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Thursday, 17 June 2021

Is a supercycle in global oil prices on the horizon?

SUPERCYCLE WATCH- Is a supercycle in global oil prices on the horizon? Perhaps, according to Saudi Arabia’s energy minister, who has warned that a drop-off in exploration could further squeeze supply in an already-tight market, causing prices to surge, according to Bloomberg.

Oil prices have been on a tear as of late, rising to highs not seen since 2018 as producers see a post-lockdown surge in demand and supply tightens. Brent has climbed more than 40% since the beginning of the year. A growing number of analysts now predict the rally continuing to eclipse the USD 100/bbl mark for the first time in almost seven years.

What’s the problem here? The minister, Prince Abdulaziz bin Salman, blamed a lack of investing for the rising prices, telling an investors conference that the Saudi government is trying to prevent a supercycle. Spiraling prices have in part been triggered by some companies, hurt by two successive oil busts, cutting back on drilling budgets to prevent a supply glut.

A message to the IEA? Oil producers have reacted harshly to a recent call by the International Energy Agency for a halt on all new oil and gas exploration projects. The historically pro-hydrocarbon global energy body said a freeze on exploration was necessary to reach emissions targets by the middle of the century, an idea denounced as a dangerous fantasy by OPEC chiefs.

China plans to tap into its metal reserves in an attempt to dodge an inevitable commodity prices boom: The country will resort to selling state stockpiles of copper, aluminum, and zinc, releasing them in batches in the near future, after its producer price index soared past even the most generous forecasts and rose 9% in May, according to the Wall Street Journal. But this strategy’s effectiveness in curbing commodity inflation will depend on how much of its stockpiles it releases — which is unclear, seeing as the country has not disclosed their size — as well as global price pressures elsewhere.

Whaddya know? The World Bank doesn’t want to help a narco state set up a bitcoin-based financial system. The World Bank has rejected a request from El Salvador to help it set up a bitcoin-based financial system, citing “environmental and transparency shortcomings” related to the cryptocurrency, Reuters reports. El Salvador last week became the first country in the world to make BTC legal tender, and its president pledged to lay the infrastructure for a crypto financial system that would allow goods to be bought, taxes to be paid and loans to be issued using the digital asset.

Down

EGX30

9,880

-0.1% (YTD: -8.9%)

None

USD (CBE)

Buy 15.60

Sell 15.70

None

USD at CIB

Buy 15.60

Sell 15.70

None

Interest rates CBE

8.25% deposit

9.25% lending

Up

Tadawul

10,855

+0.2% (YTD: +24.9%)

Down

ADX

6,697

-0.7% (YTD: +32.7%)

Down

DFM

2,839

-1.0% (YTD: +14.0%)

Down

S&P 500

4,223

-0.5% (YTD: +12.5%)

Up

FTSE 100

7,184

+0.2% (YTD: +11.2%)

Down

Brent crude

USD 73.90

-0.1%

Down

Natural gas (Nymex)

USD 3.25

-0.7%

Up

Gold

USD 1,861.40

+0.3%

Down

BTC

USD 38,780

-2.75% (as of midnight)

THE CLOSING BELL-

The EGX30 fell 0.1% at today’s close on turnover of EGP 1.25 bn (2% below the 90-day average). Foreign investors were net sellers. The index is down 8.9% YTD.

In the green: Ezz Steel (+12.0%), Sidi Kerir Petrochemicals (+4.3%) and GB Auto (+2.2%).

In the red: TMG Holding (-2.9%), Qalaa Holdings (-2.5%) and Orascom Financial Holding (-1.6%).

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