OPEC outlook sees US influencing global crude markets until 2025.

OPEC outlook sees US influencing global crude markets until 2025.

The Organization of Petroleum Exporting Countries expects US unconventional crude oil production from tight shale formations to increase the country’s global market influence through 2025, the chief economist for the cartel said on Dec. 7.

But Middle Eastern and Persian Gulf producers appear likely to regain their global market leadership by 2040, he added during a discussion about OPEC’s 2017 World Oil Outlook at the Center for Strategic & International Studies in Washington, DC.

“Tight oil supplies are the wild card. They have reshaped the global outlook in recent years,” observed Ayed S. Al-Qahtani, who directs the research division at the OPEC Secretariat in Vienna. “US tight oil supplies will be the most important contributor but are expected to reach their peak around 2025.”

Producers in the Middle East, most of which are OPEC members, have supplies that are relatively less expensive to produce, but about $10.5 trillion of investments will be required in the next 23 years, he said.

“We expect their exports to increase significantly after 2025, mainly to Pacific Asia,” said Al-Qahtani, adding that the forecast suggests demand will rise the most in China and India through 2040.

The outlook forecasts that global crude oil demand will climb to 102.3 million b/d by 2022 from 94.5 million b/d in 2016. Al-Qahtani said it appears likely to rise more quickly through 2020, when International Maritime Organization regulations for bunker fuels are due to take effect and more low-sulfur diesel fuel could be needed.

“In the longer term, we expect demand to reach 111.1 million b/d by 2040,” he said. “Most of this will be in transportation, where competition from alternative fuels is weakest.”

The number of passenger cars worldwide could double by 2040, largely driven by increases in economically developing countries, with electric vehicles representing 12% of the global fleet, Al-Qahtani said.

Downstream trends

“Downstream, refining capacity could increase by 19.6 million b/d by 2040, with Asia-Pacific and Middle East countries accounting for almost 70% of the total,” he said. “We expect refiners to add capacity in the middle of demand centers because that’s where the customers are.” About $1.5 trillion of investments will be needed to accomplish this by 2040, he said.

Al-Qahtani said OPEC anticipates that total worldwide energy demand will climb 35%, or about 96 million boe/d, through 2040. Crude oil appears likely to remain dominant as natural gas gains the most ground. “Fossil fuels are expected to remain dominant,” he said. “We expect technology, as well as policies, to continue driving emissions reductions and energy efficiency.”

Developing countries also appear likely to drive long-term economic growth globally, Al-Qahtani said. “Demand in [Organization for Economic Cooperation and Development] countries should peak in the early 2030s as their governments try to move from oil and coal to renewables out of climate concerns,” he said.

Responding to an audience member’s question, Al-Qahtani said it is OPEC’s policy not to try and predict specific prices. “We know that costs are going up, and we’re running out of cheaper supplies. That suggests prices will be higher, even without additional taxes,” he said.

“Predicting depletion rates is difficult. It’s hard to predict when you’ll run out of a resource,” he said. “I think profitability is the most important factor in deciding how long to produce something.”

Frank A. Verrastro, a senior vice-president and trustee fellow at CSIS who moderated the discussion, said, “A lot has changed in the last decade. The US clearly has a different role now than it did before, but it also faces a lot of above-ground challenges. How these are handled could determine how long this country’s new market position will last.”

-Nick Snow at nicks@pennwell.com.-

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Gold Prices Hug on to Support.

Gold Prices Hug on to Support.

Gold prices are under pressure due to multiple reasons as lack of demand, growth of bitcoin market and strength of dollar weigh on the prices.

The gold prices continued to trade under pressure but the prices seem to be hugging on to the support region of 1248 so far and this has been the case on Friday and today as well. It remains to be seen how long it would be able to hold on to this region as we have a slew of data and major economic events for the rest of the week and each one of these is likely to have a large influence on the markets. On Friday, the gold prices came under strong pressure from the dollar as the incoming data from the US continued to be supportive of the dollar. The NFP data was released on Friday and it came in stronger than expected which helped the dollar to gain strength all across the board.

Gold Under Pressure

For sometime it did look as though the support region would be broken and that the gold prices would be looking much farther below but none of that happened as the prices managed to recover but so far, the bounce in the prices has been very weak and does not inspire too much of confidence going forward. As we had mentioned in our forecast last week, the gold market has been stunned by the huge interest in the bitcoin market which provides another opportunity for traders and investors to look for large returns. This has ensured that some funds are moved out of the gold market and with the gold prices already under pressure from lack of demand and the strength of the dollar, it has only made the situation worse for gold bulls.


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Bitcoin – Futures Goes Live

Bitcoin – Futures Goes Live

Bitcoin futures went live on Sunday and it certainly didn’t go unnoticed, with the opening of two futures exchanges this week having garnered a significant amount of news coverage in recent weeks.

The Cboe futures market was the first to launch, with the CME Group scheduled to launch its Bitcoin futures contracts on 18th December.

We’ve heard plenty of speculation on the possible effects of the availability of Bitcoin futures on Bitcoin itself and the cryptocurrency world in general. The ability to short as well as go long on Bitcoin futures prices prior to contract expiration expected to lead to increased volatility in Bitcoin.

The vast amount of trades to-date have been long positions, with those looking to take short positions challenged by the inherent difficulties that have persisted in going against the grain. In hindsight, the difficulties will have been a blessing in disguise, but that doesn’t mean that the Bitcoin bears will shy away for ever.

Futures markets not only offers the option to go short, but also provides a leverage platform and this may draw in investors looking to boost earnings, though caution will is needed with Bitcoin’s volatility having shown its teeth in recent days.

Bitcoin futures this morning surged to just shy of $18,000 before easing back with more than 2,000 contracts reportedly changing hands, which is a relatively small number of contracts when compared to other asset classes, but still higher than had been anticipated.

The jump in January’s futures price provided strong support for Bitcoin in the early part of the day today, with Bitcoin gaining 12.01% to $16454.87 at the time of writing in what looks to be another move towards record levels from a weekend that saw Bitcoin fall to sub-$13,000 levels.


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