Wednesday, February 13, 2013

Oil release show positive approach

SOME readers may be wondering about the impact of geopolitical events, and the development of international policy, oil prices and market sentiment. Some people might think that, by the end of June, the International Energy Agency (IEA) agreed to release 60 million barrels of oil for the month of July. At that time, it took the stock market was surprised - and oil futures prices fell 6% as a result - and echoed in the equity space, while Treasury yields retreated as well. To provide some historical context, the International Energy Agency, it must be noted, was originally set up as a counterweight to OPEC (Organization of Petroleum Exporting Countries) in 1970, on the advice of Henry Kissinger. But nearly four decades of history, it was only the third time it was released strategic stocks - and the first time it has done since 1991, which was during the first Gulf War. Importantly, the IEA agreed to release two million barrels of oil per day for July, with the idea to compensate for the loss of daily production from Libya. The U.S. will provide half of the release, with the remainder taken by Japan, Germany, France, Spain and Italy. Significant contributions to the market losing high-quality light, sweet crude that Libya produces certain. Light, sweet crude is used primarily for the purification of fuel - which is important in industrialized countries, most of those who contributed in some way to the IEA reserve release. But readers can also specify an exciting time: it was about two weeks after the June 8 OPEC meeting, in which the OPEC member states are divided on whether to increase output, and which country (eg, excess production capacity, or not). Prior to this meeting, openly IEA urges OPEC to increase production to meet the increasing demand for oil estimates for the third quarter (July to September) 2011. Meanwhile, in a different context, some say that the U.S. presidential election campaign kick-off, and the American economy is still in a "soft patch" - the U.S. consumer recovery is still rather fragile. Because of this, it can help increase the supply of high-quality crude oil keep a lid on fuel prices, and can be useful. In terms of time, the move also coincided with the final volume of the U.S. Federal Reserve Easing program (QE2) in June, and potentially can be seen in the context of further fiscal stimulus. In terms of near-term picture, we think this move from IEA broadly positive: in fact, the basic supply and demand in the oil market for the third quarter of 2011 is looking for (and more see also) is tight, especially if demand remains strong, as we expect. On the capital market, we still support comprehensive energy stocks. A sector that is strongly linked to oil prices could potentially provide investors with some protection against some still see potential geopolitical risks and also provide exposure to sectors with strong long-term. Andrew Miller :: regional office of Barclays Wealth in Newcastle

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