Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Where Will Oil Prices Go After Algiers?

Commodities / Crude Oil Sep 28, 2016 - 06:34 AM GMT

By: OilPrice_Com

Commodities

Saudi Arabia and Iran may yet come to terms on some sort of production arrangement, but the outcome of the negotiations in Algeria this week may not do much to rescue oil prices. Following the media spectacle, the oil markets may have to shift their attention back to the supply and demand fundamentals, which are not reassuring.


Goldman Sachs revised down its estimate for oil prices for the end of this year, lowering its 4th quarter estimate from $50 to $43 per barrel. "Given upside surprises to (third-quarter) production and greater clarity on new project delivery into year-end. This leaves us expecting a global surplus of 400,000 (barrels per day) in (the fourth quarter) versus a 300,000 (barrels per day) draw previously,” the investment bank wrote, according to CNBC. The downside risk could be even worse because Goldman did not factor in large volumes of oil coming online from Libya and Nigeria, a development that is certainly not inevitable, but possible. “[W]e reiterate our view that oil prices need to reflect near-term fundamentals – which are weaker – with a lower emphasis on the more uncertain longer-term fundamentals," Goldman said.

Nigeria and Libya could bring hundreds of thousands of barrels of daily oil production back onto the market in the next few months, but there is yet one more downside risk to the market that few people are talking about. S&P Global warned this week about the very large “wildcard” that is China's oil demand, which could slow dramatically if China decides to throttle back the pace at which it is filling its strategic petroleum reserve. China does not release a lot of data regarding the specifics of its SPR, but oil imports have spiked over the past year – China has been taking advantage of cheap crude to build up its strategic stockpile. That elevated demand could prove to be temporary, however.

"Regardless of what happens on the supply side, there's this wildcard factor of the strategic petroleum reserves," Jodie Gunzberg, global head of commodities and real assets at S&P Dow Jones Indices, said at an S&P Global conference this week, according to CNBC. "Now that China has bought so much cheap oil to fill their SPR…if OPEC does freeze and tries to bring the price back up, China may push it back down because they might choose not to buy it at a higher price and just choose to use their SPR or start exporting it themselves - like they did with other commodities."

The potential reduction in Chinese imports could lead to lower oil prices for much longer, Gunzberg says. China is undergoing multiple phases of stockpiling for the SPR, with the second phase's 245 million barrels expected to be completed before the end of 2016. China has been the largest source of demand growth for much of the past decade – only to be recently surpassed by India – but we could be at a turning point with a large portion of the SPR filled. Imports are up 13.5 percent in the first eight months of this year compared to 2015, but could now stagnate.

Demand growth “has stalled and that represents a significant change in the environment for producers both in OPEC and outside it,” said Dave Ernsberger, global head of oil content at S&P Global Platts. "The successors to China who will pick up the slack in demand growth aren't quite of a size yet to have the impact that Chinese growth has had. So the demand picture is fairly frightening from a producers' point of view.”

A few months ago JP Morgan estimated that China’s efforts at filling its SPR were nearing an end, which could lead to a 15 percent drop off in oil imports as soon as September. It may take some time to see if this prediction plays out.

That would come as bad news to a global oil market that is already seeing suddenly weak demand. The IEA’s Executive Director said on Tuesday that there is little reason to be bullish. “Demand is weak, weaker than many of us thought…less than 1 million barrels per day,” Birol said in Algeria. “Supply is coming strongly, especially from Middle East countries. And the stocks are huge. As a result of that, we have lower oil prices with huge implications for the next few years.”

Link to original article: http://oilprice.com/Energy/Oil-Prices/Where-Will-Oil-Prices-Go-After-Algiers.html

By Nick Cunningham of Oilprice.com

© 2016 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules