Wishful thinking by Australian investors yesterday with more record highs for local coal miners like Whitehaven and New Hope as punters sought to buy to grab extra profits for coal exports not even earned yet in the wake of the 2 million barrels a day oil output cut by the OPEC+ group.
Data from the Newcastle export coal index showed small falls across the board with the current October month (which acts as the spot price) dipping under $US400 a tonne to $US396 a tonne for the first time in several weeks and prices for other months also in the red.
Oil prices, on the other hand, edged higher in US and then Asian dealing – but there were no big rises as some US analysts has speculated.
Shares local oil stocks also rose in the wake of the surprise decision by Saudi Arabia to desert the west and ally itself with Russia and slash global oil production by 2 million barrels a day.
Global oil prices trade sideways in Asian trading yesterday – US West Texas Intermediate crude was just over $US87 a barrel – where it had ended in New York while Brent futures were a fraction higher than the New York exit price.
All up both crude types rose between $US1.30 and $US1.70 a barrel over Wednesday and into early Thursday trading.
On the ASX the prices of Woodside (up 2.4%), Santos (up 1.8%) and Beach (up 0.3%) all rose.
Among coal companies, punters really went after shares in Whitehaven Coal and New Hope. Whitehaven shares hit an all-time high of $10.56 and ended at $10.46 for a very solid gain on the day of just over 7%. New Hope shares closed at $6.77, up 2.3% on the day and short of the all-time peak of $6.87 reached earlier in the session.
Shares in the Chinese-controlled Yancoal Australia closed at $6.4, up 0.8% on the day and well short of its all-time high of $7.15.
The way Saudi Arabia joined Russia in leading the OPEC+ group in making a deeper than forecast cut in global was an eye opener for the US government and many in Europe.
The decision was taken knowing it risked a backlash from the US and European countries already battling soaring energy inflation.
The White House said in a statement that Biden was “disappointed by the short-sighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.”
It said that Biden had directed the Department of Energy to release another 10 million barrels from the Strategic Petroleum Reserve next month.
“In light of today’s action, the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the White House said.
OPEC+ said the 2-million-barrel cut would start next month, as it looks to support prices that have fallen 30% since June on slowing growth.
The group, which also extended its mandate by a year to the end of 2023, said the cuts would be made to current production levels, rather than quota levels which most members are unable to meet.
Analysts were sceptical of the size of the cut with some claiming it was really half the 2 million figure.
Part of the OPEC+ cut is “on paper” because members already can’t supply enough oil to hit their allotments, Gary Peach, oil markets analyst at energy information firm Energy Intelligence told the Associated Press. “Only about half of that is real barrels,” he said.
A cut with oil near $90, which is “a comfortable price for all producers,” might not sit well with customers, but the oil ministers are “looking into the tunnel of recession” that could lower demand in coming months, Peach said. “They decided to pre-empt that.”
Oil supply could face further cutbacks in coming months when a European ban on most Russian imports takes effect in December. A separate move by the U.S. and other members of the Group of Seven wealthy democracies to impose a price cap on Russian oil could reduce supply if Russia retaliates by refusing to ship to countries and companies that observe the cap.
The EU agreed Wednesday on new sanctions that are expected to include a price cap on Russian oil that is meant to starve Putin’s military of the funds to finance the invasion in 2023.
Analysts at Commerzbank in New York said in their daily note Russia “will need to find new buyers for its oil when the EU embargo comes into force in early December and will presumably have to make further price concessions to do so,” analysts at Commerzbank said.
“Higher prices beforehand — boosted by production cuts elsewhere — would therefore doubtless be very welcome,” they added.
