A New Era Of Geopolitical Risk In Global Oil Markets

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Amid never ending talk and speculation over how many more barrels of Iranian oil will be removed from global markets once sanctions slated to hit Iran’s oil production on November 6 take effect, some are claiming that geopolitical factors have driven the market just as much as supply fundamentals.

At Russia Energy Week in Moscow last week, both Saudi and Russian energy ministers said they see rising geopolitical risk as driving the recent oil price increase at a time when there is sufficient supply in the market. Of course, the notion of sufficient supply will be tested soon, as will both Saudi Arabia’s and OPEC’s spare production capacity will be called on to maintain this supply. Continue reading

OPEC Has Regained Its Grip On Oil Markets

OPEC

 

Higher oil prices seem to have given OPEC the confidence that it needs to begin thinking about moving forward, and with Russia in the mix as well, it appears as though the alliance will be a force to be reckoned with.

– Gasoline prices averaged $2.92 per gallon for the week ending on May 21, and have surpassed $3 per gallon in regional markets.

– The prices are the highest for the Memorial Day weekend in four years.

– However, prices are likely to fall back soon with crude oil prices plunging over the past week. Continue reading

China is about to hold a giant meeting on spending billions to reshape the world

 

China has rapidly climbed the ranks to become the world’s second-largest economy. Now, the most populous nation on the planet wants to increase its influence by digging further into its pockets — flush with cash after decades of rapid growth — to splash out with its “One Belt, One Road” policy.

The initiative is meant to connect Asia, Europe, the Middle East and Africa to bolster trade and development. This weekend, hordes of foreign diplomats and business leaders are expected to descend on Beijing for a two-day meeting about the policy.

Here’s what you need to know:

What is “One Belt, One Road?” Continue reading

China bets on Islamic world

China launched a new round of a geopolitical game of poker with the United States. The Celestial Empire bets on the Islamic world. The goal is to expand its resource base to compete with the U.S. and Europe against the backdrop of a new scientific and technological revolution as well as the world’s large-scale political, economic, and financial reformatting. A hint at Beijing’s Islamic maneuver came with a recent tour of China President Xi Jinping to Saudi Arabia, Egypt, and Iran, with the conclusion of the bulk package of agreements with each of the mentioned actors. This tactical move came as part of the Silk Road Economic Belt and Marine Silk Road of XXI Century strategic initiatives. Continue reading

China intends to oust dollar from oil trade

China is planning to launch its own oil benchmark in October, similar to Brent and WTI, striving for a more important role in establishing crude prices. Unlike the Western benchmarks, the Chinese contracts will be nominated in the yuan, not the US dollar.

Shanghai International Energy Exchange sent a draft futures contract to market players in August, Reuters reported quoting sources. Continue reading

China bans major shareholders from selling their stakes for next six months

Regulator seeks to slow stock market plunge with threat to punish those who flout ban as other markets continue to suffer

China’s securities regulator took the drastic step of banning shareholders with stakes of more than 5% from selling shares for the next six months in a bid to halt a plunge in stock prices that is starting to roil global financial markets.

The China Securities Regulatory Commission (CSRC) said on its website late on Wednesday that it would deal severely with any shareholders who violated the rule.

The prohibition is also seen applying to foreign investors who hold stakes in Shanghai- or Shenzhen-listed companies, although most of their holdings are below 5%. Continue reading

World Entering “Golden Age of Gas”

Bloomberg published a lengthy article on the proliferation of shale gas drilling around the world, with interviews from top oil and gas executives. Drillers are trying to replicate the U.S. shale gas revolution in places such as China, Russia, India, South Africa, Australia, Argentina, the U.K, and Poland, among other places, according to the report. For example, Shell is working with Sinopec to tap the world’s largest shale gas reserves in China; Chevron teamed up with YPF SA to drill the massive Vaca Muerta shale formation in Argentina; and oil and gas companies are lining up to move into Mexico to drill the Mexican side of the Eagle Ford shale. Continue reading

US and China: The Fight for Latin America

According to Robert Valencia, China is vying for greater economic influence in Latin America, to include possibly constructing and operating an alternative ‘Panama Canal’ through Nicaragua. One unanticipated consequence of this burgeoning US-China rivalry, Valencia observes, is that it might push Latin American countries closer together.

During the first weekend of June, U.S. President Barack Obama and Chinese President Xi Jinping met in California to discuss cyber espionage and territorial claims in the Pacific Rim. While tension on these topics has hogged the headlines, the fight for influence in another area could be even more important—Latin America. Other emerging markets in Africa, where China has an overwhelming influence due to foreign direct investment in mining and oil, also offer economic opportunities, but Latin America has an abundance of natural resources, greater purchasing power, and geographic proximity to the United States, which has long considered Latin America as its “backyard.” Continue reading

The Day the Dollar Dies

Twenty-one men representing China’s most powerful institutions file into a conference room atop the icc Tower looming over Victoria Harbor. The Politburo Standing Committee has mustered the ceos of China’s four largest banks, Sinopec, and several other state-owned multinationals, plus officers from the Central Military Commission and a pair of academics from China’s top technology universities.

The general secretary formally opens the meeting. “As you know, the United States of America continues to manipulate its currency,” he begins. “It is devaluing its dollar, which steals away trade and reduces the value of its debts. The Standing Committee manages the yuan’s value to protect our manufacturing base and support employment.”

The secretary leans back ever so slightly to say what everyone in the room already knows, and the reason why they are here. “Three days ago, the Federal Reserve System announced its sixth quantitative easing policy in the past seven years.”

And now, the marching orders. Continue reading

The Battle for Canada’s Oil Sands

One hundred and seventy billion: That is the number of economically recoverable barrels of oil the Canadian oil sands are estimated to hold. It is a big prize. At $100 per barrel, it is a $17.3 trillion prize, enough to pay the official U.S. federal debt with trillions to spare. In a world of global population growth and “peak oil” constraints, it is an economy-changing, potentially country-changing prize that could skyrocket in value even higher in the years ahead.

But who will benefit from this supposed money-gushing cornucopia?

The Canadian oil sands are so expansive that America’s northern neighbors are practically begging for investors to develop them. “Our oil sands are the largest energy project in the entire world,” said Canadian Natural Resource Minister Joe Oliver on a recent trip to China. “We simply don’t have enough capital in Canada.”

It was a shocking statement—not because of what he said, but because of where he said it. Traditionally, Canada has looked to the United States for oil infrastructure development. But those days may be ending. When President Obama refused to permit the proposed Keystone pipeline that would have brought oil from Alberta to Texas refineries, he may have unwittingly changed the special relationship.

For now, Canada’s oil is landlocked, with no way to market. Existing pipelines to America are filled to capacity. But hundreds of thousands of extra barrels of oil per day are set to come onto the market over the next half decade as the oil sands operations are built. Trillions of dollars’ of oil will flow somewhere; that much you can be sure of. If America doesn’t want it for political reasons, the oil companies will find another customer.

China is already pointing the way. In January, Reuters reported that Canada’s oil industry is experiencing an “Asian invasion.” Most recently, Chinese government-owned Petro China purchased the Athabasca Oil Sands MacKay River project. It also owns an option agreement to purchase Athabasca’s Dover project. Last July, cnooc, another Chinese state-owned company, paid more than a billion dollars for Opti Canada’s 35 percent stake in its Long Lake project. That project will extract over 70,000 barrels of oil per day when up and running. In 2010, Chinese state-owned Sinopec spent $4.65 billion for a chunk of Syncrude Canada Ltd—one of the world’s largest oil sands mining operations. Sinopec also owns 50 percent of Canada’s Northern Lights project. Not long before, China Investment Corp., a giant state-owned sovereign wealth fund, offered $1.25 billion to help Penn West Energy develop oil sands leases. Canada’s Husky Energy has been owned by interests in Hong Kong for decades.

Full article: The Battle for Canada’s Oil Sands (The Trumpet)