Archive for category Oil

Economic research body says ringgit to decline further if confidence crisis remains

The Malaysian Insider
4 August 2015

The ringgit can be expected to deteriorate further if Malaysia does not solve its confidence crisis stemming from political instability in the country.

Malaysian Institute of Economic Research (MIER) executive director Dr Zakariah Abdul Rashid said lack of public confidence is the key factor resulting in the weakening ringgit, should crude oil prices remain stable.

“The political situation is complex – from the lack of confidence on how 1MDB is handled to the Cabinet reshuffle – these have put pressure on investors’ confidence and the ringgit,” he said during MIER’s 13th national economic briefing. Read the rest of this entry »

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Futures markets have much to say about oil’s direction

Gregory Meyer
Financial Times
July 17, 2015

For a brief, brave moment this year there was a sense the worst was over for the oil sector. This week, that feeling evaporated.

Iran’s agreement to curtail its nuclear programme, potentially restoring its place as a leading crude exporter, was just the latest hunk of bearish news thrown at the oil market. Saudi Arabia and Iraq are pumping record volumes. US drillers have again added rigs to probe for oil in shale rocks. China’s furious fuel demand growth is easing. For investors pondering exposure to oil through futures, shares or bonds, standing back seems the safest course.

The $50 a barrel plunge in spot oil prices from a year ago has been breathtaking. But to grasp the industry’s deepening woes, look at what futures markets are saying.

The price of West Texas Intermediate crude delivered in December 2016 has fallen below $60 a barrel, the lowest since any exchange listed that futures contract. Between the financial crisis and last year, the contract levitated between $80 and $100. Read the rest of this entry »

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As scandal rocks Malaysian government, B.C. pushes LNG deal with state-owned gas giant

By Warren Bell in Opinion | July 15th 2015
National Observer

Christy Clark is recklessly planning on linking the next generation in BC to the Malaysian government, which in the last few days has headed into the worst financial and political scandal in its recent history – the latest in a long history of questionable government behaviour.

The B.C. legislature is now sitting, at Premier Clark’s behest, in a rare summer session whose sole purpose is passing legislation to facilitate a sweetheart financial deal with Petronas, the giant Malaysian oil and gas company. Petronas wants to build a massive plant to liquefy fracked gas on tiny Lelu Island in the center of prime salmon habitat at the mouth of the Skeena River.

Petronas is wholly owned by the Malaysian government (which has been controlled by a single ruling coalition, Barisan Nasional, for the last 50 years). Petronas supplies the Malaysian government with as much as 45 per cent of its budget, according to Reuters. Read the rest of this entry »

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For Asia’s Oil Consumers, It’s a Buyer’s Market

by Eric Yep
Wall Street Journal
July 16, 2015

With ample supply, oil refineries in Asia have increasing influence over prices

SINGAPORE—With oil prices at half what they were a year ago and crude flooding into Asia from all directions, buyers from the west coast of India to southern Japan are, for the first time in decades, spoiled for choice.

The changing balance of power is already affecting the regional market share of key producers. With a full return of Iranian supplies now looming, following a nuclear accord this past week, competition will likely heat up further.

Oil consumers, mainly the refineries that turn crude into products such as gasoline and jet fuel, face a dilemma in this “new normal” era. Do they stick with multiyear contracts with long-established suppliers, primarily from the Middle East, or buy more oil on spot markets, getting cheaper prices but risking security of supply?

Asian refiners, located far from major oil-producing regions, previously have tied up as much as 95% of their crude intake through long-term contracts with reliable producers such as Saudi Arabia’s state-owned oil giant Saudi Aramco. Read the rest of this entry »

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Why Saudis Are Holding Strong on Oil

By Meghan L. O’Sullivan
Bloomberg
JAN 26, 2015

A consensus has emerged since the death of King Abdullah of Saudi Arabia that the kingdom will not change course on oil policy. This consensus is probably right, at least for the short term. It is, however, correct for reasons other than the ones that most observers have invoked.

Moreover, while it looks unlikely that the kingdom will alter oil production in the coming months, barring a major change of heart of non-OPEC producers, interesting changes to Saudia Arabia’s cabinet roster and other energy policies and could be closer than most realize.

The basis of the conventional wisdom is rooted in personalities. New King Salman bin Abdulaziz has pledged continuity, stating he will adhere to the “correct policies” of his predecessors. He also said that oil minister Ali Al-Naimi will stay in his post. Read the rest of this entry »

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Revised 2015 Budget should declare war on corruption, incompetence and extravagance to provide example and leadership of government commitment to austerity, accountability and integrity

The revised 2015 Budget should declare war on corruption, incompetence and extravagance to provide example and leadership of government commitment to austerity, accountability and integrity.

Such a campaign would save the Malaysian government and taxpayers scores of billions of ringgit, which would help the country tide through the looming economic crisis as a result of the sharp fall in prices of oil and commodities and the weakening of the Malaysian ringgit.

Despite the greatest investment in anti-corruption campaign, with the Malaysian Anti-Corruption Commission developing into a huge bureaucracy but with very little to show in terms of results, the Najib premiership is still far behind the Abdullah and Mahathir premierships in both ranking and score of the annual Transparency International (TI) Corruption Perception Index (CPI).

Malaysia lags seriously behind other countries in the battle against corruption, particularly Indonesia and China, and Malaysia is at risk of being overtaken by these two countries which had occupied the bottom two of rungs of the TI CPI 1995 two decades ago in a matter of a decade.
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It is not too late for Najib to convene a special meeting of Parliament to present the revised 2015 Budget

The question the Prime Minister, Datuk Seri Najib Razak must answer is why he is not convening a special meeting of Parliament to present the restructuring of the 2015 Budget.

As it is Parliament which approved the RM273.9 billion 2015 Budget, it is only right and proper, fully in accord with the principle of parliamentary democracy, that Najib should convene a special Parliament to present the restructured 2015 Budget because of the weakening of ringgit and the plunging oil prices.

It is not too late for Najib to do what is right, and convene a special meeting of Parliament to present the revised 2013 Budget as a special Parliament can be convened even within 48 hours. Otherwise, Najib would be showing utter contempt to Parliament and the principle of parliamentary democracy. Read the rest of this entry »

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India fails to exploit oil price slump

By M K Bhadrakumar
Asia Times
January 8, 2015

As an energy-deficient country whose import bill for oil in the last financial year stood at $150 billion, the sharp fall in oil prices is a moment to celebrate. There are two ways to celebrate. One could be to open the champagne bottle and enjoy the good things in life. Then, there is a second way – the Chinese way – which is to seize the happy hour to plan for the future.

The Indian government is sipping champagne. The budget deficit significantly narrows and that is good news for the upcoming annual budget. A Morgan Stanley report in September calculated that a mere 10 percent drop in oil price could bring down the current account deficit by 0.6 percent of India’s GDP – no small matter.

However, how is the government taking advantage of the unexpected windfall? Plainly put, the benefit has not been passed on to the consumer. Whereas in the US, the average gasoline prices have reached their lowest level in the past four-year period, there is no such luck for the Indian consumer. Worse still, the government’s price fixation method is so opaque that a suspicion forms that private oil companies are being enabled to make huge profits. Read the rest of this entry »

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Fears grow over fallout from Petrobras corruption scandal

Samantha Pearson in São Paulo
Financial Times
January 7, 2015

Fears are growing over the systemic impact of the corruption scandal at Petrobras, Brazil’s state oil producer, as one of the construction firms linked to the allegations edges closer to default and the country’s credit rating comes under pressure.

OAS, which is building the world’s third-largest dam and revamping São Paulo’s international airport, has missed two debt payments over the past week after the scandal restricted its access to funding, forcing it to preserve cash to pay for operations.

Analysts said that similar difficulties across Brazil’s construction and oil industries could have knock-on effects on the world’s second-largest emerging market economy, especially if Petrobras itself cannot regain access to capital markets.

“The risk is that the government would have to provide financial support to Petrobras in the event of an acceleration of debt,” Mauro Leos, Moody’s sovereign analyst for Brazil, told the Financial Times. Such a scenario “could lead to a credit event”, affecting Brazil’s sovereign credit rating, he added.

The warning comes as President Dilma Rousseff is battling to protect Brazil’s coveted investment grade rating with a series of market-friendly measures — efforts that could be obscured by the prospect of bailing out Petrobras, Mr Leos said.

With more than $139bn in total debt, Petrobras ranks as the world’s most indebted oil producer, but it retains an investment grade credit rating. Read the rest of this entry »

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Fuel prices drop 30 sen, 35 sen

The Malaysian Insider
31 December 2014

The retail prices for fuel in the country will be reduced between 30 sen and 35 sen from tomorrow following the downtrend in global crude oil prices, said Deputy Finance Minister Datuk Ahmad Maslan today.

He tweeted that RON95 petrol will be priced at RM1.91 a litre, a reduction of 35 sen, RON97 at RM2.11 a litre (35 sen drop) and diesel at RM1.93 a litre (30 sen drop). Read the rest of this entry »

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The Conventional Wisdom On Oil Is Always Wrong

By Ben Casselman
Five Thirty-Eight
Dec 18, 2014

In 2008, I moved to Dallas to cover the oil industry for The Wall Street Journal. Like any reporter on a new beat, I spent months talking to as many experts as I could. They didn’t agree on much. Would oil prices — then over $100 a barrel for the first time — keep rising? Would post-Saddam Iraq ever return to the ranks of the world’s great oil producers? Would China overtake the U.S. as the world’s top consumer? A dozen experts gave me a dozen different answers.

But there was one thing pretty much everyone agreed on: U.S. oil production was in permanent, terminal decline. U.S. oil fields pumped 5 million barrels of crude a day in 2008, half as much as in 1970 and the lowest rate since the 1940s. Experts disagreed about how far and how fast production would decline, but pretty much no mainstream forecaster expected a change in direction.

That consensus turns out to have been totally, hilariously wrong. U.S. oil production has increased by more than 50 percent since 2008 and is now near a three-decade high. The U.S. is on track to surpass Saudi Arabia as the world’s top producer of crude oil; add in ethanol and other liquid fuels, and the U.S.is already on top. Read the rest of this entry »

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Oil slide threatens Malaysia’s fiscal progress

By Andy Mukherjee
Reuters
December 3, 2014

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Just when Malaysia was beginning to plug the holes in its public finances, the prospect of a sharp reduction in oil revenue is threatening to undermine fiscal progress and weaken the currency.

Petronas is playing spoiler. The state energy company recently warned that its contribution to the government’s exchequer – in the form of dividends, taxes and royalties – could slide 37 percent next year from an estimated 68 billion ringgit ($20 billion) in 2014.

Such a shortfall in the main source of government’s oil-and-gas revenue would easily exceed 2 percent of GDP. That would wipe out the 1.7 percent of GDP in annual savings the government hopes to achieve by scrapping domestic fuel subsidies from Dec. 1.

The fiscal hit could be even larger if oil prices next year remain below the $75 a barrel on which Petronas based its forecast. That would threaten the government’s target of reducing the budget deficit to 3 percent of GDP, from an estimated 3.5 percent this year.

The finance ministry is refusing to give up on the 2015 target just yet. It may hope that Petronas can be persuaded to make a less drastic cut in its dividend payment. Read the rest of this entry »

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Six reasons oil’s price plunge has shaken the markets

Malcolm Maiden
The Age
December 2, 2014

Oil is a key economic input and its price has fallen sharply. All things being equal, that’s a plus for global growth, but the markets are in turmoil. Here are six key reasons why oil’s price plunge has the markets gyrating.

THIS IS AN OIL PRICE SHOCK

In 2011, 2012 and last year oil averaged $US95.13 a barrel, $US94.15 a barrel and $US98.05 a barrel respectively, a spread of just $US3.90. It averaged $US100 a barrel in the first six months of this year and got to $107.26 a barrel on June 20. Monetary policy was still loose and the consensus was that the oil price would not move sharply in either direction.

Instead, it tipped into an accelerating price slide, to about $US75 a barrel ahead of last week’s meeting of the Organisation of the Petroleum Exporting Countries (OPEC). It hit $US66.15 a barrel on Monday, after the world’s biggest producer, Saudi Arabia, failed to back OPEC production cuts, and was still below $US70 a barrel on Tuesday despite a 3 per cent-plus bounce. Investors didn’t see the price slide coming, and haven’t worked out what it means. Read the rest of this entry »

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Can Oil Prices Drop to $40 a Barrel? Some Say It’s Possible

NBC News
1.12.2014

Remember way back in June, when oil was $115 a barrel? Now it’s trading at around $67.90 a barrel for Brent crude and some analysts are predicting, given the right conditions, it could tumble to as low as $40 a barrel.

Weak demand, a strong U.S. dollar and booming U.S. oil production are the three main reasons behind the fall, according to the International Energy Agency (IEA), which warned of a “new chapter” for oil markets, which could even affect the social stability of some countries. Russia is already feeling some pain: the ruble tumbled about 4 percent on Monday, on course for its biggest daily drop since the 1998 financial crisis.

Saudi Arabia sparked talk of an oil price war as it has cut its official selling prices for some customers for four consecutive months through November. Part of oil’s drop has to do with supply conditions. Increased U.S. oil production has added to a glut in the world oil market. The U.S. now produces about 8.9 million barrels a day, while Saudi Arabia, the world’s largest producer, pumps about 9.6 million barrels a day. Read the rest of this entry »

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What you need to know about falling oil prices

by Tom Huddleston, Jr.
Fortune
December 2, 2014

Prices have been cut by one-third since mid-summer due to oversupply.

It’s looking like Monday’s spike in oil prices was little more than a blip.

The price of oil fell again on Tuesday after experiencing a brief rebound to start the post-holiday week. Crude oil prices gained as much as roughly 4% yesterday, rebounding from five-year lows, before falling again today. Prices for Brent crude oil are recently down about 2.3%, to $70.83, while West Texas Intermediate (WTI) is down 1.8%, to $67.26.

Oil prices are down sharply this year, losing over 30% of their value since hitting a summer peak. Read the rest of this entry »

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As oil tumbles, drillers seek to idle more rigs, Petronas cuts capex

Reuters
2 December 2014

SINGAPORE: Offshore drillers globally are increasingly considering “warm stacking” their rigs to take them temporarily off the market, as they gear up for a slowdown in the hunt for oil with crude prices sliding to five-year lows.

Rigs in warm stack maintain basic operations and most of the crew, and can be put to use once the owner gets a contract. Drillers put rigs in warm stacks to lower operational costs and also to keep them sufficiently ready for quick deployment, meaning they are hopeful a downturn won’t be a prolonged one.

Rigs can also be “cold stacked”, or shut down, which typically happens when an owner does not expect to find work for an extended period of time.

Oil prices have fallen about 40 percent in the past six months, with international benchmark Brent dropping below $68 to a five-year trough and nearing the marginal production cost of the most expensive offshore projects.

“Six months ago, no one talked about stacking rigs,” said Thomas Tan, chief executive officer at Kim Heng Offshore & Marine Holdings Ltd, a Singapore-based oilfield service firm, “In the last few weeks, things have become scarier and the talk of stacking started.” Read the rest of this entry »

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After oil price slump, worries as Petronas slashes dividends, capital expenditure

Malay Mail Online
DECEMBER 2, 2014

KUALA LUMPUR, Dec 2 — The recent global oil price slump has affected both Putrajaya and domestic oil and gas (O&G) industry which depend heavily on Petroliam Nasional Bhd (Petronas), after the local giant decided to slash its dividends and capital expenditure.

In the aftermath of the slump, media reports revealed declines in the ringgit, local stock market, and net worth of industry players including billionaires Tan Sri Robert Kuok and T. Ananda Krishnan, and even Tan Sri Mokhzani Mahathir.

With the US crude oil prices at a five-year low, Petronas Chief Executive Tan Sri Shamsul Azhar Abbas told reporters on Friday after the that payments to the government in the form of dividends, tax and royalties could be 37 per cent lower from the previous year to about RM43 billion in 2015 if oil stays around US$75 (RM275) a barrel.

As a result, Malaysia’s ringgit headed for its biggest two-day decline since the 1997-98 Asian financial crisis yesterday. Read the rest of this entry »

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The real difference between RON95 and RON97 — besides the price

Malay Mail Online
December 2, 2014

PETALING JAYA, Dec 2 — With RON97 now only 20 sen more expensive than RON95, more Malaysians are now able to purchase it.

In 2012, both fuels used to have a price difference of RM1 per litre.

But what exactly is the difference between RON 95 and RON97 besides the price?

RON stands for Research Octane Number, a form of fuel quality and performance rating.

The rating system was developed by Russell Marker at American firm Ethyl Corporation in 1926, following Marker’s discovery that branching in hydrocarbons reduced “knocking”, or pre-ignition. Read the rest of this entry »

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The Geopolitical Impact of Cheap Oil

Martin Feldstein
Project Syndicate
NOV 26, 2014

CAMBRIDGE – The price of oil has fallen more than 25% in the past five months, to less than $80 a barrel. If the price remains at this level, it will have important implications – some good, some bad – for many countries around the world. If it falls further, as seems likely, the geopolitical consequences on some oil-producing countries could be dramatic.

The price of oil at any time depends on market participants’ expectations about future supply and demand. The role of expectations makes the oil market very different from most others. In the market for fresh vegetables, for example, prices must balance the supply and demand for the current harvest. By contrast, oil producers and others in the industry can keep supply off the market if they think that its price will rise later, or they can put extra supply on the market if they think the price will fall.

Oil companies around the world keep supply off the market by reducing the amount of oil that they take out of the ground. Oil producers can also restrict supply by holding oil inventory in tankers at sea or in other storage facilities. Conversely, producers can put more oil on the market by increasing production or by running down their inventories. Read the rest of this entry »

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After A Bloodbath In Oil, What Next?

Christopher Helman
Forbes
12/01/2014

Welcome back from Thanksgiving week. Apparently OPEC did something and oil prices plunged. If you were as out of touch with it all as I was last week, here’s a rundown.

As we tucked into Turkey and football last Thursday, OPEC announced no output cut, no target price and no output ceiling. Sounds like a lot of no news, but the OPEC meeting has been described in historic terms. Bloomberg’s headline declared that war had broken out: “Oil enters new era as OPEC faces off against shale; who blinks as price slides toward $70?” The accompanying article made the case that OPEC is indubitably locked in a price war against U.S. shale producers.

Oil prices plunged on the OPEC news. West Texas Intermediate crude is now at $65 a barrel. It was $107 back in June.

That Bloomberg article had my favorite quote of the week, from Leonid Fedun, a board member at Russia’s Lukoil. Fedun said that by maintaining output levels, OPEC would bring about an outright crash among U.S. shale drillers. “In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” said Fedun. “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”

No surprise, Friday was a bloodbath for shares of America’s oil and gas independents. Read the rest of this entry »

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