Dec. 12, 2014

OIL PRICES AROUND THE WORLD

RUSSIA – Is the bear being pushed into a corner?

  • Russia’s currency has been devalued nearly 40% in the past month.
  • Russian central bank increased interest rates at the beginning of this week to 10.5% from 9.5% to support their currency.
  • Recently, Russian government forecast the economy to contract 0.8% in 2015. Oil and natural gas make up 50% of Russia’s budget revenue. (oil and gas represents approximately 20% of Alberta’s revenues)

VENEZUELA – Hyperinflation

  • Oil accounts for 95% of Venezuela’s export earnings. Oil and gas together represent 25% of GDP.
  • Inflation is 60% and basic items such as toilet paper and toothpaste are scarce.
  • Economy is expected to contract 1% in 2015.

OPEC– Internal Strife?

  • This week Iraq (OPEC’s 2nd largest producer) widened their Asian discount to $4 /barrel, their largest in 11 years.
  • Saudi Arabia also discounted their official selling prices to Asia and the US.
  • Kuwait lowered its price formula to Asia on December 10th to the deepest discount in 6 years.

NORWAY – Sees risks to the economy

  • This week Norway reduced their interest rate to 1.25% from 1.50% in a surprise move.
  • Norway’s central bank, Norges Bank, estimates oil investments will decline 15% in 2015 with “spillover” effects on the economy. Oil industry provides 25% of Norway’s economic output.

CANADA

  • Western Canadian Select hit $42.19 / barrel, the lowest since April 2009. (current discount $17.45)
  • The lowest-cost oil sands producers need about $51/barrel (source: Canadian Energy Institute)
  • Canadian drillers cut the number of rigs used in early December to the lowest since 2009.

IEA Cuts global oil demand

  • IEA estimates OPEC will need to pump 28.9 million BOE/day in 2015 vs 30.3 million in 2014.
  • World oil consumption is expected to increase 1% (900,000 BOE/Day) in 2015
  • IEA is forecasting production outside OPEC will expand 1.3 million BOE/day to 57.8 million.

TIDBITS

  • Canadian house prices dropped 0.3% M/M in November, the first decline in a year. Edmonton was the only city to have price gains (1.1%). For the year, house prices were up 5.2% in Canada.
  • US retail sale grew 0.7% in November (consensus 0.3%), the most in 8 months
  • US gasoline prices are the lowest in 4 years at an average of $2.62 per gallon.
  • US auto sales rose to 17.1 million annualized rate in November from 16.4 million in October.
  • US now produces the most oil in 31 years with oil production up 65% in 5 years. US now supplies 89% of its own energy.