The price of oil to $ 50 at the close of the auction is irrelevant to the overall supply. Of course, US stockpiles decreased slightly, but China’s economy is slowing, but do not forget that the three largest oil producer in the world are currently engaged in a war for market share of China and Europe.
Russia, apparently, discovered China about a year or two ago. She is already building new pipelines. She signed a deal with Chinese state-owned companies. The oil flowing. Saudi Arabia nervous, because Russia claims to be its share of the Chinese market. The Saudis began to supply even more oil to China, and, according to some, they sell it at a price lower than the market, operating at a loss, just to keep the location of the Chinese.
At the close of trading on Friday, April 29, the price of Brent crude oil settled at around $ 48 per barrel, approaching $ 50, which predicted all Russian investment bankers. There are very few. Russia and Saudi Arabia continue to work under the scheme “pump and dump”. The volume of supply will grow.
According to the news Agency “Reuters”, the Saudi company Aramco award recently sold 730 thousand barrels of oil, the independent refining Chinese company called Shandong Chambroad Petrochemicals, one of about 20 independent oil refining companies in China. In this deal, the interesting thing is that for “Aramco” it was the first case of the sale of oil independent of the company for cash and immediate delivery. Typically, Saudi Aramco sells its oil through contracts for a period of a year or more and at the official market price, not the spot market. However, as Russia makes the “Aramco” to be nervous, the company is willing to sell their oil at spot exchange rate market — although it is actually oil not sold even at the price of the spot market, and at a price discounted from the price of the basic grades of oil of Dubai, as reported by traders to the Agency “Reuters”. Cargo with a capacity of 730 thousand barrels will be delivered to China in June warehouse “Aramco” in Okinawa, Japan.
In other words, the price of oil at $ 48 per barrel — it is a fiction.
In addition, there is also Iran. Iran was one of the reasons why a few months ago the price of oil fell to $ 30 per barrel. But he only goes on the market. The Iranian government claims that eventually it will increase the volume of oil production to the level that Iran maintained prior to the embargo. Although Iran verbally supports measures to strengthen oil prices — such as the decline in production in Russia and Saudi Arabia — state oil companies also would not mind to share on the markets of China and Europe and higher oil price is not consistent with the interests of Saudi Arabia. How do you keep oil prices low? Need to sell dollars and buy oil futures irrespective of analytical indicators.
In April, oil prices rose about 20%. Apparently the market has already ceased to pay attention to the dollar, which helped boost the oil price and other economic indicators, such as the Baltic Dry index, indicator and trading index, which investors use to assess the demand for supplies on global trading routes.
The weakening of the dollar and the unfounded hope that the period of glut in the global oil market will soon be completed, boosted the U.S. oil futures by more than 20% in just three months, starting in February.
Not the whole market succumbed to this revival, which will eventually affect other risky assets, in particular suppliers of raw materials in emerging markets, including Russia.
“We are of the opinion that on the raw materials market ended the period in the game to improve and that commodity prices, including oil, will start to decrease,” says Atul Lele (Atul Lele, head of the investment division hedge Fund Deltec International located in Nassau.
The international energy Agency in just two months changed its position in the market. In February it announced that prices will decline. They began to grow. In April it stated that the dynamics of supply and demand will find its equilibrium by the second half of the month. Last week the head of BP, Bob Dudley (Bob Dudley), joked in February that we would have to use pools for somewhere to store surplus oil, expressed his agreement with this point of view.
Lele is not the only investor who hold the opposite opinion.
According to sources with whom the “Bloomberg” spoke on Friday, April 29, the recent revival “becomes a chance for salvation” for us shale oil producers, who are ready again to start to produce as soon as they become available. This can make a lot. And the money is now very necessary to them.
“The growth of oil prices in the near future remains a big question,” said UBS analyst Taunovo Giovanni (Giovanni Staunovo).
Over the past four weeks, the Baltic Dry index rose by 45%. Either the market expects a revival of trade, despite the slowdown of the economies of China and the United States, either he is betting on a weakening dollar. It does not rely on oil, because, as he said Dudley a few weeks ago, the world flooded with oil.
Since Saudi Arabia does not want to give Russia a share of the Chinese market, these flows a thick black liquid is unlikely to weaken in the near future.
