Oil

During Obama’s presidency, the US energy industry was hit strongly by environmental protection measures. Now, oil and gas industry is expected to surge forward. Do you share this point of view or not? In your opinion, will Trump’s regulations help the US become more energy independent?

At the moment, it is hard to say whether the energy industry is really going to surge forward thanks to Trump’s regulations. Still, with relatively low oil prices, the industry is not going to receive more money regardless of any regulations the President might implement. What I mean is that the government can still make these rules easier for the companies, but it will not change the investment significantly. Overall, the new regulations implementation might be positive, but it is still not a game changer. Furthermore, I suppose that there is no need for the President to relax the environmental regulations because the industry is already capable of meeting higher environmental standards.

Since early January, Oil has been consolidating at high levels and in a narrow range. The period follows the sharp rise in prices, which started at the end of November, following the Vienna OPEC meeting, when an agreement to cut production finally started to materialise. With this political uncertainty behind them, speculators have pushed net long positions to record highs, while, since year end, hedgers and commercial players have been selling forward to lock in these levels. It is this battle we are currently experiencing.

Eleven more oil producing nations have agreed to cut their production to try to boost global crude oil prices. The deal follows an announcement by OPEC 11 days ago that its members would collectively cut production by just over 1 million barrels a day.

Large oil exporters, including Russia and Mexico, said they would mimic the Opec protocol agreed at the end of November and adjust their own production to 300,000 and 100,000 barrels a day respectively from the start of 2017. Oil prices have languished at less than or around $50 a barrel since the US became largely self-sufficient on shale from 2014 onwards; but with Opec’s announcement that production would be cut on 30 November, prices recently surged more than 15 per cent, rising last week briefly above $55.

Engine maker Rolls-Royce is axing 800 jobs in its marine division as weakness in the struggling oil and gas sector takes its toll. The UK-based firm said it was too early to say where the jobs axe would fall.

Its marine business employs 4,800 people globally with around 400 in the UK, of which half are based in Bristol and the remainder across offices in the Midlands and a manufacturing site in Dunfermline, Scotland.

Rolls said the job cuts will be made next year as part of an overhaul to make annual cost savings of around £45 million to £50 million. The unit’s workforce has already been slashed from 6,000 in 2015.

An agreement between oil producer club OPEC and Russia to produce less to drain a global glut sent prices soaring in record trading volumes on Thursday, even as analysts warned other producers will likely top up supply.

On Wednesday in Vienna, the Organization of the Petroleum Exporting Countries reached a deal to reduce their oil production by 1.2 million barrels per day in order to raise global prices.

The deal also hinges on non-OPEC countries contributing an additional 600,000 barrels per day worth of cuts, with about half of that coming from Russia. On Thursday Azerbaijan said it was also willing to engage in talks on cuts.

Some time ago this Newsletter predicted an oil price of US $50 per barrel in the short term (see Newsletter 92 of 22.01.2015) and possibly prices later ranging from $60 to $65. American shale oil producers can now make profits at $50 to $55 a barrel in the Eagle Ford Basin and a bit more in the Bakken fields while those in the Permian Basin can do well at $30 a barrel. The prediction of an oil price at about $50 has thus proven to be quite accurate so far. Regarding the future for oil prices, a cap of $60 to $65 seems to be fairly safe as a prediction. The Americans will increase production as soon as the price reaches $55 a barrel or even before that.

In his last webinar, Ashraf Laidi, financial analyst and trader, author of "Currency Trading & Intermarket Analysis", has analyzed different financial instruments, using technical analysis and seasonality.
In particular Ashraf Laidi focused on what will be the future movements of EUR/USD, Oil and USD/CAD prices.
Particularly timely was the forecast on Oil which, a few hours after the webinar, felt below the threshold of 50 dollars a barrel.

General Electric (GE) and Baker Hughes (BHI) will combine to form a $32 billion oil and gas group, the two companies confirmed in a statement Monday. The combination will create the second-largest player in the oilfield services industry in terms of revenue after Schlumberger.
The move comes just a few months after Houston-based Baker Hughes’ nearly $35 billion acquisition by Halliburton was nixed by the Justice Department because of anti-competition concerns.