Posts belonging to Category Oil

Pound up after bank holiday weekend

After the 3 day weekend, the markets have opened up after fully digesting the Fed Jackson Hole meeting with the Pound increasing over the bank holiday weekend.

After the 3 day weekend, the markets have opened up after fully digesting the Fed Jackson Hole meeting with the Pound increasing over the bank holiday weekend.

Janet Yellen’s suggestion that a rate rise is still likely has seen the FTSE strengthen again by 0.3%, but oil has stated to come under renewed pressure.

With a hike now potentially in September a real possibility, Brent Crude found itself trading below $50 per barrel once more and with that, the price for those who do not hold US Dollars as their base currency will find all oil based products more expensive to purchase.

Number of investments coming into UK at year high

The number of investments that come into the UK was at a year high, up a big 11%.

A number of the 116,000 jobs created were said to have been created from overseas investments, also showing the UK as the most appealing region in Europe to do business.

A number of reasons were given as to why the UK attracts so well, such as the English language (spoken globally), fair tax and EU membership, which could now become a hindering block after Article 50 is triggered.

Today’s key data is mixed in terms of geography, with UK Mortgage Approvals, Fed’s Fischer speaking on Bloomberg and German Consumer Price Index out today which may move the markets.

UK economic growth increases to 0.7% in second quarter

UK economic growth increased in the second quarter of the year- helped by a big jump in oil and gas production.

UK economic growth increased in the second quarter of the year- helped by a big jump in oil and gas productionThe UK’s economy grew by an estimated 0.7% in the April to June period, the Office for National Statistics (ONS) said which compared with growth of 0.4% in the first quarter of the year.

Britain’s recovery strengthened, as the official figures suggested growth per head was finally back to pre-crisis levels.

Output in the economy during the second quarter was 2.6% higher than the same period a year earlier, the ONS said.

“After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years,” said ONS chief economist Joe Grice.

The UK’s economy has now seen 10 quarters of sustained economic growth.

The ONS stressed the first estimate was based on about 40% of the available economic data and is subject to revision.

It said manufacturing output experienced its first fall in two years with output dropping 0.3% in the quarter.

However, a surge in North Sea oil and gas production lifted overall industrial output by 1% – the biggest increase since late 2010.

The “mining and quarrying” component of the industrial output figures, which includes oil and gas extraction, rose by 7.8% in the quarter, the biggest increase since 1989.

The ONS said the increase, which came despite falling oil prices, was driven by tax cuts in March designed to support the sector.

Construction was flat in the period, the ONS said, recovering from a slight fall the previous quarter.

The UK’s dominant services sector recorded growth of 0.7%, following a rise of 0.4% in the previous three months.

Domestic demand is expected to remain strong, as wages rise and with the temporary effects of low inflation boosting consumer spending.

The ONS said there were also signs that businesses were finally increasing investment.

George Osborne, the Chancellor, said the figures showed Britain was “motoring ahead”. He tweeted: “We must stay on road we’ve set out on.”

The economy is now 5.2pc larger than its pre-crisis peak, and ONS said the 0.7pc expansion in the second quarter suggested that gross domestic product (GDP) per head was now “broadly equal to the pre-economic downturn peak” in the first quarter of 2008. This is expected to be confirmed by the ONS next month.

Mark Carney, the Governor of the Bank of England, has said that “sustained growth” of “around 0.6pc per quarter” will be needed for the remaining “spare capacity” in the economy to be eliminated and for rate setters to start tightening policy.

Mr Carney said in a speech this month that the decision to raise rates would come into “sharper relief” by “the turn of this year”.

UK trade deficit drops to £1.2 billion in April

The UK trade deficit dropped to £1.2 billion in April from £3.1 billion in March according to the Office for National Statistics.

UK trade deficit dropped to £1.2 billion in April from £3.1 billion in March An £8.6 billion deficit on goods was partially offset by an estimated surplus of £7.4 billion on services the ONS said.

The ONS added that in the quarter to April, exports were flat after 0.3% growth in the first quarter, but imports were up 2.1%, the same as in the three months to March.

UK exporters have struggled in the face of weak demand in the eurozone.

Part of the deficit dip was down to a fall in imports of art and furniture, said the ONS. Another factor was less oil being imported.

Last year, companies began stockpiling oil as the price of the commodity collapsed.

The deficit – a description of how much imports exceed exports by value – was less than economists had expected.

“Monthly trade figures are notoriously volatile but today’s significant improvement is nonetheless very welcome, but there is no room for any complacency,” said David Kern, chief economist at the British Chambers of Commerce.

“The longer term trend still shows a worsening in the trade position in recent months. It is clear that we are not making enough, sustained, progress in closing the trade gap.”

The UK’s trade deficit for 2014 widened to £34.8 billion, the biggest gap since 2010.

What these figues continue to point out is the futility of focusing our exports on countries which are struggling economically rather than English speaking countries with growing economies.

Oil prices- Opec members split over output cuts

The oil cartel OPEC is split over how to react to the sharp slump in oil prices.

Oil prices- Opec members split over output cutsSaudi Arabia has indicated it will not push for output cuts to help push up oil prices, as Opec oil producers prepare for their meeting on Thursday.

The oil market will “stabilise itself eventually”, said Saudi Oil Minister Ali al-Naimi. Saudi Arabia is the largest producer of the 12 members of the Organization of the Petroleum Exporting Countries (Opec).

Among the Opec members, Venezuela and Iraq have called for output cuts as the price of Brent crude has plunged 30% since June, triggered by a sharp rise in US shale oil output and weakening global demand.

There is speculation that tomorrow Opec could announce its first cut in oil production since 2009 in an attempt to support the oil price.

However, fellow Opec member United Arab Emirates’s (UAE) Oil Minister Suhail bin Mohammed al-Mazroui appeared to side with Saudi Arabia, indicating it would not push for a cut in production, saying “the market will fix itself ultimately”.

“We are not going to panic, this is not the first time, this is not a crisis that requires us to panic … we have seen (prices) way lower. We are not interested in the short fixes because we know they will not last,” Mr al-Mazroui told Reuters.

The responses from Saudi Arabia and UAE come a day after non-Opec member Russia, which produces an estimated 11% of global oil, said it would not co-operate with any production cut.

Following a meeting with Saudi Arabia, Venezuela and Mexico representatives, Russian Energy Minister Alexander Novak said the country’s energy companies would produce around the same amount of oil next year as they did in 2014.

He told reporters in Moscow he was sceptical that Opec would decide on Thursday to cut output quotas.

The heated debate over how to react to the sharp fall in oil prices has led to some suggesting that Thursday’s meeting could last longer much longer than usual.

“It might take a bit longer than the ordinary meetings,” said one delegate. “They must agree, even if they have to stay here for two days. It is a matter of death or survival for budgets.”

King puts the boot into the City

Another week begins, and the spotlight passes from one central bank head to another – Sir Mervyn King of the Bank of England. King puts the boot into the CityIn the past two weeks the markets have watched Fed Chairman Bernanke speak about interest rates and possible further quantitative easing.

Last week ECB President Trichet used language that indicated rate rises are just around the corner (sending the Euro markedly higher against the Pound and Dollar) and this week it is the turn of Bank of England and Mervyn King with the monthly MPC meeting scheduled this week.

After last month minutes showing three members voting for a rate rise, Sterling has enjoyed a bounce against the Dollar – if not the Euro – and if the Bank does decide to raise rates we can expect further gains.

However, King seemed to rule out any symbolic rate rises in the inflation report last month and given the current spike in crude oil stemming from unrest in the Middle-East, the doves on the MPC will be stressing that the UK economic recovery cannot be put in jeopardy by raising rates.

King has also drawn criticism from the city with comments over the weekend that city institutions are too short-term orientated.

Given that Mr King once said he thought central banking should be a dull subject, the thinking may be that he seems to be overplaying his hand and that could hurt the credibility of the bank if he is seen to be overly political.

The ECB meeting has been the catalyst for the recent Euro strength, but any rate rise in the Eurozone would probably only be beneficial for the Germans.

The struggling periphery PIGS nations will certainly not welcome any move – especially the Spanish whose mortgages are prices from one year Euribor – which jumped 14 basis points immediately after Mr Trichets announcement.

In the face of rises oil prices, which acts as a global tax, raising rates at the behest of the Germans risks derailing any sustainable recovery in nations trying extremely hard to get their public (and private) finance back in order.

Sterling weakens despite Bank of England’s interest rate vote

The future path for UK interest rates is still very unclear even with the benefit of the minutes from this month’s MPC meeting. Sterling weakens despite Bank of England's interest rate vote Despite the fact that members Sentance and Weale were joined by Spencer Dale in arguing for an immediate rise in interest rate, the majority of the committee remained unconvinced and in Posen’s case, still adamantly opposed to such a move.

This left the vote at 6-3 against an increase and despite renewed news warning about imminent and repeated rate rises, it is going to take a real change in sentiment from 2 of the 5 ‘steady as she goes’ voters to trigger a rise.

Wise Money finds it difficult to believe that this can occur until the committee has seen further evidence that the UK economic pick up has not been brought to a shuddering halt.

This feasibly, is unlikely to be the situation until towards the end of April when we and the MPC will get first sight of the preliminary 1st Qtr GDP data for 2011, a week prior to the May rate setting meeting which itself takes place a week prior to the release of the Bank of England’s May Quarterly Inflation Report.

It does look to me as though this meeting will be the first possible for a move in rates and the forex market seems to be of the same opinion with Sterling, having risen sharply yesterday morning, slipping against all the major currencies. Sterling is likely to remain vulnerable.

The crisis in Libya is still causing concern for commodities, equities and the world in general.

The little news that is emerging is very worrying with the escalating unrest disrupting oil supplies as civil war looms.

Oil prices have rocketed despite the fact that any shortfall in supply could be easily covered by Saudi Arabia.

The move looks more to do with fears that the problems will persist for some time yet and might spread further across the region.

Brent oil price rises to $111 a barrel

For a third straight day the price of crude oil has continued to climb on production fears at the twelfth largest OPEC producer. Brent oil price rises to $111 a barrelThe price of Brent crude oil has hit $111 a barrel, and US crude also rose in price, as worries persist about the unrest in Libya.

Markets are concerned the trouble could worsen in key oil producing countries, affecting supplies and hitting growth.

The price of Brent rose more than $5 a barrel, to $111.25 as US light sweet crude oil prices hit $100 a barrel for the first time since October 2008, before settling up 2.8% at $98.10 a barrel.

It comes as the White House said it was watching oil prices.

“We are obviously monitoring this very carefully and we are concerned about it,” White House spokesman Jay Carney said.

The markets have been gripped by uncertainty this week as investors tried to work out the possible impact of the Libyan violence on oil supplies.

With foreign oil companies suspending production, experts pointed out that the state-owned National Oil Company has run Libya’s oil fields before and could do so again.

It did so in the 1980s when US oil firms left the country – but production would be hampered without the input of experienced of foreign oil companies- who are repatriating their staff to safety.

Oil prices continue to rise as Libya riots spread

Oil prices have continued to rise in the UK and US after ongoing riots in Libya and worries about the impact on the country’s crude exports.
Oil prices continue to rise as Libya riots spreadIn London Brent crude rose by more than $2 a barrel to $108.5, before falling back to $106.79 a barrel.

In New York, US light sweet crude oil rose by $5.60 to $91.80 a barrel.

US shares were also behind at midday. Asian stocks had closed down, and European shares also fell before recovering by mid-afternoon.

At noon in New York, the Nasdaq was behind by 1.65%, the Dow by 0.76%, and the S&P 500 by 1.11%.

At close France’s Cac 40 had fallen by 1.15%, Germany’s Dax by 0.05%, and the London FTSE by 0.30%.

Meanwhile, Spanish oil firm Repsol-YFP was joined by Italy’s Eni in closing down production in Libya.

On Tuesday, the Standard & Poor’s (S&P) credit rating agency downgraded Libya from A- to BBB+, and said it could lower the rating further.

Libya is the world’s 12th-largest exporter of oil, and there are concerns that growing tensions in the country could hit oil production.

Spillover into other big regional producers, such as Saudi Arabia and Kuwait, is another concern that is forcing up the price of oil.

Global oil companies have been pulling staff out of Libya as unrest continues to spread.

The rising price of oil, which could fuel further rises in already high inflation rates and hit corporate profits, affected stock markets in Asia and Europe.

Unrest in the region could spark a wider correction in stock markets, analysts said.

Oil price rises on Libya riots fear

The price of oil has risen on worries of the riots in Libya over the weekend.
Oil price rises on Libya riots fearBrent crude had jumped 2.6% by late afternoon to $105.2 a barrel, its highest level since before the 2008 financial crisis.

European energy companies are evacuating some staff from the country, which is a major oil and gas producer for the European market.

The European Union is preparing to evacuate its citizens from the country.

The UK Foreign Office has already advised that those without a pressing need to remain in the country, should leave by commercial means if it is safe to do so, as has the US.

Meanwhile Turkey has already begun flying its 3,000 or so citizens in the country home.

Commodities markets are worried about more than just Libya, with the threat of unrest escalating in Iran – the second biggest oil producer in the Organisation of Petroleum Exporting Countries (Opec).

There is nervousness that even Opec’s biggest producer, Saudi Arabia, may yet succumb to instability, although the autocratic regime there has yet to witness any protests.

Oil supplies in Libya and elsewhere have yet to be significantly disrupted by any of the events in the Middle East.

Opec is thought to have an additional 4.7 million barrels-per-day available, compared with Libya’s exports estimated at 1.5 million.

Libya is responsible for only 2% of all oil production worldwide, although its share of the European market is estimated at 10%.

Oil production is essential to the Libyan economy, with oil output accounting for 95% of export receipts and 25% of the country’s economic output.