6 Apr 2015
Further pressure ahead for Oil – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Research Team, comments on the key factors which might weigh on oil prices, and further mention that global price pressure will intensity in the year ahead even if oil prices do not increase from present levels.
Key Quotes
“The preliminary and framework agreement tentatively reached over Iran’s nuclear program does not mean sanctions will be immediately lifted. The political opposition in Washington and Tehran, let alone Jerusalem and Riyadh, should not be under-estimated, could still scupper the deal.”
“Nevertheless, the prospect of more Iranian oil adding to the world’s surplus output is negative for prices, especially for Brent, with which it competes most directly.”
“Middle East and Asian refineries are preparing for seasonal maintenance. By increasing supply, it may also weigh on prices. We are also concerned that hedges put on last September-October have begun rolling off, and the establishment of new hedges may weigh on prices.”
“After being nearly halved over the past six months, the shuttering of US oil rigs has begun slowing. The growth in US output has peaked or nearly so.”
“At the same time, the capital life blood of many shale producers will be reduced as banks reassess the value of the collateral (oil reserves) used to secure funding. This may lead to more industry rationalization through liquidation and acquisitions.”
“The sharp drop in oil prices in the second half of last year has been the single biggest factor driving down measured inflation.”
“As the year progresses, it will slowly drop out of year-over-year comparisons. Toward the end of the year and into next year, price pressures globally will intensify even if the price of oil does not increase much from here.”
Key Quotes
“The preliminary and framework agreement tentatively reached over Iran’s nuclear program does not mean sanctions will be immediately lifted. The political opposition in Washington and Tehran, let alone Jerusalem and Riyadh, should not be under-estimated, could still scupper the deal.”
“Nevertheless, the prospect of more Iranian oil adding to the world’s surplus output is negative for prices, especially for Brent, with which it competes most directly.”
“Middle East and Asian refineries are preparing for seasonal maintenance. By increasing supply, it may also weigh on prices. We are also concerned that hedges put on last September-October have begun rolling off, and the establishment of new hedges may weigh on prices.”
“After being nearly halved over the past six months, the shuttering of US oil rigs has begun slowing. The growth in US output has peaked or nearly so.”
“At the same time, the capital life blood of many shale producers will be reduced as banks reassess the value of the collateral (oil reserves) used to secure funding. This may lead to more industry rationalization through liquidation and acquisitions.”
“The sharp drop in oil prices in the second half of last year has been the single biggest factor driving down measured inflation.”
“As the year progresses, it will slowly drop out of year-over-year comparisons. Toward the end of the year and into next year, price pressures globally will intensify even if the price of oil does not increase much from here.”