By Sonny Atumah

Last week the Greeks in a referendum overwhelmingly voted ‘’NO’’ giving  their Prime Minister, Alexis Tsipras, a stronger mandate to negotiate with their creditors against further austerity measures.

Greek voters on July 6 2015 rejected austerity measures from the country’s creditors- European Cental Bank (ECB), European Union (EU) and the International Monetary Fund (IMF), in a referendum caused by the Syriza government. Greece’s debt to these creditors is $352.7billion; putting its debt -to -GDP ratio at 174.9 percent. Debt- to- GDP ratio measures a country’s debt compared to its economic output.

Angela Merkel, German Chancellor and Euro zone leader holds two cards: a red and a yellow, which one does she issue to end the Greek crisis? There are other three members on the danger list of the debt-to- GDP ratio in Europe as follows – Italy (132.9 percent), Portugal (129.2 percent), and Ireland (123.3 percent).

The defining moment in Greece and indeed Europe has lowered equity and commodity markets around the world to a dangerous level.  Ordinarily, this situation would not have caused a stare considering the fact that Greece is neither a major oil producer nor a consumer.

But the Greek scenario has been under investors’ radar as any default in loan repayment schedule could cause calamity in Europe’s financial market. It is a frightening situation that has weakened the euro value and also caused a possible flight of investors for dollar equities.

The currency that oil is traded is the dollar. Oil price in dollars tend to move inversely to the United States currency. An appreciated dollar has forced the price of oil down the low fifties, in the West Texas Intermediate (WTI), signaling another possible down spiral. Experts’ prediction of a bull run in this quarter may have been dashed.

We hope Merkel’s card may hold the aces now for upper market equilibrium to prevent a price low of the forties in the WTI, as happened in early 2015 due to oversupply of oil from the Americas shale.

The unfolding event in China is for worry; the recently assumed world’s leading importer of crude portends danger for crude producers and suppliers. China is having its share of slowdown in its bigger stock market, the Shanghai Composite. Her Central Bank’s approval of the purchase of $19.3 billion worth of shares has not stopped the uncontrolled loss and plunge of the stock market.

The danger signal of battering oil prices is volatility in the crude oil market. OPEC’s decision to maintain 30 million output levels in June contributed to highest levels of oil in Western Europe. OPEC members’ share of this business is desperation and risk of internal unrest. Survival of most countries is being threatened by depressing oil prices.

In Nigeria, many state governments have gone cap in hand to the Federal Government for a bail out to pay their workers’ salaries. Last week, the Central Bank governor, Godwin Emefiele, in an order to commercial banks placed import fund restrictions on some goods that Nigeria produce locally to shore up her currency and reduce the depletion of its foreign reserve, now at $31.9 billion.

Nigeria had earlier devalued her currency. To increase our revenue base and to get real value and rely less on crude, investments in refineries could be more profitable. Nigeria should open the window for investors to come in.

Iran which is expected to get online about one million barrels per day, when the nuclear deal is zeroed in this weekend with the P5 + 1; as the removal of sanctions would compound the already precarious global oil market.

Again the American shale has appeared to be invulnerable to high production costs, thereby increasing the global glut which has lowered the price of crude. This affected the economy of Canada early in the year, as she has oil as her most important export commodity.

As the bubble bursts in the roller coaster business, energy stock investors absorb the quick punches. We learn from Warren Buffet investment advice of ‘’ be fearful when others are greedy and greedy when others are fearful’’ This investor’s guru’s wise counsel is always a delight.

With the attendant risks, many large companies including oil majors that plunged into shale oil production are reducing their rigs, retrenching their staff members. These companies are cutting their losses with their downstream investments in refineries globally.

Royal Dutch Shell according to Oil Price Intelligence, reports that the Anglo-Dutch company is sticking with its strategy to going big despite the enormous risk. It is ready to drill in the Chukchi Sea a project that has cost the company about $7billion.

The company is ready to commit another $1billion to drill one well with its unique challenges in an area that other companies dread because they feel the reward is not worth the risk. The area in the Artic has sea ice and with no onshore infrastructure.

The closest deep-water port is 1000 miles from the South Alaska. Oil Price reports that Artic Alaska holds a lot of oil and gas estimated to be 30 billion of oil and 221 trillion cubic feet of natural gas.

Elsewhere in Mexico, Shell has also approved the construction of its 8th offshore drilling platform in the Gulf of Mexico. According to reports, Shell is targeting 650 million barrels of oil, 80 miles from Louisiana shore.

The company says it has devised means of reducing production cost by 20 percent, and can break even if oil price is about $55 a barrel. It is to produce 175, 000 barrels per day from the Appomattox and Vicksburg fields. However, four firms have pulled out of Mexico’s upcoming auction of offshore oil and gas investments.

As the big bets continue, oil majors, money managers and other investors are heading for Argentina where there is a shale boom similar to that of the United States. The United States Energy Information Administration reveals that the Argentina Shale has the capacity of 27 billion barrels of oil and 802 trillion cubic feet of natural gas.

Foreign companies including Exxon Mobil, Chevron, Gazprom, Petronas, Dow Chemical, Wintershall, Sinopec among others have made commitments in billions of dollars severally and in conjunction with the Argentine National Oil Company, the YPF for investments. Argentina holds the second largest shale gas and the fourth shale oil in the world.

With the bear run in the global oil business occasioned by Eurozone financial crisis, china stock market crash, the American shale, it is not clear whether experts’ prediction of a bull run of up to $75 per barrel by year end would be realisable.