Etikett: OPEC

Cheap Oil for Longer

ETFSeCurities Cheap Oil for LongerCheap Oil for Longer

ETFS Multi-Asset Weekly Cheap Oil for Longer

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Highlights

Unchanged OPEC daily quota pushes crude lower.

Central Banks drive equities to record levels.

Commodity currencies feel the pain of weak oil prices.

Following Mario Draghi’s comments indicating that the European Central Bank is ready to step up its efforts to fight deflationary headwinds, all eyes will be on the ECB meeting this week to see if rhetoric will be followed with action in the near future. US Q3 GDP was revised upwards indicating more strength in the economy than most has expected. This week’s US non-farm payroll data could act as another catalyst for cyclical asset price gains if the numbers come in above expectations. While OPEC’s inaction this week will hurt investors who are long oil, cheaper world oil prices could help boost growth in oil importing nations, once again helping other cyclical assets.

Commodities

Unchanged OPEC daily quota pushes crude lower. Last Thursday the highly anticipated OPEC meeting bore no good news for crude prices as the cartel decided to maintain the current daily supply target of 30 million barrels a day. The inaction resulted in the price of Brent falling -8.5% on the week with a vast majority of the decline occurring directly after the meeting’s conclusion was revealed. In our view the impact of Brent remaining below $80/bbl will have two important consequences, the first of which will be to cause global suppliers to curb production as the price level breaches the marginal cost of production dissolving producer profits. The second is to put more pressure on OPEC to reduce exports at the June 2015 meeting as members struggle to balance their government budgets with oil at current levels. This should create a more supportive environment for oil in the longer term.

Equities

Central Banks drive equities to record levels. European shares rallied higher this week following ECB president, Mario Draghi’s address of the European Banking Conference where he stated current policy measures are insufficient to ensure price stability in the Eurozone. This stoked speculation among investors that the ECB will broaden its asset purchase program to engage in full blown quantitative easing, driving the DAX 30 and FTSE MIB 5.18% and 4.64% higher. In Asia, Chinese equity markets applauded moves by the People’s Bank of China (PBoC) as it reduced both the benchmark 1-year deposit and lending rate, demonstrating the central bank’s willingness to take action to ensure the economy meets target growth levels. The MSCI China A Index rose 7.9% over the week as the Chinese equity market surpassed Japan’s to become the world’s second largest stock market for the first time since 2011 totalling $4.48tn.

Currencies

Commodity currencies feel the pain of weak oil prices. The sharp drop in oil prices last week weakened the Norwegian Krone by 2.5% against Pound Sterling, 2.4% against the US Dollar and 1.9% against the Euro. A bullish US Dollar against commodity currency basket strategy returned close to 1% last week. We believe the US Dollar will continue to gain strength on the back of diverging global monetary policy. The US Fed will likely embark on a tightening phase in 2015, while the ECB and BOJ will have to continue to loosen. Last week’s surprise upward US GDP revision and bullish expectation for this week’s US payrolls number has aided US Dollar strength. The Swiss National Bank was spared being forced to “tie its hands” with gold and compromise its ability to cap its exchange rate against the euro at 120, after the Swiss population voted against the proposal at the referendum over the weekend.

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ETF Securities Research team
ETF Securities (UK) Limited
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E  info@etfsecurities.com

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Oil Falls as OPEC Disappoints

Oil Falls as OPEC Disappoints

Oil Falls as OPEC Disappoints

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OPEC resisted calls to cut production last week, disappointing investors who had positioned for a tightening of oil supply. Brent oil fell more than 8% in response. OPEC countries, which produce approx. 40% of global oil output, refrained cutting because non-members like Russia and Mexico made it clear that they will not reciprocate and hence OPEC countries will simply lose market share. Last week’s inaction increases the need for a large cut at the June 2015 OPEC meeting. Although the Swiss population rejected the proposal for their central bank to hold 20% of its assets in gold, support for metal will likely come from India. In a surprise move, the Indian government loosened the restrictions on gold imports, which will likely increase physical gold demand as local premiums fall

Oil ETPs inflows surged in anticipation of production cuts. Last week we saw US$12.4mn and US$13.3mn of flows into long Brent and long WTI oil ETPs respectively. Flows into Brent were the highest since August while flows into WTI were the highest in four weeks. Although OPEC resisted calls to cut production last week, we believe the cartel will eventually have to reduce supply to help stabilise global oil prices. The cartel jointly produces approximately 40% of global oil output. While the US is gaining an increasing share of global output (by displacing oil imports through its own production) and Russia remains a formidable player, we believe it is too early to write off OPEC as an irrelevant cartel when it comes to setting global prices. We believe that last week’s inaction increases the need for a large cut at the June 2015 OPEC meeting. Many OPEC countries need oil prices above US$100/bbl to balance government budgets. While these countries can run budget deficits, the appetite to do so will wear thin as the cost of financing starts to increase. We believe that OPEC countries will reunite to work in their common interest instead of engaging in a price war. Indeed the price of oil right now is too low for many of the shale and tight oil operations in the US to remain profitable and will curtail the rapid expansion of US oil production until prices stabilise at a higher level. We believe some investors will view today’s oil price as an attractive entry point in anticipation of tightening supplies in 2015 and will accumulate long positions in oil ETPs. Other investors may pare their holdings in response to yesterday’s inaction if they have a shorter investment horizon.

Investors favour palladium over platinum. Palladium ETPs received US$33.6mn of inflows last week, marking a 3-week high, while platinum ETPs saw outflows of US$10.4mn, marking a nine-week low. Both demand and supply drivers support palladium over platinum. Brisker car sales growth in the US and China compared to Europe supports more greater palladium use over platinum. Palladium supply is also more constrained, given historic reliance on Russian State stockpile sales, which we believe have dwindled close to zero.

ETFS Nickel (NICK) sees highest inflows since May on supply concerns. US$14.9mn flowed into NICK last week. Some investors fear that the Philippines could follow Indonesia’s lead in banning raw ore exports. China had become highly reliant on the Philippines for high grade laterites imports for its nickel-pig-iron (NPI) production. If the Philippines also ban exports of the ore, Chinese production of NPI could suffer and raise demand for closely related nickel in 2015.

Key events to watch this week. Next week will be dominated by central bank decisions with the Bank of Canada, Bank of England and European Central Bank having their respective policy meetings. While no changes in policy setting are expected, guidance for the future will be closely watched. We will finish the week with US non-farm payrolls. Any strong growth in jobs could be construed as a cue for the Federal Reserve of the US to raise interest rates in H1 2015, which would be gold price negative.

 

Video Presentation

 

Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

For more information contact

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

 

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OPEC under Pressure as Oil Prices Remain Below US$80/bbl

OPEC under Pressure as Oil Prices Remain Below US$80/bbl

ETFS Research Note -OPEC under Pressure as Oil Prices Remain Below US$80/bbl

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Key highlights

Oil prices have fallen by over 20% since the end of August, as OPEC is alleged to have started a price war to maintain its market share in light of the rapid growth of shale oil in the US in recent years.

Ultimately, the key to greater support in oil prices lies with OPEC and we believe that the oil cartel, which has been in existence since 1960, will not fall apart and will eventually commit to cutting back on oil production.

While US production is abundant, with oil production at multi-decade highs there is little potential for US crude exports in the near-term, capping the negative impact the over-supply in the US has on global prices.

WTI crude and Brent are now trading over 20% below the US$100/bbl level that is considered a “fair price” by most OPEC producers and that has historically been defended by the OPEC. While weak global demand for oil and distillates combined with ample global supply of crude has weighed on both Brent and WTI prices over the past few months, OPEC inaction contributed to push oil prices below US$80/bbl. OPEC has historically played a fundamental role in keeping oil prices above US$100/bbl. However, OPEC members entered a price war in October, selling their oil at a discount in Asia and the US order to retain their market share.

The key to greater support in oil prices lies with OPEC. According to OPEC’s Secretary General, US shale oil.  producers will be the most hurt by persistently low oil prices while OPEC will be broadly unaffected. While different oil fields have different breakeven costs, most US shale oil, which accounts for most of the global oil production growth over the past few years, has a breakeven price in the range of US$60- US$80. According to the IEA, 82% of crude oil and condensates production from the United States has a breakeven price of US$60/bbl or lower. However, the majority of OPEC countries are estimated to require oil prices of at least US$90-US$100/barrel to balance their government budgets.

Hence, we believe it is a matter of time before OPEC start to reduce supply and that could happen as early as November 27, when OPEC holds its next meeting. There appear to be a clear split between Gulf OPEC members and the remaining countries in terms of cutting oil production to sustain oil prices. Saudi Arabia and other Gulf members have publicly opposed a production cut, while Libya, Venezuela and Ecuador have urged oil price support ahead of the next OPEC meeting. Currently OPEC produces 30.5mn barrels per day,
0.5mn barrels above the current production ceiling of the organisation. Most non-Gulf members are calling for Saudi Arabia to bear the brunt of the supply reduction as they allege that is where the majority of the overproduction comes from.

With the future of the Organization of the Petroleum Exporting Countries at risk, we believe Saudi Arabia will have to cut production in order to soothe the increasing restlessness of the other OPEC members. We reiterate our positive view on both Brent and WTI and believe prices will recover from current low levels.

For more information contact:

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E  info@etfsecurities.com

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This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).

When being made within Switzerland, this communication is for the exclusive use by ”Qualified Investors” (within the meaning of Article 10 of Section 3 of the Swiss Collective Investment Schemes Act (”CISA”)) and its circulation among the public is prohibited.

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En emerging market som investerare bör hålla ögonen på

En emerging market som investerare bör hålla ögonen på

 

En emerging market som investerare bör hålla ögonen på, speciellt de som investerar i obligationer utfärdade av så kallade emerging markets. Brasilien har fått sin kreditvärdighet sänkt tidigare i år, och har nu den lägsta nivån av investment grade hos av Standard & Poors. Turkiet har det besvärligt i relationerna med så gott som samtliga kreditvärderingsinstitut och Rysslands kreditvärdighet har sänkts inte bara en utan två gånger under 2014. Det finns emellertid ett land som vi anser är viktigare att övervaka, nämligen Venezuela.

Det finns i dagsläget ingen börshandlad fond som är specifikt inriktad på att replikera utvecklingen för vare sig den venezolanska aktiemarknaden eller för obligationer utgivna av Venezuela, något som blankare världen över beklagar med tanke på hur en sådan ETF skulle ha utvecklats under det senaste året. Övriga börshandlade fonder som replikerar utvecklingen för länderna i OPEC (Organization of Petroleum Exporters) har inte haft en gynnsam utveckling under 2014, vilket kan förklaras av ett fallande oljepris.

Venezuela har emellertid en framträdande plats i vissa ETFer som investerar i tillväxtmarknaderobligationer, inklusive iShares Emerging Markets High Yield Bond ETF (NYSEArca: EMHY). EMHY avsätter nästan 11% av sitt kapital på 200 MUSD till investeringar i Venezuelas obligationer, en betydande summa när det oljerika sydamerikanska landet som enligt vissa bedömare är på väg att göra en default.

Avkastningen på två venezuelanska obligationer ligger nära 27 procent. Med en inflation som toppade på nästan 60 procent är kostnaden för kreditswappar som handlare skulle använda för att försäkra sig mot standard på venezuelanska femåriga obligationer nu högre än något annat land, enligt Financial Times.

Den 8 september sade Harvard ekonomen Ricardo Hausmann att Venezuela långsamt rör mot en default. Sedan dess har EMHY backat 2,4%. Han säger att

Venezuela är på väg att implodera. De flesta människor vet om detta och erkänna landet har brist på mat och medicin säger Peritus Asset Management Chief Investment Officer Tim Gramatovich. Vad som inte är lika känt är att Venezuela har förlorat alla sina tekniska talanger. Så medan Venezuela har en stor reserv bas av tung olja, har landet ingen kvar som kan producera den.

Gramatovich säger också att de venezuelanska oljereservoarerna är bland de mer tekniskt utmanande. Kalifornien-baserade Peritus är underrådgivare för AdvisorShares Peritus High Yield ETF (NYSEArca: HYLD). Denna ETF har ingen exponering mot venezuelanska obligationer.

Med nästan 7 procents vikt mot Venezuela har Market Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM) backat 2,8 % sedan 8 september, men den största delen av att denna börshandlade fonds vikt fördelas på betydligt starkare länder som Kina, Mexiko och Colombia, som alla har investment Grade rating och ingen av dem är nära default. Dessa länder svarar tillsammans för 21 procent av vikten i HYEM.

Investerare bör ändå vara försiktig med Venezuelas skuld, särskilt om oljepriserna fortsätter att falla.
Kineserna har bidragit med ett visst kapital till Venezuelas oljeindustri men det räcker inte.

 

Have oil prices reached their lows

Have oil prices reached their lows?

Martin Arnold, global foreigne xchange and commodity strategist at ETF Securities, says oil prices have probably reached their lowest point for the year as they are not sustainable for OPEC producers Have oil prices reached their lows

Oljepriset

Pris på olja, både på WTI och Brent. Du kan se det aktuella priset på WTI- och Brent-olja, samt hur det oljepriset har utvecklats över olika tidsperioder. Överst visas WTI-priset och under det Brent-priset.
WTI (West Texas Intermediate), även känd som Texas Light Sweet, är den typ av olja som oftast används som riktmärke för prissättning av olja. WTI handlas i New York. Brent är den typ av olja som är vanligast i Europa. Oljefutures går till leverans varje månad året om. Olja handlas bland annat på New York Mercantile Exchange under tickersymbolen CL (avser Light Sweet Crude Oil) och huvudkontraktet prissätts i USD och cent per fat.