Although the FT's Mr. Cotterill delivers the expected virtuoso performance, the chorus, in the guise of the comments, is where the real action is at.
Smart crowd.
From the Financial Times'
Lex Live:
This is the transcript of the Live Blog session ending at 13:05 on 22 Oct 2014.
World crude prices have stopped falling precipitously – for now.
Plenty seem to be betting that prices can rise quickly from $85 a
barrel, if a ‘floor’ is not far below. Lex isn’t so sure – and in this
live note will look at the winners and losers of a longer oil slump.
Join us at 12pm London for the discussion.
Hello. Welcome to Lex Live – and another of Lex’s experiments in
writing a note ‘live’, giving you the ability to tell us how silly we
are in real-time. EXCITING!
Today we’re looking at the oil market – and essentially, whether the
recent end to the slide in prices actually is much of a turning point.
That means I (with my colleague Alan Livsey) will be looking at:
- How the market is positioned
- Whether supply disruptions will boost prices
- How low a price Gulf producers can get away with, fiscally
- And something of an elephant in the room – demand in Asia.
We’ve been doing a few notes recently on these subjects. So first, let me bring them up …
Firstly – Lex’s big view on the oil price collapse last week was that
Asia is a large factor, actually. Not least, Saudi Arabia’s price cuts
seem to have been aimed at keeping market share in Asia.
Here’s a taste:
This volatility has led to attempts at psychoanalysis. Saudi price
cuts are “really“ about geopolitics, Russia or finding the lowest price
at which US shale production becomes unviable ($80 a barrel,
supposedly).
The conspiracy theories ascribe too much power to Saudi oil
production. At about 12 per cent of the global total since 1975 (except
for the mid-1980s blip), Saudi share in oil is roughly equivalent to Rio
Tinto’s in iron ore: another market where big players overproduce
because they cannot sustain an all-powerful cartel.
There is also a simpler explanation. The market share Saudi Arabia
really cares about, for the medium term, is in Asia. The region will
import far more oil over the next decade.
We’re quite keen on the ‘Opec isn’t actually much of a cartel’ point. What do faulty cartels tend to do? Overproduce.
But here’s a contrary view, via Oxford Energy today
– Opec at least isn’t in as bad a spot as it was in the 1980s, when
oversupply in the oil market really did blow up prices quite badly.
I guess the standard objection here is would be that ten years is
nothing to the Saudis. They want a market that is oversupplied for a
sustained enough period that lots of investment in marginal supply, from
Iraq to the US, is dropped
Well, you can also see the point made by Oxford Energy there about
the outlook for demand looking better in 2014 vs, say, 1984. Which would
help Saudi while it’s busy knocking out swing barrels in shale.
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MUCH MORE
