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Russia drags down the world economy - Oil prices fall by 20% - Final nail in the coffin?

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Following an announcement by the Russians it is clear that OPEC and Russia could not agree on measures to keep the oil price stable. On the contrary they are now in an open price war and the price of oil is in free fall, down 20% as of this morning.

 

Australian stocks led a plunge in early Monday trading in the Asia-Pacific region, falling 5.9 percent. Tokyo shares fell 4.7 percent, and Hong Kong opened 4.1 percent lower. Futures markets indicated big losses for Wall Street and Europe when they open later on Monday.

https://www.nytimes.com/2020/03/08/business/saudi-arabia-oil-prices.html

 

But this is only the start as New York and London will open later today epic falls are forecast.

 

Is this the final nail in the coffin for the world economy or a silver lining, in that the cheap oil will benefit the Chinese economy? What will happen to your economy?

 

Thoughts please.

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Cheap oil should be a bonus for the World,

as I know when the price goes up,so does

most other things, coming down when oil

is cheaper,does not happen as it should or

as quickly.

regards Worgeordie

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In the short term this should be good news for China. So the Chinese economy should benefit. But how the US replies could determine the future. Here's Bloomberg's take:

 

“Investors will not focus on global stimulus measures, a potential ramp in production from China, the healthy U.S. consumer, aggressive Fed easing, and relatively attractive U.S equities, until they have confidence that the U.S. government and Fed will ‘do what it takes’ to lower tail risk,” Dennis Debusschere, head of portfolio strategy at Evercore ISI, wrote in a note to clients Sunday. “If that happens, the focus will turn to how the outbreak has evolved in China and if the U.S. is on a similar path.”

 

https://finance.yahoo.com/news/correction-deepens-u-stock-futures-220508907.html

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Posted (edited)

That's for sure, if you wait till the Wall Street and London openings the falls will be epic and it will be a perfect time to buy shares.

 

But whilst the US economy has been on a nice uptrend, we have recently had an indicator that not all is well, the services PMI figure contracted for the first time in 4 years:

 

"Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said: “With the exception of the government-shutdown of 2013, US business activity contracted for the first time since the global financial crisis in February. Weakness was primarily seen in the service sector, where the first drop in activity for four years was reported, but manufacturing production also ground almost to a halt due to a near-stalling of orders. “Total new orders fell for the first time in over a decade. The deterioration in was in part linked to the coronavirus outbreak, manifesting itself in weakened demand across sectors such as travel and tourism, as well as via falling exports and supply chain disruptions. However, companies also reported increased caution in respect to spending due to worries about a wider economic slowdown and uncertainty ahead of the presidential election later this year. “The survey data are consistent with GDP growth slowing from just above 2% in January to a crawl of just 0.6% in February. However, the February survey also saw a notable upturn in business sentiment about the year ahead, reflecting widespread optimism that the current slowdown will prove shortlived.”

 

https://www.markiteconomics.com/Public/Home/PressRelease/2ea84928c5d74262bbe387ec2b19d337

 

The recent rate cut obviously showed that the Fed is concerned about the US economy and that not all is well.

 

Hopefully the resilience of the Americans is real and this will only be a short-lived downturn.

 

And not the arrival of one of the four horsemen of the Apocalypse.

 

 

Edited by Logosone
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44 minutes ago, Logosone said:

in that the cheap oil will benefit the Chinese economy?

don't forget Vlad is Xi's best friend and here is the proof....... Vlad slogan MRGA

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44 minutes ago, Logosone said:

Is this the final nail in the coffin for the world economy or a silver lining, in that the cheap oil will benefit the Chinese economy? What will happen to your economy?

 

Thoughts please.

My only thoughts are what's wrong with Chinese benefiting.

My economy will be better with cheaper fuel at the pump.

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40 minutes ago, worgeordie said:

Cheap oil should be a bonus for the World,

as I know when the price goes up,so does

most other things, coming down when oil

is cheaper,does not happen as it should or

as quickly.

regards Worgeordie

Bonus ?!

Not when you have oil shares

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China and Russia are close, but what is Russia's real agenda here?

 

This comes against a backdrop of US oil producers flooding the market, and thereby depressing oil prices. So this way Putin can hit back at the US by taking out the US shale oil producers who will be the first to fall by the wayside because they need oil prices above 50$ to make money, given their costs.

 

So my best guess, the Russians did not want to take huge cuts and believe they can live with the lower prices, that that is preferable to cuts, and as a nice side play they take out US shale oil producers?

 

https://foreignpolicy.com/2020/03/06/russias-defiance-sets-the-stage-for-oil-price-bloodbath/

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10 minutes ago, Kwasaki said:

My only thoughts are what's wrong with Chinese benefiting.

My economy will be better with cheaper fuel at the pump.

Nothing wrong with cheap oil helping China. 

 

The question is will it be enough to create stability and growth in the world economy? China again approaching good growth will not be enough. The world is looking to the US, and the Fed. They will have to lower rates to  boost the world economy. So will many other federal banks, that still have interest rate room to cut.

 

Cheap fuel at the pump would be useless if the pump operators go bust after all. We need a stable economy and growth.

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21 minutes ago, poohy said:

Not when you have oil shares

Or work in the O&G industry 😞 

I have always loved high gas prices, meant I was able to earn a living!

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Somehow I doubt that there will be much in the way of sympathy, for most of the Arab oil producers, nor for Russia. None of them are what I would refer to as "good citizens". They have not done much good with their wealth. And they have sowed major discord, especially the heinous Saudi regime, the nasty Emirates regime, and of course Dictator Putin. MBS, Sheikh Maktoum, and Putin are always up to no good. That is just who they are. 

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22 minutes ago, Logosone said:

China and Russia are close, but what is Russia's real agenda here?

 

This comes against a backdrop of US oil producers flooding the market, and thereby depressing oil prices. So this way Putin can hit back at the US by taking out the US shale oil producers who will be the first to fall by the wayside because they need oil prices above 50$ to make money, given their costs.

 

So my best guess, the Russians did not want to take huge cuts and believe they can live with the lower prices, that that is preferable to cuts, and as a nice side play they take out US shale oil producers?

 

https://foreignpolicy.com/2020/03/06/russias-defiance-sets-the-stage-for-oil-price-bloodbath/

I think that with Russia's GDP being 60% oil & gas, they cannot withstand any prolonged price drop as well as the US will be able to. This is going to seriously screw them. The only ones who will really benefit country-wise are the Chinese. And all consumers of anything, as prices will come down.

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