Editorial: Ouroboros, The Dragon's Tale & Changing Appetites

Ouroboros n.

From the Greek meaning "tail-devouring snake". An ancient symbol depicting a serpent or dragon eating its own tail. It represents cyclicality, perpetuity and the infinite.

Across the world they are calling it "The Great Fall of China". Since the last time this column was penned, Chinese stocks have lost 13 per cent of their value in two days of carnage in Shanghai. Since the impromptu devaluation of the renminbi a fortnight ago, some $5 trillion has been wiped off Chinese stocks in the biggest sustained rout since the nadir of the Global Financial Crisis in 2007.

As is to be expected when the world’s second largest economy falters, winged rumour’s swift flight turned to contagion and neighbouring Japan’s Nikkei index plunged to a two year low.

At the end of Monday trading, West Texas Intermediate (WTI) crude had sunk to $38, its lowest level since February 2009. Brent crude slid to $43 per barrel, down by 5.6 per cent in an August that has so far seen the international benchmark nosedive by almost 19 per cent. The price of Brent is down by 57 per cent year-on-year and in an unabated tumble that would have been unthinkable 12 months ago. Worryingly, there are no immediate signs that this downward trajectory will reach a plateau any time soon.

As the United States and OPEC continue to pump at record numbers in a desperate scrabble to maximise dwindling profits and maintain market share, the race to the bottom may be inexorable. OPEC’s next congress is scheduled for early December, and it is unlikely that there will be a rush to assistance before then, if at all.

The traditional speculation season of the Summer months has been postponed. Perhaps the only salvation for an ever decreasing oil price is that shrinking drilling rates and attenuating output will eventually redress the balance, allowing demand to once more outstrip supply.

Today, the industry’s deliverance relies on the serpent eating its tail. Let us hope that its appetite has not been aroused by other flavours….

Tim Haðdar is the Editor In Chief at Oil & Gas IQ. Reach Him At Twitter Or OGIQ

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