Creating new perspectives since 2009
Items by John Kemp
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Oil consumption tracking is all about Asia
Oil market analysts must make sense of a bewildering array of statistics about production, consumption and inventories, compiled and published with varying definitions and degrees of accuracy and timeliness. The challenge is to form an accurate and nuanced picture of the whole market capable of generating useful forecasts, without becoming...
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Hedge funds polarised on oil by economy and supply threats
Hedge fund managers remain deeply divided about what matters more for the future direction of oil – intensifying fears about a global recession or Saudi Arabia’s production cuts and other supply disruptions. Hedge funds and other money managers sold futures and options equivalent to 25 million barrels in the six...
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Strait of Hormuz and the risk of uncontrolled escalation
The Strait of Hormuz, the narrow shipping lane between Iran and Oman named after the fabulously wealthy ancient kingdom of Ormus, has fascinated oil traders since the Iranian revolution in 1979. Iran has periodically threatened to close the strait to enemy shipping, while the United States and its allies have...
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Oil prices stumble as hedge funds become overextended
Hedge fund managers added even more bullish long positions in crude oil and refined fuels last week, but positions showed signs of becoming stretched, setting prices up for a setback, Reuters reports. Hedge funds and other money managers were net buyers of another 46 million barrels of futures and options...
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Trump and Saudi Arabia at odds over oil prices
US President Donald Trump and the Saudi government have closely aligned views on most issues but they disagree significantly on the desirable level for oil prices, which could become a source of volatility in 2019/2020. In keeping with his iconoclastic approach to governing, Trump has kept up a public commentary...
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NOPEC bills provide useful leverage for the White House
For a proposed statute still at the first stage of the legislative process, with only a handful of sponsors in the US Congress, the “No Oil Producing and Exporting Countries Act of 2019” (NOPEC) is generating a lot of comment. The amount of attention being paid to the proposed legislation...
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Saudi Arabia resumes familiar role as swing producer
Saudi Arabia has resumed its traditional role as the swing producer, sharply reducing its output to tighten the oil market and push prices higher, Reuters reports. The de facto OPEC leader has demonstrated, once again, that it can always tighten the physical market, boost prices and push the calendar spread into...
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Saudi energy minister goes to OPEC with a weak hand
Saudi Arabia’s energy minister, Khalid al-Falih, must play a bad hand of cards as well as he can at next week’s meeting of OPEC and non-OPEC oil producers in Vienna. Falih’s challenge is to get other countries on board with output cuts to avert another crash in oil prices next...
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Oil market power ebbs from OPEC to the troika
The Organization of the Petroleum Exporting Countries has been marginalised as critical decisions about the oil market are taken by a troika of the United States, Russia and Saudi Arabia. The rise and subsequent fall in oil prices this year has been almost entirely driven by production decisions in these...
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Trump presses home his Saudi oil advantage after Khashoggi affair
US President Donald Trump has in effect agreed to overlook the killing of journalist Jamal Khashoggi in return for Saudi Arabia’s help to contain oil prices and for its assistance in other areas. The United States and Britain have seized on the vulnerability of the kingdom and its de facto...
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Saudi Arabia's oil weapon doesn't work
Saudi Arabia is unlikely to employ its so-called “oil weapon” in the diplomatic crisis over the disappearance of a journalist after visiting the country’s consulate in Istanbul. Experience from the last time Saudi Arabia tried to use oil sales as a diplomatic instrument in 1973/74 shows such action does not...
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Oil prices ease as funds continue profit-taking
Hedge fund managers have continued to take profits on their bullish positions in crude oil as the late summer rally has faded and fears about oil consumption and the state of the economy have replaced concerns over sanctions on Iran. Fund managers cut their combined net long position in the...
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Trump sets implied oil price target below $80
The United States has sent mixed messages to OPEC and its allies over the last week about whether they need to do more to raise oil production and hold down prices. “The OPEC monopoly must get prices down now” President Donald Trump demanded on Twitter on Sept. 20. We protect the...
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Oil market balance of power shifts
The shift in oil market power away from OPEC towards a bilateral relationship between Saudi Arabia and Russia is the culmination of structural changes in oil production over the last 20 years. These shifts are deeply structural and have little to do with the personality or negotiating skills of individual...
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United States hints at sanctions waivers on Iran oil
The Trump administration’s top diplomat has indicated the United States might grant waivers to some countries allowing them to continue importing Iranian crude when sanctions snapback in November. “There will be a handful of countries that come to the United States and ask for relief,” Secretary of State Mike Pompeo...
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Could Saudi Arabia replace all the barrels lost from Iran sanctions?
The United States wants to eliminate all Iran’s crude oil exports from November, and is relying on Saudi Arabia and other OPEC and non-OPEC members to fill the gap in supplies. “Our goal is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales,” a senior...
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White House must choose between tough Iran sanctions and moderate gasoline prices
The White House can drive Iran’s oil exports to zero, or it can have moderate US gasoline prices, but it probably cannot have both. The awkward tension between the administration’s foreign policy priority (tough Iran sanctions) and its electoral calculation (to keep gasoline prices low) explains its increasingly frequent comments...
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Oil price rise poses challenge for sanctions policy
The United States and Saudi Arabia seem to have an understanding to keep the oil market well supplied and avoid a significant price rise after the US re-imposition of sanctions on Iran. But exactly what this involves is not clear to the market, and may not even be clear to...
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Saudi Arabia wants higher prices to kick oil addiction
Saudi Arabia’s financial position has stabilised as a result of the increase in oil prices as well as efforts to raise non-oil revenues and trim government spending. But the country probably needs even higher prices and revenues in the next few years to pay for its ambitious transformation programme while...
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OPEC must think about exit strategy
Smoothly exiting from the current output pact, and perhaps replacing it with another agreement, has become the most important policy question for the Organization of the Petroleum Exporting Countries and its allies. Under the current “declaration of cooperation”, issued in December 2016, OPEC with Russia and some non-OPEC countries have...
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Saudi Arabia cannot escape destiny as swing producer
Saudi Arabia has been forced to return to the role of swing producer in the oil market, despite the country’s insistence for three decades it would never play the role again. Saudi Arabia and its allies in the Gulf Cooperation Council (GCC) account for the majority of production cuts made...
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Trump's empty threat to stop buying Saudi oil: Kemp
President-elect Donald Trump is very unlikely to restrict imports of crude oil from Saudi Arabia despite threats to do so issued during the election campaign. Trump is first and foremost a showman and impresario rather than a policy wonk. Much of what he said on the campaign trail was intended...
