Base metals on LME edge higher today

Main events in today’s market:

  • Oil volatile on expectations of OPEC’s final decision
  • Rate hike odds drop after Fed signals gradual tightening
  • Global stocks move higher after Fed minutes, OPEC in focus
  • K. economic growth revised lower in first quarter
  • Bitcoin rally keeps going; tops $2,600

For further info on these subjects, visit: http://www.investing.com

LME Morning trade

In comparison with yesterday, LME base metal prices went up in today’s morning trade. Those were the slight improvements in prices after yesterday’s weakness.

Yesterday, LME Prices closed down an average of 0.7%. It happened mainly due to Moody’s downgrade of its rating on China. Nickel survived the strongest hit with a 2.4% drop. However later it has marginally recovered, right this morning, trading $45 per tonne higher.
Nevertheless yesterday’s slight lift in dollar price, it has again fallen. And it is currently trading at 96.91. The lower dollar prices are giving back up to the base metal prices.

Most noteworthy, the US Federal Open Market Committee’s (FOMC) May meeting minutes are currently showing some uncertainty over the outlook for US rate increases after June.

“As always, China sentiment this afternoon remains key but assuming that there isn’t [a] complete meltdown. I feel the macro tone will see some demand creep into the base complex on the open of Europe with some key resistance within reach on many metals here just above current levels.”  (Matt France at Marex Spectron.)

Copper, aluminium and tin retrieved upwards momentum. Later, the lead was little changed at $2,077 per tonne. The only anomaly was a minor decline in zinc as it slipped $4 lower this morning.

Copper price stabile

Observing the LME three-month copper price, it was up $16 to $5,898 per tonne. Later the concerns over Chinese copper demand have gained higher levels once more, following a 30% slump in the country’s red metal imports. It happened during the first four months of the year.

China imported 202,626 tonnes of refined copper in April. China April imports saw a decrease 40.7% year-on-year. Observing copper trade and production, the Grasberg mine workers are planning a strike for a month longer. Extending it until July this year. Copper stocks fell a net 4,100 tonnes to 321,575 tonnes.

 

Base metals up

Regarding the three-month aluminium price, it rose $11.50 this morning to $1,956.50 per tonne. In terms of stocks, they continued to tumble. Falling a further 9,475 tonnes to 1,470,550 tonnes. Nickel gained some strength after yesterday’s $245 per tonne dive, it was up $45 to $9,145 per tonne. Stocks fell 954 tonnes to 383,844 tonnes.

Observing the zinc prices, they dethroned the trend with a $4 decline; it is currently trading at $2,631 per tonne. Stocks fell 1,525 tonnes to 335,875 tonnes. Lead’s three-month price was little changed. Going up just $1 per tonne to $2,077. Stocks were down 100 tonnes to 183,400 tonnes. The three-month tin price gained $90 to trade at $20,465 per tonne. Stocks were unchanged at 2,060 tonnes.

 

 

 

 

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SHFE: Copper Prices retreat, Other base metals divergent

Base metals prices and trends on the Shanghai Futures Exchange were on different paths this morning. Copper prices leveled higher after the dollar pulled-back on an uncertain outlook for post-June US rate rises.
”The most-traded July copper contract on the SHFE rose 140 yuan ($20) or 0.3% to 45,920 yuan per tonne as of 03:26 BST. Around 115,000 lots of the contract have changed hands so far. ” (Metal Bulletin)

In the meantime, the three-month copper contract on the LME rose $13 to $5,695 per tonne.

“The weaker US dollar has provided SHFE copper prices with support but the decline in Chinese refined copper imports in April will limit how much prices can rebound…”

Observing the dollar index, it again came under pressure falling as low as 96.96 on Thursday. This happened after the US FOMC May meeting minutes showed some doubts over the odds for US rate increases post-June.

In terms of FOMC minutes, they “were interpreted cautiously by the market as confirming the likelihood of a June rate hike. But also showing some uncertainty over the trajectory for rates thereafter.” The main source of uncertainty is coming from the inflation outlook. National Australia Bank said this morning.

Crude oil prices continued to find back-up in expectations that members of the OPEC will agree to extend their supply cut into next year during their meeting in Vienna today.

Copper

 
Observing the Chinese refined copper imports, they fell 40.7% year-on-year to 202,654 tonnes last month. But at the same time, copper concentrate imports rose 7.7% year-on-year. Observed m-o-m, they fell 16.9%-  to 1.36 million tonnes in April.
Later, The SHFE-LME copper arbitrage remained at a loss on Wednesday. Leveling at $112 per tonne.  While the zinc arbitrage was profitable at $119.
Speaking about copper stocks, the total copper stocks at LME stockrooms fell a net 4,200 tonnes. To a level of 325,675 tonnes on Wednesday.

Other base metals mostly lower


Firsly, the july aluminium contract on SHFE fell 30 yuan or 0.2% to 13,955 yuan per tonne.  Secondly, july zinc price gained 65 yuan or 0.3% to 22,450 yuan per tonne. Thirdly, july lead price decreased 60 yuan or 0.4% to 15,870 yuan per tonne. Following, the nickel contract slipped 120 yuan or 0.2% to 76,150 yuan per tonne. And finally the SHFE September tin price increased 450 yuan or 0.3% to 144,740 yuan per tonne.

Currencies & data  

The Brent crude oil spot price rose 1.2% to $54.48 per barrel as of 03:20 BST on Thursday.

This morning, the dollar index was 0.06% higher. At the level of 97.01 as of 03:20 BST on Thursday. Shanghai Composite index stood at 3,070.32 recently, up 0.2% at 10:18 Shanghai time.
Also worth mentioning, the US existing home sales in April reached 5.57 million. It is below both the forecast of 5.65 million and April’s reading of 5.71 million. While U.S. weekly crude oil inventories fell 4.4 million barrels, far more than expectations of a decline of 2.4 million barrels and the previous week’s reading of a 1.8 million-barrel decline.
UK will announce its second estimate GDP while the USA will release unemployment claims, goods trade balance and preliminary wholesale inventory later today.

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Final foresight before OPEC’s official meeting on May 25th

OPEC and its non-OPEC allies oil producers, today in Vienna went closer to agreeing on prolonged output cuts.

The OPEC will tomorrow definitely decide on whether to prolong the accord reached in December.

Market participants expect an extension by nine months. Supported by the scenario in which OPEC’s main member Saudi Arabia and top non-member Russia agreed this month they would support such a move.

Kuwait on Wednesday gave a signal that OPEC could possibly discuss deepening the cuts.

Countries including  Algeria, Kuwait, Venezuela, current OPEC president Saudi Arabia and non-OPEC producers Russia and Oman advised keeping the cuts “at the same level”.

The Ministerial committee said in a statement it had recommended extending the cuts by nine months to March 2018.

 

Energy Ministers

When asked about the period in which the cuts are going to extend, Saudi Energy Minister Khalid al-Falih confirmed it will be a nine-month extension.

“Before the end of the year, prices may go above $55 a barrel.” (Noureddine Boutarfa)

The further extension by 9 months will help rebalance the market faster.  This is a fact on which Saudi Arabia and Russia agreed. It would be more beneficial than the previous 6 months agreed. This will prevent crude prices gaining levels below $50 per barrel.

“OPEC has already achieved a lot. They stopped the oil market surplus from building even before they started cutting.” said Gary Ross (for Reuters)

The majority of OPEC ministers including Iraq’s have already voiced support for extending cuts by nine months.

Bijan Zanganeh, Iranian Oil Minister who was pretty conflicting with Saudi Arabia in most previous OPEC meetings, now said extensions of six or nine months were possible. Zanganeh is due to arrive in Vienna today.

 

Deeper Cuts

Current OPEC’s cuts are helping the oil prices to stay at levels above $50 a barrel. It is giving a fiscal support to producers. Among producers there are many countries which heavily rely on their energy revenues. And that is their way to tap holes in their budgets.

Observing the 2014, and its Oil price decline..It led to Russia and Saudi Arabia’s agreement to force the lower production in some countries, in order to keep the kind of a balance in the market. These also led to the unrest in countries such as Nigeria and Venezuela. And impacted the everyday life of people in these countries.

A substantial deeper cut was unlikely “unless Saudi Arabia initiates it with the biggest contribution and is supported by other Gulf members”.

By 13:40 GMT on Wednesday, Brent crude was trading loosely flat just above $54 a barrel.

 

OPEC goals

”OPEC has a self-imposed aim to bring the stocks down from a record high of 3 billion barrels. And lead them to their five-year average of 2.7 billion.” (Reuters)

Boutarfa explained that he believes stocks remained stubbornly large in 1H17 because of high exports from the Middle East to the United States.

“Thankfully, things are improving and we started seeing a draw in inventories in the United States.” Boutarfa said

”I believe that inventories should decline to their five-year average by the end of 2017.”

Some sources said the OPEC association could also send a message about tighter exports.  However it was not so clear how would they present that on Thursday.

Tomorrow is the day when Final decisions are taking place in Vienna. It will have huge impact on market movements, and it will also strongly affect the Oil market rebalance in medium-term.

 

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Gold dips impacted by macroeconomic factors

Top things to know in today’s Market

  • China downgraded by Moody’s for first time since 1989
  • Metals slump on China downgrade
  • Fed minutes on tap
  • Gold dips, dollar steady ahead of Fed minutes
  • Oil continues bullish run ahead of OPEC meeting

For further info on these 5, visit: www.investing.com 

 

Gold prices

European trade today saw the plummet in Gold prices. It happened as investors are looking ahead to minutes of Fed Reserve’s latest policy meeting. It will bring out the further hints about the timing of next U.S. rate hikes.

Comex gold futures went down for $6.20, or around 0.5%. To the new price of $1,249.21 a troy ounce by 3:25AM ET (07:25GMT). Meanwhile, spot gold was at $1,249.52.

Previously, on Tuesday, gold lost about $6.00 per unit. Due to lower dollar and its six-and-a-half-month lows

 

Fed meeting

The Fed is going to release minutes of its most recent policy meeting at 2:00PM ET (18:00GMT). Currently, the traders are seeking further insight into the likelihood of higher interest rates in the following months.

The Fed’s publication will also provide some details on the Fed’s agreements about shrinking its huge $4.5 trillion balance sheet.

Interest rates of the United States central bank remained unchanged. This way they gave the positive evaluation to U.S. economy. It will probably still be on track for two more rate hikes of the current year.

U.S. economic data

At the moment, the U.S. economic data is a bit shaken by political turmoil in the White House. So the data combined with possible deepening political unrest is raising doubts over the Fed’s power. And its ability to boost rates as much as it would want. Speaking about the period till the end of 2017.

 

Currencies & data

The dollar index was at 97.32 in London morning trade. It fell to the lowest since November 9. Reaching the level at 96.70 at the start of the week. This happened due to political uncertainty surrounding the President Trump’s administration. It pressured the dollar lower.

Investor sentiment has been hit by fears that the U.S. political system could become swallowed by crisis. It could possibly prevent lawmakers from pushing through tax or spending reforms. Which certainly would not be good for U.S. economy.

On the Comex, silver futures declined 17.3 cent. In percentage that is about 1%, to $16.96 a troy ounce.

Observing the global metals trading, platinum slipped 0.8% to $941.60. While palladium dipped 0.2% to $770.58 an ounce.

Copper futures fell 0.9 cents to $2.587 a pound.

Moody’s Investors Service downgraded China’s credit ratings on Wednesday. And significantly by one notch to A1 from Aa3. Quoting expectations that the financial strength of the world’s second-biggest economy would maybe erode in the coming years.  Because growth slows and are being followed by debt which continues to rise.

 

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BHP enforces to dredge new nickel mines in Western Australia

Today’s Morning trade Global

Base metals prices on the SHFE were mainly lower today. The copper prices were oscillating between slight gains and losses. As consolidation set in following the rally seen since May 19.

The most-traded July copper contract on the SHFE was unchanged at 45,770 yuan ($6,644) per tonne. As of 05:00 BST. Around 163,000 lots of the contract have changed hands so far.

In the meantime, three-month copper contract on the London Metal Exchange fell $45 to $5,669 per tonne.

The existing rally in copper prices since late last week is mostly driven by macroeconomic factors. For example a weaker dollar, stronger crude oil prices, etc… 

“So far this year, SHFE copper prices have tended to move lower after rebounding for a short while. We think fluctuations will continue for copper prices as it seeks its low for this year.” (Beijing analyst said)

“There has been some supply disruptions. But it was not enough to cause prices to surge. Which means the problem could be with demand.”

 

China’s rating

On Wednesday, Moody’s downgraded China’s rating to A1 from Aa3. Happened on expectations that China’s financial strength will erode somewhat over the coming years. With economy-wide debt continuing to rise as potential growth slows.

“While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt. Also the consequent increase in contingent liabilities for the government.” (Reuters reporting on China’s subject)
After falling to as low as 96.79 on Monday a rebound in the dollar index on Tuesday also checked investors’ appetite for commodities.

Crude oil prices were supported by expectations that members of the OPEC will agree to extend their supply cut into next year during their meeting in Austria on Thursday May 25.

 

BHP – New Nickel Mines

 

BHP Billiton is looking for environmental and ecological approval. In order to dig two new mines to extend the life of its Nickel West unit. The planned mines are located in the state of Western Australia.

One of the world’s top nickel producers – Nickel West, applied for EPA of Western Australia. It is the Environmental Protection Authority. According to info found on their official site, the company asked to clear 842 hectares (2,080 acres) for two open pit mines.

BHP has earmarked about $2 million per month during 2016 and 2017 for making improvements at Nickel West. (Reuters)

Nickel West gets lots of the concentrated ore it uses, to feed its 100,000 tonnes-per-year Kalgoorlie nickel smelter, from its neighbor Mount Keith mines. It also has deals with other miners operating nearby for additional feed.

“At the current rate of production, the resource supporting Mount Keith will need to be sustained from other ore sources at some stage over the next five years.”

“Securing environmental approval for the proposed Mount Keith Satellite Project will help to ensure Nickel West has a strong future and will continue to make a significant economic contribution.” (BHP)

 

Nickel prices

Observing the period of past 6 years, the Nickel prices have fallen nearly 70 percent, due to a global supply glut. The 70% is serious number, and it affected the market firmly.

”BHP booked a $1.25 billion after-tax impairment on Nickel West in 2013. A year later, following an unsuccessful sales process, BHP took Nickel West off the auction block.” (Reuters)

 

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Oil prices rise, as OPEC’s decision is getting closer

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Tuesday’s Oil prices were a bit volatile, but now Oil rose again on expectations of OPEC’s output cuts extension. As Thursday is nearing, the OPEC meeting is giving a support to global oil prices. There were some losses earlier today in the session. After White House said it would sell off half of the country’s oil stockpile. But as it turned out, this intentions were not strong enough to impact the oil price seriously.

Brent crude LCOc1 traded up 7 cents at $53.94 per barrel at 1348 GMT (9:48 a.m. ET), after a low of $53.20.

U.S. light crude CLc1 was up 10 cents at $51.23.

The OPEC countries, onwards with Saudi Arabia, and other producers including Russia will meet on May 25. They are going to extend a pledge to cut output by 1.8 million barrels per day (bpd). The cuts might possibly go even deeper. And they will last at least until March 2018.

The cuts were initially agreed to last six months until the end of June. But as discussed later, it is decided that Oil market would gain better back up if the prolonged cuts last 9 months.

 

Kuwait

Essam al-Marzouq, Oil Ministed of Kuwait said today that not all OPEC countries and its allies supported a nine-month extension. So the producers would discuss this week precisely whether to extend output cuts by a six or nine months.

There are many sources which say that they predict a smooth meeting with a nine-month extension likely to be agreed.

“OPEC meets on Thursday amid increasing optimism that the production cuts agreed last November will be rolled over and most likely to the end of 1Q18,” Colin Smith, analyst at Panmure, said in a note on Tuesday, adding he expected a rollover would “likely deliver a significant tightening of the market.” (Reuters)

 

Early trade today

Earlier today, oil prices declined a bit, on the White House plan to sell off half of the nation’s 688 million-barrel oil stockpile.

The budget, to be delivered to Congress on Tuesday, is only a proposal. So it will not take the real effect in its current form.

“Congress needs to agree to this which is rather uncertain,” said Carsten Fritsch, commodity analyst at Commerzbank. (Reuters)

 

Allies in OPEC deals

 

Carlos Perez, Ecuador Oil Minister said OPEC and other oil-producing countries are going to discuss a six- or nine-month extension to output cuts and probably choose the latter.

“Six and nine months are both proposals on the table … we will support the majority, probably the nine months.” Perez told reporters after arriving in Vienna today.

When asked whether deeper cuts would be discussed, he said: “Not at this point, I don’t think so.”

Noureddine Boutarfa, energy minister of OPEC member Algeria, said OPEC was discussing a possible nine-month extension, with curbs kept at the same level as under the group’s existing deal.

“Right now we are talking about nine months,” Boutarfa said.

Khalid al-Falih also arrived in Vienna on today, but didn’t want to comment to reporters.

There were some comments among delegates that they do not expect major surprises. Everything is pretty clear so far.

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April Copper imports in China: Fall of 41% due to tighter financial regulation

May 23rd; Main events in financial market:

  • Sterling slips after deadly Manchester terror attack
  • Global stocks mixed in cautions trade
  • Oil price oscillates as OPEC meeting draws closer
  • Euro zone business activity rises at fastest pace since 2011
  • Bitcoin keeps growing; tops $2,200

For further info on these subjects, visit: www.investing.com

 

The monthly analysis

Firstly, if compared to a period of year ago, China’s refined copper imports fell by 41%. This shows that traders buying power was affected by strained access to credit.

The China’s imports of refined copper fell down to 202,645 tonnes previous month. It is the lowest level seen since February. And compared to March levels, it sees the 18 % down.

Observing the January – April period, China’s refined copper imports have slumped. Coming to the lower levels of 31 percent compared to the last year. Those were impacted partly byChina’s credits & because short-term interest rates and banks became more reluctant to lend.

“In general, metals traders have been suffering from rising financing costs, fierce competition and a slowing economy.” Said JP Morgan in a report.

 

Chinese banks & credits

“While Chinese banks have anecdotally been maintaining existing credit lines for metals-based companies, it has become increasingly hard to get approval for new lines of credit.” (Reuters)

China’s top leadership and their officials have set list of priorities in country’s economy, aimed for this year. The main priority is indentifying the containment of financial risks and asset bubbles. Due to this, China has elevated the short-term interest rates.

It continued with imports of more copper scrap. Those imports were up in the first four months of the year, for 18 percent. That happened after the surge in prices of late last year encouraged and gave a support to a flood of scrap metal back into the market.

 

Concentrate imports

Observing the copper concentrate imports: They continued to grow, even in April. When compared to a period of year ago, they were up 7.7 percent. And they are in line with the year’s trend.

The slight decline in production happened in Chile, caused by a strike earlier this year. But this was more than offset by almost 60 percent jump in imports from Peru. Which than compensated the amounts, and brought a certain balance to the market. However, China’s imports went way lower.

China’s exports of refined copper fell in April from the same month year earlier. But on the other side, they are now at nearly 125,000 tonnes . Which is up 65 percent if observed year to date.

Copper is one of the most ”popular” amid base metals and their trade. China has definitely set a list of priorities in order to stabilize the market. And precisely wants to see if the parts of financial regulation are doing fine with the market aims. What is the key which will connect all the market participants, and bring the balance to country’s imports, exports, trades, production, and all the accompanying businesses, the time will soon show.

 

 

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One-fifth of Mongolia to be opened for digging

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Mining industry executives expect new mining boom in Mongolia. It is going to start very soon. It will open about 21% of country’s territory. Which is more than one-fifth, in order to explore its mining potential.

Mongolia goes through financial IMF-led bailout. And it currently removed the main obstacle of $5.5 million which was affecting its economy. It was a Mongolian banking law, that had required big companies to refer their sales revenues from foreign investments through Mongolian banks. Later it made a proposal to explore wider area of Mongolian territory.

 

Reforms

 

Reform, followed by further steps, all in order to open the mining sector, would definitely see the industry & investment grow.

“It is an important thing for Mongolia as a whole. I think the reaction and the commitment you are seeing from the Mongolian government over the last two weeks to repeal this tax, it shows its firm commitment to really get the foreign investments going and particularly that is very much settled on the mineral exploration and the mining industry in Mongolia.” Andrew Stewart, CEO of Xanadu Mines said.

By some CNBC reports, Stewart also spoke about Xanadu’s flagship Kharmagtai project. Its location is 120km south of Oyu Tolgoi. And it demonstrates that Mongolia offers increasingly favorable odds for discovering significant copper and gold deposits. When compared to mature mining jurisdictions, for example Canada & Australia.

IMF data shows that the economy only grew 1 percent in 2016 from 2.4 percent in 2015.

 

Numbers

By exploration, and Mongolian government efforts given in the mining potential, the country can meliorate its economy. Rise its GDP and of course the economic security which follows. Dashdorj was said to have remarked that the landlocked country bordering China and Russia and among the top 20 countries by landmass needs to take the step to resolve economic woes that go back several years.

Encouraging exploration is crucial for the healthy mining industry. When government gives the effort in structural changes in the industry there exists a great platform on which country can establish its capacities.

 

Mongolia’s growth in 2H17 and 2018

Mongolia’s growth will definitely accelerate this year. Supported by these huge mining investments. Info are coming from Asian Development Bank and its 2017 Outlook report. The forecast says growth will accelerate 2.5% this year, but will be around 2% in 2018. Followed by the base effect of upsurge in coal production in 2017.

This is based on the assumption that investment in the second phase of Oyu Tolgoi mine will rise from $200 million last year to $1 billion in 2017 and $1.2 billion in 2018.

While Oyu Tolgoi is Mongolia’s highest profile mining operation, the country plays host to a number of the copper, gold and coal mines.

Mongolia is a country richly provided with mineral resources.  The Erdenet Copper Mine has been operating for several decades and the indications are that there is still a number of decades of mine life to come.

 

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Base Metals & New electric vehicles

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Further production of Electric vehicles will rise demand for base metals

Electric vehicle market will to boost for 13.7% of global car sales in 2025. This means that copper, aluminium and nickel could highly benefit on these movements.

If we estimate a situation in which 100% of the world’s vehicles were electric, this would impact a copper demand growth of 21%. (Compared to a current growth). Later, the aluminium demand would rise by 13%. While Nickel would see incredible boost of demand for INCREDIBLE 118 % ! Rare metals, such as , lithium, cobalt and graphite would also face a rising demand.

”These figures were based on findings by analysts who physically took apart an entry-level Chevrolet Bolt to see what it contained. ” (Metal Bulletin)

There were comments on how aluminium demand would also rise.

Due to the electrical infrastructure required to fuel the vehicles. These facts were not explained to the fullest.
In 100% electric vehicles scenario, platinum group metals were forecast to see a 53% drop in demand. Steel would see a marginal decline in demand in the context of the global steel market.

“We are more convinced than ever that electric cars will reach the tipping point in the penetration curve in the next few years.”

“This new generation of electric cars has far-reaching implications. For not only the global auto industry but also for many other sectors, such as capital goods, chemicals, mining, technology and energy.” (UBS Research)

The new models of electric cars are going to enter the market soon. For example, the Tesla Model 3 is going to hit the market in upcoming years. UBS Research expects that 14.2 million electric vehicles will be sold in 2025.

 

 

Second successive month of strikes in Grasberg copper mine

Numbers of workers at Grasberg mine, from the workers union decided to go on a second-month strikes. It is the 2nd consecutive month. Because the strikes started in May, and it was expected that they would be one-month long.

“Yes, the strike will go on for a second month.” union representative Tri Pusputal said on Monday May 22.
Freeport is frequently operating under a temporary export permit. To ship copper concentrates out of Grasberg. It is in the Indonesian territory of West Papua, after the government lifted an export ban in April.

The Freeport has been able to ship material to key customers in Japan, South Korea, India and China. But despite that, production at the mine has been affected over the past month by the May strike.

There is another obstacle in Freeport’s production in Indonesia. The company delayed 86,000 tonnes of contained copper.

And also reported that red metal sales coming straight from the mine were down. In percentage, for almost 28% in the first quarter of 2017. Due to this ban.

Grasberg is the world’s second largest copper mine by production. Mining 680,000 tonnes of copper in concentrate during the course of 2016. It is also the second largest for gold – producing 42.3 tonnes in 2015.

The extension of Grasberg mine strike could affect further production and further gains in copper concentrate TC/RCs.

Which confirmed to a three-month high of $80.5 per tonne/8.05 cents per pound. (According to the Metal Bulletin reports)

When asked to comment, the Freeport was not available.

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OPEC, hedge funds and the Sistine Chapel

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The most important Events in the Market Today:

  1. Oil is extending rally as investors wait for OPEC meeting on Thursday
  2. Global stocks mostly higher as markets recover poise
  3. Dollar creeps up off 6-month lows
  4. British pound slides as U.K. threatens to quit Brexit talks
  5. Bitcoin tops $2,100 for the first time!

For further info on these subjects, visit: www.investing.com

 

OPEC story

The story begins in the summer of 2016. Mohammad Barkindo had met Ed Morse in the Vatican’s Sistine Chapel.

It was unusual encounter which led to a later numerous important events.

The chat between two of them, at an energy industry event held in the Chapel, has caused OPEC to reshape the way of doing its businesses. It changed the way OPEC deals with hedge funds. And as well its influence in global oil market.

Barkindo, having had to deal with an oil price slump of that time, told Morse that OPEC aims to understand the way financial players worked in the oil markets.

“It was at the Vatican that we first discussed the idea of OPEC reaching out to the financial players in the oil markets.” (Barkindo)

“The world of oil has changed, including the fundamentals and its dynamics. And so must OPEC.”

He said Morse helped in organising a meet up for OPEC officials with hedge funds at the end of 2016.

“We went further to break the Berlin Wall with tight oil producers and met them in Houston in March.” (Barkindo said for Reuters)

 

Khalid al-Falih and his team

 

In different locations and meetings, Khalid al Falih and his team held discussions with hedge funds. They also met top trading houses Vitol and Litasco in Vienna in November, before the previous OPEC meeting. (According to some non-official news.)

Falih’s predecessor, Saudi oil minister Ali al-Naimi, often took advice from oil market consultants, but also often gave advice to hedge funds saying: “Leave the market alone”.

Now the situation has changed.

“As the market got increasingly financialised, the Saudis and others at OPEC understood and accepted it is not just driven by fundamentals and decided it was worth engaging with those who move the market short-term.” (Reuters)

 

Whatever it takes

Observing the past two months, Falih has couple times used the phrase by Mario Draghi, from his successful bid to defend the euro.

OPEC will do “whatever it takes”, to reduce the oil glut, says Falih.

Hedge funds bought firmly into the oil market late last year. When it became apparent OPEC is going to cut production. They have heavily sold those positions in recent weeks, stalling a recovery in oil prices near $50 a barrel.

“It is exceptionally important for producers to understand the behaviour of financial market players and what they think about future price trends.”

This time OPEC will definitely do whatever it takes to achieve the kind of equilibrium, and stability in global Oil market.

 

 

 

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