OPEC EXPECTED TO CUT - WHERES THE CUT FROM UNCLE SAM

[ceo_energemsier + 1,818]

1 hour ago, 0R0 said:

 

Yes, China is over-levered, it is not just the 330% of the official statistics. There is an additional shadow banking credit that is not directly reported. It was deliberately off the books both to keep the banks afloat during a financial breakdown. Despite SOE Provincial and Municipal SIVs filling out as much or more than the private credit, the owners are the general public via insurance and trust products and Wealth Management products and managed asset accounts (WMPs AMP) deliberately issued outside the banks and at arms length to them despite much of the origination having had come from the banks proper or their investment banking arms. 

Prof. Malinen in Finland estimates another 200% or more of GDP in these shadow banking instruments in China. He charts it out to total 600-700% of GDP.

I can't fault the aggressive early bird frackers. New tech, enormous profits dominating the vistas as far as the eye can see, if I were them, I would have been doing just the same, not considering that a million others like me may just bust the market in a year or two when we were all on line. In "shale oil Fiasco" we all lamented the disappointing productivity of child wells, particularly in the Permian, can you imagine what prices would have been like if the productivity was as expected originally? Would $20 have actually held up? "careful what you wish for"

Just remember that at the time, China GDP was growing double digits in the aftermath of the biggest stimulus ever conducted anywhere over the 2008-1019 crisis. 85% of the world's growth. All were straight lining their oil demand growth on logarithmic charts to the sky and nobody was paying attention to the pathetic oil demand trends in the developed world and NICs. It is hard to stop stupid when history and statistics were on your side and you didn't need to even put lipstick on your pig on the investor road show, everyone was thinking crown roast. 

So they signed horrible leases and terrible funding terms and paid the price in 2016. Those that survived are paying the price now. 

As I pointed out elsewhere, the Saudis are targeting Russia at EU ports. Not so much US shipments. If @ceo_energemsier is correct then they are being rather successful with what looks like displacing 2 mob/d of Russian crude in N Europe. Roughly one additional Russian VLCC per day being held up at sea. Have not identified a Russian counter move yet. The Urals grade crude is just sitting there on the ocean. Eating a bit of Russian money as rates have ballooned, and providing no revenue. The Russian revenue picture is hurt also by NG and LNG prices having crashed a few months ago already. It is a double whammy for Russian FF revenue. The little <$2 Bil hole that the CBR was projecting for the Russian budget is about 1/3 of what is already happening this week. Either Russia rejoins OPEC+ or oil will be permanently sold at the lowest cost of marginal production out of the US shale, about $30 till depletion takes care of production volumes. 

Yes, this is what a free market looks like. Prices fluctuate between high supply constrained markets and low oversupplied markets. The OPEC + cartel, like the TRRC before it and Standard oil before, have rigged the market for a century. Production is now too far flung and no longer requires enormous concentrated capital projects so there is going to be a boom and bust cycle unless Russia joins in, in which case, the prices will be supported but OPEC+ will slowly lose share. Russian oil company plans to rush ahead with development are not something the Saudis are considering a healthy move. It may make sense for the Russian oil majors but promising to increase future supply into an overwhelmed market is not going to fly. I doubt they manage to fund it externally, nor to speak of funding it from cash flow. 

 

 

 

I can tell you this, I have secured 2 URALS cargoes at very very good rates and more to come. URALS has been upended in the NWE-EuroMed markets and even in Asia. Companies with credit and cash are buying up what they can for sale later, contango !

While some others are buying up and storing for later at these below prices

Russian economy will be hurting bad soon enough, they can continue the price war but they are not going to be successful. Maybe bread and meat lines in Moscow again LOL .

 

[Ward Smith + 6,615]

On 3/12/2020 at 8:15 AM, Douglas Buckland said:

If you get rid of the scaremongering and victim mentality I seriously doubt we’d have a global depression resulting from the CV issue.

Pretty sure the recession has already begun. 

[El Nikko + 2,145]

4 hours ago, 0R0 said:

What is that for? The new pound sterling?

 

The really clever people just grab a bunch of free newspapers from the local shop every time they go in there 😂🤣

Failing that there's always the cat

[George8944 + 128]

On 3/13/2020 at 10:46 AM, Ward Smith said:

but it forced us to run the printing press flat out

Being the reserve currency didn't do this.  Being off the gold standard did this.   Without a peg, the currency is at the whim of the politicians who can spend without consideration of the payback.   Currency that get's printed without limit eventually loses its value and becomes like Monopoly money.

As an interesting side note,   both Russia and China have been net gold buyers over the last 5-8 years.   We will hear more about why sometime in the future.  For what many consider a cold, useless metal.  They are sure "banking" a lot of it.

[George8944 + 128]

13 hours ago, wrs said:

How is CV not the same?  Keep in mind, the market was pretty much in balance before this occurred.  

One is a physical destruction of property that takes capital for the recovery.  CV is an economic problem brought on by poor debt management and weak business practices.   Investors threw money at companies that were not making money or barely eeking out an existance at the higher prices.  The dreams of getting rich quickly, just repeated the mistakes that happened with the carnage of the dot.com bubble break.

Bad management or unwise investors do not deserve my tax dollars as a bailout.   Again,  don't be duped into thinking a bailout is required.  The oil isn't going any place and these assests will be scooped up at fire sale prices by prudent, better managers.  

Edited March 15, 2020 by George8944
grammar/spelling

[Ward Smith + 6,615]

8 minutes ago, George8944 said:

Being the reserve currency didn't do this.  Being off the gold standard did this.   Without a peg, the currency is at the whim of the politicians who can spend without consideration of the payback.   Currency that get's printed without limit eventually loses its value and becomes like Monopoly money.

As an interesting side note,   both Russia and China have been net gold buyers over the last 5-8 years.   We will hear more about why sometime in the future.  For what many consider a cold, useless metal.  They are sure "banking" a lot of it.

Actually being the reserve currency is why all of this happens. Remember the Federal Reserve, which is an entirely private enterprise and has nothing to do with the federal government (other than some sketchy one way rules enacted in the dead of night in 1913 while Congress was at Christmas recess) is the one doing the "printing". They're quite literally at the beck and call of the international banks. It's a confusalopoly by design. 

Banking in general, and by definition, exists to separate the producers from their hard earned production, to be replaced by a "chit" which says, "Atta boy".

When you borrow money from a bank they require you to have assets and collateral before they can "risk" loaning you the money they create out of thin air. You can't borrow 25 times your assets, but every bank does that every day. You deposit $1000 in a bank, they immediately borrow $25,000 based on that "asset" because you've got it in a certificate of deposit for 2 years. They're "borrowing" from the Federal Reserve, which is itself a consortium of member banks. Just a big game of musical chairs. 

[El Nikko + 2,145]

12 minutes ago, Ward Smith said:

Actually being the reserve currency is why all of this happens. Remember the Federal Reserve, which is an entirely private enterprise and has nothing to do with the federal government (other than some sketchy one way rules enacted in the dead of night in 1913 while Congress was at Christmas recess) is the one doing the "printing". They're quite literally at the beck and call of the international banks. It's a confusalopoly by design. 

Banking in general, and by definition, exists to separate the producers from their hard earned production, to be replaced by a "chit" which says, "Atta boy".

When you borrow money from a bank they require you to have assets and collateral before they can "risk" loaning you the money they create out of thin air. You can't borrow 25 times your assets, but every bank does that every day. You deposit $1000 in a bank, they immediately borrow $25,000 based on that "asset" because you've got it in a certificate of deposit for 2 years. They're "borrowing" from the Federal Reserve, which is itself a consortium of member banks. Just a big game of musical chairs. 

When I grow up I want to be a central bank too 😥

[Douglas Buckland + 6,308]

10 hours ago, James Regan said:

@Douglas Buckland Remember that wee conversation over Hysteria I think it’s coming. Bogroll ???

https://www.usatoday.com/story/money/2020/03/02/coronavirus-toilet-paper-shortage-stores-selling-out/4930420002/

It’s already here Jimmy!!!!

[Douglas Buckland + 6,308]

5 hours ago, Ward Smith said:

Pretty sure the recession has already begun. 

Yep....due to fear mongering and the victim mentality!

[El Nikko + 2,145]

42 minutes ago, Douglas Buckland said:

It’s already here Jimmy!!!!

They didn't listen!!! Now look what's happened

[Douglas Buckland + 6,308]

Fear driven panic strips the thin veneer of civilization rather quickly....

[James Regan + 1,776]

5 hours ago, Douglas Buckland said:

Fear driven panic strips the thin veneer of civilization rather quickly....

CNN are using versions of the theme tune from “walking dead “ behind regular shows such as Amanpour.

History or Discovery channels have started flooding the channels with epidemia programs , Netflix alike. 
 

I think some parts of this population want to cause havoc and hysteria.

i just don’t get the panic buying of toilet paper 🧻 why??

Edited March 15, 2020 by James Regan

[Douglas Buckland + 6,308]

Panic buying of toilet paper just started today in KL.....unbelievable!

I think one of the big problems in this day and age is that people have developed a ‘victim mentality’. Everyone has to be a victim of something, anything to make them feel validated.

When did mankind become such PUSSIES?

[James Regan + 1,776]

Im looking at the numbers for USA Confirmed Cases 2885 - Dead 60 and this is after only at best 20,000 tested 11,000 by CCD the rest by the private sector that apparently they can’t keep count of. This is not looking very good at the start , lack of control at best , the shutting of boarders was Stage 1 this part has passed affectivness , now it’s testing of the population, the next two weeks supposedly 4 Million tests will be available so the numbers of positive cases will undoubtedly expand ten fold over night, this needs to be explained to average Joe the bog role hoarders as these numbers are going to blow already scared minds away.

Europe is now the epicenter next will be USA a big country with a big population and an infrastructure that even with warning will not be ready, are not ready.

I don’t see this being so bad in South America due to the climate generally these viruses like colder environments.

Getting back to average Joe in USA I expect to see the worse that can come out of humans in survival mode, this is not a slant but a natural reaction driven into society from Birth , confidence and drive and survival of the fittest will become obvious. This is already happening in Europe to an extent but fortunately they don’t have guns, it’s going to be interesting to watch from the bleachers.

Edited March 15, 2020 by James Regan

[wrs + 893]

11 hours ago, George8944 said:

One is a physical destruction of property that takes capital for the recovery.  CV is an economic problem brought on by poor debt management and weak business practices.   Investors threw money at companies that were not making money or barely eeking out an existance at the higher prices.  The dreams of getting rich quickly, just repeated the mistakes that happened with the carnage of the dot.com bubble break.

Bad management or unwise investors do not deserve my tax dollars as a bailout.   Again,  don't be duped into thinking a bailout is required.  The oil isn't going any place and these assests will be scooped up at fire sale prices by prudent, better managers.  

They both interrupt the flow of customers and therefore cash.  The payments the business was making are interrupted, both to employees and creditors.  That much is the same and those ripple effects are the same. I agree that the physical aspects are worse in the hurricane and depending on where you are, you are as ready for it as you can.  With CV there was no real way to take precautions and while you can make the claim that the only business that fails due to it is a badly run business, I think you are wrong.  

Most small businesses only have cash in the bank for a month or maybe three.  I know, I ran a cash-flow funded business for 15 years.  It's very hard to stay above water but we did it without loans.  We almost went under in 1999 due to the y2k focus.  We had no new business for almost 6 months.  I went without a salary for four of them and I would say that we were better run than most from what I could tell. In any case, a two month interruption in business will not be good for any business, big or small.  I think we are still on the front end of how the ripples are going to play out.

[Gerry Maddoux + 3,627]

As someone who moved in the midst of this—it wasn’t much when I completed the transaction—and literally didn’t have any TP, I can tell you that people were frightened. I was #80 in line, for TP! No one has a clue at this point how bad it’s going to get. Coping skills have devolved. 

[Ward Smith + 6,615]

On 3/15/2020 at 8:28 AM, Gerry Maddoux said:

As someone who moved in the midst of this—it wasn’t much when I completed the transaction—and literally didn’t have any TP, I can tell you that people were frightened. I was #80 in line, for TP! No one has a clue at this point how bad it’s going to get. Coping skills have devolved. 

I'm so old, I still remember when toilet paper was so plentiful, people used to actually throw it into the trees and yards belonging to their enemies. 

Edited March 17, 2020 by Ward Smith
Added pic for the younguns

[James Regan + 1,776]

Ass continues to fall out of the Oil market, Dow Furures will probably stall this evening all of this after the fed dropping to Zero plus billions of stimulus, all the tools in the box have now been used and let’s prepare for another dismal day tomorrow, are we heading for a recession?

”Relax we have this under control “

Edited March 15, 2020 by James Regan

[James Regan + 1,776]

It just did, has this ever happened before ir the Dow futures throw the breaker?

https://finance.yahoo.com/news/stock-futures-tumble-fed-takes-220239548.html

[James Regan + 1,776]

As WTI slides into the 20s this may be that perfect storm we discussed at the start of this thread! Who will bail out the shale companies the same who will bail out the air industries the cruise industry and every other industry that’s about to get clipped by CV19 hysteria? I think shale oil companies are finally going to have to drink the kool-aid. 

[George8944 + 128]

9 hours ago, wrs said:

They both interrupt the flow of customers and therefore cash.  The payments the business was making are interrupted, both to employees and creditors.  That much is the same and those ripple effects are the same. I agree that the physical aspects are worse in the hurricane and depending on where you are, you are as ready for it as you can.  With CV there was no real way to take precautions and while you can make the claim that the only business that fails due to it is a badly run business, I think you are wrong.  

Most small businesses only have cash in the bank for a month or maybe three.  I know, I ran a cash-flow funded business for 15 years.  It's very hard to stay above water but we did it without loans.  We almost went under in 1999 due to the y2k focus.  We had no new business for almost 6 months.  I went without a salary for four of them and I would say that we were better run than most from what I could tell. In any case, a two month interruption in business will not be good for any business, big or small.  I think we are still on the front end of how the ripples are going to play out.

I think we are talking two different magnitudes of business.   Yes, I agree a small family business has less reserves available to weather some storms.  I'm talking "small" companies large enough to buy land, capital equipement and people to drill for oil.   CV is just the crisis de jour. They didn't learn their lesson when Saudi drove down prices a few years ago.  Banks and hedge funds caught on and greatly tightened their lending requirments a few years back.  The news has been filled for the last 12 months how investors are depanding returns on their investment.  With that as a back drop and ignoring CV, do you think these drillers are in a better place now and could survive  sub-$40 oil?  Most could not and to my point,  they did nothing to plan for this.

I think the other area we don't see eye to eye is with pain.  It is NOT the job of the Federal government to straighten all the business roads, or fill the valley and level the mountains so businesses can survive.    Taxing me, to save you only takes money out of my local economy and shifts it to your economy.  ( Money paid in taxes keeps me from consuming.)     It makes for good politics, but most of the time, bad economics.

[wrs + 893]

1 hour ago, James Regan said:

It just did, has this ever happened before ir the Dow futures throw the breaker?

https://finance.yahoo.com/news/stock-futures-tumble-fed-takes-220239548.html

just last week

[wrs + 893]

6 minutes ago, George8944 said:

I think we are talking two different magnitudes of business.   Yes, I agree a small family business has less reserves available to weather some storms.  I'm talking "small" companies large enough to buy land, capital equipement and people to drill for oil.   CV is just the crisis de jour. They didn't learn their lesson when Saudi drove down prices a few years ago.  Banks and hedge funds caught on and greatly tightened their lending requirments a few years back.  The news has been filled for the last 12 months how investors are depanding returns on their investment.  With that as a back drop and ignoring CV, do you think these drillers are in a better place now and could survive  sub-$40 oil?  Most could not and to my point,  they did nothing to plan for this.

I think the other area we don't see eye to eye is with pain.  It is NOT the job of the Federal government to straighten all the business roads, or fill the valley and level the mountains so businesses can survive.    Taxing me, to save you only takes money out of my local economy and shifts it to your economy.  ( Money paid in taxes keeps me from consuming.)     It makes for good politics, but most of the time, bad economics.

You infer a lot from things I didn't say.

[George8944 + 128]

21 hours ago, Ward Smith said:

Actually being the reserve currency is why all of this happens. Remember the Federal Reserve, which is an entirely private enterprise and has nothing to do with the federal government (other than some sketchy one way rules enacted in the dead of night in 1913 while Congress was at Christmas recess) is the one doing the "printing". They're quite literally at the beck and call of the international banks. It's a confusalopoly by design.

First,  I understand how fractional banking works, it's not the sinful thing you portray.  Fractional banking has zero to do with any particular currency being the reserve currency.  Every modern country uses the reserve banking system in one form or another and they aren't reserve currencies. As such,  I'm not sure what you are including when you say this is "why all this happens".   The FED Reserve (FR) creates money to cover the excess spending of Congress.  Not vice versa.   (The FR buys Treasury Debt, not purchased by everyone else.  It's how we stay a float.)   Even this does has nothing ( well, little) to do with us being the reserve currency.  All Central Banks around the world are monetizing their political bodies debt and they aren't a resreve currency.  I'm not sure the link you were making is accurate.

We are the reserve currency because when we took the world off the gold standard, we were the largest, strongest economy in the world.  Other countries wanted to (maybe had to) buy from us and as the largest economy, with crazy consumerism they definately wanted to sell to us as well. With gold out of the picture, the currency most in circulation and with the strongest economy to stand behind the fiat paper promise was the United States.  That why we became the reserve currency.    As you said, the FR was created in 1913, but we didn't become the worlds reserve currency until we cancelled the Brenton Woods Agreement in the early 70's.  If it was their creation that made us the reserve currency, it would have happened around 1913, not 60 years later.

We need to keep an eye on China and Russia and the larger emerging markets of Brazil, India, etc.  China and Russia are creating their own bank transfer system.   We also aren't the manufacturing power house we once were.  That title goes to China.  As more of the world buys goods from China, and China buys from them (Think China buying soy beans from South America or cement and metal ore from Australia) those trading partners will switch away from paying in dollars to paying in Yuan.  China will pay in Yuan because countries will want the Yuan to buy manufactured goods from China.  Add to this, China is building a gold horde and will probably back their money with it. 

Russia is doing a similar thing with the Ruble.   They sell natural gas and oil to European countries.   Germany may allow Russia to buy German manufactured good in Rubles so the German State can turn around and use those Rubbles to buy natural gas.   Russia too is build huge stash of the cold, "useless" metal.

We can agree to disagree on this.

 

[Enthalpic + 1,496]

On 3/14/2020 at 2:21 PM, El Nikko said:

That's not going to make an ounce of difference at this point especially if demand starts crumbling in the US and Europe

They all need to stop drilling right now and the siutation will balance itself out, also sending someone to have a little word in MBS's ear about pulling this stunt when there is a 'pandemic' already threatening the global economy.

Obviously they are applying pressure when it will be most effective. 

Trump started softening the economy with his trade war, covid deals a big blow, SA recognizes the opportunity and plays their low-oil price pressure card.