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.
- 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.
- 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.