Poor Chinese economic data pushed prices down

A predictably quiet day on world oil markets with the US closed for Thanksgiving. Poor Chinese economic data pushed prices down somewhat and has done so again this morning but crude looks destined to have an up week, albeit modestly.

This day last year the Saudis, ahem, Opec, were announcing the new policy of going for market share, or as they said, not subsidising high cost producers around the world. Has it been a success, well the jury is still out and may be for some time yet. Remember that the oil price had already fallen by around $35 in the run-up to the meeting as fears of a confrontation grew. There is little doubt that the Gulf producers wouldnt have expected prices to fall so far but now they are in it and staying in it. Probably the biggest error was to think that US shale would blink first, it didnt due to a combination of hedging, debts being maintained and considerable efficiencies making production work at well below $50. Who did blink then? It was the majors with no scope in the balance sheets to maintain capex and pay debt and dividends out of reduced cash flow. My guess is that we now have around $300bn of projects binned by the majors, some of which will never reappear. It is all down to timing, that the US producers could maintain flow which is only just pegging back and that the majors cuts wont take effect until next year at the earliest. When all this kicks in watch out as although the world is floating on a sea of oil at the moment, it may not always be so.

Anyway, back to the here and now, we are still playing the game of taking it in turns to lobby Opec with the meeting still a week away. Yesterday it was the turn of the Russian Oil Minister, Alexander Novak who said that Russia and Saudi Arabia are to set up a ‘special joint working group’ on oil and gas cooperation. It must work if it’s a ‘special’ working group mustn’t it….