Home » Posts tagged 'Rakesh Upadhyay'

Tag Archives: Rakesh Upadhyay

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Why China Is Really Dictating the Oil Supply Glut

May 2, 2016

Why China Is Really Dictating the Oil Supply Glut

While the world was speculating about oil prices plunging to $20 and $10 per barrel, China was busy stockpiling its reserves.

The chart below shows an increase in imports as crude prices collapsed. Since the beginning of this year, China has imported a record quantity of oil.

(Click to enlarge)

Back in January 2015, Reuters had reported that China planned to increase its strategic petroleum reserves (SPR) from 30 days to 90 days. In January 2016, it was revealed that China was building underground storage to complement its above-ground storage tanks.

The Chinese urgency points to two things. China believes that crude oil prices will not remain at the current levels for long, and that a disruption is possible due to geopolitical reasons, which can propel oil prices higher.

As a net importer of crude, it is protecting itself against a black swan event and using the current low prices to fill its tanks. The filled up tanks will ensure a steady supply of crude for at least three months in case of a disruption.

Does the record buying spree by the Chinese indicate a bottom in crude oil prices?

That is difficult to conclude, but it does put a floor beneath the current lows, because in all likelihood, China will resume its record buying and top up its SPR if prices tank.

The total Chinese imports in March via the very large crude carriers was 7.7 million barrels a day. Other than the supertankers, China also imports oil through pipelines and small tankers.

…click on the above link to read the rest of the article…

Angola Could Be OPEC’s First Member To Fall

April 13, 2016

Angola Could Be OPEC’s First Member To Fall

OPEC-member Angola, which is dependent on oil for 95 percent of its export revenues, is facing an urgent cash flow problem, and the only way out is external help as the dominoes start to fall.

Angola has sought financial aid from the International Monetary Fund (IMF) to weather the crisis engulfing the African nation due to low oil prices, while President José Eduardo dos Santos has gone as far as to dip into the country’s sovereign wealth fund just to pay civil servant salaries.

The Finance ministry said in a statement: “The government of Angola is aware that the high reliance on the oil sector represents a vulnerability to the public finances and the economy more broadly. The government will work with the IMF to design and implement policies and structural reforms aimed at improving macroeconomic and financial stability, including through fiscal discipline.”

Along with the drop in oil prices, it doesn’t help that Angola’s economy has largely become a kleptocracy—a government run by those gunning for status and personal gain at the expense of the nation.

For those who may argue with this terminology, we can look at the Angolan President’s daughter, Isabel dos Santos, who is worth $3.3 billion and is the richest woman in Africa, according to Forbes. Meanwhile, 68 percent of the Angolan population lives below the poverty line.

President José Eduardo dos Santos has run the country since 1979, but until now, he has avoided seeking aid from the IMF, most likely because the IMF has been known to delve into the state’s finances to locate irregularities—irregularities such as the President’s daughter’s net worth being over 6,000 times Angola’s GNI.

Only a few believe that the actions of the IMF may help bring an end to the opaqueness of the current rule.

…click on the above link to read the rest of the article…

Are The Saudis And Russians Deliberately Sabotaging Doha?

April 7, 2016

Are The Saudis And Russians Deliberately Sabotaging Doha?

The actions and intentions of Saudi Arabia and Russia—the two largest oil-producing nations attending the Doha meeting on 17 April—have dashed all hopes of any fruitful outcome. The most important meeting of the last three decades, which has promised to forge new friendships and a new cartel, is turning out to be the biggest farce, even before the curtain is raised.

All of this undermines the efforts of the smaller nations, which were hopeful of a production freeze from the meeting.

Instead, we’re looking at Russia, whose oil production is now at a 30-year high after the nation produced 10.91 million barrels per day (bpd) in March, according to Reuters. In fact, these output figures are second only to the record 11.47 million bpd Russia produced in 1987.

Related: Oil Sanctions Risk Pushing An Unstable North Korea Over The Edge

Saudi Arabia is also firmly back on its non-committal path, saying that it will go along with the production freeze if everyone else does, including Iran—of which there is no chance. Saudi Arabia’s deputy crown prince Mohammed bin Salman on 1 April told Bloomberg: “If all countries agree to freeze production, we’re ready. If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

According to a report by Helima Croft, global head of commodity strategy at RBC Capital markets, the five nations shown on the chart below are at the maximum risk of a major crisis due to lower oil prices.

The chart shows the oil price levels required by respective nations to survive. “Our ‘fragile five’ states…were already facing severe political and security challenges when oil prices were above $100/bbl and the situation has grown far more grim as these countries have struggled to fund their state apparatuses and provide essential services,” the Financial Post quoted Croft as saying.

…click on the above link to read the rest of the article…

China And India Rewrite The Rules Of The Oil And Gas Game

March 24, 2016

China And India Rewrite The Rules Of The Oil And Gas Game

India and China have seen exponential growth in oil demand over the past 25 years. Combined, they consume 16 percent of the world’s oil–second only to the U.S. at 20 percent. And analysts expect that by 2040, these two growing economies will double their combined consumption to 30 percent. These are game-changing numbers that have all major producers seeking inroads to this territory.

Most spectacularly, new trade routes are being established and Indian refiners are moving away from long-term contracts with Middle East nations, favouring African spot purchases, reports Reuters.

At the start of the decade, Russia supplied about 7 percent of total imports to China, compared to 20 percent supplied to China by Saudi Arabia. However, Russia has overtaken the Saudis as the largest supplier to China four times in 2015, which is significant because Saudi Arabia had lost the top spot only six times in the preceding five years, according to data from RBC Capital markets.

RBC Capital Markets’ commodity strategist Michael Tran pointed out that seven countries have beaten the growth rate achieved by Saudi Arabia in the past five years, as shown in the chart above.

“Meanwhile, Saudi Arabia is losing its crown as its selling prices in Asia haven’t been attractive enough,” claimed Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, to Bloomberg in June 2015.

On the other hand, Nigeria overtook Saudi Arabia as the largest supplier to India back in 2015, as reported by Reuters.

…click on the above link to read the rest of the article…

Oil Price Crash Was Not Saudi Arabia’s Fault

March 11, 2016

Oil Price Crash Was Not Saudi Arabia’s Fault

Quite simply, the Saudis want to maintain their market share, but their means to control that are dwindling.

The whole internet is jam-packed with analysis portraying Saudi Arabia and OPEC as villains for the oil price collapse. On a closer look, however, the Saudi’s could have taken no reasonable steps to avert this situation. This is a transformational change that will run its full course, and the major oil producing nations will have to accept and learn to live with lower oil prices for the next few years.

Why the Saudi’s are not to blame

(Click to enlarge)

As seen in the chart above, barring the period during the last supply glut, the Saudi’s have more or less maintained constant oil production, increasing production only modestly at an average of roughly 1 percent per year.

Related: Exposing The Oil Glut: Where Are The 550 Million Missing Barrels?!

The last time the Saudi’s reduced production, the only objectives they achieved were higher debt and lower market share. It’s no surprise that this time, they were unenthusiastic about following that same path. Had they resorted to any cuts, it would have ended with them losing market share and revenues—nothing more.

U.S. oil production has almost doubled in the last 10 years

When it comes to oil, Saudi Arabia has enjoyed an unopposed leadership position for a long time. When that position was threatened by the U.S. shale oil, it was natural for them to attempt to protect their market share. However, like every other industry, leaders tend to be lax, ignoring competition until it’s too late. The same happened here too—most oil producing nations failed to take corrective measures, and they are facing its consequences now.

Where are we heading

…click on the above link to read the rest of the article…

 

Will Russia End Up Controlling 73% of Global Oil Supply?

March 7, 2016

Will Russia End Up Controlling 73% of Global Oil Supply?

The meeting between Russia, Qatar, Saudi Arabia and Venezuela on 16 February 2016 was the first step. During the next meeting in mid-March, which is with a larger group of participants, if Russia manages to build a consensus—however small—it will further strengthen its leadership position.

Until the current oil crisis, Saudi Arabia called the crude oil price shots; however, its clout has been weakening in the aftermath of the massive price drop with the emergence of US shale. The smaller OPEC nations have been calling for a production cut to support prices, but the last OPEC meeting in December 2015 ended without any agreement.

Now, with Russia stepping in to negotiate with OPEC nations, a new picture is emerging. With its military might, Russia can assume de facto leadership of the oil-producing nations in the name of stabilizing oil prices.

Saudi Arabia has been a long-time U.S. ally, but that, too, is changing. Charles W. Freeman Jr., a former U.S. ambassador to Riyadh, recently noted that “We’ve seen a long deterioration in the U.S.-Saudi relationship, and it started well before the Obama Administration.”

U.S.-Saudi relations further soured due to the Iran nuclear deal that ended in January with the U.S. lifting sanctions—a move the Saudis vehemently opposed. The Saudis had to look for a new ally to safeguard their interests in the Gulf, considering the threats they face from the Islamic State (ISIS) and Iran.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress