Commodities

Oil, bonds highlight risk of imperfect recovery

10 Jun 2009

Huge deficits and zero rates are keeping depression and deflation away. But the oil price has been swept up by the rising liquidity tide and bond yields have risen in a fearful response to free money. The two together could make for a more painful recovery than the market hopes.

China throws petrol on speculative fire

2 Jun 2009

A 7% raise in official petrol prices is a nod towards market forces. Beijing is clearly worried about cushioning the fragile consumer. The problem is that its petrol price controls can encourage speculation.

Waning supply helps underpin oil price rise

13 May 2009

Oil prices have rocketed about 70% in three months. With demand still declining, that owes much to a revival of investor spirits. But there's something else: supply capacity, especially from Opec, is shrinking. With demand recovery in mind, that's a reason to bid up the price.

BP and Shell can cope with $50 oil

28 Apr 2009

Neither company is comfortable with the current price. They think at least $60 a barrel is needed to keep up investments and maintain their dividends. But both can borrow more. BP looks like the safer shortterm bet. It is growing faster and spending less than Shell.

Chinese gold rush would benefit China least

27 Apr 2009

Changing US Treasuries into gold would help Beijing undermine the dollar s dominance. But years of mercantilism can t be unwound painlessly. Big Chinese buying would drive the yellow metal s price sky high. The biggest beneficiary of a gold rally? Step forward, Uncle Sam.

Iraqi oil recovery still a mirage

23 Apr 2009

The nation needs foreign help to meet its target of doubling production in five years. Security risks are no longer insurmountable, but the politics may be. A parliamentary committee has pledged to push Shell out before it has even arrived. Even service contracts look risky.

Some Russian companies are more equal than others

7 Apr 2009

Gazprom, for example. The debtladen Russian giant has agreed to buy out Eni's 20% stake in Gazprom Neft for $4.2bn. The Italian oil major bought in two years ago when former oil major Yukos was broken up, under state pressure. Where will Gazprom get the money? From the state.

Total real winner in Santander’s E2.8bn Cepsa sale

31 Mar 2009

The Spanish bank sold its 32% stake in the oil company to Abu Dhabi. The French oil company, which owns a 49% stake in Cepsa, gains a friendly partner and effective control of the company. Santander took too long to sell the stake. But it managed a decent price in a dire market.

Paper gold: nice idea, shame about the politics

24 Mar 2009

China s suggestion for a world reserve currency managed by the IMF is smart. It would address some of the financial imbalances that tipped the world into crisis. But China seems to be primarily motivated by friction with the US the nation with most to lose from such a plan.

Gold could be set for huge speculative bubble

19 Mar 2009

With the US and other countries monetizing budget deficits, the chance of rapid inflation has surged. The annual production of gold, the traditional hedge, is far below the world s rate of money supply growth. An inflationary panic could thus bring an explosive gold price rise.

Opec accepts hard reality

16 Mar 2009

The oil cartel says it didn t cut production quotes because it s worried about what high oil prices would do to the fragile economy. But it hasn t delivered on recent promised production cuts. Until Opec can keep its word, it makes sense not to overpromise.

Russian cash crisis offers China great oil deal

18 Feb 2009

China s $25bn oil purchase agreement with Russia trades cash for bargainpriced oil over 20 years. That solves a chunk of China s longterm oil supply problem. Russia may be unreliable, but the deal s advantages make it well worth the risk.

BP shouldn’t rush to name new chairman

11 Feb 2009

Paul Skinner was tipped for the top job at the UK oil producer, but the Rio Tinto chairman has tarnished his record with a big cash acquisition at the top of the market, and an ongoing fight over raising capital to pay for it. There s no rush to make a decision, so best to wait.

Oil at $45 is not cheap

10 Feb 2009

It s easy to lose perspective on the oil price given the $147 high it hit last year. But it traded below $35 for decades before the recent superspike. If producers think its current level is too cheap, that s because they have grown accustomed to high prices.

Exxon’s record $44bn profit makes tempting target

30 Jan 2009

During a financial crisis when the US government is strapped for cash, it s not hard to imagine windfall and other taxes springing into lawmakers' minds. But look again 2008 may have been great, but Exxon s business is in secular decline.

Kuwait blemished by Dow debacle

29 Dec 2008

The oil state's scrapping of a $17bn joint venture with the US chemicals giant may be financially justifiable. But it still reflects badly on Kuwait s business acumen: after renegotiating the terms only weeks ago, Kuwait now looks capricious and beset by political infighting.

Gold may glitter again in 2009

16 Dec 2008

Huge government deficits, low interest rates and rapidly growing money supply all add to the likelihood of renewed inflation and a rising gold price. Since there's much more hot money than in 1980, a gold bubble could push the price above 1980's peak of $2,430 in today's money.

OPEC membership not in Russia’s interest

12 Dec 2008

President Medvedev has hinted at joining the oil cartel, which is making fresh output cuts. But Russia s oil production is already stagnating. Participation in Opec might have only a limited effect in supporting prices. Worse, it would weaken Russia s complex ties with the West.

Petrobras is probably China’s best oil partner

10 Dec 2008

China's offer of $10bn to develop Brazil's offshore fields helps both China, which needs longterm oil supplies, and Petrobras, whose fields are marginal at low oil prices. The US shouldn't worry much: a Chinese deal with Brazil is less ominous than one with Venezuela.

Exxon profit could follow oil south

30 Oct 2008

The oil giant raked in a Q3 profit of $14.8bn. With oil peaking in July and staying above $100 a barrel for most of the quarter, it s no surprise Exxon once again broke its earnings record. But lower production and falling prices could make this trend hard to sustain.