery.
Gulf states regard the Houthis as a proxy of their archrival, Shiite Iran, while the Houthis say they are fighting a revolution against corrupt officials beholden to the West.
posted note:
The Saudi army is staffed by Yemeni. There is no way KSA can send these guys into Yemen combat.
If Houthi manage to lob a single missile into
Saudi oil infrastructure it game over.
Only then will inevitable questions be asked;
“How could KSA put the entire world’s oil based economies at risk for no political or monetary gain?”
IOW’s History depends on one of the poorest nations on earth successfully retaliating against the richest. Houses made of glass are tempting targets for vandals and oppressed.
If you too busy today, we can come back.
Makati1 on Fri, 4th Sep 2015 6:46 pm
Russia can survive on $50 oil. They don’t have the bills to pay that the West or ME does. Plus, they still have ~$100B in USTs to cash in.
Like when you made $40k/yr, didn’t spend more than you made, and saved some for a ‘rainy’ day. You also started a garden and are mostly self-sufficient. (Does anyone in America do that anymore?) When you are laid off, and your income drops 50%, you are not so stressed out as you can likely ride it out until the situation changes for the better. If it doesn’t, you can still survive with some degree of comfort. That is Russia.
This is America: “… the government in the USA owes $46.1 trillion (not $18 trillion) and the US GDP is $14.77 trillion (not $17.9 trillion), as of June 2015, truth be told. 46.1 / 14.77 = 312%. Total government debt in the US is at 312% of GDP, which is well past the point of collapse for any country….”
http://davidstockmanscontracorner.com/wall-street-and-the-military-are-draining-americans-high-and-dry/
Pass the popcorn, it’s getting interesting.
Boat on Fri, 4th Sep 2015 7:07 pm
BC,
If the change rate pattern repeats, we could see the price of oil persisting in the $20s-$30s and US oil production at 5-6Mbd for the next 5-10 years.
How is that possible. You gave me assurance the big crash started 1 month ago. In 5 months were supposed to be at Mad Max status.
Are you thinking oops now?
Kenz300 on Sun, 6th Sep 2015 12:00 am
Maybe Russia and other oil producing countries should spend some of their oil wealth on expanding and diversifying their economies so that they are not solely dependent on oil exports.
Putting all your eggs in one basket makes it very bad when prices for your SOLE commodity fall.