Oil Prices Fall After Producers Fail to Reach Deal at Doha By Georgi Kantchev Updated April 17, 2016 9:42 p.m. ET

Hopes of a deal had helped oil prices rally in recent weeks

 Oil prices opened sharply lower in early Asian trading hours on Monday after major oil producers ended their meeting in Doha, Qatar, over the weekend without reaching an agreement to cap production.

Hopes for a deal among major producers, including several from the Organization of the Petroleum Exporting Countries and Russia, were a main driver in a rally that lifted U.S. crude prices more than 50% from their February lows. U.S. crude settled at $41.50 a barrel on Friday.

Now, much of those gains could be eroded in a market that has already endured a turbulent year, analysts say.

U.S. crude was recently trading 5.7% lower at $38.05 a barrel and Brent down 5.2% at $40.86 a barrel.

“This is an extremely bearish scenario,” said Abhishek Deshpande, oil analyst at Natixis. “Prices could touch $30 a barrel within days.”

Steep falls in crude could also weigh on equity markets more generally. Stocks have often moved alongside oil this year. Bank shares, for instance, many of which have large energy portfolios, have been pressured by the declines in oil.

Qatari Minister of Energy and Industry Mohammed Saleh al-Sada attends a news conference following the oil-producers' meeting in Doha, Qatar on Sunday.

Qatari Minister of Energy and Industry Mohammed Saleh al-Sada attends a news conference following the oil-producers’ meeting in Doha, Qatar on Sunday. —  Photo: European Pressphoto Agency

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Global Stocks Edge Higher as Rising Oil Prices Encourage Investors By Riva Gold Updated April 8, 2016 5:05 a.m. ET

Global stocks were mostly higher Friday while haven assets cooled, as rising oil prices helped rekindle investors’ appetite for risk.

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The Stoxx Europe 600 was up 0.6% in morning trade, following a broad-based retreat from equities around the world on Thursday.

Shares of oil and gas companies led gains as commodity prices rebounded from recent losses. Brent crude oil was up 3% at $40.59 a barrel, while copper futures in London rose 0.8% to $4,672 a ton.

Analysts warned volatility in the oil price is likely to remain high ahead of a meeting of oil producers in Doha on April 17.

Europe’s banking shares also gained Friday after falling sharply in the previous session. Shares in UniCredit S.p.A. were up more than 6% after the Italian lender’s chief executive confirmed institutions are working on a privately funded solutions for Italian banks’ capital and loans issues.

Futures pointed to a 0.6% opening gain for the S&P 500. Changes in futures do not necessarily reflect market moves after the opening bell.

On Thursday, Wall Street saw its steepest decline since February as investors grew cautious following a two-month rally, while bond yields tumbled.

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Oil Plunge Sparks Bankruptcy Concerns – By BRADLEY OLSON and ERIN AILWORTH Jan. 11, 2016 7:58 p.m. ET

A tanker leaves an oil refinery in Corpus Christi, Texas, earlier this month. The benchmark price of U.S. crude tumbled more than 5% to $31.41 a barrel on Monday, setting a 12-year low.

A tanker leaves an oil refinery in Corpus Christi, Texas, earlier this month. The benchmark price of U.S. crude tumbled more than 5% to $31.41 a barrel on Monday, setting a 12-year low. Photo: Bloomberg News

Crude-oil prices plunged more than 5% on Monday to trade near $30 a barrel, making the specter of bankruptcy ever more likely for a significant chunk of the U.S. oil industry.

Three major investment banks— Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc. —now expect the price of oil to crash through the $30 threshold and into $20 territory in short order as a result of China’s slowdown, the U.S. dollar’s appreciation and the fact that drillers from Houston to Riyadh won’t quit pumping despite the oil glut.

As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017, according to Wolfe Research. Survival, for some, would be possible if oil rebounded to at least $50, according to analysts. The benchmark price of U.S. crude settled at $31.41 a barrel, setting a 12-year low.

More than 30 small companies that collectively owe in excess of $13 billion have already filed for bankruptcy protection so far during this downturn, according to law firm Haynes & Boone.

Morgan Stanley issued a report this week describing an environment “worse than 1986” for energy prices and producers, referring to the last big oil bust that lasted for years. The current downturn is now deeper and longer than each of the five oil price crashes since 1970, said Martijn Rats, an analyst at the bank.

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Global Market Jitters Continue on China Worries – By Riva Gold Jan. 11, 2016 4:10 a.m. ET

Oil prices fall again as investors remain nervous over Chinese regulators’ plans

China's benchmark Shanghai stock index closed down 5.3% as investors continued to worry over the state of the world's second-largest economy.

China’s benchmark Shanghai stock index closed down 5.3% as investors continued to worry over the state of the world’s second-largest economy. Photo: Agence France-Presse/Getty Images

Global stocks were off to a shaky start Monday as intensifying fears about the Chinese economy continued to hit risky assets, building on a bruising first week of the year.

The Shanghai Composite Index fell 5.3% amid deepening concerns that Chinese authorities would be unable to stem the turmoil in its financial markets and broader economy.

Nervousness around China also sent markets in Asia lower across the board as the price of oil tumbled anew. European stocks were little changed.

Chinese officials haven’t adequately explained to investors the reasons behind the decisions to allow their currency to decline in recent days, said Dirk Thiels, head of investment strategy at KBC Asset Management. “It only increases suspicion that maybe something worse is going on [in China’s economy] than people are expecting,” he said, adding that, personally, he doesn’t believe this to be the case.

The Stoxx Europe 600 was flat in early trade after falling 6.7% last week.

Despite a strong U.S. jobs report and relatively upbeat economic releases from Europe last week, “It is difficult to envision a bright outlook for the global economy amid a steeper deceleration in China and lack of aggressive policy response,” strategists at Barclays wrote in a note.

Rapid weakening of China’s currency and volatility in its stock markets last week sparked turmoil in global markets, sending the Dow Industrials down over 1,000 points in the worst-ever opening week for U.S. stocks.

While a weaker currency should support Chinese exports, investors worry that rapid downward adjustments to the yuan could spark a global currency war. More volatility could hit financial markets if investors take the news as a sign that the world’s second-largest economy is slowing faster than expected.

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A Bold Few Traders Earn Billions Flouting Rivals – By ROB COPELAND Dec. 28, 2015 7:25 p.m. ET

The investors that did the best in 2015 are those that defied conventional wisdom

Maverick Capital’s Lee Ainslie reaped rewards from his contrarian take on Apple Inc.

Maverick Capital’s Lee Ainslie reaped rewards from his contrarian take on Apple Inc.Photo: Daniel Acker/Bloomberg

Most Wall Street traders early this year predicted oil prices would rebound through 2015 and buoy the drillers and equipment providers with close ties to crude. But John Armitage believed more trouble was ahead.

That uncommon conviction and related bearish bets helped his firm Egerton Capital LLP earn $1.5 billion after fees, making Mr. Armitage one of the few to grab a big score in a year that bewildered many on Wall Street.

Many star traders had a rocky year as consensus predictions persistently came up short.

First a move en masse by hedge-fund and private-equity firms into beaten-down junk-rated energy bonds backfired when oil prices fell further. Then the stock of hedge-fund favorite Valeant Pharmaceuticals International Inc. more than halved following controversy about its business model.

Meanwhile, the U.S. Federal Reserve repeatedly pushed back its long-anticipated interest-rate rise, dragging down funds that specialized in macroeconomic prognostications.

The average hedge fund is down more than 3% this year, according to researcher HFR Inc. It is the latest of several disappointing annual performances for managers who promise to churn out profits even in volatile conditions.

The S&P 500 nears year-end roughly flat following painful swings throughout 2015 and far below the 8.2% growth forecast of bank and money-management strategists polled by researcher Birinyi Associates at the start of the year.

Those who did well defied conventional wisdom. Take Maverick Capital Ltd. founder Lee Ainslie, who formed a contrarian take on Wall Street’s most widely held stock: Apple Inc.

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Oil-trading legend Andy Hall thinks everyone is dead wrong about one big thing – Akin Oyedele Sept 4 2015

crude oil spewing

Ulet Ifansasti/Getty Images

Andy Hall, hedge fund boss and the so-called god of oil trading thinks the market is wrong about how “oversupplied” the oil market is, according to a letter obtained by Bloomberg.

Crude oil prices crashed 60% from highs last year, rebounded for a few months this year, and then tumbled into a bear market.

Many in the oil market attributed the collapse to a market that was heavily oversupplied.

According to the US Energy Information Administration, crude oil stocks are currently near an 80-year high.

But as Bloomberg’s Simone Foxman and Saijel Kdishan report, Hall’s most recent letter to clients said, “the world, whilst moderately oversupplied, is not awash in oil.”

Hall’s Astenbeck Capital Management hedge fund was, however, crushed by the ugly downturn in oil prices two months ago and lost about 17% in July — its second-largest loss ever. The fund was flat in August.

According to Bloomberg, Hall said in his latest note to clients there’s still room to store about 200 million barrels of oil, adding that current prices reflect a “worst case scenario.”

Again, official data from the EIA show that US crude stockpiles have definitively surged within the past year, though it seems that Hall doesn’t think this as dire a signal for the market as current prices reflect.




Why economists were totally wrong about cheap oil – CHRISTOPHER S. RUGABER, AP MAY 23, 2015, 5:05 PM

gas pump

Matt RourkeGas is pumped into a car at the Eastcoast filling station Thursday, Dec. 18, 2014, in Pennsauken N.J.

WASHINGTON (AP) — If there was one thing most economists agreed on at the start of the year, it was this: Plunging oil prices would boost the U.S. economy.

It hasn’t worked out that way.

The economy is thought to have shrunk in the January-March quarter and may barely grow for the first half of 2015 — thanks in part to sharp cuts in energy drilling. And despite their savings at the gas pump, consumers have slowed rather than increased their spending.

At $2.74 a gallon, the average price of gas nationwide is nearly $1 lower than it was a year ago. In January, the average briefly reached $2.03, the lowest in five years.

Cheaper oil and gas had been expected to turbocharge spending and drive growth, more than making up for any economic damage caused by cutbacks in the U.S. oil patch.

Consider what Federal Reserve Chair Janet Yellen said in December: Lower gas prices, Yellen declared, are “certainly good for families. … It’s like a tax cut that boosts their spending power.”

Other experts were more direct: “Lower oil prices are an unambiguous plus for the U.S. economy,” Chris Lafakis, an economist at Moody’s Analytics, wrote in January.

So what did they get wrong?

It turns out that the economic effects of lower energy prices have evolved since the Great Recession. Corporate spending on drill rigs, steel piping for wells and railcars to transport oil has become an increasingly vital driver of economic growth. So when oil prices fall and energy companies retrench, the economy suffers.

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Venezuela’s shortages could lead to a humanitarian crisis 17 April 2015 Last updated at 18:25 BST 

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Venezuela has the biggest oil reserves in the world, yet its economy is in crisis.

Widespread shortages and spiralling inflation are fuelling popular discontent, President Maduro blames the fall in oil prices and interference from the US.

Last month tensions rose further when President Obama imposed economic sanctions against seven Venezuelan officials.

Ian Pannell reports from the Venezuelan capital Caracas.

Produced by the BBC’s Lindle Markwell; filmed and edited by Ian Druce

Goldman: Here’s Why Oil Crashed—and Why Lower Prices Are Here to Stay – by Tom Randall 12:37 PM PST February 11, 2015

Oil prices have gotten crushed for the last six months. The extent to which that was caused by an excess of supply or by a slowdown in demand has big implications for where prices will head next. People wishing for a big rebound may not want to read farther.

Goldman Sachs released an intriguing analysis on Wednesday that shows what many already suspected: The big culprit in the oil crash has been an abundance of oil flooding the market. A massive supply shock in the second half of last year accounted for most of the decline. In December and January, slowing demand contributed to the continued sell-off. Goldman was able to quantify these effects.

Goldman’s model is simple on its face, looking at just two variables over time: the price of oil and the value of U.S. stocks (as measured by the S&P 500). The idea is that the stock market is a pretty good indicator of economic demand. So when stocks move in tandem with oil prices, demand is in the driver’s seat. When the price of oil moves in the opposite direction of stocks, the shock is coming from supply.

It’s a bit more complicated than that—for the statistically inclined, Goldman uses a “vector autoregression with sign restrictions”—but you get the idea. In the following chart, they split apart the effects of demand shocks (left) from supply shocks (right).

Demand & Supply

The chart on the left shows what you might expect: strong demand leading up to a precipitous decline during the recession beginning in late 2008. The supply chart on the right shows a shock of undersupply in late 2007, leading to years of relatively steady supply expectations. Oversupply shocks picked up, beginning in 2012, as U.S. shale-oil production exceeded expectations, culminating in a piercing shock of oversupply last year that sent markets reeling.

The big take-away: “[T]he decline in oil has been driven by an oversupplied global oil market,” wrote Goldman economist Sven Jari Stehn. As a result, “the new equilibrium price of oil will likely be much lower than over the past decade.”

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