X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Energy: Oil markets sabotaged - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 13, 2001

    Energy: Oil markets sabotaged

    The terrorist attacks on the U.S commercial capital, besides sending shock waves across open societies, rocked global financial and commodity markets. Two commodities to take centre-stage were gold and crude oil, which spiked up sharply, although for different reasons.

    As events unfolded on tragic Tuesday, crude oil (Brent blend) prices breached 9 month highs of $31 / barrel before closing the day 5.9% higher at $29.1 / barrel. The sharp jump seems to be a knee-jerk reaction, as markets tried to come to grips with the ramifications of the 'act of war' against one of the most powerful nations of the world. Similar nervousness and doomsday theories sent financial and other commodity markets reeling.

    Crude oil prices have retraced some of the gains registered the previous day. Brent oil closed the day at $28.8 / barrel while October futures were trading at $28 / barrel. The higher prices, nonetheless, do reflect the market belief that the perpetrators belong to some Middle Eastern terrorist outfit. Consequently, any retaliatory activity could sabotage crude oil supplies.

    The Organisation of Petroleum Exporting Countries (OPEC) and U.S defence personnel have helped placate some of the fears. The OPEC secretary general, Ali Rodriguez, has stated that the body will work towards maintaining market stability and ensuring sufficient supply of oil. This could also include increased production if deemed necessary. Although retribution could ultimately be the agenda, U.S is expected to adopt a responsible line of action for bringing the perpetrators to book.

    Oil markets have witnessed significant volatility over the past two years, as prices shot through the roof from $15 / barrel to $35 / barrel. In calendar year '01, oil prices have remained firm despite the deteriorating global economic environment. This is largely due to the OPEC attempting to maintain balance in oil markets. The cartel has cut output thrice this calendar year by an aggregate 3.5 m barrels / day (mbd). The latest cut of 1 mbd came into effect in September '01. On the other hand, the International Energy Agency (IEA) has reduced estimated oil demand several times this calendar year. The latest estimates place global oil demand for 2001 at 76.4 mbd. As per OPEC estimates, non-OPEC production is expected to be 49.2 mbd, which indicates OPEC production is expected to meet 35.6% of global demand.

    The current spike in oil prices seems to be largely due to the uncertainty concerning the outfit involved in the terrorist attack. In the event any of the OPEC members are indicted there could be pressure on prices, as supplies could get hit. But with early pointers indicating at terrorist outfits in Afghanistan, oil prices could retrace their steps. Having said that, global sector fundamentals look threatening. IEA has reported a drop in oil inventories of member countries for the month of July. OPEC has effected another 1 mbd production cut in September and the Northern Hemisphere is headed into the high consumption winter months. Consequently, prices could strengthen over the next three months.

    The Indian refining companies have nothing much to cheer for in FY02. Petroleum product consumption, like last fiscal, is showing signs of remaining flat. Oil prices continue to exhibit firmness. Although the Government has repeatedly stated its intentions to deregulate the petroleum sector, the first half of the fiscal is about to close with no progress in that direction. That said, the Government has permitted oil companies to enter into oil future contracts. Consequently, the companies could ride over the short-term volatility in oil prices seen in the past few days. A prolonged period of higher oil prices, arising from U.S retaliatory activity, could adversely affect their bottomline.

     

     

    Equitymaster requests your view! Post a comment on "Energy: Oil markets sabotaged ". Click here!

      
     

    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    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.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    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.

    Oil India Ltd: A weak quarter (Quarterly Results Update - Detailed)

    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.

    GAIL: A Robust Quarter (Quarterly Results Update - Detailed)

    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.

    ONGC: Lower Write-offs Support Performance (Quarterly Results Update - Detailed)

    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

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    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.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE OIL & GAS


    Aug 22, 2017 09:32 AM

    S&P BSE OIL & GAS 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS