Tag Archives: Extractive industries

Economist Liam Halligan says crude oil has gone into “bull market” territory!

Received from Douglas (Mick) Field
28 Aug 2016 at 1:00 p.m.

Message: Good summary here on the oil situation. Especially clear opening comment on the dependency on fossil fuels in the foreseeable future. But full article (warning: pay wall) also good on the situation re the economic battle for supply.

oil drums [sputniknews.com][sputniknews.com]

### telegraph.co.uk 27 Aug 2016 • 2:19PM
Why I’m sticking with my forecast of oil rising to $60 a barrel
By Liam Halligan
In the absence of a major financial meltdown, oil will end 2016 north of $60 a barrel,” this column stated at the turn of the year. It was a forecasting flourish possibly fuelled by one Christmas brandy too many. With just four months of 2016 to go, though, I’m sticking to my Yuletide view.
Attempting to predict the oil price is crazy. Yet no decent economist can afford not to. The world economy still revolves around oil –used in everything from transport and electricity generation to the production of plastics, synthetics and so much else. And for all the breathless talk about renewables, and the grim inevitability of growing nuclear dependence, we remain addicted to oil.
As recently as 2005, world crude consumption was just 84.7 million barrels a day. That’s since gone up to 95.1 million daily, a 12pc increase in just 10 years. And that rise came during a decade when global GDP growth was rather sluggish. Had the world economy not endured the 2008 financial crisis, and subsequent stop-start recovery, oil consumption would have grown even more. But still, for all the expansion of wind and solar, and endless hype about a “post-petroleum world”, oil consumption continues to rise relentlessly and that won’t change any time soon.
The oil price has surged this month, up from around $41 a barrel in early August to almost $52 last week, before falling back slightly. This 20pc-plus increase puts crude technically into “bull market” territory. This is striking, not least because from mid-June to the end of July, oil was in “a bear market”, having dropped over 20pc. Despite this summer volatility, though, the direction of travel is clear. Oil has been climbing steadily, if not always in a straight line, from its February low of $28 a barrel. This August rise in oil prices stems from market fundamentals on the one hand, and geopolitical speculation on the other.

Earlier this month, the highly respected International Energy Agency (IEA) published a report suggesting global crude supply will fall short of demand during the third quarter by nearly a million barrels a day. This projected deficit comes despite the fact that the Opec exporters’ cartel continues to pump like billy-o. Having traditionally restricted supply to keep prices high, Opec has over the last two years been doing the reverse, of course – flooding global markets with oil, lowering prices to squeeze high-cost US shale producers out of existence. Amidst record production by Saudi Arabia, Kuwait and UAE, total Opec output hit an eight-year high in July, up no less than 840,000 barrels a day on the same month in 2015. This Opec supply surge was more than offset, though, by the dramatic ongoing slump in output from producers outside Opec. Declines in the US, China, Canada and Mexico combined to push non-Opec production down by more than 1.1 million barrels a day compared to July 2015. […] If there is a deal in Algiers, and it binds with Opec holding together, and the Russians staying on board then my end-of year oil prediction, in the absence of a Lehman-style global meltdown, will almost certainly come true. Such geopolitical stargazing has helped push up oil prices this month. During the first week of August, short crude oil positions on the NYMEX, one of the world’s leading commodity exchanges, were at a 10-year high. A large number of traders, in other words, thought oil was set to fall back towards $30. That view has now been thoroughly trounced, with the resulting “short squeeze” helping to drive this latest 20pc oil price rise. Aside from speculation and diplomatic wrangling, though, there’s growing evidence of an emerging supply-demand deficit. Buried in the IEA’’s latest report is the significant observation that it expects a further 900,000-barrel reduction in non-Opec output by the end of this year. This Saudi-driven price war has seen global investment in oil exploration and field development cut by $300bn, some 41pc, since 2014. The “active rig count”–, the number of wells being pumped worldwide, is down 37pc. Before these trends are slowed, let alone reversed, oil will need to spend at least six months, and probably a year, firmly above $60 a barrel, if investors are to be convinced profits can be made, so persuading them to put serious money back into future crude production. Unless global markets crash, I say that year of $60-plus oil will be 2017.

Full article at http://www.telegraph.co.uk/business/2016/08/27/why-im-sticking-with-my-forecast-of-oil-rising-to-60-a-barrel/

● Liam Halligan (@LiamHalligan) – Economist/Writer/Broadcaster, Telegraph Columnist, BNE Editor-at-Large, Proud member of http://www.thehooligans.co.uk Locations: London, Saffron Walden, Moscow.

Posted by Elizabeth Kerr

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Warning! NZ disposable income down

Link received Mon, 6 Apr 2015 at 1:00 p.m.

█ Message: Wouldn’t read this in local media !!!

### marketoracle.co.uk Apr 05, 2015 – 01:28 PM GMT
Economics / Asian Economies
New Zealand Economy – There’s Trouble Brewing In Middle Earth
By Raul I Meijer
For the second time in three years, I’m fortunate enough to spend some time in New Zealand (or Aotearoa). In 2012, it was all mostly a pretty crazy touring schedule, but this time is a bit quieter. Still get to meet tons of people though, in between the relentless Automatic Earth publishing schedule. And of course people want to ask, once they know what I do, how I think their country is doing.
My answer is I think New Zealand is much better off than most other countries, but not because they’re presently richer (disappointing for many). They’re better off because of the potential here. Which isn’t being used much at all right now. In fact, New Zealand does about everything wrong on a political and macro-economic scale. […] I’ve been going through some numbers today, and lots of articles, and I think I have an idea what’s going on. Thank you to my new best friend Grant here in Northland (is it Kerikeri or Kaikohe?) for providing much of the reading material and the initial spark.
To begin with, official government data. We love those, don’t we, wherever we turn our inquisitive heads. Because no government would ever not be fully open and truthful.

This is from Stuff.co.nz, March 19 2015:
New Zealand GDP grew 3.3% last year

New Zealand’s economy grew 3.3% last year, the fastest since 2007 before the global financial crisis, Statistics NZ said. Most forecasts expect the economy to keep growing this year and next, although slightly more slowly than in the past year. For the three months ended December 31, GDP grew 0.8%, in line with Reserve Bank and other forecasts. That was led by shop sales and accommodation. That sounds great compared to most other nations. But then we find out where the alleged growth has come from (I say alleged because other data cast a serious doubt on the ‘official’ numbers) […] while the economy ostensibly grew by 3.3%, disposable income was down. That’s what you call a warning sign.

….Meijer’s commentary continues in reference to recent New Zealand news stories:

Stuff: Dairy Slump Hits New Zealand Exports To China
Radio NZ: Export Drop Rattles Companies
NZ Herald: World Dairy Prices Slide 10.8% On Supply Concerns
Radio NZ: World ‘Awash With Milk’
NZ Herald: Stress Too Much For Farmers
NZ Herald: Hot Properties: Auckland Valuations Out Of Date Within Months

He ends by citing NZ Herald: New Zealand’s Economic Winds Of Change:

Chaos theory calls it the butterfly effect. It’s the idea that a butterfly flapping its wings in the Amazon could cause a tornado in Texas. The New Zealand economy has plenty of its own butterflies changing the weather for GDP growth, jobs, interest rates, inflation and house prices. [..] One of the flappiest at the moment is the global iron ore price. It’s barely noticed here but it’s an indicator of growing trouble inside our largest trading partner, China, and it is knocking our second-largest partner, Australia, for six. It fell to a 10-year low of almost US$50 a tonne this week and is down from a peak of more than US$170 a tonne in early 2011.
[…] President Xi has reinforced the contrasting effects of the changes in China on Australia and New Zealand by encouraging consumers and investors to spend more of China’s big trade surpluses overseas. Tourism from China was up 40% in the first two months of this year from a year ago, and there remains plenty of demand from investors in China for New Zealand assets.
The dark side of this tornado in New Zealand after the flapping of the butterfly’s wings in China was felt in Nelson this week. The region’s biggest logging trucking firm, Waimea Contract Carriers, was put into voluntary administration owing $14m, partly because of a slump in log exports to China in the past six months.
That’s because New Zealand’s logs are now mostly shipped to China to be timber boxing for the concrete being poured in its new “ghost” cities. The Chinese iron ore butterfly has flapped and now we’re seeing Gold Coast winter breaks become cheaper and logging contracts rarer.

Read full article

Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

Posted by Elizabeth Kerr

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