- Here is just the latest ...
- 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
Showing posts with label crude. Show all posts
Showing posts with label crude. Show all posts
Wednesday, October 14, 2015
My Recent Articles on Gold, Silver, Oil and More
Wednesday, January 28, 2015
10 Crude Oil Links and Charts
Click on any of the headlines (except the first chart, which I made on Stockcharts.com) and it will bring you to a longer story.
1. A Monthly Chart of Brent Crude
(Updated chart)
2. Goldman Sachs sees WTI crude oil at close to $40 per barrel in first half
ONDON (Reuters) - Goldman Sachs said on Wednesday it expected prices for WTI crude oil to trade close to $40 (26 pounds) per barrel for most of the first half of 2015 in one of the lowest forecasts among major investment banks.
Goldman, one of the most active banks in commodities, said that after a very weak first half prices should recover to $65 per barrel for WTI and $70 for Brent.
3. U.S. oil well shut-ins start as crude rout batters small producers
As oil prices fell by more than half over the last six months from more than $100 per barrel, the U.S. oil industry responded by slowing its blistering growth and dialing back expansion plans.
Now, with U.S. crude around $46 a barrel, operators are already closing some small old wells, known as strippers, and tens of thousands of similar wells are on the verge of losing money. A further slide could, by some estimates, idle an equivalent of up to 2 percent of U.S. supply, slowing overall output growth more than expected or even leaving it flat.
There are about 400,000 stripper wells in the United States, most with operating costs of between $20 and $50 per barrel, according to analysts at Wood Mackenzie, a leading energy and commodities consultancy.
"At $40, we think you have got about 100,000 to 200,000 barrels per day at risk" from U.S. stripper wells, said RT Dukes of Wood Mackenzie.
Vast efficiency gains also mean that more oil can be squeezed from fewer new wells. For example, EOG Resources Inc said in November that output of new fracked wells in the Eagle Ford shale of Texas was up 39 percent compared with wells sunk at the start of 2014.
4. Fewer oil rigs does not mean less crude, EIA says
The sharp decline in oil prices has had a significant effect on U.S. drilling activity, the EIA said. Citing data from oil-field services company Baker Hughes Inc. BHI, the EIA said there has been a 16% decline in the number of active onshore drilling rigs in the continental U.S. from the end of October through last week.
In a January outlook, the EIA forecast Brent crude to average $58 a barrel this year and $75 a barrel in 2016, with New York-traded West Texas Intermediate forecast to be lower than Brent’s by between $3 and $4 a barrel during those years.
Discussing how fewer operating rigs don’t necessary mean less production, the EIA gave the example of North Dakota in the 2008 downturn. Permits and drilling activity fell at the time, but “production rates did not decline as substantially,” the EIA said.
5. Lower 48 oil production outlook stable despite expected near-term reduction in rig count
Should its price forecast be realized, EIA projects that the number of operating rigs will decrease by approximately 24% from January to October 2015 before beginning to rebound in November 2015. However, the outlook for Lower 48 production reflects more than just the rig count. Other key factors include the efficiency of drilling, which EIA tracks in its Drilling Productivity Report, the rate of decline in production from existing wells, and changes in the amount of time between the start of drilling (called spudding) and the completion of the well.
6. Falling crude prices will leave oilfield services companies ‘parked,’ may trigger layoffs
CALGARY – Depressed oil prices will cause many producers to drill, but not draw from, new wells, with the result that oilfield service companies will suffer from the drop in activity, the head of the Petroleum Services Association of Canada said Tuesday
PSAC is now predicting 7,650 new wells will be drilled in Canada this year, which would mark a 32% drop from the 11,226 wells drilled in 2014.
7. China to keep 200 MMbbl crude hoard even if oil rallies
BEIJING (Bloomberg) -- China is poised to maintain its commercial hoard of more than 200 MMbbl of crude within three years even if oil rallies toward $130/bbl.
In terms of capacity, China can store 307 MMbbl of commercial oil inventory as of last year, CNPC said in its annual research report also published on Jan. 28. Strategic oil storage tanks, spread over six bases nationwide, can take a further 141 MMbbl, the company said.
8. Cease Fire? The Energy Report 1/28/15
Is OPEC getting ready to declare a cease fire in the oil production wars? OPEC Secretary-General Abdullah al-Badri said that a bottom in oil may be near and high level rumors of meetings between OPEC and Non-OPEC members are creating speculation that there may be some type of agreement in the works to curtail production. Even Saudi Aramco said it would postpone some projects as it appears low oil prices are even making some Saudi expansion unprofitable. While there have been many denials the talk has been making the rounds and it offered oil some support aided by the weakened dollar. Yet with U.S. oil supply rising over 12 million barrels yesterday according to the American Petroleum Institute and rising Iraqi production it is unclear as to how they can structure a cut that will make a difference in the growing global oil glut.
Today is a key day for oil! If oil is going to have a chance to bottom it will have to surge off record U.S. supply and the Fed statement. While there is no press conference most believe the Fed will keep their thoughts behind closed doors and not change the statement. In the meantime traders will look at the Gasoline demand numbers as well as refinery runs to see if there is any changes that might signal are close to a bottom. $44 is the line in the sand for West Texas Intermediate.
9. Oil Prices: What’s Behind the Drop? Simple Economics
United States domestic production has nearly doubled over the last six years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once found a home in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices.
On the demand side, the economies of Europe and developing countries are weakening and vehicles are becoming more energy-efficient. So demand for fuel is lagging a bit.
Households will likely spend $750 less on gas this year because of the oil prices, the United States Energy Information Administration said Tuesday. Europeans and consumers around the world will enjoy similar benefits.
Finally, #10, from January 20th ...
5 Reasons This Crude Move is Unbelievable
1. A Monthly Chart of Brent Crude
(Updated chart)
2. Goldman Sachs sees WTI crude oil at close to $40 per barrel in first half
ONDON (Reuters) - Goldman Sachs said on Wednesday it expected prices for WTI crude oil to trade close to $40 (26 pounds) per barrel for most of the first half of 2015 in one of the lowest forecasts among major investment banks.
Goldman, one of the most active banks in commodities, said that after a very weak first half prices should recover to $65 per barrel for WTI and $70 for Brent.
3. U.S. oil well shut-ins start as crude rout batters small producers
As oil prices fell by more than half over the last six months from more than $100 per barrel, the U.S. oil industry responded by slowing its blistering growth and dialing back expansion plans.
Now, with U.S. crude around $46 a barrel, operators are already closing some small old wells, known as strippers, and tens of thousands of similar wells are on the verge of losing money. A further slide could, by some estimates, idle an equivalent of up to 2 percent of U.S. supply, slowing overall output growth more than expected or even leaving it flat.
There are about 400,000 stripper wells in the United States, most with operating costs of between $20 and $50 per barrel, according to analysts at Wood Mackenzie, a leading energy and commodities consultancy.
"At $40, we think you have got about 100,000 to 200,000 barrels per day at risk" from U.S. stripper wells, said RT Dukes of Wood Mackenzie.
Vast efficiency gains also mean that more oil can be squeezed from fewer new wells. For example, EOG Resources Inc said in November that output of new fracked wells in the Eagle Ford shale of Texas was up 39 percent compared with wells sunk at the start of 2014.
4. Fewer oil rigs does not mean less crude, EIA says
The sharp decline in oil prices has had a significant effect on U.S. drilling activity, the EIA said. Citing data from oil-field services company Baker Hughes Inc. BHI, the EIA said there has been a 16% decline in the number of active onshore drilling rigs in the continental U.S. from the end of October through last week.
In a January outlook, the EIA forecast Brent crude to average $58 a barrel this year and $75 a barrel in 2016, with New York-traded West Texas Intermediate forecast to be lower than Brent’s by between $3 and $4 a barrel during those years.
Discussing how fewer operating rigs don’t necessary mean less production, the EIA gave the example of North Dakota in the 2008 downturn. Permits and drilling activity fell at the time, but “production rates did not decline as substantially,” the EIA said.
5. Lower 48 oil production outlook stable despite expected near-term reduction in rig count
6. Falling crude prices will leave oilfield services companies ‘parked,’ may trigger layoffs
CALGARY – Depressed oil prices will cause many producers to drill, but not draw from, new wells, with the result that oilfield service companies will suffer from the drop in activity, the head of the Petroleum Services Association of Canada said Tuesday
PSAC is now predicting 7,650 new wells will be drilled in Canada this year, which would mark a 32% drop from the 11,226 wells drilled in 2014.
7. China to keep 200 MMbbl crude hoard even if oil rallies
BEIJING (Bloomberg) -- China is poised to maintain its commercial hoard of more than 200 MMbbl of crude within three years even if oil rallies toward $130/bbl.
In terms of capacity, China can store 307 MMbbl of commercial oil inventory as of last year, CNPC said in its annual research report also published on Jan. 28. Strategic oil storage tanks, spread over six bases nationwide, can take a further 141 MMbbl, the company said.
8. Cease Fire? The Energy Report 1/28/15
Is OPEC getting ready to declare a cease fire in the oil production wars? OPEC Secretary-General Abdullah al-Badri said that a bottom in oil may be near and high level rumors of meetings between OPEC and Non-OPEC members are creating speculation that there may be some type of agreement in the works to curtail production. Even Saudi Aramco said it would postpone some projects as it appears low oil prices are even making some Saudi expansion unprofitable. While there have been many denials the talk has been making the rounds and it offered oil some support aided by the weakened dollar. Yet with U.S. oil supply rising over 12 million barrels yesterday according to the American Petroleum Institute and rising Iraqi production it is unclear as to how they can structure a cut that will make a difference in the growing global oil glut.
Today is a key day for oil! If oil is going to have a chance to bottom it will have to surge off record U.S. supply and the Fed statement. While there is no press conference most believe the Fed will keep their thoughts behind closed doors and not change the statement. In the meantime traders will look at the Gasoline demand numbers as well as refinery runs to see if there is any changes that might signal are close to a bottom. $44 is the line in the sand for West Texas Intermediate.
9. Oil Prices: What’s Behind the Drop? Simple Economics
United States domestic production has nearly doubled over the last six years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once found a home in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices.
On the demand side, the economies of Europe and developing countries are weakening and vehicles are becoming more energy-efficient. So demand for fuel is lagging a bit.
Households will likely spend $750 less on gas this year because of the oil prices, the United States Energy Information Administration said Tuesday. Europeans and consumers around the world will enjoy similar benefits.
Finally, #10, from January 20th ...
5 Reasons This Crude Move is Unbelievable
It’s been one amazing sell off in Crude Oil; so amazing we can’t stop writing about it. We’ve covered the long term picture of Crude, The Best Tweets from Crude’s Drop, How to Play a Bounce , andeveryone else’s articles on crude. But we can’t stop staring at it… We’re the commodity focused moth to the proverbial flame.
But why is this sell off so amazing? What’s special about it?
Monday, January 26, 2015
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.
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.
Tuesday, January 13, 2015
When the Paddy Wagon Comes Along, It Takes The Good Girls Along With the Bad
As you can see from this chart of West Texas Intermediate Crude Oil vs some major energy industry funds, when oil goes South, it drags everybody with it.
(link)
As Charlie Belida used to say, "When the paddy wagon comes along, it takes the good girls along with the bad."
Now, oil is primed for an oversold bounce here. Do you believe this is the bottom? Or is this a chance to get out of some losing positions at higher prices? And perhaps add some positions with short-oil exposure?
In $10 Trigger Alert, I've been recommending stocks that should do well as oil prices go lower (because energy is a major input for them OR they make more money when consumers have more money). What you do is up to you. Be careful.
Good luck and good trades.
UPDATE: Some supporting articles
Storing Oil At Sea Is About Futures Prices, Not Crude Oil Prices Rebounding
Some of the major oil trading firms are hiring oil tankers for up to 12 months.
Record natural gas production makes for bearish outlook
Dry natural gas production, according to the EIA, was at a record high in October for the eighth consecutive month.
According to the EIA’s projections, 2015 will be the tenth consecutive year of production gains, thanks to booming production from shale plays, especially the Marcellus.
US Oil production Continues to Rise
Last week, crude production increased to 9.13 MMbbls per day from 9.12 MMbbls per day the week before. In its December Short-Term Energy Outlook (or STEO), the EIA reported that output will hit 9.3 MMbbls per day in 2015, which is 700,000 barrels above the 2014 level.
Are energy MLPs finally feeling the heat of falling commodity prices?
(link)
As Charlie Belida used to say, "When the paddy wagon comes along, it takes the good girls along with the bad."
Now, oil is primed for an oversold bounce here. Do you believe this is the bottom? Or is this a chance to get out of some losing positions at higher prices? And perhaps add some positions with short-oil exposure?
In $10 Trigger Alert, I've been recommending stocks that should do well as oil prices go lower (because energy is a major input for them OR they make more money when consumers have more money). What you do is up to you. Be careful.
Good luck and good trades.
UPDATE: Some supporting articles
Storing Oil At Sea Is About Futures Prices, Not Crude Oil Prices Rebounding
Some of the major oil trading firms are hiring oil tankers for up to 12 months.
Record natural gas production makes for bearish outlook
Dry natural gas production, according to the EIA, was at a record high in October for the eighth consecutive month.
According to the EIA’s projections, 2015 will be the tenth consecutive year of production gains, thanks to booming production from shale plays, especially the Marcellus.
US Oil production Continues to Rise
Last week, crude production increased to 9.13 MMbbls per day from 9.12 MMbbls per day the week before. In its December Short-Term Energy Outlook (or STEO), the EIA reported that output will hit 9.3 MMbbls per day in 2015, which is 700,000 barrels above the 2014 level.
Are energy MLPs finally feeling the heat of falling commodity prices?
Wednesday, October 15, 2014
Nice Oil Cartel You Got There. Be a Shame if Something Happened to It
This morning, we saw the front-month WTI contract dip below $80; it has since rebounded and crude oil is flat-to-up for the day as I write this. Still, it's fair to say that oil is under pressure. Almost as soon as the Saudis said they would accept a US-dollar $80 oil price for an extended period of time, the price of oil set out to prove them right.
We can point to fundamental reasons for oil weakness. Those are ...
But there is also a political component to the oil price crunch. And that is, the Organization of Petroleum Exporting Countries (OPEC) is starting to fracture. I'll have more on this in an InvestmentU.com story later this week. But the Cliff's Notes version is that despite falling prices, OPEC increased its oil production last month to a 13-month high. At the same time, Saudi Arabia is cutting prices to retain market share. Iraq and Iran are also cutting prices to keep market share.
All this is driving the price of Brent Crude, the international oil benchmark, lower and lower. It's down around 23% year-to-date, dropping from $113 to below $84 briefly this morning.
The Saudis don't like lower prices, but they know they can bear them better than higher-price producers like Canadian oil sands or Russia.
In the meantime, OPEC members like Venezuela are shouting LOUDLY for an emergency meeting to prop up oil prices. The Saudis -- who have been stabbed in the back by the Venezuelans enough times that they should have a whole set of steak knives by now -- are saying "too bad."
That doesn't bode well for the future of the cartel. I know, I know -- it couldn't happen to a nicer bunch, right?
So here's the question. If there is a political component to the oil price, what does this mean for the falling price of U.S. oil?
It means that the fall in U.S. oil prices is more in sympathy to the move in Brent crude. It's NOT because the U.S. economy is slowing.
In fact, domestic U.S. oil demand is sitting near all-time highs.
So is this move in U.S. oil companies overdone? If they can make a profit at current prices, or at least at $70 a barrel or so (probably as low as we'll see WTI crude go), then yes, they are being priced for a disaster that is not going to happen. Not unless Godzilla is moving toward San Francisco right now and nobody told me.
Now, that doesn't prevent me from having a position in ProShares UltraShort Oil & Gas (NYSE: DUG) in Gold & Resource Trader. It's our second time holding it, we got into it early, and while we took partial gains, we'll hold the rest for the wild ride that is probably ahead.
But my analysis which I've just shared with you also prevents me from panicking. It's not the end of the oil boom story. It's maybe the end of a chapter. A new one is beginning.
News and Links of Interest
Estimate of Global Oil Demand Growth Cut Again. Global oil consumption will increase by about 650,000 barrels a day this year to an average 92.7 million a day, according to the IEA, which advises 29 nations on energy policy. The estimate for demand growth is 250,000 barrels a day lower than last month’s forecast, and about half the level the agency projected in June.
(Source)
Commodity Price Drop Gives Fed Additional Breathing Room. Goldman Sachs economists last week estimated the combined effects of a weak dollar and soft commodities prices would shave 0.2 of a percentage point off core inflation next year, pushing against the Fed’s efforts to lift already-low inflation up to its 2% target. Senior Fed officials have signaled pretty clearly in the past few weeks that they’re looking at mid-2015 for liftoff from near-zero interest rates. The confluence of developments weighing on inflation is dampening the urgency in that discussion. (Source)
Global Oil Glut Sends Prices Plunging. The good news: Every one-cent drop in gas prices means a $1 billion annual decline in energy spending by Americans, estimates Brett Ryan, U.S. economist at Deutsche Bank. “It’s like a tax cut that consumers can use to eat out more often, buy more goods or help save for a new home,” he said. (Source)
Lockheed makes breakthrough on fusion energy project. On Wednesday LMT said it had made a technological breakthrough in developing a power source based on nuclear fusion, and the first reactors, small enough to fit on the back of a truck, could be ready for use in a decade. (Source)
Retail Sales in U.S. Dropped More Than Forecast in September. Wages remain low, which means people aren't spending. (Source)
Crumbling U.S. Fix Seen With Global Trillions of Dollars. Another public-private partnership. Every $1 billion in new infrastructure investment creates about 18,000 jobs, according to a 2009 report by economists at the University of Massachusetts’ Political Economy Research Institute. (Source)
They saved the eurozone; they just forgot to save the people. Eurozone officials have preached a gospel of budget austerity and "structural reform" to ailing economies as the cure for the crisis. The eurozone has ten countries — including big ones like France, Italy, and Spain — that are doing worse than Rhode Island. Greece has 11 million people — making it more than 10 times the size of Rhode Island — and an unemployment rate of almost 27 percent. Meanwhile, Finland is considered one of the healthy eurozone economies but only Nevada and Rhode Island have unemployment rates higher than Finland's, and they're close. (Source)
See also: EU Austerity Witch Doctors Attack Each Other
Economists are increasingly worried that Europe is going to drop into deflation. Here are the latest deflation figures from Europe, for September.
(Source)
Good luck today.
We can point to fundamental reasons for oil weakness. Those are ...
- Rising oil production in the U.S. and other regions (Libya, Iraq, etc.).
- Economic weakness in China. The latest is that China's CPI came in weaker than expected (1.6% vs expectations of 1.7%). That's adding to disinflation worries.
- Weakness in Europe, which is ground zero for deflation and slowdown concerns
- The International Energy Agency keeps cutting its estimates for growth in global oil demand. It has now cut demand estimates for four months in a row.
But there is also a political component to the oil price crunch. And that is, the Organization of Petroleum Exporting Countries (OPEC) is starting to fracture. I'll have more on this in an InvestmentU.com story later this week. But the Cliff's Notes version is that despite falling prices, OPEC increased its oil production last month to a 13-month high. At the same time, Saudi Arabia is cutting prices to retain market share. Iraq and Iran are also cutting prices to keep market share.
All this is driving the price of Brent Crude, the international oil benchmark, lower and lower. It's down around 23% year-to-date, dropping from $113 to below $84 briefly this morning.
The Saudis don't like lower prices, but they know they can bear them better than higher-price producers like Canadian oil sands or Russia.
In the meantime, OPEC members like Venezuela are shouting LOUDLY for an emergency meeting to prop up oil prices. The Saudis -- who have been stabbed in the back by the Venezuelans enough times that they should have a whole set of steak knives by now -- are saying "too bad."
That doesn't bode well for the future of the cartel. I know, I know -- it couldn't happen to a nicer bunch, right?
So here's the question. If there is a political component to the oil price, what does this mean for the falling price of U.S. oil?
It means that the fall in U.S. oil prices is more in sympathy to the move in Brent crude. It's NOT because the U.S. economy is slowing.
In fact, domestic U.S. oil demand is sitting near all-time highs.
So is this move in U.S. oil companies overdone? If they can make a profit at current prices, or at least at $70 a barrel or so (probably as low as we'll see WTI crude go), then yes, they are being priced for a disaster that is not going to happen. Not unless Godzilla is moving toward San Francisco right now and nobody told me.
Now, that doesn't prevent me from having a position in ProShares UltraShort Oil & Gas (NYSE: DUG) in Gold & Resource Trader. It's our second time holding it, we got into it early, and while we took partial gains, we'll hold the rest for the wild ride that is probably ahead.
But my analysis which I've just shared with you also prevents me from panicking. It's not the end of the oil boom story. It's maybe the end of a chapter. A new one is beginning.
News and Links of Interest
Estimate of Global Oil Demand Growth Cut Again. Global oil consumption will increase by about 650,000 barrels a day this year to an average 92.7 million a day, according to the IEA, which advises 29 nations on energy policy. The estimate for demand growth is 250,000 barrels a day lower than last month’s forecast, and about half the level the agency projected in June.
(Source)
Commodity Price Drop Gives Fed Additional Breathing Room. Goldman Sachs economists last week estimated the combined effects of a weak dollar and soft commodities prices would shave 0.2 of a percentage point off core inflation next year, pushing against the Fed’s efforts to lift already-low inflation up to its 2% target. Senior Fed officials have signaled pretty clearly in the past few weeks that they’re looking at mid-2015 for liftoff from near-zero interest rates. The confluence of developments weighing on inflation is dampening the urgency in that discussion. (Source)
Global Oil Glut Sends Prices Plunging. The good news: Every one-cent drop in gas prices means a $1 billion annual decline in energy spending by Americans, estimates Brett Ryan, U.S. economist at Deutsche Bank. “It’s like a tax cut that consumers can use to eat out more often, buy more goods or help save for a new home,” he said. (Source)
Lockheed makes breakthrough on fusion energy project. On Wednesday LMT said it had made a technological breakthrough in developing a power source based on nuclear fusion, and the first reactors, small enough to fit on the back of a truck, could be ready for use in a decade. (Source)
Retail Sales in U.S. Dropped More Than Forecast in September. Wages remain low, which means people aren't spending. (Source)
Crumbling U.S. Fix Seen With Global Trillions of Dollars. Another public-private partnership. Every $1 billion in new infrastructure investment creates about 18,000 jobs, according to a 2009 report by economists at the University of Massachusetts’ Political Economy Research Institute. (Source)
They saved the eurozone; they just forgot to save the people. Eurozone officials have preached a gospel of budget austerity and "structural reform" to ailing economies as the cure for the crisis. The eurozone has ten countries — including big ones like France, Italy, and Spain — that are doing worse than Rhode Island. Greece has 11 million people — making it more than 10 times the size of Rhode Island — and an unemployment rate of almost 27 percent. Meanwhile, Finland is considered one of the healthy eurozone economies but only Nevada and Rhode Island have unemployment rates higher than Finland's, and they're close. (Source)
See also: EU Austerity Witch Doctors Attack Each Other
Economists are increasingly worried that Europe is going to drop into deflation. Here are the latest deflation figures from Europe, for September.
- Italy: -0.1%. Italy is in its second month of deflation
- Spain: -0.3%. Spain has the most serious deflation of any large eurozone economy; it's in its third consecutive month
- Germany: 0.8%. The fact that Germany has some of the highest inflation in the eurozone tells you a lot.
- France: 0.4%. A five-year low. Core inflation is actually now at zero, the lowest in modern history.
- The UK: 1.2%. The UK isn't in the eurozone, but inflation is also at a five-year low.
(Source)
Good luck today.
Thursday, January 9, 2014
The 5 Most Important Energy Charts Today
Chart #1: US Oil Production
Domestic crude oil production increased 1.0 million bbl/d—rising more
than the combined increases in the rest of the world—to reach its
highest level in 24 years. This increase marked the largest observed
annual increase in U.S. history.
This year, production should continue to soar.
Read more about the latest EIA production forecasts HERE.
Chart #2: Affect of Lower Imports on US Trade Balance
Read more on this HERE.
Chart #3: Falling Oil Imports and Rising Petroleum Product Exports
Economist Ed
Yardeni believes we are experiencing or at least headed for a "fracking
dividend." It's like a peace dividend. Basically, we spend less money
on imported oil, so we have more to spend on our own economy.
Interestingly, over the next year, total US liquid fuel consumption met by imports will reach a 24% low, off 60% from 2005 level.
Chart #4: Prices of U.S. and International Oil Benchmarks
Meanwhile, spot the trend in prices for West Texas Intermediate, the U.S. crude oil benchmark ...
But all that new U.S. oil production is keeping the price of international oil stable. You can read more about that HERE.
Chart #5: The Big Drawdown in Natural Gas in Storage
Working gas in storage is not only below last year, it's below the 5-year average as well. And we have yet to see the big draw-down from the "Polar Vortex"
Tuesday, November 26, 2013
China's Huge Oil Deal ... With Ecuador
Reuters gives us the scoop on Ecuador's oil deal with China ...
And another Reuters story tells us that Ecuador's oil output should rise 9% to 550,000 barrels per day by the end of the year. That's a 9% gain. Maybe Ecuador's own domestic oil use will expand to use that ... or maybe the new production (90% of it anyway) will go straight on the boat to China.
The US is currently the #1 export market for Ecuador's oil.
Here's the thing: Ecuador has a much bigger oil prize just waiting to be tapped.
That's because Ecuador discovered an estimated 900 million barrels of oil reserves in 2007. It was hidden beneath Yasuni National Park, a world biological preserve home to several indigenous groups.
President Rafael Correa worked with the United Nations to create a trust fund that would pay Ecuador not to drill. In return Ecuador would preserve a rainforest with more species per hectare than in all of North America. Also, keeping the oil in the ground is a sure-fire way to avoid putting carbon in the air, and the rainforest itself plays an important role in capturing and storing carbon.The UN estimated that the trust fund would stop 400 million tons of carbon from entering the atmosphere by not burning the oil and another 800 million tons by stopping the removal of carbon-consuming plant life.
The cost would be $3.6 billion. Everybody wins, right?
Wrong. Flinty-fisted global donors put up only $13 million in cash (and $167 million in pledges). So, President Correa railed against foreign donors for their apathy, canceled the trust fund project and went ahead with the oil drilling in the rainforest.
Anticipating the decision, oil companies built roads and drilling infrastructure adjacent to the park.
Now, all that oil (or 90% of it) is going into China's hands.
Ecuador probably is making the best of its bad choices. Ecuador has $18.19 billion in foreign debt, up 20% in a year, and equal to 20% of Ecuador's $90 billion gross domestic product. It also has $12.52 billion in public debt, up 25% in a year.
Part of the problem is the awful terms that Ecuador gets on loans after defaulting on its foreign debt in 2008. Correa, a U.S.-trained economist, declared a large chunk of Ecuador's foreign debt "illegitimate" and "odious."
Reuters adds:
Down the road, who knows what China will do. But this is certainly an interesting twist in the global oil markets.
Shunned by most lenders since a $3.2 billion debt default in 2008, Ecuador now relies heavily on Chinese funds, which are expected to cover 61 percent of the government's $6.2 billion in financing needs this year. In return, China can claim as much as 90 percent of Ecuador's oil shipments in coming years, a rare feat in today's diversified oil market.So how much oil is that? Well, the same story reveals that Chinese-controlled firms are already getting 83% of Ecuador's oil exports, which run around 360,000 barrels per day. That's from total production of 504,000 barrels per day.
And another Reuters story tells us that Ecuador's oil output should rise 9% to 550,000 barrels per day by the end of the year. That's a 9% gain. Maybe Ecuador's own domestic oil use will expand to use that ... or maybe the new production (90% of it anyway) will go straight on the boat to China.
The US is currently the #1 export market for Ecuador's oil.
Here's the thing: Ecuador has a much bigger oil prize just waiting to be tapped.
That's because Ecuador discovered an estimated 900 million barrels of oil reserves in 2007. It was hidden beneath Yasuni National Park, a world biological preserve home to several indigenous groups.
President Rafael Correa worked with the United Nations to create a trust fund that would pay Ecuador not to drill. In return Ecuador would preserve a rainforest with more species per hectare than in all of North America. Also, keeping the oil in the ground is a sure-fire way to avoid putting carbon in the air, and the rainforest itself plays an important role in capturing and storing carbon.The UN estimated that the trust fund would stop 400 million tons of carbon from entering the atmosphere by not burning the oil and another 800 million tons by stopping the removal of carbon-consuming plant life.
The cost would be $3.6 billion. Everybody wins, right?
Wrong. Flinty-fisted global donors put up only $13 million in cash (and $167 million in pledges). So, President Correa railed against foreign donors for their apathy, canceled the trust fund project and went ahead with the oil drilling in the rainforest.
Anticipating the decision, oil companies built roads and drilling infrastructure adjacent to the park.
Now, all that oil (or 90% of it) is going into China's hands.
Ecuador probably is making the best of its bad choices. Ecuador has $18.19 billion in foreign debt, up 20% in a year, and equal to 20% of Ecuador's $90 billion gross domestic product. It also has $12.52 billion in public debt, up 25% in a year.
Part of the problem is the awful terms that Ecuador gets on loans after defaulting on its foreign debt in 2008. Correa, a U.S.-trained economist, declared a large chunk of Ecuador's foreign debt "illegitimate" and "odious."
Reuters adds:
China's cash advances to Ecuador cover only a slice of the near $13 billion a year Ecuador can earn from oil sales. But since 2009 PetroEcuador has agreed to sell Chinese firms several hundred million barrels of oil, valued far higher than the loans themselves, according to a Reuters analysis of seven different contracts. With those supplies locked up, other buyers now get few chances to purchase crude from PetroEcuador in competitive tenders.Interestingly, China may or may not send the Ecuadoran oil to China.Instead, Chinese oil firms can sell the oil to would-be Ecuadorean trading partners and capture an enormous discount.
Down the road, who knows what China will do. But this is certainly an interesting twist in the global oil markets.
Thursday, August 29, 2013
Ouch! Falling Currency Send Oil Price Soaring in India
Here's a great chart from The Energy Burrito Blog via Marketwatch, showing the price of oil in Rupees (blue line) and US dollars (green line). The Indian Rupee is falling hard and fast -- the biggest decline in 20 years. This is sending oil prices in that country ballistic.
Read the story HERE.
Read the story HERE.
5 Terrifying Things The Oil Market Should REALLY Worry About
F@ck Syria. Syria is a country whose leader has killed 70,000 people in the last two years, and yet he is opposed by such brutal fanatics that he can still make mealy-mouthed excuses about it being justified. Holy crap, there are no good sides in Syria. It's like Sauron's orcs are taking on the Death Eaters, with helpless non-combatants caught in the middle. Am I really supposed to root for someone in that match? Is my government really stupid enough to get involved and become, as one ex-Congressman put it, "Al Qaeda's air force"?
Wait, don't answer that last question. Washington continues to take cries of "how stupid are they" as some kind of dare.
But really, f@ck Syria when it comes to oil prices. The market CAN'T be worried about Syria's domestic oil production. Sure, Syria's output is now 40,000 barrels a day, down from its pre-crisis output of 350,000 barrels a day, but that's a drop in the bucket when it comes to global oil supply.
No, instead, the market is apparently bidding up crude on worries that Syria's bubbling cauldron of hate will overflow to neighboring countries that are more important to the oil market. Maybe.
On the other hand, if there is a resolution in Syria that DOESN'T involve Armageddon -- maybe by paying off all parties involved, like we sometimes do -- then oil prices should go down.
So in that event, let me give you 5 other things the oil market should be worried about instead of Syria.
Here's a map of global oil supply outages ...
You can see the trend on that chart and it's an ugly one. One of the biggest problems is in Libya. So let's talk about that.
The overthrow of former Libyan leader Moammar Qadhafi in 2011 was seen by many as ushering in a new democratic era for the North African country, promising work for the people and a period of economic prosperity.
That just shows that "many" people don't know squat about the Middle East. Without its iron-fisted strongman, Libya is descending into its long traditions of tribalism, feudalism, and kleptocracy.
In a recent note, Geoff Porter, analyst at North Africa Risk Consulting, said Libya is "more lawless and chaotic than ever."
The East of the country is run by warlords. Regional groups are pushing federalism, or seceding from the state and establishing autonomous regions within Libya.
With chaos comes thievery, of both oil and oil equipment. Result: Libyan oil production dropped to 400,000 barrels per day (bpd). That caused state oil company NOC to declare force majeure on exports from the four ports and there seems to be no let-up in the unrest.
Indeed, things are getting worse. Deutche Bank put out a note saying in part:
There's no reason to panic ... yet, anyway. Libya produces less than 2% of the world's oil. On the down side, Libyan crude is the light, sweet crude that European refiners crave. There doesn't seem to be an easy substitute. And the less Libyan crude there is on the market, the tighter global supply becomes.
And the problem is it isn't just Libya.
As I pointed out yesterday, Many smaller (and not-so-small) oil producing countries around the world are seeing their production decline ...
This becomes problematic when oil revenue is a major source of government funding. For example, 30% of the Mexican budget comes from oil revenue, and Mexico's oil revenue is falling quickly.
So, this could lead to more chaos around the world. If you think what is happening in Syria is fascinating, imagine if we get another dozen or so Syrias. Meanwhile, global supply will tighten all the while.
And global demand? As I mentioned yesterday, global oil consumption is just going up. Heck, the acceleration could be huge.
Inflation is a beast that has been so tame and sleepy for years, many people have forgotten how badly it can bite. Many people think that inflation WON'T come back.
Those people are fools.
Sure, inflation can come back. And one of the things that can fuel inflation is rising oil prices.
We're already seeing this in India. The Indian Rupee is falling so hard and fast -- the biggest decline in 20 years -- that fuel prices are rising and this is feeding into general inflation, inflation that is already heating up thanks to a falling currency. Result: Some basic food items have tripled in price.
We shouldn't see that kind of hyperinflation in the U.S. But we could still see inflation. Even the Energy Information Administration says so ...
Source: http://www.eia.gov/todayinenergy/detail.cfm?id=8170
So, basically, if energy prices take off, expect inflation to heat up again.
Did you know that the U.S. recently passed Russia in oil production, measuring by total liquids produced? Do you think the Russians are happy about that?
Source
Saudi Arabia still leads the world in oil production, but the US has passed Russia for second place and is closing in on the Saudis. These are the latest figures from 2012 from the Energy Information Administration.
Total liquids also includes natural gas liquids. Russia is still the world’s biggest overall energy exporter: It’s the No. 1 oil producer and No. 2 in gas after the U.S. But the US oil production keeps growing.
In fact, US oil output has risen to the highest level since 1989.
To put that in perspective, the last time this happened, Phil Collins was at the top of the U.S.pop charts.
This jump in production, in turn, is sending US crude and petroleum product exports soaring.
As we export more oil and oil products, some of Russia's best customers are now shifting their purchases and buying from the U.S.
The problem is, Russian President Vladimir Putin largely relied on oil and gas production to fuel economic expansion during his first two presidential terms. But Russia’s overall economic growth slumped to just 1.2% in the second quarter, significantly lower than the economic ministry’s forecast of 1.9%.
Result: Russian energy giant Gazprom has lost more than $280 billion in market value since 2008. Experts on the country’s economy and governance attribute the decline to U.S. investment in the innovative oil and gas extraction technique of hydraulic fracturing, or “fracking,” which dampened U.S. demand for imports and exerted downward pressure on global gas prices and Gazprom’s profits.
According to sources, Putin has resisted modernization of Russia’s energy economy because of the alternatives. Less dependence on oil and gas revenue would translate into cuts to subsidies for Russia’s poorer regions, sharp reductions in military spending, and fewer tax breaks for the state’s “pet projects.”
And Bloomberg Businessweek reports:
In other words, America's energy ascendance could really piss off the bear.
The good news for Putin is that Russia's known oil reserves -- primarily between the Ural Mountains and the Central Siberian Plateau -- are enough to sustain current production levels for just 20 years. The bad news is that Russia might also be running out of cheap, easily accessible NEW sources of oil. This makes oil in the Arctic circle more of a prize, and that brings Russia into direct competition for resources with the U.S. and other western powers.
Hey, did I mention that Putin feels "infuriated" by Obama? So, yeah, the potential for tensions to rise between the two superpowers is quite good.
Bottom line: There are plenty of things for the oil market to worry about. Syria is a distraction from the real problems. A resolution in Syria could send oil prices tumbling lower in the short-term. Wise investors might use such a pullback to load up, as longer-term forces push prices higher.
Wait, don't answer that last question. Washington continues to take cries of "how stupid are they" as some kind of dare.
But really, f@ck Syria when it comes to oil prices. The market CAN'T be worried about Syria's domestic oil production. Sure, Syria's output is now 40,000 barrels a day, down from its pre-crisis output of 350,000 barrels a day, but that's a drop in the bucket when it comes to global oil supply.
No, instead, the market is apparently bidding up crude on worries that Syria's bubbling cauldron of hate will overflow to neighboring countries that are more important to the oil market. Maybe.
On the other hand, if there is a resolution in Syria that DOESN'T involve Armageddon -- maybe by paying off all parties involved, like we sometimes do -- then oil prices should go down.
So in that event, let me give you 5 other things the oil market should be worried about instead of Syria.
Scary Thing #1: Oil Supply Outages Around the World.
Here's a map of global oil supply outages ...
You can see the trend on that chart and it's an ugly one. One of the biggest problems is in Libya. So let's talk about that.
Scary Thing #2: Libya is Descending Into Chaos
The overthrow of former Libyan leader Moammar Qadhafi in 2011 was seen by many as ushering in a new democratic era for the North African country, promising work for the people and a period of economic prosperity.
That just shows that "many" people don't know squat about the Middle East. Without its iron-fisted strongman, Libya is descending into its long traditions of tribalism, feudalism, and kleptocracy.
In a recent note, Geoff Porter, analyst at North Africa Risk Consulting, said Libya is "more lawless and chaotic than ever."
The East of the country is run by warlords. Regional groups are pushing federalism, or seceding from the state and establishing autonomous regions within Libya.
With chaos comes thievery, of both oil and oil equipment. Result: Libyan oil production dropped to 400,000 barrels per day (bpd). That caused state oil company NOC to declare force majeure on exports from the four ports and there seems to be no let-up in the unrest.
Indeed, things are getting worse. Deutche Bank put out a note saying in part:
Libya normally produces about 10x more oil than Syria. Libyan oil production has dropped to as little as about 200,000 bpd (from an average of 1.4 million barrels per day) as of the most recent reporting period as labour strikes disrupted port operations and consequently crude oil exports.
There's no reason to panic ... yet, anyway. Libya produces less than 2% of the world's oil. On the down side, Libyan crude is the light, sweet crude that European refiners crave. There doesn't seem to be an easy substitute. And the less Libyan crude there is on the market, the tighter global supply becomes.
And the problem is it isn't just Libya.
Scary Thing #3: Production in Multiple Countries Is Falling Like a Rock
As I pointed out yesterday, Many smaller (and not-so-small) oil producing countries around the world are seeing their production decline ...
This becomes problematic when oil revenue is a major source of government funding. For example, 30% of the Mexican budget comes from oil revenue, and Mexico's oil revenue is falling quickly.
So, this could lead to more chaos around the world. If you think what is happening in Syria is fascinating, imagine if we get another dozen or so Syrias. Meanwhile, global supply will tighten all the while.
And global demand? As I mentioned yesterday, global oil consumption is just going up. Heck, the acceleration could be huge.
Scary Thing #4: Rising Oil Prices Stoke Inflation
Inflation is a beast that has been so tame and sleepy for years, many people have forgotten how badly it can bite. Many people think that inflation WON'T come back.
Those people are fools.
Sure, inflation can come back. And one of the things that can fuel inflation is rising oil prices.
We're already seeing this in India. The Indian Rupee is falling so hard and fast -- the biggest decline in 20 years -- that fuel prices are rising and this is feeding into general inflation, inflation that is already heating up thanks to a falling currency. Result: Some basic food items have tripled in price.
We shouldn't see that kind of hyperinflation in the U.S. But we could still see inflation. Even the Energy Information Administration says so ...
Over the past ten years, the Chained Consumer Price Index -- a measure of change in the cost of living -- for energy (the blue line in the top chart) has approximately tracked the movements of the international Brent crude oil price.
Source: http://www.eia.gov/todayinenergy/detail.cfm?id=8170
So, basically, if energy prices take off, expect inflation to heat up again.
Scary Thing #5: Uncle Sam Keeps Poking Russia's Angry Bear
Did you know that the U.S. recently passed Russia in oil production, measuring by total liquids produced? Do you think the Russians are happy about that?
Source
Saudi Arabia still leads the world in oil production, but the US has passed Russia for second place and is closing in on the Saudis. These are the latest figures from 2012 from the Energy Information Administration.
Total liquids also includes natural gas liquids. Russia is still the world’s biggest overall energy exporter: It’s the No. 1 oil producer and No. 2 in gas after the U.S. But the US oil production keeps growing.
In fact, US oil output has risen to the highest level since 1989.
-1.png)
To put that in perspective, the last time this happened, Phil Collins was at the top of the U.S.pop charts.
This jump in production, in turn, is sending US crude and petroleum product exports soaring.
As we export more oil and oil products, some of Russia's best customers are now shifting their purchases and buying from the U.S.
The problem is, Russian President Vladimir Putin largely relied on oil and gas production to fuel economic expansion during his first two presidential terms. But Russia’s overall economic growth slumped to just 1.2% in the second quarter, significantly lower than the economic ministry’s forecast of 1.9%.
Result: Russian energy giant Gazprom has lost more than $280 billion in market value since 2008. Experts on the country’s economy and governance attribute the decline to U.S. investment in the innovative oil and gas extraction technique of hydraulic fracturing, or “fracking,” which dampened U.S. demand for imports and exerted downward pressure on global gas prices and Gazprom’s profits.
According to sources, Putin has resisted modernization of Russia’s energy economy because of the alternatives. Less dependence on oil and gas revenue would translate into cuts to subsidies for Russia’s poorer regions, sharp reductions in military spending, and fewer tax breaks for the state’s “pet projects.”
And Bloomberg Businessweek reports:
America’s surprising return as an energy superpower is complicating life for the Russian petro state. The rise of a vibrant, global, and pipeline-free liquefied natural gas (LNG) market is a direct threat to Russia’s interests in Europe, where Gazprom, the state-owned energy giant, supplies about 25% of the gas. So is the shift in pricing power from suppliers to consumers as a result of the huge supply shock emanating from North America.
In other words, America's energy ascendance could really piss off the bear.
The good news for Putin is that Russia's known oil reserves -- primarily between the Ural Mountains and the Central Siberian Plateau -- are enough to sustain current production levels for just 20 years. The bad news is that Russia might also be running out of cheap, easily accessible NEW sources of oil. This makes oil in the Arctic circle more of a prize, and that brings Russia into direct competition for resources with the U.S. and other western powers.
Hey, did I mention that Putin feels "infuriated" by Obama? So, yeah, the potential for tensions to rise between the two superpowers is quite good.
Bottom line: There are plenty of things for the oil market to worry about. Syria is a distraction from the real problems. A resolution in Syria could send oil prices tumbling lower in the short-term. Wise investors might use such a pullback to load up, as longer-term forces push prices higher.
Subscribe to:
Posts (Atom)