Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Cartel

Fitch Knocks Saudi Arabia’s Credit Rating Down Another Notch

This article appeared online at TheNewAmerican.com on Wednesday, March 22, 2017:

Fitch Ratings downgraded Saudi Arabia’s credit rating again on Wednesday, bringing it perilously close to “speculative,” from “investment grade.” It dropped the country’s long-term credit rating from A+ to AA-, but with a “stable” outlook, noting that the reduction was due to the country’s “continued deterioration of public and external balance sheets.”

Fitch sees what both Moody’s and Standard and Poor’s, the other two global credit rating agencies, see: declining oil prices hurting a country that once enjoyed the highest investment grade ratings thanks to high oil prices that not only paid for extravagant welfare programs and subsidies to its citizens but allowed it to accumulate three-quarters of a trillion dollars in foreign reserves — more than ample to ride out any conceivable storm.

The rating agencies have seen that an inconceivable storm arrived in 2014 when

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More Evidence that OPEC’s Influence is Waning

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 22, 2017:

A measure of the success – and failure – of OPEC’s agreement to limit crude oil production can be seen in the chart of NYMEX crude oil price behavior (Sources below) dating from last fall. When the agreement was inked back in November, crude was at $46.50 a barrel. The price soared and traders got excited, putting in long bets that set records.

By early January, reality began setting in as compliance among the cartel’s members and non-members (who agreed to go along for the ride) began to wane. The roof fell in a couple of weeks ago when inventory builds continued to set records, and the price dropped through support at $50.

In other words, in OPEC’s attempt to birth an elephant, it succeeded in birthing a gnat.

Saudi Arabia maintained a stiff upper lip during the Houston oil conference, stating flat out that

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Saudi Arabia Losing Influence in Global Oil Markets

This article appeared online at TheNewAmerican.com on Tuesday, March 21, 2017:

As it continues to wrestle with declining oil prices worldwide, Saudi Arabia, the de facto head of the OPEC oil cartel, is giving up ground. It said a week ago that it would not allow any “free riders” to enjoy higher oil prices if they rose due to Saudi’s singular attempt to keep them up. A week later it was reported that the kingdom cut its production by 800,000 barrels per day, 60 percent below its agreement. So much for disclaimers against those “free riders” who continue to violate the agreement by exceeding their quotas.

Now comes news that the kingdom’s exports to the United States for the week ended March 10

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OPEC: A Lesson in Why Cartels Fail

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 15, 2017:

OPEC countries

OPEC countries

Every cartel comes together when individual members think they can obtain a greater economic benefit working together than they can alone. Every cartel breaks apart when members think they can do better alone. If a cartel is sanctioned by a government, it becomes a monopoly.

Since 1960, OPEC has largely stayed together with the collusion of governments and Big Oil interests around the world. But the fracking revolution, operating in the free market, is blowing up the model. Specifically,

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Drop in Crude Oil Prices Threatens OPEC and Its Production Cut Deal

This article appeared online at TheNewAmerican.com on Tuesday, March 14, 2017:  

A report released on Tuesday from OPEC indicated just how phony and ineffective is its highly touted production cut “agreement” the cartel managed to lash together among its members and nonmembers last fall. The agreement was designed to remove some 1.8 million barrels a day (mbd) from worldwide production — enough, it was hoped, to drive crude oil prices higher. Before the agreement OPEC was producing 32.5 mbd. Tuesday’s report indicated that the agreement has reduced daily production to — ready? — 31.96 mbd.

The agreement was destined to fail from the beginning. First,

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Crude Oil Price Plummets, Catching OPEC by Surprise

This article appeared online at TheNewAmerican.com on Thursday, March 9, 2017:

Wednesday’s crude oil price drop caught hedge fund managers, big money investors, day traders, and OPEC by surprise, with the sell-off, the biggest one-day drop in 13 months, continuing into Thursday. The five-percent drop on Wednesday pushed crude oil down to $50 a barrel, with Thursday witnessing a further drop to $49. Early Tuesday morning crude was selling at $54 a barrel.

The sell-off started with the announcement on Tuesday by the American Petroleum Institute (API) that

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Another Way to Fund Trump’s Wall: Interdict Drug Cartels’ Cash Flowing Into Mexico

This article appeared online at TheNewAmerican.com on Tuesday, February 28, 2017:

United States Border Patrol Dodge Ram at a che...

United States Border Patrol Dodge Ram at a checkpoint near Tucson, Arizona.

With the announcement by the Department of Homeland Security (DHS) on Tuesday that sites have already been selected to start building the wall across the country’s southern border came increased concerns about how it was going to be paid for. Said the DHS:

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OPEC’s Influence Wanes as Members Cheat on Production Cuts

This article appeared online at TheNewAmerican.com on Monday, February 13, 2017:

OPEC’s report on how its members are complying with the production-cut agreement hammered out last fall came out on Monday. As expected, it reported cheating among its members.

Per the November 30 agreement, members allegedly agreed to cut production to 32.5 million bpd (barrels per day) of crude. Iraq, Venezuela, Angola, and Algeria cut their production modestly but less than they agreed, while Nigeria, Libya, and Iran produced more. Because Nigeria and Libya are exempt from the production cuts, Saudi Arabia, Kuwait, and UAE (United Arab Emirates) were forced to over-comply. The total produced by the cartel in January came in just below the target of 32.5 million bpd at 32.1 bpd.

Accompanying the report was a statement that crude oil price “gains were capped by increased drilling activity in the US.”

Those crude oil prices are likely to continue to drop despite OPEC’s best efforts to force them higher. The headwinds the cartel faces are monumental:

First, U.S. rig counts jumped to 591 last week, the highest since October 23, 2015 and an increase of 114 since the OPEC agreement.

 

Second, the Department of Energy announced it will be reducing the U.S. strategic oil reserve later this month through the sale of 10 million barrels.

 

Third, crude oil inventories jumped by nearly 14 million barrels last week, bringing the stockpile of private oil inventories close to an 80-year record level at 508 million barrels.

 

In addition, U.S. oil and gas companies are raising new money through Wall Street equity offerings at rates not seen since at least the year 2000. In January alone, 13 different offerings raised $6.64 billion. And they are using that new money not only to develop existing oil fields, but to acquire additional reserves through mergers and acquisitions (M&A). Last year, M&A activity totaled $24 billion. For 2017, oil and gas companies have already invested half that much and it’s only February.

All of this illustrates the decreasing influence of OPEC in directing the price of crude oil on the world market. Aside from the cheaters, OPEC is also faced with other forces over which it has no control, mostly in the oil industry of the United States.

Trump Showed His Hand to Mexican President Nieto, via Twitter

This article was published by The McAlvany Intelligence Advisor on Monday, January 30, 2017:

Poker Rule No. 65 is “Don’t Show Your Hand:”

The problem with showing cards when you have them is that people then assume that the next time you don’t show them you don’t have them. And when you want them to think you have them the next time you feel obligated to show your hand again. If you start showing people your cards all the time, they are going to figure out the way you play long before you figure out the way they play.

If one player is Donald Trump, you don’t allow the media to see your hand either, especially since they will do everything in their power to expose his hand, disrupt the game and make Trump look like a fool.

The flurry of tweets last week taught Trump that lesson.

Following issuance of his executive order to start building the wall along the US’ southern border, Trump tweeted:

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ATF Elimination Act Re-introduced in the House

This article appeared online at TheNewAmerican.com on Friday, January 20, 2017:

Bureau of Alcohol, Tobacco, Firearms and Explo...

Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) headquarters in Washington, D.C.

In re-introducing the ATF Elimination Act on Thursday, January 12, Representative Jim Sensenbrenner (R-Wis.) explained one of the primary reasons why: “The ATF is a scandal-ridden, largely duplicative agency that has been branded by failure and lacks a clear mission. It is plagued by backlogs, funding gaps, hiring challenges, and a lack of leadership.”

Not once did he explain the real reason the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF for short) should be eliminated:

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OPEC Claims That U.S. Shale Producers Won’t Threaten Its Efforts to Raise Crude Oil Prices

This article appeared online at TheNewAmerican.com on Wednesday, January 18, 2017:

English: Montage for the Davos article on Wiki...

Montage of Davos photographs

Speaking at the elites’ conference in Davos earlier this week, Saudi Arabia’s oil minister, Khalid al-Falih, erred when he said that U.S. oil shale producers weren’t a threat to OPEC’s plans to raise crude oil prices by cutting its production. He said that U.S. oil producers “will find they need higher prices” because existing fields (Permian, Bakken, etc.) are being exhausted, and because the costs of lifting new production are going up, thanks to U.S. “inflation on [in] the cost of doing business.”

The minister then engaged in straight-line thinking in a variable world and predicted that

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Another Setback for Big Taxi: Uber, Lyft OK’d to Serve Atlanta Airport

This article appeared online at TheNewAmerican.com on Monday, January 2, 2017:  

Following months of negotiations with Uber, Lyft and other ride-sharing (e-hailing) companies, the city of Atlanta, which owns and operates the Hartsfield-Jackson Atlanta International Airport (shown), is allowing them to serve passengers effective on Sunday, January 1, 2017.

They have been serving them for months despite restrictions, but those rules were rarely enforced. Now it’s legal.

But not without costs. First,

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OPEC Agreement to Limit Production Boosts Crude Price 11 Percent

This article appeared online at TheNewAmerican.com on Thursday, December 1, 2016:

Coat of Arms of Saudi Arabia

Coat of Arms of Saudi Arabia

The global price of crude oil jumped more than 11 percent since OPEC announced on Wednesday its first agreement to limit production by the cartel since 2008. There are many moving parts to the agreement — perhaps too many.

First, the cartel’s de facto leader, Saudi Arabia, has promised to

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OPEC to Meet in Vienna Wednesday to Plan Production Cuts

This article appeared online at TheNewAmerican.com on Friday, November 25, 2016: 

Oil ministers from the 14 oil producing countries that make up the OPEC cartel are arriving in Vienna to prepare for their formal gathering there next Wednesday. The meeting is supposed to finalize a tentative agreement reached in September that would put a cap on the cartel’s production in an effort to raise the price of a barrel of crude oil. A sufficient rise would reduce the pain currently being inflicted on those members as the decision to keep pumping in November 2014 has bitten them — some of them badly.

Saudi Arabia was forced last month to

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OPEC Lives in a Dream World

This article was published by The McAlvany Intelligence Advisor on Friday, November 18, 2016:  

There are at least two problems with Saudi Arabia’s oil minister’s dream as he expressed it on television on Thursday: one, he doesn’t know what he’s talking about, and two, what he does know is wrong.

Mark Twain put it well: “It’s not what you don’t know that kills you. It’s what you know for sure that ain’t true.”

Saudi Arabia’s Energy Minister, Khalid al-Falih (shown), still thinks OPEC can impact the world oil markets the way they were able to just a few short years ago:

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Saudi Oil Minister “Optimistic” That OPEC Will Cut Production

This article appeared online at TheNewAmerican.com on Thursday, November 1, 2016:  

English: Flag of the Organization of Petroleum...

Flag of the Organization of Petroleum Exporting Countries

Saudi Arabia’s Energy Minister Khalid al-Falih said on television on Thursday that the crude oil market is close to becoming “balanced” between supply and demand and that the OPEC meeting happening in less than two weeks will likely generate an enforceable limit on the cartel’s production:

Reaching (a decision) to activate that ceiling of 32.5 million barrels per day will speed up the (market) recovery and will benefit producers and consumers….

 

I’m still optimistic that the consensus reached [last month] for capping production will translate … into caps on [each cartel member’s] levels.

He also added that he “hoped” an agreement the cartel might reach would be honored by non-OPEC member Russia.

Hope is not a strategy. Neither is optimism based upon it,

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Oil and Gas Prices Dropping in Anticipation of Trump Presidency

This article appeared online at TheNewAmerican.com on Monday, November 14, 2016:  

Even as prices for crude oil and natural gas were already declining thanks to continued overproduction by the OPEC cartel, the commitment of millions of dollars in new capital expenditures by major oil companies next year, and the stirring of recovery in the oil patch, last Tuesday’s election added additional impetus to the decline. The price for crude oil for December delivery has dropped more than $2 a barrel since the election, and Evan Kelly, writing at OilPrice.com, thinks it’s going to drop further, perhaps much further.

Reasons abound, mostly around Donald Trump’s promise to breathe new life into an industry hampered by overregulation driven by questionable concerns over global warming.  As Kelly wrote:

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Crude Drops 10 Percent; Price Decline Just Beginning

This article appeared online at TheNewAmerican.com on Wednesday, November 2, 2016:

Midday last Thursday, the price of crude oil for delivery in December touched $50, and it’s been all downhill since then. At noon on Wednesday crude oil futures touched $45 a barrel on news that inventories soared last week by the most in 34 years.

The market wasn’t expecting that. It was bad enough that the American Petroleum Institute (API) reported a supply increase nine times greater than analysts and observers were expecting last week. Those market seers were betting on an increase of a million barrels. Instead the API reported the increase was 9.3 million — a miss of gigantic proportions.

On Wednesday, however, the Energy Information Administration (EIA) reported that the API’s estimate was far too low:

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OPEC Fails to Agree as U.S. Energy Industry Ramps Up

This article appeared online at TheNewAmerican.com on Monday, October 31, 2016:

After 12 hours of effort to hash out an agreement to cut oil production that can be presented formally to the Organization of Petroleum Exporting Countries in November, 14 oil ministers meeting in Vienna over the weekend gave birth to — a goose egg. Without an agreement, the November 30 gathering is likely to be irrelevant, just as the cartel itself is becoming.

Every cartel eventually blows up due to members unwillingness to 

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OPEC Continues to lose its game of Chicken with US Energy Producers

This article was published by The McAlvany Intelligence Advisor on Monday, October 31, 2016:

It is said that, in a game of chicken, the one who flinches first loses. Last week Saudi Arabia flinched.

It went to the global bond market, hat in hand, hoping to raise $10 billion to slow down its liquidation of its foreign reserves. Last year those reserves dropped by $100 billion. With the market stronger than anticipated (or perhaps because they knew it was the most they could raise for quite a while) they raised $18 billion.

That $18 billion will be gone in two months, leaving investors holding a piece of paper that might not be redeemable for face value at maturity. What will be left is the increasingly irrelevant cartel that Saudi Arabia has led for the last 55 years.

For proof,

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.