My Recent Articles on Gold, Silver, Oil and More

• Here is just the latest ...
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•         Why I’m Buying Silver - and Why You Should, Too
•          The Swiss Are Investigating 7 Banks for Gold Manipulation... Here’s What You Need To Know
•      The Golden Hour Is Here
•       Get Ready to Profit from Falling LNG Prices
•       Sucker Punch! Russia Could Join OPEC

Today's Must-See Chart #2: Brent Crude Oil

Here's a monthly chart of the international crude oil benchmark, $BRENT. You can see that it is coming down to support.

I realize the supply/demand picture for $Brent has changed since it tested support around $43 and $40 years ago. However, there are many technical analysts in the market.  We can expect buyers to come in and defend those levels.

And while there could be panic spikes to the downside, I think $40 is probably where $brent will base this year.  But we'll see.




The US oil benchmark, West Texas Intermediate, trades at a discount to Brent, but that is changing. And Canada's oil benchmark trades at an even deeper discount.

People are trying to call a bottom in crude oil right now. Most recently, OPEC General Secretary Abdullah al-Badri made vague comments that they "will see some rebound very soon", based on nothing but his own intuition, I guess. Also, he said oil prices could reach $200 per barrel if there's a lack of investment following this price slump. This reversed oil's earlier price decline, when it seemed to be drifting lower (again) after new Saudi regent, King Salman Bin Abdulaziz, pledged to maintain the old king's policies. Since those policies seem to be to pump as much oil as they want, those comments hurt oil.

So who's right?  al-Badri or Abdulaziz? 

I'm seeing lots of articles on oil; certainly "bottom" speculation is high. Some may say that such a media frenzy is itself a sign of a bottom. I'm not so sure. What we need to see is global supply go down and global demand go up. THEN we can start bottom-calling.

The Charts That Makes OPEC Nervous

Bloomberg offers this chart ...



Bloomberg reports: "last year was the first since 1993 that the value of OPEC’s total crude exports didn’t track the direction of global gross domestic product. The bottom panel shows how the group supplying about 40 percent of the world’s oil fetched lower average prices and also shipped fewer barrels year on year."

In fact, production among OPEC’s 12 members fell 2.5% to average 31.6 million barrels a day last year.

Meanwhile, how about US oil production? Take a gander at the latest EIA chart...

The upward slope since 2008 is pretty impressive. And yes, fracking is driving this boom.

We're producing more oil all the time. Next year, U.S. crude oil production is likely to hit its highest level since 1972. U.S. oil production has jumped from 5.0 million barrels per day in 2008 to 7.4 million last year and is expected to average 8.5 million this year and 9.3 million next year, according to the EIA.

As for exports,  last year, the U.S. exported 43.8 million barrels of oil, double the rate of 2012, and up nearly tenfold since 2003.

To compound OPEC's problems, Iraq's output is only expected to hold steady next year. I guess things could be worse with the civil war they have going on.

Chart of US Crude Oil Production Growth Is Amazing

On Friday, the EIA released its latest "This Week in Petroleum," including final-year energy production figures for 2013. It includes this chart ...

From the report:

• Total U.S. crude oil production averaged 7.5 million bbl/d in 2013, 967,000 barrels per day (bbl/d) higher than 2012 and the highest level of U.S. production since 1989. In December 2013, U.S. crude oil production reached 7.9 million barrels per day (bbl/d).
• The 15% increase in U.S. production from 2012 to 2013 was the largest annual percentage increase since 1940. 
• U.S. crude oil production gains were geographically concentrated in Texas and North Dakota, which together accounted for 83% of U.S. production growth. 
• Net imports fell to 7.6 million bbl/d – the lowest level since 1996.

source 

In fact, US crude oil production grew by 50% between 2008 and 2013 (I did the calculations for a presentation I'm putting together for the big IU conference in Carlsbad). 

This record pumping happened even though the harsh winter curbed production in North Dakota and Montana.

You know who else is increasing crude oil production a lot last year? Iraq. Iraq pumped the most in 35 years. Meanwhile, the rest of OPEC is scrabbling to keep up.

Gold, Energy, Charts and More for Monday

I'm flying to San Francisco this week, where I will be interviewing CEOs and other reps from a bunch of mining and energy companies. I'll post videos for my subscribers later in the week, so they can form their own opinions about these companies and what the CEOs have to say.

In the meantime, here are some things that have caught my eye.

Precious Metals

Thanks to the government crackdown on imports, Indian gold demand ahead of the Diwali festival season has been cut in half.

Holdings in gold-backed ETPs fell to 1,841.9 metric tonnes on Nov. 29, the lowest since March 2010, according to  Bloomberg data.

What's more, November saw $1.4 billion exiting gold-tracking ETFs, according to BlackRock. That brings the 2013 year-to-date outflow for the group to $36.4 billion. Gold ETFs around the world hold $74.1 billion, according to the same figures.

Speaking of November, spot gold showed a decrease of around 5.5% for the month. Gold hasn't dropped that much in November (which seasonally should be a bullish month) since 1978, according to data from the World Gold Council. In November 1978, gold fell 20%.

Historically speaking, gold has averaged a gain of 1.4% during November over the last 45 years, according to research by online gold exchange BullionVault and CNBC. Obviously, this time it's different.

You want some optimism? BMR points out that "what followed after that horrible November 1978, by the way, was an immediate climb that intensified throughout 1979 and eventually resulted in a quadrupling of the Gold price over a period of just 14 months"

Other Metals

China is expected to produce 770 million tons of steel this year, a record for the country.

Meanwhile, Mexican drug cartels ship iron ore to China, and China ships chemicals used to make methamphetamines to Mexican ports. Call it "Breaking Badder." Or "Breaking Malo." Hollywood, call me.

China

Not only is China getting grabby about airspace over flyspeck islands that no one lives on, it's also using ancient shipwrecks to lay claim to most if not all of the South China Sea. And who's going to tell them "no"? Too bad we spent all our treasure fighting endless wars in the Middle East, eh?

Energy

The United States will pass Saudi Arabia and Russia to become the world’s top oil producer in 2015, according to the International Energy Agency. Also, the IEA raised its forecast of global oil demand  to 101 million barrels per day (bpd) in 2035, up from 86.7 million bpd in 2011. That far out, those forecasts are Amazing Karnak-esque.

Meanwhile, OPEC expects overall demand for its crude to drop by about 300,000 barrels a day next year. Tensions are rising in the group over which members should trim back production. Couldn't happen to a nicer buncha people.

Global Economy

Morgan Stanley's Global Economics research team has a new note out looking ahead at 2014 titled Five Key Transitions.
In it, they identify five big themes that characterize what the regions of the globe are going through right now:

1. US: From QE to credible forward guidance on interest rates.
2. Japan: From deflation to (moderate) inflation.
3. Europe: From financial fragmentation to a credible banking union.
4. China: From leverage-driven growth to reform-driven growth.
5. EM: From broken traditional to sustainable new growth models.

As MS sees it, the more these transitions are accomplished in 2014, the more likely we'll see robust global growth

Meanwhile, Bank of America Merrill Lynch has a chart showing that European equities have seen the longest streak of inflows in 11 years.

Finally, in the U.S. retail spending over Thanksgiving weekend dropped for the first time in at least seven years. Warning sign, or will Cyber-Monday (today) save retailers?Stay tuned.