What’s Affecting Oil Prices?
The last year has been an exciting one for oil, to say the least. Starting the year in the high $90s a barrel, today it sits at 66$. There have been many factors that have tied into this story – here is some of the highlights.
US Shale Production is booming, through a combination of horizontal drilling and hydraulic fracturing. Production increased to 9.08 million barrels a day through Nov. 28. Weak Chinese trade data did not help matters.
“Notwithstanding day-to-day movements, the fundamental picture hasn’t really changed, and that is one of supply outstripping demand growth for most of the year,” said Phin Ziebell (senior analyst at National Australia Bank).
As Russian sanctions rev up, Washington has banned imports of high technology oil equipment to Russia and imposed sanctions on Russian oil majors. This has stopped Western firms from supporting exploration and production of shale oil reserves in the Arctic. Russia is the second largest oil exporter, with production hovering around 10.5 million barrels per day. Russia is depending on the development of new reserves to maintain it’s current output.
To make matters worst, a recent report from Morgan Stanley suggests that Brent crude, an international standard, could hit as low as $43 a barrel.
Saudi Arabia, Top producer of oil in the Middle East, blocked OPEC output cut. This shift represents a major shift in the groups policies, and essentially means a battle for market share between OPEC and non-OPEC countries.
OPEC forecast that demand for its oil would drop to 28.9 million barrels a day next year, compared with 29.4 million barrels a day in 2014, the lowest amount in 12 years! Some suggest that recent shifts in OPEC have effectively killed the group.
“The U.S. is producing in a very, very bad manner. Shale oil, I mean it is a disaster from the point of view of climate change and the environment,” Foreign Minister Ramirez, who represents Venezuela at OPEC, said.
Yet as oil prices continue to show weakness, several countries such as India, Indonesia and Turkey stand to gain through leverage of their deficits.
- Published in Blog, Oil and Gas
The Venture Hitting New Lows – Is it Time for a Turnaround Yet?
The S&P/TSX Venture Composite Index dropped -12.81 points today, hitting a 10 year low.
Contrarian investors must be salivating today as oil scraps at the bottom with an 5 year low. Morgan Stanely said that oversupply would most likely peak next year with OPEC deciding not to cut output.
China’s exports rose by 4.7{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}, down from 10.6{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} in October. While the US economy is doing well, China’s economic growth slowed to 7.3{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} in the last quarter, the lowest in 5 years. We are beginning to see history repeat itself on the venture – after 4 years of dropping, it would not be unusual to expect a turnaround in the shortterm. It might go sideways a bit like back in 1991-92 or 2000-2003, however a pattern emerges – take a look back from 1990 to now on the index.
1991-1992> sideways
93> up
94> down
95-96> up
96-99> down
2000> up
00-03> sideways
03-06> up
06-08> down
08-10> up
10-14> down
See the pattern? There is almost a clear back and forth that happens, and following the history, it looks like we are soon to see an uptrend.
- Published in Blog
China takes Top Spot in Latest IMF Report
It’s official – the US economy is now #2 in the world. If it isn’t obvious already, China took the lead this year.
The International Monetary Fund released it’s latest economic report.
The IMF oversees the international monetary system and monitors the financial and economic policies of its members. It keeps track of economic developments on a national, regional, and global basis, and reports annually.
In terms of real purchasing power, China now represents 16.5{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} of the global economy, whereas the US represents 16.3{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}. To be fair the is a difference of 0.2{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}, however this shows the growing economies in Asia. India comes in third at 7.2{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}.
The last time that the US slid from the first spot was when Ulysses S. Grant was president! In the short term this won’t change much, but the long term implications. Economic power has always been a strong indication of political and military power. Britain, Spain, France, Rome… they all were once on top of the world – but when their economies declined, so did their power and influence.
Will history repeat itself? Only time will tell.
- Published in Blog
The Market at a Glance
S&P/TSX Composite Index rose to 14,754.06, or up 0.92{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} today. The big shakers were TSX gold, energy and material sectors.
S&P/TSX SmallCap Index returns today, breaking a seven day streak of decline.
Gold prices rose today, as crude oil saw a rally. “The move up in crude prices is giving gold the boost,” said Phil Streible, a senior commodity broker at R.J. O’Brien & Associates. A contrarian analysis of gold-market sentiment suggests however this may be a weak foundation.
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Press Release: OrganiGram (OGI.V) builds three grow rooms in Moncton
2014-12-01 08:17 ET – News Release –
Mr. Denis Arsenault reports
ORGANIGRAM ANNOUNCES THREE ADDITIONAL GROW ROOMS PASS INSPECTION – INCREASE PRODUCTION
OrganiGram Holdings Inc. has completed, as part of the expansion at its medical marijuana production facility in Moncton, the construction of three additional 72-flowering-light grow rooms. In accordance with the Marihuana for Medical Purposes Regulations, all necessary Health Canada inspections and approvals have been obtained.
The completion of the three new grow rooms will add 1,700 plants to the facility, enabling the company to increase production levels to one million grams (1,000 kilograms) and represents approximately $8-million in revenue per year.
“We are extremely happy to be making this announcement today. The OrganiGram team has been working tirelessly to bring these new grow rooms on-line and fulfill our commitment to MMPR patients,” said Denis Arsenault, chairman and chief executive officer.
Expansion update
Additionally, the company began construction of a further eight grow rooms on Oct. 1, 2014. The construction of these 90-flowering-light rooms is expected to be complete and production to begin in February, 2015. Once completed, this phase of expansion will add 11 grow rooms totalling 936 flowering lights to the current facilities capacity. This expansion will increase the facility’s production to three million grams (3,000 kilograms) and represents approximately $24-million in revenue per year.
We seek Safe Harbor.
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- Published in Blog
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