• Tag Archives Oil
  • Market Talk- November 17, 2017

    The tax reform bill passing the US House yesterday certainly added to sentiment, after great earnings releases for markets but Asia need more help for cash today. Having opened strong all core markets then drifted and even saw the Nikkei trade negative. For the week it closes down 1.3% which has broken a two month rally. The Hang Seng performed well all day closing up around +0.6% but only off-set the decline in the Shanghai (-0.5%). India traded well following Thursday’s credit upgrade eventually adding an additional +0.7% onto yesterdays gain. All eyes are still on the DXY as we approach the weekend as just below we have the 50 Day Moving Average at 93.50. Oil has bounced following comments from potential output cuts led by OPEC.

    This post was published at Armstrong Economics on Nov 17, 2017.


  • Huge Crude Stakes

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    There is a titanic struggle going on right now in the oil market. On the one side of the futures market are the usual pace setters, the money managers. Last week, the latest COT data available, they went the most net long since March. If it continues, it will close in on the most positive futures position since the record long they established back in February.
    Normally that would be insanely bullish for oil prices. But just as in February/March another part of the futures market has intervened on the other side. Back then it was the oil producers who rising inventory forced into a larger and larger offsetting net short (hedge).
    This time, however, it is the swap dealers who are short for reasons that aren’t really clear. The weekly COT report for the last week in October showed a record net short for dealers, just beating their most extreme position from the middle of 2013 at -424k contracts. In the first week and November, they blew away that record at -470k.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ November 16, 2017.


  • Mueller Subpoena Spooks Dollar, Sends European Stocks, US Futures Lower

    Yesterday’s torrid, broad-based rally looked set to continue overnight until early in the Japanese session, when the USD tumbled and dragged down with it the USDJPY, Nikkei, and US futures following a WSJ report that Robert Mueller had issued a subpoena to more than a dozen top Trump administration officials in mid October.
    And as traders sit at their desks on Friday, U. S. index futures point to a lower open as European stocks fall, struggling to follow Asian equities higher as the euro strengthened at the end of a tumultuous week. Chinese stocks dropped while Indian shares and the rupee gain on Moody’s upgrade. The MSCI world equity index was up 0.1% on the day, but was heading for a 0.1% fall on the week. The dollar declined against most major peers, while Treasury yields dropped and oil rose.
    Europe’s Stoxx 600 Index fluctuated before turning lower as much as 0.3% in brisk volumes, dropping towards the 200-DMA, although about 1% above Wednesday’s intraday low; weakness was observed in retail, mining, utilities sectors. In the past two weeks, the basic resources sector index is down 6%, oil & gas down 5.8%, autos down 4.9%, retail down 3.4%; while real estate is the only sector in green, up 0.1%. The Stoxx 600 is on track to record a weekly loss of 1.3%, adding to last week’s sell-off amid sharp rebound in euro, global equity pullback. The Euro climbed for the first time in three days after ECB President Mario Draghi said he was optimistic for wage growth in the region, although stressed the need for patience, speaking in Frankfurt. European bonds were mixed. The pound pared some of its earlier gains after comments from Brexit Secretary David Davis signaling a continued stand-off in negotiations with the European Union.
    In Asia, the Nikkei 225 took its time to catch up to the WSJ report that US Special Counsel Mueller has issued a Subpoena for Russia-related documents from Trump campaign officials, although reports pointing to North Korea conducting ‘aggressive’ work on the construction of a ballistic missile submarine helped the selloff. The Japanese blue-chip index rose as much as 1.8% in early dealing, but the broad-based dollar retreat led to the index unwinding the bulk of its gains; the index finished the session up 0.2% as the yen jumped to the strongest in four-weeks. Australia’s ASX 200 added 0.2% with IT, healthcare and telecoms leading the way, as utilities lagged. Mainland Chinese stocks fell, with the Shanghai Comp down circa 0.5% as the PBoC’s reversel in liquidity injections (overnight net drain of 10bn yuan) did little to boost risk appetite, as Kweichou Moutai (viewed as a bellwether among Chinese blue chips) fell sharply. This left the index facing its biggest weekly loss in 3 months, while the Hang Seng rallied with IT leading the way higher. Indian stocks and the currency advanced after Moody’s Investors Service raised the nation’s credit rating.

    This post was published at Zero Hedge on Nov 17, 2017.


  • Solid Sales Growth and Margins at New Highs Drive 3Q17 Results

    Summary: For the third quarter (3Q17), S&P earnings rose 12% yoy, sales grew 6% and profit margins expanded to new all-time highs.
    These strong results are not due to the rebound in oil prices. Sales for the sectors with the highest weighting in the S&P have grown an average of 7% in the past year and 19% in the past 3 years. Moreover, margins outside of energy have expanded to a new high of 10.8%.
    Bearish pundits continue to repeat several misconceptions: that “operating earnings” are deviating more than usual from GAAP measurements; that share reductions (buybacks) are behind most EPS growth; and that equity gains are unreasonably out of proportion to earnings growth. None of these are correct. Continued growth in employment, wages, and consumption tell us that corporate financial results should be improving, as they have in fact done.
    Where critics have a valid point is valuation: even excluding energy, the S&P is now more highly valued than anytime outside of the late 1990s technology bubble. With economic growth of 4-5% (nominal) and margins already at new highs, it will take excessive bullishness among investors to propel S&P price appreciation at a significantly faster rate. At this point, lower valuations are a notable risk to equity returns.
    92% of the companies in the S&P 500 have released their 3Q17 financial reports. The headline numbers are good. Overall sales are 6% higher than a year ago, the second best growth rate in nearly 6 years. Earnings (GAAP-basis) are 12% higher than a year ago. Profit margins are at a new high of 10.2%, exceeding the prior peak from 2014.

    This post was published at FinancialSense on 11/16/2017.


  • Retail Sales (US) Are Exhibit #1

    In January 2016, everything came to a head. The oil price crash (2nd time), currency chaos, global turmoil, and even a second stock market liquidation were all being absorbed by the global economy. The disruptions were far worse overseas, thus the global part of global turmoil, but the US economy, too, was showing clear signs of distress. A manufacturing recession had emerged which would only ever be the case on weak demand.
    But the Fed just the month before had finally ‘raised rates’ for the first time in a decade, though after procrastinating all through 2015. Still, surely these wise, proficient technocrats wouldn’t be so careless and clueless as to act in this way during a serious downturn. After all, what are ‘rate hikes’ but the central bank’s shifting concerns toward a faster economy perhaps reaching the proportions of overheating.
    The dissonance was striking, nowhere more so than at the Federal Reserve itself. On the day the FOMC voted for the first of what was supposed to be (by now) ten to fifteen increases (not just four) the central bank also released estimates on US Industrial Production that were negative year-over-year, a condition that just doesn’t happen outside of either a recession or a condition very close to one.
    The mainstream sided easily and eagerly with the technocrats. Even as the Fed failed to act month after month, the word ‘transitory’ printed prominently in each article rationalizing why a manufacturing recession just wouldn’t matter, the media would claim how ‘strong’ and ‘resilient’ especially US consumers were.

    This post was published at Wall Street Examiner on November 15, 2017.


  • Venezuela Signs $3.2 Billion Debt Restructuring Deal With Russia

    As Venezuela teeters right on the brink of complete financial collapse, Bloomberg reports that Russia has agreed to restructure roughly $3.2 billion in outstanding obligations. While details of the restructuring agreement are scarce, both sides reported that the deal spreads payments out over 10 years with minimal cash service required over the next six years.
    Russia signed an agreement to restructure $3.15 billion of debt owed by Venezuela, throwing a lifeline to a crisis-wracked ally that’s struggling to repay creditors.
    The deal spreads the loan payments out over a decade, with ‘minimal’ payments over the first six years, the Russian Finance Ministry said in a statement. The pact doesn’t cover obligations of state oil company Petroleos de Venezuela SA to its Russian counterpart Rosneft PJSC, however.

    This post was published at Zero Hedge on Nov 15, 2017.


  • Canada Builds $300 Million Highway To Nowhere, But Is There A Hidden Agenda?

    A new $300-million first of its kind ‘permanent’ highway will officially open in the Northwest Territories of Canada on Wednesday.
    This will be the first time in Canada’s history that the national highway system will be linked to all coasts. The completion of the four-year project is said to connect the tiny Arctic coastal town of Tuktoyaktuk with the rest of the communities to provide better transportation for residents.
    We think there could be another reason why Canada would build a highway to nowhere.
    As explained by one citizen in the video below, the new route is called ‘road to resources’, it’s where major reserves of oil and gas reside, and at one time inaccessible due to poor infrastructure.

    This post was published at Zero Hedge on Nov 14, 2017.


  • Ruble, Real Tumble As Oil Slumps On Weaker IEA Outlook

    WTI Crude is tumbling this morning, breaking down below $56 following a monthly report Tuesday from the International Energy Agency that said 2017 price gains along with milder-than-normal winter weather are slowing demand growth. This drop is weighing on oil-producers with the Ruble and Real dropping most…
    The IEA reduced its demand estimate for next year by 200,000 barrels a day to 98.9 million a day, according to projections in its report. Forecasts for demand growth next year also fell by 100,000 barrels a day to 1.3 million a day.

    This post was published at Zero Hedge on Nov 14, 2017.


  • IEA Pours Cold Water On OPEC Optimism, Warns Global Oil Demand Shrinking

    Pouring cold water on yesterday’s optimistic demand forecast projected by OPEC, which projected global crude demand growth to rise by 1.5mm b/d in 2018, this morning the International Energy Agency warned that the crude oil price rally could be short-lived because, contrary to OPEC’s expectations, global oil demand will be weaker than expected this year and next. In its closely watched monthly oil report, the IEA cut its crude demand growth outlook by 100,000 barrels a day for 2017 and 2018, as the WSJ reported. The agency now expects demand to grow by 1.5 million barrels a day this year and 1.3 million barrels a day next year.
    The IEA predicted that balances will likely show the crude market is oversupplied in Q4 2017 and the first half of 2018, with oil demand in 2017 at 97.7mmb/d, rising to 98.9 million in 2018. Meanwhile, non-OPEC Oil Supply is expected To rise by 700,000b/d In 2017 To 58.1mmb/d, and another 1.4 mmb/d in 2018 to 59.5mm b/d, led by shale output.
    The IEA also noted that global oil inventories fell 63mm barrels In Q3, only second quarterly draw since 2014, with the call on OPEC crude seen at 32.6mmb/d in Q4, declining to 32.0mmb/d in Q1 2018.

    This post was published at Zero Hedge on Nov 14, 2017.


  • U.S. SHALE OIL PRODUCTION UPDATE: Financial Carnage Continues To Gut Industry

    As the Mainstream media reports about the next phase of the glorious U. S. Shale Oil Revolution, the financial carnage continues to gut the industry deep down inside the entrails of its horizontal laterals. The stench of fracking fluid must be driving shale oil advocates utterly insane as they are no longer able to see financial wreckage taking place in these companies quarterly reports.
    This weekend, one of my readers sent me the following Bloomberg 45 minute TV special titled, The Next Shale Revolution. If you are in need of a good laugh, I highly recommend watching part of the video. At the beginning of the video, it starts off with President Trump stating that the U. S. has become an energy exporter for the first time ever. Trump goes on to say, ‘that powered by new innovation and technology, we are now on the cusp of a new energy revolution.’ While I have to applaud Trump’s efforts for putting out some positive and reassuring news, I wonder who is providing him with terribly inaccurate energy information.
    I would kindly like to remind the reader, the United States is still a NET IMPORTER of oil. We still import nearly six million barrels of oil per day, but we export some finished products and a percentage of our shale oil production. Thus, we still import a net of approximately three million barrels per day of oil.
    A few minutes into the Bloomberg video, both Pioneer Resources Chairman, Scott Sheffield, and Continental Resources CEO, Harold Hamm, explain how advanced technology will revolutionize the shale oil industry and bring down costs. I find that statement quite hilarious as Continental Resources and Pioneer continue to spend more money drilling for oil and gas then they make from their operations. As I stated in a previous article, Continental Resources long-term debt ballooned from $165 million in 2007 to $6.5 billion currently. So, how did advanced technology lower costs when Continental now has accumulated debt up to its eyeballs?

    This post was published at SRSrocco Report on November 14, 2017.


  • Mideast Turmoil: Follow the Oil, Follow the Money

    In this scenario, time is running out for Saudi Arabia’s free-spending royalty and state– and for all the other free-spending oil exporters.
    While there are numerous dynamics at work in the turmoil roiling Saudi Arabia and by extension, the Mideast, one way to cut to the chase is to follow the oil, follow the money. Correspondent B. D. recently posited a factor that has been largely overlooked in the geopolitical / fate-of-the-petrodollar discussions: Perhaps the core dynamic is a technical one of diminished oil production. Here is Bart’s commentary: “I think the Saudis may be quickly running out of profitable oil to produce/export. I think they tried to over-produce for a while to damage the competition… and they now have production issues resulting from that. (As has happened in the past) I think they may have recently slipped over the event horizon for being the world’s swing producer of ‘cheap-ish and abundant’ oil. That has huge ramifications for the global markets ability to quickly respond to supply/demand fluctuations.

    This post was published at Charles Hugh Smith on MONDAY, NOVEMBER 13, 2017.


  • US to Import Inflation from Japan, China, South Korea

    Even from Japan – whose export producer prices are soaring.
    The oil price collapse that started in 2014 pushed down input costs that companies – the ‘producers’ – faced. And producer price indices, which measure inflation further up the pipeline, plunged. But this is over. And the biggest export powerhouses in Asia that have ballooning trade surpluses with the US, show how.
    The Producer Price Index in Japan – the ‘Corporate Goods Price Index,’ as it’s called there – jumped 3.4% in October compared to a year ago, after already climbing an upwardly revised 3.1% in September, the Bank of Japan reported on November 13. It was the tenth month in a row of year-over-year gains and the highest annual rate since September 2014, by which time the collapsing energy prices were mopping up any inflationary pressures (chart via Trading Economics):

    This post was published at Wolf Street on Nov 12, 2017.


  • Chart of the Week: Another Compelling Note of Caution

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Leveraged loan prices and WTI tracked each other pretty well during the ‘rising dollar’, unsurprising given that the oil sector was over-represented in most new deals as the one truly booming part of the domestic US economy. That was the case on the rebound, too, where leveraged loan prices rose at the same time oil prices did. And then both started falling again earlier this year in March.
    Only leveraged loan prices continued to fall, diverging noticeable from WTI in June/July. With prices still almost two years after the bottom significantly less than before the ‘rising dollar’, it’s an unmistakable note of caution amplified in the diverging trend recently from oil (indicating broader risk concerns than just US shale producers).
    It’s a gentle downturn in prices at this point, but a persistent one (eight month so far). The last time this leveraged loan price index diverged so much from WTI? Summer 2013.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ November 10, 2017.


  • Dramatic Footage: Bahrain Oil Pipeline Explodes, Bursts Into Giant Flames

    #BREAKING : Huge #fire resulted in a gas pipeline explosion in #Bahrain while ago. (exact cause yet to be confirmed) pic.twitter.com/kAgQ1nJARa
    — (@HSajwanization) November 10, 2017

    An oil pipeline in Bahrain exploded, and burst into giant fireball, as numerous videos posted on social media showed. According to the Saudi Gazette, an explosion caused a fire in an oil pipeline near Buri village. It adds that no injuries have been reported, and that civil defense teams are extinguishing the fire.
    More from Al-bilad Press (google translated):
    A large explosion of one of the oil pipelines near the area of ??Buri overlooking the market Waqif, and evacuate all houses near the scene of the explosion. The Waqif market was completely closed so firefighters could control the fire. The Ministry of the Interior through its official account on the site “Twitter” there is no casualties at the scene. It also announced the cutting off of traffic on the Crown Prince’s road towards Hamad City.
    The representative of the “country” from the heart of the pipe fire in the village of Buri that a huge fire block devoured a group of cars parked off the village and Souq Waqif.
    The delegate added that the civil defense mechanisms rushed to the scene of the incident from the area centered in the village of Damastan and began to block the flames of escalating fire and has been strengthened from the number of other centers.

    This post was published at Zero Hedge on Nov 10, 2017.


  • OPEC’s War Against Shale Is Far From Over

    Authored by Gregory Brew via OilPrice.com,
    Despite the recent market rally and current bullish streak in oil prices, the years-long competition for market share between OPEC and U. S. shale producers shows no sign of abating, and will likely continue for the next several years at least.
    That was OPEC’s conclusion in the group’s World Oil Outlook released this week. OPEC believes U. S. shale production will grow faster than previously expected, reaching 7.5 million bpd by 2021, an increase of 56 percent from the group’s estimate last year.

    This post was published at Zero Hedge on Nov 10, 2017.


  • Asian Metals Market Update: November-10-2017

    The US dollar weakened and gold rose on suspicion that Trump’s tax cut proposal could see modifications. The next seven days is filled with market moving US economic data releases. The answer which investors will be looking for is what next after the expected December interest rate hike by the Federal Reserve. I am looking into global inflation/deflation targets for next year. Energy price trend will play a key role in inflation direction next year. The big challenge is to judge the pace of rise of crude oil prices and not the actual rise. At the moment the bottom for crude oil looks at $42 and top at $86+ in the next twelve months.
    Developments in bitcoins and block chain technology are being closely watched.

    This post was published at GoldSeek on 10 November 2017.


  • “Lull Before The Storm” – Will China Bring An Energy-Debt Crisis?

    Authored by Gail Tverberg via Our Finite World blog,
    It is easy for those of us in the West to overlook how important China has become to the world economy, and also the limits it is reaching. The two big areas in which China seems to be reaching limits are energy production and debt. Reaching either of these limits could eventually cause a collapse.
    China is reaching energy production limits in a way few would have imagined. As long as coal and oil prices were rising, it made sense to keep drilling. Once fuel prices started dropping in 2014, it made sense to close unprofitable coal mines and oil wells. The thing that is striking is that the drop in prices corresponds to a slowdown in the wage growth of Chinese urban workers. Perhaps rapidly rising Chinese wages have been playing a significant role in maintaining high world ‘demand’ (and thus prices) for energy products. Low Chinese wage growth thus seems to depress energy prices.

    This post was published at Zero Hedge on Nov 9, 2017.


  • How Close Are We to Peak Gold?

    Well-known mining geologist Keith Barron, Chairman and CEO of Aurania Resources, tells Financial Sense Newshour that with the average goldmine worldwide extracting gold below 1 gram per ton, peak gold is probably here and that, unlike oil, there isn’t any new technology that makes finding it or extracting it any easier.
    No New Tech Coming, Peak Gold Is Probably Here
    Similar to what we’ve seen in the oil markets with fracking, past innovations helped make extracting marginal gold deposits economical. Now, however, the low-hanging fruit is gone, Barron stated. An average gold mine worldwide is extracting gold at below 1 gram per ton and there isn’t a lot of economic wiggle room if deposits are yielding less than that.
    As a result, large operations have emerged that rely on open-pit mining and economies of scale to reduce costs. If the gold price dipped down, however, operations such as these would be in trouble, Barron noted, because the margins are very thin.
    It’s doubtful that we’ll see any technology emerge that would make lower grade ore bodies pay more efficiently, Barron noted. The only thing he sees down the road is more recovery operations.
    There has been talk of Peak Gold for several years, Barron stated, and the numbers indicate we will reach it this year or next. After this point, production profiles start to fall worldwide.

    This post was published at FinancialSense on 11/09/2017.


  • Oil at Two-Year Highs as Saudi Arabia Engages in Its Own ‘Game of Thrones’

    Recently I identified five agents of change that I believe investors should know about right now. I’d like to add one more to the list: Mohammad bin Salman. The crown prince of Saudi Arabia, 32, was little known outside the region before this past weekend when he jailed members of the royal family, presumably in an attempt to consolidate power ahead of taking the throne. Resembling a plotline from an episode of ‘Game of Thrones,’ the mass detentions signal a seismic change in Saudi leadership – which, in turn, is putting upward pressure on global oil prices.
    Saudi Arabia is the world’s second-largest oil producer and single biggest oil exporter, so any development that might alert investors that the kingdom’s production levels or oil policy could be disrupted has historically had a profound effect on prices. When the country’s former king, Abdullah bin Abdulaziz Al Saud, passed away in January 2015, oil jumped more than 8.6 percent for the week.
    And so was the case on Monday, after news broke of the shakeup. West Texas Intermediate (WTI), the American benchmark for crude, closed above $57 a barrel for the first time since June 2015, adding nearly 35 percent from its summer 2017 low. A weaker U. S. dollar, down about 3.2 percent from the same time last year, is also providing support, as is slower U. S. supply growth following Hurricanes Harvey and Irma.

    This post was published at GoldSeek on 9 November 2017.


  • Asian Metals Market Update: November-9-2017

    Gold and silver are not out of the woods. So far Trump has not said anything to destabilize the markets. Fears of a surprise resulted in the rise of gold and silver yesterday. Developments in Saudi Arabia are here to stay. It may or may not affect metals and crude oil. The internet is filled with speculation that there is collusion between Israel and Saudi to expand Israel among other political agendas. Something is fishy in Saudi Arabia. Something big will happen in the Middle East over the coming months. Only big political news from the Middle east will impact global financial markets.
    The trading volumes in bitcoins is not even five percent of its current potential. Bitcoins and other crypto currencies have a lot higher to go. A few Mount Gox type vanishing will be needed to prevent bitcoin prices from zooming. Nations will be forced to adopt and regulate bitcoins. Greater adoption of crypto currencies will imply greater investment demand for gold and silver.

    This post was published at GoldSeek on 9 November 2017.