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13-OCT-2014 Who Kneecapped Oil?
I have followed the oil market for eternity and the recent price
action is best characterised as unprecedented and white-knuckle.
In fact, the oil market has always been very high beta and exhibits
magnified price reactions to the demand and supply dynamic. Where
markets are net short, price setting can be determined by the last
buyer who is paying up in a net supply deficit scenario and that's why
you see those big price spikes around futures expiry. However, this is
a binary thing. In a situation where there is a net surplus, the price
setter can be those last sales transacted at deep discounts.
The conditions [and I will explain them momentarily] are optimal for a
complete wash-out [a 'blow-off bottom' was more earthy description in
my time] down as far as $50 a barrel. Markets over- shoot, crude oil
does it big time and any and every model needs to consider such a
The big game-changer has been US crude output which rose from 5.7
million barrels per day in 2011 to 8.4 million barrels in the second
quarter of 2014, a remarkable 47 per cent gain, and touched 8.88
million barrels a day last week, the most since March 1986, according
to the US Energy Information Administration.
In its monthly oil market report, OPEC said output increased by
402,000 barrels a day in September to 30.47 million, representing the
biggest monthly gain since November 2011.
Iran and Saudi Arabia are offering their oil at the deepest dis-
counts since 2008. Essentially, the global system is awash in oil and
the US has displaced a lot of imports and these displaced barrels are
being offered at fire sale prices.
President Obama and his administration is the answer to my question:
who kneecapped oil prices?
In fact, as long ago as 2011, Thomas Donilon, who was then a US
national security adviser, was signalling this and very clearly.
"America's new energy posture allows us to engage from a posi- tion of
greater strength. Increasing US energy supplies act as a cushion that
helps reduce our vulnerability to global supply disruptions and price
shocks. It also affords us a stronger hand in pursuing and
implementing our international security goals."
The US administration has turned price slasher and like in Alfred
Hitchcock's totemic movie "Pyscho", oil has been sliced up real good.
The US has flooded the oil market and the commodity is now a
geopolitical spear [Michael Klare and Tom Engelhardt].
It is the US that is the new price setter for the oil markets and this
is a deep and important geopolitical development. The new price levels
will have immediate and enormous geopolitical and financial knock-on
effects. It will place intolerable pressure on oil producers and
particularly those operating from a higher base price.
It is not too difficult to calculate who are the biggest losers in
this new price normal, and Vladimir Putin's Russia springs to mind
.@Lagarde Says African Nations Should Consider Oil-Subsidy Cut @IMFNews @Bloomberg
African nations should consider cutting fuel subsidies and oil
exporters must curb spending as a slump in crude prices takes its toll
on government revenue, International Monetary Fund Manging Director
Christine Lagarde said.
An almost 60 percent drop in oil prices since June has forced policy
makers in Nigeria, Africa's biggest crude producer, to devalue the
currency, raise interest rates to a record and consider shaving the
2015 budget by 8 percent. As President Goodluck Jonathan seeks
re-election on Feb. 14, he's avoided further cutting fuel subsidies
that cost as much as $7 billion a year, after an attempt to do so in
2012 sparked protests.
Subsidizing countries "should think about reducing and phasing out the
oil subsidies, taking advantage of the oil price and using public
finance more wisely than in undifferentiated energy subsidies,"
Lagarde said in an interview on Wednesday in the Rwandan capital,
Kigali. "For the exporting countries that are clearly taking a hit on
both accounts of reduced trade revenues and reduced public revenues,
they have to be very cautious with public spending, and reduce what
can be reduced and use whatever is left over as buffers."
Fuel subsidies in Nigeria cost as much as $7 billion a year, while in
Angola, Africa's second-biggest oil producer, the government is
seeking to lower subsidies to 1 percent of gross domestic product from
The IMF last week lowered its 2015 economic-growth outlook for
sub-Saharan Africa to 4.9 percent from a previous estimate of 5.8
percent in October, citing "shocks" to oil-producing economies from
falling prices. The growth forecast for Nigeria, the continent's
largest economy, was lowered to 4.8 percent from 7.3 percent.
"Shortly after the elections the authorities will have to reassess the
situation in view of the continued decline of oil prices to see if
more needs to be done," said Lagarde. "They may have to take more
Negotiations with Ghana over a loan program are continuing in order to
resolve "a few issues" before a proposal can be submitted to the IMF
board for approval, said Lagarde.
The West African nation is seeking as much as $1 billion in aid from
the lender to help ease a crisis sparked by a depreciation in the
currency and soaring public debt. The government expects to enter the
loan program by the end of February, according to Deputy Finance
Minister Cassiel Ato Forson.
In the Ebola-stricken nations of Liberia, Sierra Leone and Guinea, the
IMF will probably propose additional support valued at $130 million,
along with considering debt relief through, at least in part,
"re-purposed funding," she said. The viral illness killed at least
8,785 people in the three West African countries since an outbreak
began in Guinea in December 2013, according to the Centers for Disease
Control and Prevention.
A precautionary credit line for Kenya, East Africa's largest economy,
will probably be concluded by next month, said Lagarde. The IMF said
in November it had reached a preliminary agreement with Kenya for a
$750-million standby loan to help protect the economy against possible
Ghana Stock Exchange Composite Index Bloomberg -4.17% 2015
Ghana's cedi will be much more stable this year, after slumping 31
percent against the dollar in 2014, as it will be supported by robust
interventions, a senior central bank official said on Wednesday.
Yao Abalo, head of treasury at Bank of Ghana, told Reuters that the
central bank viewed the current pressure on the cedi as seasonal and
temporary, and had begun boosting liquidity support to calm market
"We have started increasing our support for the market and we will
continue to do so vigorously this year, in addition to other plans to
ease foreign exchange uncertainties," he said. He did not give details
of what those plans were.
17-NOV-2014 Dwindling Oil Fortunes Not Good For Kenya
Madagascar could lose battle against locusts if funds don't come, UN warns
Ethiopia expects to open a new railway line linking the capital Addis
Ababa with the Red Sea state of Djibouti in early 2016
In the capital, a new $475 million light railway system will be tested
in the next few weeks before scheduled services start. It will be the
first city metro to operate in Sub-Saharan Africa.
For now, logistical difficulties such as poor roads and an old fleet
of trucks mean transporting goods from the capital to Djibouti can
take days. The new railway line will cut the journey time to about
"It is a game-changer for us," said Getachew. "It will be one of the
most vibrant economic corridors in the world."
Stanbic Bank Uganda (SBU) has signed an $85 million, 18-month loan to
fund its general business activities, the first time it has borrowed
from international loan markets, the main arranger of the facility
said on Wednesday.
The lender joins a flurry of sub-Saharan African banks that have
tapped loan markets in recent weeks, as local institutions look to
increase their funding bases and international lenders seek higher
returns in emerging economies compared with the low interest rate
environment back home.
SBU will use the funds to back lending for trade-related finance in
chosen sectors such as energy, manufacturing, and infrastructure among
It is paying an interest rate of 250 basis points over the London
interbank offered rate (Libor), a statement from Dubai's Emirates NBD
The loan was originally targeting $75 million but was increased due to
interest from banks wanting to back the deal. The final list of
participants included Al Ahli Bank Kuwait, Al Khaliji Commercial Bank,
Commercial Bank of Qatar and Standard Chartered.