jueves, 4 de julio de 2013

jueves, julio 04, 2013

July 2, 2013 5:21 pm
 
Crude at $100 defies commodities sell-off
 
On the face of it, oil has defied gravity. Amid a deepening sell-off in commodities that has sent gold and industrial metals tumbling, crude has been impassive.
 
As a transport fuel, oil is closely linked to the ups-and-downs of the world economy. Yet, benchmark Brent has held steady above the $100 a barrel level even as metals have floundered amid concern at slowing Chinese growth and the prospect of reduced emergency support from the US Federal Reserve.
 
 
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For producers and consumers alike, the question is whether this resistance to falling prices in other commodities markets is temporary or evidence of more lasting resilience.

In the bullish corner stands the International Energy Agency. It has warned oil prices will have to rise over the next three months to accommodate demand from new refineries in Saudi Arabia and China.
 
Faster growing countries beyond Europe and the US have been adding refining capacity at breakneck pace in recent years, and these are likely to ramp up production regardless of the outlook for the global economy.
 
Crude supply would struggle to keep up with refining demand until price effects helped rebalance the market,” the industrialised countries’ energy watchdog said in its most recent oil market commentary. That could see prices heading back towards their high for the year of almost $120.

But the IEA view stands in contrast to the downbeat mood prevailing elsewhere in a market that is generally preoccupied with the twin threats of surging North American supply, and moderating demand from a slowing China.

In this more bearish view, the US shale revolution, along with higher output from Iraq, is likely to keep a lid on prices in the medium term. Due to a number of factors, that are increasingly well understood, oil is unlikely to break into a higher trading range,” says Edward Morse, head of commodities research at Citi.

In the short term, much will ride on which of these two interpretations holds sway in Washington, where pressure is growing to limit Iranian oil production further.

Iranian exports have halved since US-led sanctions were imposed at the start of 2012, with relatively little impact on the price of oil. But legislation currently before Congress would require a further cut of 1m barrels a day within a year, in effect reducing Iranian exports to zero.
 
The new US energy secretary Ernest Moniz told Reuters over the weekend that “markets could be quite resilient to” a further decline in exports, thanks to rising output elsewhere.

But, for some, this is a misreading of the market, and one which risks sending oil prices much higher. The reason is that the oil market may be tighter than it appears and that looking at levels of spare production capacity alone is misleading.

While light and sweet crude oil is in plentiful supply globally thanks to surging output from US shale fields, medium and sour crude oils are not, particularly in Europe, where the price of Brent, a blend of North Sea oils, is set. The EU has completely cut off imports of medium-heavy Iranian over the past 18 months while increased demand for Russian crude from domestic refineries and from Asia has limited the flow of Urals oil to Europe.

“Those arguing that shale can compensate for lost Iranian production are comparing apples and oranges,” says Yasser Elguindi, oil analyst at consultants Medley Global Advisors. “The argument doesn’t account for major differences between grades.”

Questions also remain over the level of spare production capacity available to compensate for any further reductions in Iranian output.

The case for further action against Tehran assumes that Saudi Arabia stands ready to increase output to support sanctions against its theological and strategic rival, as it did last summer. But Saudi output has already climbed to 9.6m b/d in May, according to the IEA, a jump of more than 200,000 b/d from April, which took production to a level not far short of the record highs seen last year.
 
Domestic Saudi demand is expected to rise still further over the summer, as the kingdom burns more oil to generate electricity for air conditioners. Although the Saudi can sustainably produce 12.3m b/d according to the IEA, it aims to maintain a large chunk of spare capacity at all times.

“Even if Saudi Arabia replaces Iranian oil barrel for barrel, the consequent reduction in spare capacity would create a risk premium in the market,” says Robert McNally, a former White House official, now head of the Rapidan Group. He argues that the US needs to prepare itself for higher oil prices as a result of tougher sanctions on Iran.

Even without further reductions in Iranian exports, the market is inching up on perceptions of growing risk in the Middle East. Brent has climbed $2 to within reach of $104 a barrel this week, as mass protests in Egypt have raised concerns about disruptions to tanker travel through the Suez Canal, a key choke point for the oil trade. Crude at $100-plus could be here for a while yet.

 
Copyright The Financial Times Limited 2013.

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