Posts By Nick Cunningham

Can We Expect An Oil Price Correction Soon?

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Oil prices touched a more than two-and-a-half-year high this week, but have faltered mid-week. Market sentiment is more bullish than it has been in a long time, but the risk of falling back is still very much alive. There has been a series of market forces that have come together, all at just the right time, to push Brent up into the mid-$60s per barrel. Falling inventories, near-unanimity from OPEC to extend the production cuts, a slowdown in U.S. shale, bullish positioning from oil traders and some unexpected unrest in the Middle East. Taken…

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Did Oil Markets Overreact To The Saudi Purge?

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Saudi Arabia’s powerful crown prince led a massive purge over the weekend, ousting around a dozen royal cousins in a bid to consolidate power. The removal and detentions of so many members of the royal family were ostensibly the outgrowth of an anti-corruption campaign, but the actions put the top security institutions under the control of the king and the crown prince after having been distributed among different family factions for decades. In essence, Crown Prince Mohammed bin Salman (aka, MBS) has ended decades of tradition and has consolidated…

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A Very Bullish Case For Commodities

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The fortunes of oil and gas producers have been dramatically different from metal producers this year. Energy prices have been lackluster, and energy stocks have fared even worse. Meanwhile, prices for a variety of metals have jumped sharply. Taken together, commodity prices broadly are more or less flat, but that obscures the very different performances between energy and metals this year. According to a recent report from Goldman Sachs, entitled, “Metals Shine as Oil Volatility Dulls,” demand for all sorts of commodities has been…

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600,000 Bpd At Risk As Venezuela Delays The Inevitable

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The debt situation is coming to a head in Venezuela. The Venezuelan economy has been in shambles for years, plumbing new depths when it seems that things cannot get any worse. All the while the Venezuelan government prioritized debt payments, even as people go hungry in the streets. But Caracas is running out of time and money. On Thursday, President Nicolas Maduro went on state TV and said that he would seek a restructuring of Venezuela’s debt. But he sowed some confusion by using different words for what he was seeking. As Bloomberg reported…

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The Remarkable Recovery Of Big Oil

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Royal Dutch Shell kept the party going this week, reporting a huge jump in profits for the third quarter. It is something of a clean sweep for the oil majors, who posted sizable increases in quarterly earnings compared to the same period a year earlier. Shell said its profit on a cost-of-supplies basis – similar to net income – hit $3.7 billion in the third quarter, more than double the $1.4 billion it took in a year before. The sharp improvement echoed the results of Shell’s peers, which reported a few days earlier. ExxonMobil…

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Why Oil Bulls Are Running Rampant

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Brent crude has successfully consolidated its position above $60 per barrel this week, and WTI is approaching $55 per barrel, which would be the highest oil price in more than two years. The gains come after OPEC officials have all but signaled that they will extend their production cuts in a few weeks at their meeting in Vienna. But crucially, an extension would occur at a time when the oil market has significantly tightened, bolstering the bullish momentum exhibited for crude prices. Evidence that the oil market is tightening can be found in…

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Is The U.S. Solar Boom In Jeopardy?

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The U.S. solar industry has surged in recent years, accounting for the largest source of new electric capacity in the past year, with plenty of room to grow. However, the Trump administration is weighing a trade tariff that could seriously curtail the explosive growth figures for U.S. solar. On Tuesday, the U.S. International Trade Commission (ITC) recommended a 35 percent tariff on imported solar panels in response to a complaint from a U.S.-based solar manufacturer over cheap imported panels. The trade case has been cited by the solar industry…

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Is Saudi Arabia’s Oil Strategy Working?

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The IMF estimated that Saudi Arabia will need oil prices to trade at about $70 per barrel in 2018 for its budget to breakeven, a dramatic improvement from the $96.60 per barrel it needed just last year. Saudi’s improvement is the most dramatic out of all the Middle Eastern oil producers, and it also suggests the combination of austerity, cuts to wasteful subsidies, new taxes and economic reforms are starting to bear fruit. The improvement is all the more important because Saudi Arabia and its fellow OPEC members are restraining output as…

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Can $60 Oil Last?

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Brent is back at $60 for the first time in more than two years, but the big question is: Can crude hold onto its gains? Oil prices firmed up in recent weeks, but held back from key resistance points—roughly $60 per barrel for Brent, and around $55 per barrel for WTI. Oil traders were reluctant to test the upper limits of the “shale band” at $60, a threshold that has repeatedly forced traders to liquidate their bullish bets or get burned. Top analysts argue that it would take something really significant to allow oil to break above…

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The Return Of Deepwater Oil

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In a historic auction for deepwater oil assets in Brazil, the oil majors showed up on October 27 and bought several offshore blocks, indicating a high level of interest in the country after a major policy overhaul allowed private investment. Royal Dutch Shell won half of the blocks that were offered, and Shell was already one of Brazil’s largest foreign investors. After purchasing BG Group for around $50 billion, Shell took a large presence in Brazil. The logic behind Shell’s strategy is that the company argues it can breakeven with…

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