1. OPEC Abandons U.S. Dollar
2. Greenspan: More Dollar Weakness Ahead
3. Official: OPEC Split Over Further Oil Cuts
January 2007 - Oil-producing countries have reduced their dollar holdings to the lowest
level in two years and shifted oil income into other currencies, according to the Bank for
International Settlements.
Members of the Organization of Petroleum Exporting Countries and Russia reduced their
dollar holdings from 67 percent in the first quarter to 65 percent in the second quarter.
At the same time, they increased their holdings of euros from 20 percent to 22 percent,
the BIS said. They also boosted holdings of the yen and British pound.
Eighteen months ago, the oil-producing countries’ exposure to the dollar was above 70
percent. "The revelation in the latest BIS quarterly review . . . confirms market
speculation about a move out of dollars and could put new pressure on the ailing U.S.
currency," the Financial Times reports.
The BIS, the central bank for the developed world’s central banks, disclosed that
OPEC’s dollar deposits fell by $5.3 billion, while euro and yen-denominated deposits
rose $2.8 billion and $3.8 billion, respectively.
The last time oil-exporting countries reduced their exposure to the dollar — in late
2003 — it pushed the euro to an all-time high against the dollar.
The BIS noted: "While the data are not comprehensive, they do appear to indicate a
modest shift over the quarter in the U.S. dollar share of reporting banks’
liabilities to oil exporting countries."
According to the Times, "the dollar has suffered weakness because of concerns about
global imbalances and the future course of the Federal Reserve’s interest rate
policy."
1. OPEC Abandons U.S. Dollar
Oil-producing countries have reduced their dollar holdings to the lowest level in two
years and shifted oil income into other currencies, according to the Bank for
International Settlements.
Members of the Organization of Petroleum Exporting Countries and Russia reduced their
dollar holdings from 67 percent in the first quarter to 65 percent in the second quarter.
At the same time, they increased their holdings of euros from 20 percent to 22 percent,
the BIS said. They also boosted holdings of the yen and British pound.
Eighteen months ago, the oil-producing countries’ exposure to the dollar was above 70
percent.
"The revelation in the latest BIS quarterly review . . . confirms market speculation
about a move out of dollars and could put new pressure on the ailing U.S. currency,"
the Financial Times reports.
The BIS, the central bank for the developed world’s central banks, disclosed that
OPEC’s dollar deposits fell by $5.3 billion, while euro and yen-denominated deposits
rose $2.8 billion and $3.8 billion, respectively.
The last time oil-exporting countries reduced their exposure to the dollar — in late
2003 — it pushed the euro to an all-time high against the dollar.
The BIS noted: "While the data are not comprehensive, they do appear to indicate a
modest shift over the quarter in the U.S. dollar share of reporting banks’
liabilities to oil exporting countries."
According to the Times, "the dollar has suffered weakness because of concerns about
global imbalances and the future course of the Federal Reserve’s interest rate
policy."
Warren Buffett is betting billions the dollar will crash in 2007.
2. Greenspan: More Dollar Weakness Ahead
The U.S. dollar will stay weak for the next few years, according to former Federal Reserve
Chairman Alan Greenspan. Greenspan blames the U.S. balance of payments deficit for the
prolonged frailty of the dollar.
“I expect that the dollar will continue to drift downwards until there will be a
change in the U.S. balance of payments,” remarked Greenspan, who spoke via video-link
to a business conference in Tel Aviv.
“There has been some evidence that Organization of Petroleum Exporting Countries
nations are beginning to switch their reserves out of dollars and into euro and yen,”
continued Greenspan.
MoneyNews told readers yesterday that the Bank for International Settlements, which is
known as the “central banks’ central bank,” reported a decline in U.S.
dollar reserves in OPEC countries as well as oil exporter Russia.
“It is imprudent to hold everything in one currency,” advised Greenspan, who
sounded like he was talking down the dollar. In fact, Greenspan added that at some point
the dollar would decline in value.
"That [a falling dollar] will be the experience of the next few years,"
Greenspan said.
Can Ben Bernanke avoid the coming currency crisis?
3. Official: OPEC Split Over Further Oil Cuts
A narrow majority of OPEC members want to cut the group's oil output further when they
meet in Abuja on Thursday, a top OPEC official said on Monday.
Hasan Qabazard, OPEC's director of research, said his view was OPEC should wait to judge
the full impact of its existing 1.2 million barrels per day reduction before cutting
again.
Asked how many countries backed supply curbs, he told Reuters in an interview: "I put
it at 60/40."
"I see mixed signals. Some ministers believe there should be cuts but some other
ministers believe the market is balanced."
He listed Saudi Arabia, Algeria, the UAE and Qatar among those countries favoring supply
curbs of at least 500,000 barrels per day. At an emergency meeting in October, OPEC
decided to remove 1.2 million bpd from the market after a 25 percent drop in the oil price
from its $78.40 mid-July peak. "I would prefer that we wait until January to see how
our cuts in Doha take effect . . . prices have gone up a little bit."
He raised the possibility of price spikes during the northern hemisphere winter when
demand peaks.
"You don't want to have the price go up drastically. That might be harmful for
economies," he said.
Prices have rallied from a low of $54.88 on Nov. 17 for U.S. crude to more than $61 a
barrel, above OPEC's undeclared price target of $60 a barrel — $55 for OPEC's basket
of crude.
Sixty a Barrel Fair for All
Qabazard said a $60 a barrel price did not risk harming the world economy and enabled OPEC
countries to invest in oil infrastructure.
"$60 for WTI seems to be a good price. This price has also promoted investments in
the upstream, in the refining sector."
While price is significant, he said OPEC's real concern was balancing supply and demand.
He said estimated excess supply of between 500,000 and 700,000 bpd — assuming full
compliance with curbs agreed in October — was not a worry now.
It could swell to 1.2 million bpd and become a problem when demand falls during the second
quarter, especially if non-OPEC producers come close to meeting expectations of 1.8
million bpd growth.
"The worry is that in the second quarter of 2007 we'll have a lot more supply than
demand," the OPEC official said.
Cuts in place have gone some way towards draining oil stocks in the industrialized world
that rose to 2.76 billion barrels, equivalent to 55 days of demand, in September versus
2.64 billion the previous year, or 53 days of demand.
Qabazard said he considered 52 days of forward supply reasonable.
Stocks in industrialized nations are about 100 million barrels above the five-year
average, he said, while U.S. commercial inventories were 20 million barrels above the
five-year average. U.S. stocks of distillates, including heating oil, were bang on the
five-year average for the season.
Dollar Continues Downward
Some OPEC members have expressed concern at the weakness of the dollar. The dollar has
fallen 11 percent this year versus the euro, eroding the purchasing power of OPEC's
revenues from the dollar-denominated oil market.
"The decline of the dollar is a concern because the U.S. economy is a concern.
Normally the world economy follows the U.S. economy, but we have seen evidence of a
decoupling of the European and Asian economies from the United States so the worry is
less," Qabazard said.
"We see lots of risks in the U.S. economy next year but we also see positive signs,
so we hope that next year the dollar will come back up. It's at very low levels and I
don't think it will decline more than it already has."
Greenspan says: More Dollar Weakness Ahead
The U.S. dollar will stay weak for the next few years, according to former Federal Reserve
Chairman Alan Greenspan. Greenspan blames the U.S. balance of payments deficit for the
prolonged frailty of the dollar.
“I expect that the dollar will continue to drift downwards until there will be a
change in the U.S. balance of payments,” remarked Greenspan, who spoke via video-link
to a business conference in Tel Aviv.
“There has been some evidence that Organization of Petroleum Exporting Countries
nations are beginning to switch their reserves out of dollars and into euro and yen,”
continued Greenspan.
MoneyNews told readers yesterday that the Bank for International Settlements, which is
known as the “central banks’ central bank,” reported a decline in U.S.
dollar reserves in OPEC countries as well as oil exporter Russia.
“It is imprudent to hold everything in one currency,” advised Greenspan, who
sounded like he was talking down the dollar. In fact, Greenspan added that at some point
the dollar would decline in value.
"That [a falling dollar] will be the experience of the next few years,"
Greenspan said.
Warren Buffett is betting billions the dollar will crash in 2007.
Buffett ... billionaire financier George Soros ... and Microsoft head Bill Gates all bet
against the dollar last year. They lost! A contagion of the world's largest banks in the
currency market -- Deutsche Bank AG ... UBS AG ... and Citigroup Inc.-- all missed the
dollar's rally in 2005. In fact, Buffett was so convinced of a dollar decline in 2005 that
he lost almost $1 billion while bank analysts forecast the dollar would fall to an
all-time low of $1.40 per euro. Instead it rose 14.4%.
But they all know the Fed can't run a large current-account deficit for long. So, the
dollar bears are sticking to their predictions -- saying they weren't wrong ... JUST
EARLY!
http://www.newsmax.com
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