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The OPEC + alliance is facing pressure, but it does not want to change its strategy

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The OPEC + alliance is facing pressure, but it does not want to change its strategy

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Vienna (AFP) – The Oil Exporting Countries (OPEC) and their partners in the OPEC Plus are expected to continue their strategy of gradually increasing production on Thursday, despite Western pressure to end the price volatility in Ukraine amid the war.

Analysts believe that the 13 members of the Riyadh – led OPEC and their ten allies in the Moscow-led OPEC + are likely to increase their total production volume by 400,000 barrels a day in May.

“OPEC + surprised markets many times during its monthly meetings, but maintained the current fundamental situation,” said Stephen Innes, an analyst at SPI Asset Management.

He added that “evidence does not indicate any deviation from the policy that began in the spring of 2021”.

Discussions of the organization will begin with technical discussions before the public meeting via video link at 13:00 (11:00 GMT) at its headquarters in Vienna.

However, expectations are high, especially during the 2008 financial crisis when oil prices touched a record high of 7. The Western Texas Intermediate crude hit a high of $ 139.13 a barrel and the WTI $ 130.50.

Since then, prices have fallen from their highest level, making it “less likely that OPEC + will decide to increase its output,” says Gorston Fritz, a researcher at Commerzbank.

On Thursday, the White House is expected to announce plans to withdraw up to one million barrels a day from US strategic reserves, according to sources close to the Bloomberg Agency.

The price of a barrel of US West Texas Intermediate crude oil has fallen more than 5 percent since the start of Asian markets.

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International calls

For the “OPEC +” alliance, which was established in 2016 with the aim of regulating the market, Fritsch pointed out that the recent price increase was “mainly due to geopolitical risks, and not due to a real shortage of supply”.

As prices rose due to Western sanctions on Moscow and lost hope for progress in the peace talks, the war raised fears that Russia’s oil supply would be disrupted and caused sharp fluctuations.

But calls from the international community have multiplied, especially after the United States and Britain decided to stop importing oil from Russia, making it the second largest crude exporter in the world after Saudi Arabia.

German Economy Minister Robert Hebeck also launched an “urgent appeal to oil-exporting countries the next day to increase production to mitigate market shocks.”

For its part, the International Energy Agency described the company’s results as “disappointing” in the past, urging the OPEC + alliance to be “on the right side”.

“I hope this meeting will bring positive news that will help ease the pressure on the oil markets,” IEA Executive Director Fatih Birol said in mid-March.

The G7 countries have sent the same message, while British Prime Minister Boris Johnson visited Riyadh and sought to increase productivity with the leaders of Saudi Arabia and the United Arab Emirates.

“Stay here”

But despite all these international efforts, the Gulf states are still rejecting Western demands.

At this point, the OPEC + alliance looks stronger than ever. UAE Energy Minister Suhail al-Masroui said on Monday that it (the coalition) was “staying here”, signaling its commitment not to let the “political” system get in the way.

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“If someone is not willing to deliver 10 million barrels a day, we can not replace the Russians,” he said.

For his part, Saudi Energy Minister Abdul Aziz bin Salman reiterated his commitment to OPEC + on Tuesday, saying that the agreement “otherwise, there will be no stability in the energy market” and “the problem of price volatility will worsen”. ”

Although he supports OPEC +’s non-political “culture”, many experts believe that Saudi intervention in the markets would be seen as a betrayal of Russia, preventing it from using its oil and gas exports to put pressure on the West.

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Economy

Demand for gold from central banks around the world continues to rise…banks bought 337 tonnes in the third quarter, bringing the total to 800 tonnes at the start of the year with a growth rate of 14%…selling only one. Tons in 9 months.

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Demand for gold from central banks around the world continues to rise…banks bought 337 tonnes in the third quarter, bringing the total to 800 tonnes at the start of the year with a growth rate of 14%…selling only one.  Tons in 9 months.


Islam Saeed wrote

Friday, December 1, 2023 06:30 PM

Communication Central banks Worldwide, demand for gold in 2023, according to reports World Gold CouncilIn gold trends in the third quarter, central banks’ demand for gold increased by 337 tonnes – the third largest purchase level in a quarter – but this was 459 tonnes less than what banks bought in the third quarter of 2022. tons

Since the beginning of the year, demand by central banks has increased by 14% year-on-year, reaching a new record level of 800 tonnes of gold.

Gold holdings reported by global central banks rose by a net 77 tonnes in September, as banks’ total sales of 78 tonnes were just 1 tonne, indicating strength in central banks’ gold purchases.

The World Gold Council showed that outflows from gold investment funds continued in October, but at a slower pace than in September, with outflows of $2 billion in October, the fifth consecutive monthly loss.

Since the start of the year, the funds’ investment holdings have declined by 6%, while the total value of assets managed by the funds has increased by 3% due to rising gold prices. Global outflows from gold-backed funds have reached US$13 billion since the start of the year. Equivalent to 225 tonnes of gold lost.

Gold neared a 6-month high in November on strong expectations in markets that the Federal Reserve has ended its interest rate hike cycle, and the time has come to set a date for a rate cut. Positive for gold prices.

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Spot gold – at the time of writing the Gold Billion Technical Report – was trading at $2043 an ounce, up 0.4% after yesterday’s drop of 0.4% to a record low of $2031 an ounce.

In November, gold prices rose 2.6% to $53 an ounce, from a 6-month high of $2052 an ounce and a low of $1931.

Gold is on track to post a 2.2% gain this week, and prices are up around $43 an ounce, marking a third straight week of gains. October and November.

On the other hand, we see the US dollar post its biggest decline in a year in November, while the dollar index fell 2.9% to its lowest level in nearly 4 months. The Federal Reserve is holding off on raising interest rates, and it’s expected to start cutting interest rates in the first half of 2024.

As for the 10-year US government bond yield, it fell 12.3% in November to a nearly 3-month low of 4.247%, raising the prospect of gold gains due to its inverse correlation with gold. With bond yields, in addition to lower opportunity costs. As an alternative to gold, it does not provide income to its holders.

The current time frame sees the price of gold fluctuate below the resistance level of $2050 per ounce, before undergoing a negative correction in light of pressure on the price, before the price of gold reaches its all-time high targets of $2080 per ounce, then registers a target of $2100, and if the price breaks above the 2035 level, the dollar , until the 2025-2020 region, $ per ounce, after which the 2010 dollars support level will begin. ounce.

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Following are the key events that influenced the gold price movement last November:

– Demand for safe havens, including gold, in financial markets has weakened as the war in Gaza has not reached a current ceasefire.

– The consumer price index (a key inflation indicator) in the United States of America fell to 3.2% in October, beating expectations of 3.3% and the previous reading of 3.7%.

The core personal consumption expenditure index (the Fed’s preferred inflation gauge) fell in October, bringing the annualized rate to 3.5%, down from the previous reading of 3.7% expected.

– Moody’s Credit Rating Agency downgraded the US outlook to negative after holding it steady while keeping the credit rating at its highest Aaa rating.

Moody’s pointed to rising downside risks related to US credit and debt as the main reason for downgrading the outlook.

– Minutes from the Federal Reserve Bank meeting showed bank members maintaining a tight monetary policy and a willingness to raise interest rates further if necessary, but with more caution.

Reports from members of the Federal Reserve show that if inflation rates continue to fall for more than a month, the bank may abandon some of its monetary tightening policy.



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Economy

OPEC Plus has voluntarily cut 2.2 million barrels, and prices are falling in the economy

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OPEC Plus has voluntarily cut 2.2 million barrels, and prices are falling in the economy

Oil prices fell in early trade – today, Friday – to continue losses that began after producers in the OPEC Plus alliance agreed to voluntarily cut crude output in the first quarter of next year.

Brent crude futures for February were down 0.4% at $80.5 a barrel by 7:34 GMT, while US West Texas Intermediate crude futures were down 0.3% at $75.7.

Saudi Arabia, Russia and other members of the OPEC Plus group – which pump more than 40% of global oil – have agreed to voluntary production cuts of more than two million barrels per day in the first quarter of 2024.

However, at least 1.3 million barrels per day of these cuts come from voluntary cuts already implemented by Saudi Arabia and Russia.

Representatives earlier said new additional cuts of up to two million barrels per day were under discussion.

OPEC Plus production – comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – reflects a cut of about 5 million barrels a day aimed at actually supporting prices and reaching the market by about 43 million barrels a day. Stability.

Discount details

In a statement after the meeting, OPEC said the cuts totaled 2.2 million barrels per day from eight producers.

The figure includes Saudi and Russian voluntary cuts of 1.3 million barrels per day.

The additional cut of 900,000 barrels per day pledged on Thursday comes from 200,000 barrels per day of fuel exports from Russia and the remaining 6 members, Reuters reported.

The United Arab Emirates said it agreed to cut output by 163,000 barrels per day, while Iraq announced an additional 220,000 barrels per day cut in the first quarter.

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Algeria plans to voluntarily cut its oil production by 51,000 barrels per day in the first quarter of 2024, while Kuwait announced it will voluntarily cut oil production by 135,000 barrels per day for 3 months from next January.

Saudi Arabia, Russia, the United Arab Emirates, Iraq, Kuwait, Kazakhstan and Algeria were among producers who said the cuts would be phased out after the first quarter if market conditions allowed.

Fears

OPEC Plus’ focus on cutting production comes in light of a slump in prices that hit $98 a barrel at the end of September, as well as growing concerns about weak economic growth in 2024 and expectations of a surplus in supplies.

This month, the International Energy Agency predicted a slowdown in demand growth in 2024, as “the last phase of the economic recovery following the Covid-19 pandemic dissipates and energy efficiency, the expansion of electric vehicles and structural factors combine.”

Oil prices fell about 0.3% in early trade on Friday (Reuters)

Member of Brazil

OPEC Plus invited Brazil to become a member of the group, and the Brazilian energy minister said he hoped to join next January.

Brazil is one of the world’s 10 largest oil producers and, as of 2016, the largest producer in Latin America.

Brazil’s crude oil production reached a record level of 3.7 million barrels per day last September, an increase of approximately 17% from the same month last year and a 6.1% increase from August 2023, according to “Argus Media”.

UBS analyst Giovanni Stonovo said, “Brazil is a big oil producer and a leader in crude production growth, so it’s important to get involved, but it doesn’t seem to be cutting production like Mexico, so it’s going to be good. OPEC Plus, and less important for the oil market.” “, according to Agence France-Presse reports.

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The OPEC Plus alliance was formed in late 2016, when Russia and nine other countries joined OPEC to support lower oil prices, and from late 2022, the alliance relies on production cuts of about 5 million barrels per day.

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Economy

Rolls-Royce sets bold goals to keep flying

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Rolls-Royce sets bold goals to keep flying

Rolls-Royce’s transformation program is accelerating as the British Aerospace Group has been hit hard by the pandemic and problems with its Trent 1000 engines.

One of the company’s latest pledges is to add £2 billion in operating profit by 2027, which is estimated to be four times the £0.65 billion it announced in 2022. But this method seems more reliable than previous attempts.

The project hinges on Rolls-Royce’s aviation and aerospace division, the largest of its three divisions by revenue, as it accounts for 45% of the group’s total revenue of £12.7 billion in 2022, while the defense and power generation divisions make up the rest, but civil aviation within the company The segment achieves operating margins of only 2.5% by 2022. The plan aims to increase this percentage to 15-17%. Projected increase in earnings before interest and taxes.

It seems possible. According to Nick Cunningham of Agency Partners, competitors such as Safran and General Electric have an 18 percent share of the sector. However, unlike Rolls-Royce, they benefit from making more margin engines for narrow body aircraft.

One reason for Rolls-Royce’s narrow margin is that it has priced its new engines higher as it tries to build market share in the wide-body aircraft sector. This happens when the company’s profits come from service and maintenance contracts.

A more rational approach is required. Rolls-Royce has achieved a fair amount of expansion; So they have to reduce the discount. At the same time, older aircraft fleets will require more servicing and maintenance, which will improve their revenue diversification.

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Rolls-Royce has also indicated it wants to cut costs by between £400m and £500m and cut 2,500 jobs. Investors may view this with skepticism, as previous attempts to rein in the sprawling legacy of an expanding business have proven short-lived.

A positive factor is that new CEO Tufan Ergin Bilgic is strict. Also, the company had recently experienced a death, which allowed it to make the necessary cultural change.

Investors have increased the value of the stock by 80% in the past six months, hoping that Ergin Bilgic will be able to implement his plan. However, the group still trades at a discount of up to a quarter to rival Saffron based on 2025 earnings. If Ergin Bilgic achieves his goals, Rolls-Royce could fill the gap.

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