They are the building blocks of our daily stuff, from sports shoes to computer keyboards, created when oil and natural gas molecules are split, or cracked, to produce ethylene, propylene and other chemicals.The science may be esoteric, but petrochemicals are big business in the oil-rich Persian Gulf, and they’re poised for further growth. Energy producers view these compounds increasingly as a key to unlocking more profit from each barrel of crude they pump.Just last month, Abu Dhabi and Qatar each announced plans for new plants. In April, Saudi Arabian Oil Co., the world’s biggest crude exporter also known as Saudi Aramco, teamed up with Total SA for a $5 billion facility in the kingdom and signaled its intention to invest in the U.S. Arab oil producers in the Gulf are boosting capacity at home and abroad to secure sales in a business that McKinsey and Co. estimates will drive 70 percent of the growth in demand for oil through 2035.Crude producers can earn $15 a barrel by … [Read more...] about Mideast Bets on $100 Billion Industry as Oil-Use Outlook Dims
20 year oil price chart
Oil prices steadied near 3-1/2 year highs on Friday as the prospect of new U.S. sanctions on Iran tightened the outlook for Middle East supply at a time when global crude production is only just keeping pace with rising demand, Reuters reports. The United States plans to reintroduce sanctions against Iran, which pumps about 4 percent of the world’s oil, after abandoning a deal reached in late 2015 that limited Tehran’s nuclear ambitions in exchange for the removal of U.S. and European sanctions. The global oil market is finely balanced, with top exporter Saudi Arabia and No.1 producer Russia having led efforts to curb oil supply to prop up prices. Benchmark Brent crude LCOc1 was down 20 cents at $77.27 a barrel by 1330 GMT. On Thursday Brent hit $78, its highest since November 2014. U.S. light crude CLc1 was down 10 cents at $71.26, having touched a 3-1/2 year high of $71.89 on Thursday. Many analysts expect oil prices to rise as Iran’s exports fall. “The … [Read more...] about Oil near multi-year highs as Iran sanctions tighten supply outlook
Bond pricing.Let’s say you’re the chief financial officer of a company with some bonds outstanding, and you want to issue some new bonds, and you are trying to figure out what interest rate you’ll have to pay on the new bonds. How can you do that? The traditional way to do it is to open up your office door, where you will find a pack of investment bankers waiting to talk to you. Each of them will have a pitchbook, and in each pitchbook there will be a page that says “Indicative new-issue pricing for XYZ Corp.” (if they’re careful they will have replaced “XYZ Corp.” with the name of your company), and you can just look at that pricing and have a decent idea of what new bonds will cost you. If you turn the page, you will probably see some supporting data—charts of the yields on your existing bonds, new-issue concessions for other recent issuers in your sector with similar credit ratings, etc.—which serves both to justify the … [Read more...] about Robots Can Price Your Bonds for You
Gasoline prices are up about 30 cents a gallon for the average American over the past year. And you can bet the average American doesn't like that -- even though, at about $2.80 a gallon, gasoline is nowhere near the nearly $4 level that held before oil prices crashed.Half a world away, India's drivers have it even worse. Pump prices in Delhi are actually higher than in the summer of 2014 and have become a political flashpoint ahead of next year's elections. Similarly, Beijing's drivers are paying prices not far off those that prevailed before oil began falling.It's easy to think that drivers drive, come what may; if you need to go get groceries, you go get groceries, whether you're burning fuel that costs $2 or $4 a gallon.But data compiled by ClearView Energy Partners, a research firm based in Washington, suggest that isn't necessarily the case -- and not just in the U.S. They looked at the correlation of oil demand with real gross domestic product and real … [Read more...] about Oil Demand: The Price Is Right or the Customer Is Right?
Each month, I publish reports on ten to fifteen publicly traded upstream oil & gas companies. Part of each report is my estimation of what the company would sell for in a negotiated transaction. I’ve been doing this for almost twenty years and during that time there have been several oil price cycles. The one that started in mid-2014 includes one of the most severe declines in crude oil prices in the last century. It has lasted much longer than the average cycle, which is about two years. (Click to enlarge) • Oil price cycles tend to overshoot on both the upside and the downside. The price of oil never stays at the “Right Price” for very long because a small over-supply can push the price quite low and a small under-supply can cause a big price spike. During the early months of this cycle, crude oil prices dropped below $30/bbl. • Once oil supply & demand get out of balance, there is no quick fix. This is an extremely capital intense business and … [Read more...] about Oil Prices Poised To Rise As Cycle Comes To An End