The relationship between Iran and Saudi Arabia has always been in strained. Oil export is one of the prime areas which causes tension between the two said nations.
What is the oil war about?
Saudi Arabia and Iran are two of the leading oil exporter in the world trade. This fact thus creates a vast competition between them. Recently, rates of business competition among exporting countries trend upward. However, Iran and Saudi have taken competitiveness to a higher level.
The core of the war between Iran and Saudi is more than just oil exportation. Despite being both Muslim countries, Saudi Arabia and Iran still differs in their culture, beliefs and perspective on several matters. Thus, these differences contribute more to the heating rivalry between the two.
Iran’s interest in oil is mainly driven by economic gain. Since the sanctions imposed on Iran were ended they have been concentrating their efforts on increasing oil production in order to export additional units of oil per day.
They want to increase their exports in order to regain their past high market share. They do not want to drive oil prices down; they are more interested in financial gain.
Saudi Arabia’s side
Saudi Arabia already has a large amount of wealth, so their interest in oil is more than just financial. They also have produced large amounts of oil at competitive prices to carefully targeted markets.
Saudi Arabia has recently been concentrating their efforts on reducing ties with Iran and they have been involved other nations in agreeing on a deal to freeze oil output. These discussions have been affected by Saudi demanding that Iran join. Iran has so far resisted joining the agreement.
Where things currently stand
Iran has taken incredible success in its opt to concentrate on increasing their oil production. Figures show that Iran has currently an average of around 3.5 million barrels of oil being exported per day.
Said accomplishment has knocked business and economic experts when Iran attained the increase in just three (3) months—far from their prediction that it will take Iran a year to have such achievement.
Iran has also opted out of talks regarding freezing oil outputs. They stated that they wanted to improve their production to pre-sanction levels. They quoted their pre-sanction levels as being 4 – 4.2 million barrels exported per day.
If their most recent figures are correct then they are not far from their pre-sanction targets. Once they reach their target, will they then consider agreeing to an output freeze? If they did then what do these mean for Saudi Arabia?
What would an output freeze mean?
The initial agreement is that nations in the agreement would freeze their oil output to levels achieved in January.
The output freeze, if it goes ahead, would affect the Middle East’s ability to meet the increase in demand over the summer months. The effect on Saudi would be the equivalent of 5000,000 barrels a day.
When you take this into consideration it is understandable that the oil markets reaction would be in trouble. The stock market reflected traders and investors unease after the output freeze was announced.
The initial reaction failed to take into account was that January’s production levels were quite high, so the impact may not be as great as initially feared.
Will Iran agree to the output freeze?
Now that Iran appears to be recovering at a fast speed following the end of their international sanction, there is every possibility that they may now agree to the output freeze. Previously they have stated that they want to concentrate on increasing their production.
Discussions surrounding the output freeze broke down following Saudi Arabia’s insistence that Iran should join the agreement.
As it stands, Iran is still refusing to agree to the output freeze; however they have urged the other nations to continue discussions.
So, what happens now?
It would appear now that they have reached a standstill. Unless Saudi Arabia agrees to back down on their insistence that Iran agrees to the freeze or Iran agree to commit to the freeze, it seems unlikely that the freeze will go ahead.
If the freeze fails to go ahead, the summer production demand is free to go ahead as usual. The stock market has also recovered after news broke of the discussions breaking down.
Still, it’s uncertain what the next move will be, it has however been stated that the talks are far from over.
Iran Vs Saudi
It is unlikely that the ongoing conflict between Iran and Saudi Arabia is going to end anytime soon. The wounds run far too deep and issues, such as the output freeze, only add to the damage.
In order for the tension to end both sides would need to agree to put their differences aside. After all, diplomacy should always take its toll. Neither side is showing signs of being prepared to even entertain this notion. So, the fight will continue.
How this ongoing tension will affect the oil industry is unsure. Iran’s recent success has, however, made things increasingly interesting.
Gold Prices Reach Historic High, Breach $2,000 Level
For the first time ever, gold prices reach a historic high level of $2,000 today, even reaching a high of $2,049.18. Judging from the way the markets are still active, there are signs it’s still going up. Buoyed by a week dollar, low Treasury yields, and fiscal stimulus, gold keeps rising. On Monday, worldwide holdings in gold ETFs totaled 3,365 tons, and prices have surged more than 30% YTD. As prices rise during the day, there are yet no indicators that the bull market for gold is ending soon.
Related Article: How To Buy Gold For Your Investment Portfolio
Along with government securities, dollars, and others, gold is a safe haven investment. Safe havens are assets that investors turn to during market turmoil. investors turn to during market turmoil. These stocks usually keep, or even gain value during periods of hardship. As they aren’t correlated with the economy, safe haven value can rise in value in a market crash.
While the gold prices reach historic high. Gold has profited from the pandemic and its resulting economic downturn. While US Treasury yields have dropped to below-inflation levels, lowering their value. Gold meanwhile, does not pay an income. In a booming economy, interest levels go high, which means higher yields for bonds or securities. For gold, the lack of yields makes it strong when the market crashes.
The Fed’s earlier decision to lower interest rates to near-zero pushed investors to look into gold. It serves as an insurance asset in case stock prices go down. With the depreciation of the dollar, gold is the current safe haven choice for investors. With a weaker dollar, other currencies rush to buy gold, hence the historic highs. According to Rhona O’ Connell of StoneX Group: “Gold is a haven. It doesn’t have anyone else’s political or financial risk associated with it.”
Other factors contributing to the rise in gold prices are international in nature. The tension between China and the United States over trade issues is one. Lately, some analysts think that the recent Lebanon explosion also pushed prices higher.
Stimulus plans also have an effect on prices. Some see the rising stock prices on news of a new stimulus package as a signal. It means stimulus money is powering the stock rally, and might not be sustainable. This also leads investors to turn to gold instead.
Market strategist Margaret Yang believes the rise will continue in the next months. She said today’s low-interest rates and fiscal stimulus makes gold bullish for the mid and long term. And with the elections in November, gold prices may swing further depending on the winner. Analysts think that gold can breach the next psychological barrier of $2,500 within the year.
Pushing Precious Metals
Gold isn’t the only precious metal winner lately. Silver prices have also spiked to more than 30% year to date. Some analysts even believe that silver has the potential to outperform gold. Once the world economy recovers, industrial consumption will return. This in turn will spur demand for silver, which many industries use. Already, the gradual reopening of industries has increased demand for silver. Its increasing applications in the medical and telecommunications fields helped with the demand. Apart from silver, platinum and palladium are also enjoying high prices this year.
Watch this video as the gold prices reach a historic high level of $2,000:
Latest Update On Oil – Expected to Settle Between $45 and…
“Oil is going to a new price point because of the revolution in production,” said Bill Perkins, chief investment officer of energy-focused hedge fund firm Skylar Capital Management. Perkins believes the price of crude could fall as low as $45 a barrel. He is personally short, a bet that the price of the commodity will drop. He believes oil will settle between $45 and $80 a barrel in the next year.
“Companies are harnessing amazing new technology to destroy the traditional energy value chain,” Perkins said. “There’s a lot of money to be made on that.” “U.S. energy names remain a significant net exposure for equity long/short managers who added longs and cut shorts after October’s trough,” the report said. “If pressed, one could interpret this positioning as bullish for energy stocks.”
Andurand thinks crude might hit $50 a barrel within the half-moon of 2015 and so rebound to a high of $70 within the fourth quarter. He also said the oil market is oversupplied by between 1.5 and a couple of million barrels per day, given weak demand, low disruptions to produce and enhanced production by nations that do not belong to the Organization of the oil mercantilism Countries.
“OPEC is not the swing producer anymore. U.S. shale oil producers are, but will take more time to react to prices than OPEC—it is a game changer that will lead to more volatile prices and bigger price ranges,” he added.
Morgan Stanley aforesaid the worth would wish to fall as low as $35 or $40 a barrel to prevent production and rebalance provides.
Still, the bank noted that the worth can doubtless rise eventually.
“Oversupply is probably going exaggerated and therefore the market is also content regarding side risks,” the report aforesaid.
Investing in Energy Markets Part 2: Oil, Gas and Energy
It’s no secret that the energy industry is very profitable, with oil and gas making up 80% of the market.
Thus, these two resources attract the most people. They are the best energy investment resources due to high demand and wide range of options. However, with energy scares fresh in our recent memory and the climate change movement greatly affecting energy policy, new alternatives are constantly being sought.
Everything that we do requires some type of energy. As a result, the price of energy affects the going rate for other commodities as well. When the price of oil increases, the price of transporting goods goes up as well.
That is why the cost of milk fluctuates and why your favorite imported coffee beans are more expensive than Folgers. Factors that contribute to these prices include geopolitics and natural disasters, but can never truly be accounted for in full. That is one of the underlying points to understand and accept about energy markets. Something can always go wrong. Typically, it doesn’t, but when it does things can get hairy and fast.
TYPES OF ENERGY SECTORS: That could affect your Household
Nuclear Nuclear power actually produces 1/10th of the world’s power, without emitting carbon. The United States and China have roughly 75% of the world’s nuclear plants with India and Russia also tapping into the market.
“Green” and renewable energy companies You can invest in different companies that place an emphasis on renewable resources by using the stock market. This option is optimal for investors who like the idea of green technology but do not now want to run the risk of investing in developing companies directly. This market has always been tricky from an investment perspective due to volatility. If you have an appetite for risk, however, this is a good place to look.
Modern Energy (solar, wind, geothermal, transportation, efficiency) Modern energy is made up of three major components or categories. They are wind, solar and biomass. The renewable sector is expanding at a rapid rate. We have witnessed a steady employment increase in the energy sector since 2011 with no end in sight. All types of investors and speculators are flocking to the natural resource markets in attempts to get out ahead of the renewable energy trend that could be the way of the future.
Big Oil In 2010, the world market for oil witnessed an incredible increase of 32%, to over $2,100 billion. According to estimations of oil segment professionals, the market’s value will hit $2,683 billion in 2015. The competitiveness of the global market of the crude oil is explained by its limited resources and mankind’s insatiable appetite for growth. This factor should not be disregarded easily. Our desire for more explains the majority of the energy marketplace.
Gas sector The market of natural gas reached $18.5 billion by the end of 2011. Demand for gas has recovered to match and surpass pre-recession levels. The US prices for gas are half of those in Asian countries and the EU. Gas demand decreased 3% in 2009, but at present is on the rise.
Electricity Buying the stock of electricity companies is the preferred way of entering this marketplace. The majority of the participation in electricity markets, however, takes place in the futures markets. Since power companies are constantly projecting and calibrating their loads, the futures market is the only place where investors with this sort of risk profile will feel that they belong.
Coal Many non-coal energy sectors directly depend on the performance of coal because burning coal has been proven to produce enough energy to support high demand. Due to recent regulations in the US by the Environmental Protection Agency, coal has taken a minor hit, but until a massive, institutionalized adoption of newer technology, it is highly unlikely coal will be going anywhere for the foreseeable future. In other words, coal is very much a barometer for this market. Though it is unlikely to happen any time soon, a massive dip in coal production would likely signal the emergence of a new viable energy source.
Hydro Hydropower energy is still very limited but there has been over $75 billion in investments pledged to R&D before the year 2020. There are some companies worth checking into, but for now this is very much a long term play.
Energy Funds These funds are established with companies related to the energy field. Be aware that some energy funds are more successful than others and produce a higher return than others. Often times, the energy funds are established to diversify various portfolios and minimize risk.
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