23 Dec 2014
OPEC’s scourge may have huge geopolitical impact – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale explains that OPEC’s strategy to let prices fall sufficiently enough to price out non-OPEC producers might have a huge geopolitical impact, raising concerns about sustainability of energy companies in Canada, and fuelling further AUD weakness.
Key Quotes
“I'm struck this morning that it's technological change which has increased global oil supply and teechnological progress which has slowed the growth of oil demand. Ali al-Naimi's promise to maintain OPEC output even if prices fall to USD 20/bl is a reaction to the impact of technology on OPEC's power (much reduced, at least temporarily). The strategy - let prices fall sufficiently that non-OPEC producers are priced out - surely entails both an overshoot and huge geopolitical impact.”
“Russia is a major loser, as are those oil producers who have built economies that need high oil price to maintain economic and social stability.”
“Within major FX markets, CAD has so far escaped with less weakness than it might have done. But if oil prices do spike even lower, we will see growing concerns about the viability of many energy companies in Canada and USD/CAD will trade though 1.20.”
“Perversely, we have seen a more marked reaction by AUD, and AUD/CAD is back at levels last seen a year ago. Australia, of course, is a resource-rich economy but not an oil-rich one. We're not standing in the way of further AUD weakness as commodity prices fall further, but CAD can play catch-up.”
Key Quotes
“I'm struck this morning that it's technological change which has increased global oil supply and teechnological progress which has slowed the growth of oil demand. Ali al-Naimi's promise to maintain OPEC output even if prices fall to USD 20/bl is a reaction to the impact of technology on OPEC's power (much reduced, at least temporarily). The strategy - let prices fall sufficiently that non-OPEC producers are priced out - surely entails both an overshoot and huge geopolitical impact.”
“Russia is a major loser, as are those oil producers who have built economies that need high oil price to maintain economic and social stability.”
“Within major FX markets, CAD has so far escaped with less weakness than it might have done. But if oil prices do spike even lower, we will see growing concerns about the viability of many energy companies in Canada and USD/CAD will trade though 1.20.”
“Perversely, we have seen a more marked reaction by AUD, and AUD/CAD is back at levels last seen a year ago. Australia, of course, is a resource-rich economy but not an oil-rich one. We're not standing in the way of further AUD weakness as commodity prices fall further, but CAD can play catch-up.”