Jul 5, 2001|
Energy: Price spike or reality?
Crude oil has been much in the news over the past year, as prices of the natural resource scaled 20-year highs of $30 / barrel. Oil prices have now been trading above $20 / barrel over the past two years.
In 4QFY01, as the northern hemisphere came out of the winter months, oil prices declined from their highs to approximately $26 / barrel during this period. Anticipating a decline in global oil demand, having seen the back of high consumption months, the Organisation of Petroleum Exporting Countries (OPEC) cut back on oil supplies by an aggregate 2.5 m barrels per day (mbd) in early 2001. Following the cut back, however, were the high consumption months of motor spirit with the onset of the summer season, which ate into oil stocks. Further, with Iraq playing truant in the oil markets by cutting off exports the seeds for a fresh rally were sowed. Crude oil prices climbed their way back to $28 - $29 / barrel in the first two months of 1QFY02.
Oil importing countries could be breathing easy, as oil prices have declined over the month of June by an estimated 14%, back to $25 / barrel. However, the drop in prices could be more out of the deteriorating health of the global economy, which in itself is not very encouraging. The U.S economy continues to sputter along as economic indicators reflect conflicting trends. The Japanese economy has once again slumped into negative growth and key European countries, part of the European Union (EU), have registered slower economic growth. However, much of the growth in incremental oil demand is from fast-growing Asian economies, especially China, which is now the third biggest burner of crude. Consequently, hints for crude price movements and consequently OPEC action could depend on economic growth in the Asian region and whether the 'slowdown' malaise afflicts these economies.
The OPEC, which met on July 3 to review their production policy, this time around, probably had a cakewalk in light of the above economic developments. The cartel has decided to leave the current production levels untouched. The uncertain economic environment and a build up in global oil stocks has kept the cartel wary of any supply hike, in an effort to prevent a slump in crude prices. The cartel has stated $25 / barrel, as its preferred price of crude. The OPEC meets next in late September to review the global energy situation. Oil markets, however, are apprehensive of the large gap between the two meetings, as Iraq continues to threaten to stay out of the oil markets. The rogue producer contributes an estimated 3 mbd or 4% to world production. Further, the Northern Hemisphere once again is moving into the high consumption winter months, which could draw down oil stocks leading to a run up in oil prices. One hopes it does not result into a price spike similar to last year. The OPEC may need to stay on guard to turn on the taps.
More Views on News
Mar 27, 2017
GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.
Mar 17, 2017
ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.
Jan 24, 2017
Oil India Limited announced results for the quarter ended September 2016. The company has reported an 6.5% and 7.8% Year on Year (YoY) decline in sales and net profit respectively during the quarter.
Dec 3, 2016
GAIL (India) Ltd has announced results for the quarter ended September 2016. The company has reported 16 % year on year (YoY) decline in sales, while bottom-line grew 180% YoY.
Nov 3, 2016
ONGC has announced results for the quarter ended September 2016. The company has reported 10.3 % year on year (YoY) decline in sales, while bottom-line grew 6.3% YoY.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407