Thursday, December 25, 2014

Christmas Weekend Linkfest: 6 Top Links

Link #1: Thanks to falling oil prices, Europe's trade surplus is booming!

Link #2: US Oil Prices Tank on surge in US supply, imports

The U.S. is awash in oil, with record levels of production meeting a rising tide of imports. The U.S. Department of Energy said oil stocks rose by 7.26 million barrels, while analysts had expected a decline of 1.8 million barrels. 

 "Refiners produced the highest amount of gasoline ever reported by the EIA — 9.92 million barrels per day," noted Andrew Lipow, president of Lipow Oil Associates. He said refiners produced the second-highest amount of distillate fuel ever, at 5.24 million barrels per day, second only to 5.26 million barrels a day in December 2013.

Refineries were also running at a high rate, with utilization at 93.5 percent. "To be able to build crude inventories like that in the face of a 93.5 percent utilization rate is remarkable. Imports are also rebounding," said John Kilduff of Again Capital. He said imports of crude rose to 8.3 million barrels per day from 7.1 million the previous week. 

Link #3Saudi Arabia projects huge deficit as oil price drop bites

The government announced the $38.6 billion deficit on state-run television, saying it would nonetheless boost projected spending by tapping its vast financial reserves.

The 2015 budget shortfall is the first deficit projected by the OPEC kingpin since 2011 and the largest ever for the kingdom.

The price of oil, which makes up around 90 percent of public income in Saudi Arabia, has lost about half of its value since June due to a production glut, weak global demand and a stronger US dollar.

If oil prices remain at the current level of about $60 a barrel for benchmark Brent crude, Saudi Arabia is expected to lose half of its oil revenues of $276 billion posted in 2013. Oil income this year is expected at $248 billion.

But the wealthy kingdom, which pumps about 9.6 million barrels per day, can easily tap into huge fiscal buffers, estimated at $750 billion, to meet the deficit.

Link #4: Oil’s Swift Fall Raises Fortunes of U.S. Abroad

A plunge in oil prices has sent tremors through the global political and economic order, setting off an abrupt shift in fortunes that has bolstered the interests of the United States and pushed several big oil-exporting nations — particularly those hostile to the West, like Russia, Iran and Venezuela — to the brink of financial crisis.

The price plunge may also influence Iran’s deliberations over whether to agree to a deal on its nuclear program with the West; force the oil-rich nations of the Middle East to reassess their role in managing global supply; and give a boost to the economies of the biggest oil-consuming nations, notably the United States and China.

It might even have been a late factor in Cuba’s decision to seal a rapprochement with Washington.

For Iran, which is estimated to be losing $1 billion a month because of the fall, it is as if Congress had passed the much tougher sanctions that the White House lobbied against

Link #5: Commodity Supercycle Could Be Over Says Deutsche Bank

The ten year-old commodity supercycle, triggered by rising demand in booming emerging markets, “has come to a clear and abrupt end” as the price of oil has been halved, a report from Deutsche Banks says.  While other commodities have been heading south for some time, it is the fall in the price of oil, however, that appears to be sealing a sea change in thought regarding the end of the commodity supercycle.

The report from Josef Auer and Lorenz Vignold-Majal, notes that the Commodity Price Indices compiled by Germany’s Hamburg Institute of International Economics (HWWI) have reached their lowest levels since 2010, leading to a trend lower in commodity prices. Moderate global growth from 2012 to 2014, the bank noted, is “no doubt one of the main reasons, and perhaps the most important one, for the trend.”

To read the whole report, click here.

Link #6: 10 Economic Questions for 2015

1) Economic growth: Heading into 2015, most analysts are pretty sanguine.   Even with contraction in Q1, 2014 was a decent year (GDP will grow around 2.4% in 2014).  Will 2015 be the best year of the recovery so far?  Could 2015 be the best year since the '90s?  Or will 2015 disappoint again?

2) Employment:  With one month to go, 2014 is already the best year for employment growth since the '90s.   Will 2015 be as strong?  Or will job creation slow in 2015? 

3) Unemployment Rate: The unemployment rate was at 5.8% in November, down 1.2 percentage points year-over-year.  Currently the FOMC is forecasting the unemployment rate will be in the 5.2% to 5.3% range next December.  What will the unemployment rate be in December 2014?

Read the rest.

By the way, U.S. vehicle sales saw their strongest December in 10 years, weekly initial unemployment claims decreased to 280,000, mortgage applications are increasing, and personal income and spending are increasing.

In fact, thanks to cheap oil, consumer spending is blasting off.

More by the way, the S&P 500 is up 12.6% year-to-date as I write this. In the past four years, it's up 65%!

(Updated chart)

And most indications are that the S&P 500 is about to take another leg up.

Do tell me again how President Obama is a socialist who creates a negative business environment.

Anyway, have a Merry Christmas. I'll talk to you next week.

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