Greece will get its bailout. Spain will be rescued! So why the heck did we ever doubt it? Yesterday the doubts crept into the market place as the European politicians played a game of economic chicken trying to get a sense of who might blink. Today the market is coming back on yet another story that indeed it will just be a matter of time before Spain asks for help. In the meantime, the oil market plays a game of risk-on/risk-off as this economic mating ritual plays out. I feel so used!
Just when they wanted you to believe that all was just about lost, the Financial Times is reporting that the, “Spanish government is prepared to make a rescue request that would allow the European Central Bank to begin buying its debt, but the issue is being delayed by the needs of other countries in the single currency.” Gee, now you tell us.
The FT says that Madrid has now found a formula that it feels comfortable with to make a rescue request – a significant shift in position compared to before the summer – and is waiting for external factors, such as the way it would influence other countries such as Italy, to be resolved. They say that a senior official within the Spanish ministry of economy said Spain did not require any money from the European Stability Mechanism, the Eurozone’s state rescue fund, but would be comfortable making a request for a credit line only to satisfy the conditions of the ECB to begin buying bonds.
Despite the tough talk on Greek austerity and the realization that they will fall short of their agreed upon goals, Reuters News reports that the Greek Prime Minister says that Antonis Samaras says that, "Greece will soon get the next tranche. Its economy needs liquidity like a desert needs rain." This also sounds like the Lyric’s to an “America” Song.
So Greece is getting cash and Spain is going to ask for help, so sit back and get ready for a bailout bounce. The euro is on its way up hitting the highest level since Oct. 8 — the last time bailout hopes were still in play. While demand expectations have taken a hit from most of the major energy reporting groups, will it matter if the risk play comes back on? Add to that a seasonal low time could reinforce the market's bullish expectations. So will the expected drop in demand bring prices down?
Dow Jones reports that Khalid al-Falih said in a speech made to the Oxford Energy Institute late September released on Aramco's web site said that oil prices are unlikely to collapse even though demand is expected to slow and supplies of fossil fuels have risen significantly, the chief executive of state-owned oil giant Saudi Aramco said.
"Our industry now faces downward pressure on demand; supply abundance; a slow-down in the deployment of renewable; and reduced momentum on climate change legislation. It doesn't mean our industry is in bad shape or that prices are going to collapse, but that's a profoundly altered world energy landscape from the one we faced a decade, or even just a few years, ago," he said. Demand this year, for example, is expected to increase by only a modest 850,000 barrels per day, or less than 1%, whereas growth averaged more than 2.3% between 1965 and 2010.
The firm is adapting to the "paradigm shift" in the energy industry but will continue to invest in crude oil exploration and development in a bid to keep its oil production portfolio robust. Mr.al-Falih said the firm will invest $35 billion over the next five years on oil exploration and development, while it also plans to increase its conventional and unconventional gas supplies by almost 250% over the coming couple of decades. The company also hopes to diversify its energy portfolio and boost earnings from downstream activities by growing and integrating chemicals with its world-scale refining operations, he added.