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: Oil Prices

What Happens After Venezuela Destroys its Currency?

This article appeared online at TheNewAmerican.com on Friday, April 29, 2016:  

English: THE KREMLIN, MOSCOW. At a joint press...

Hugo Chavez and Vladimir Putin

Venezuela is unable to pay its currency printers. Those printers have been flying in planeloads of currency in the middle of the night, landing at airports where it is offloaded onto trucks to be dispersed to banks throughout the country. In other words, Venezuela doesn’t have the money to pay for its money.

The destruction of the currency, the bolivar fuerte (“strong bolivar”), has been documented at The New American and elsewhere. When oil prices dropped, so did revenues to fund the various socialist welfare schemes put in place by the communist Hugo Chávez and continued by his protégé, Nicolás Maduro, at Chavez’s passing in March 2013. Instead of reining in those unaffordable programs, socialist economists instead decided to print their way out of the crisis.

The results were predictable, and catastrophic.

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Have Oil Prices Hit Bottom?

This article appeared online at TheNewAmerican.com on Thursday, April 21, 2016:  

The 40 percent increase in the price of crude oil just since the end of January prompts two questions: Have investors seen the bottom in oil prices, and have drivers seen the lows in gas prices?

Todd Garner, the managing partner at Protec Energy Partners hedge fund, thinks so:

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Have Oil Prices Hit Bottom?

This article appeared online at TheNewAmerican.com on Thursday, April 21, 2016:

The 40 percent increase in the price of crude oil just since the end of January prompts two questions: Have investors seen the bottom in oil prices, and have drivers seen the lows in gas prices?

Todd Garner, the managing partner at Protec Energy Partners hedge fund, thinks so:

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Goldman Sachs’ Warning Dents Crude Oil Price

This article appeared online at TheNewAmerican.com on Wednesday, April 13, 2016:  

The price of crude oil, which reached $65 a barrel a year ago, fell below $30 in January with expectations that its decline wouldn’t end until it hit $20, or even lower. But hopeful optimists see light at the end of the tunnel — this coming from next Sunday’s OPEC meeting in Doha, Qatar (photo above) — where an agreement to freeze production at current levels will be on the table, bid crude higher in an almost straight line. On Tuesday NYMEX crude hit $42 a barrel, a 40-percent jump from January’s lows.

A note from Goldman Sachs on Tuesday provided a sobering view:

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Evidence Mounts for U.S. Recession in 2016

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

Nearly everyone with an opinion is warning about the increasing probability of the United States entering a recession — two quarters of negative growth — before the end of the year.

Cabinet - Class Photo, 1984: Front row: David ...

President Ronald Reagan’s former budget director David Stockman (middle, left) has been negative on the economy for months, noting in early February that

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The Best Evidence Yet of a US Recession This Year

This article was published by The McAlvany Intelligence Advisor on Monday, March 14, 2016:  

The best evidence comes from the US Treasury with its daily report of tax receipts from wages and salaries. It’s pure, it’s timely, and it’s free of massaging and/or manipulation. And it’s ugly.

John Williams, the skilled and capable economic statistician whom the establishment economists love to hate, author of ShadowStats.com, has built a graph (see source below) showing

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Oil Industry Facing Massive Challenges

This article appeared online at TheNewAmerican.com on Monday, February 29, 2016:  

Sunoco

Energy producers are facing challenges that are threatening the existence of not only marginal, highly-leveraged producers, but large companies as well.

Canadian-based Suncor is just one example. Known for its Sunoco brand (now Petro-Canada), Canada’s largest crude-oil producer reported three weeks ago that it suffered a fourth-quarter loss of $1.45 billion and that it was slashing its capex (capital expenditures) for 2016 by 10 percent, forcing its expected 2016 production to fall by the same amount. It is also selling assets in order to keep paying its dividends to nervous investors. But Steve Williams, the company’s CEO, told equally nervous participants that “We will be one of the last guys standing.”

Lamar McKay, BP’s deputy chief executive, did the same: “Times are tough. You’d almost call them brutal right now. But we will adapt. We will make it.” This from the world’s sixth-largest oil and gas company which lost $6.5 billion in 2015 and was forced to lay off more than 3,000 employees.

John Hess, CEO of the Hess Corporation, also pumped his company’s resilience in the face of low crude prices. A much smaller company than BP, Hess Corporation suffered a loss of $3 billion last year, its first in more than a decade. Said Hess: “Our company has some of the best acreage [in North Dakota]. We can be more resilient as prices recover.”

Taken together, the oil industry worldwide has cut more than 300,000 jobs since the summer of 2014 (the peak of oil prices), while capex of nearly $1.5 trillion will be cancelled between 2015 and 2019, according to the conference sponsor. So far nearly 50 U.S. oil producers have filed for bankruptcy protection this year, with many more sure to follow this spring as banks readjust their reserve valuations used to back up their loans. This could imperil more than $17 billion in debt held by banks.

The most important revelation at the conference came from Saudi Arabia’s oil minister, Ali Al-Naimi, when he said that his country — despite rumors to the contrary that had driven crude oil prices temporarily higher — had absolutely no plans whatsoever to cut production in order to support higher prices. On that news alone, NYMEX crude oil fell $2 a barrel on Friday.

One of the problems facing these executives is the fact that frackers continue to produce in the face of falling rig counts and smaller workforces. Peak oil production touched 9.6 million barrels a day last year and remains at 9.1 million bpd. Daniel Yergin, the founder of Cambridge Energy Research Associates (CERA), now a subsidiary of IHS Inc., expects things to get worse — perhaps much worse — before they begin to get better:

This year is going to be very rough on the industry, very turbulent. We think that the decline in U.S. production is going to get more serious — another 600,000 to 800,000 barrels a day in this kind of price environment.

Globally the energy industry cut capex spending in 2015 by nearly 30 percent compared to 2014, while those in the United States have cut even further: an estimated 40 percent. For 2016, IHS CERA expects several large U.S. producers to cut spending by 50 percent compared to last year.

In the meantime, there’s another problem: where to store the surplus crude oil, estimated to be piling up at the rate of 1.5 to two million barrels every day. Empty tankers are being leased to store the surplus, called “floating storage,” waiting for demand to pick up (or supplies to dwindle). Now there is “rolling storage,” with 20,000 empty railroad tank cars sitting in sidings and storage yards across the country. Salt caverns and tankers are almost at capacity, and companies such as the Musket Corporation are taking advantage. Musket is a privately-held shipping company in Houston that built its business shipping crude oil by rail. But now it is in the storage business, finding and leasing empty tank cars to store the surplus until that “turnaround” day arrives, when demand exceeds production, and the surplus can be sopped up.

Since there is little evidence on the horizon to support higher crude oil prices, oil industry executives are running out of options and optimism. It will take more than a stiff upper lip to jawbone higher oil prices. In the meantime, for many it’s a matter of survival until that happy day arrives.

Pollyanna in Houston: False Optimism Pervades Oil Conference

This article was published by The McAlvany Intelligence Advisor on Monday, February 29, 2016:

Cover of "Pollyanna"

Cover of Pollyanna

Author Eleanor Porter would be proud. Not only did her 1913 children’s book Pollyanna establish the “Pollyanna Principle” (someone with an excessively optimistic outlook despite facing all manner of difficulties), it set in motion eleven sequels by Elizabeth Borton or Harriet Lammis Smith. There were movies starting Mary Pickford and Hayley Mills.

All three authors were present in Houston last week, at least in spirit. First,

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Jawboning Higher Oil Prices

This article was published by The McAlvany Intelligence Advisor on Wednesday, February 17, 2016:  

The art of jawboning has gotten such a bad reputation that even the Securities and Exchange Commission website decries it:

We deride “jawboning” as (a) government wagging a finger at business and labor to act with restraint, while government acts without restraint; or (b) government asking labor and business to do what is against their self-interest and in the public interest, which is usually ineffective, and when it works it rewards the greedy and penalizes the patriotic.

It used to work by issuing an implicit threat to accomplish a desired end. And on Tuesday, in the first few minutes of trading, traders of both stocks and oil bought the threat, causing prices to bounce higher at the open but then fade afterwards.

The threat was this, issued by the Russian Ministry of Energy following a brief meeting of worthies from Russia, Saudi Arabia, Qatar, and Venezuela:

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Low Oil Prices Are Tempting Politicians to Raise Gas Taxes

This article appeared online at TheNewAmerican.com on Monday, February 8, 2016:  

The White House announced Thursday that the president would be asking Congress to raise taxes on imported oil by $10 a barrel to be used to fund what the Wall Street Journal describes as “new green transportation projects.” The new taxes to be levied on oil companies will be passed down to motorists who will enjoy the opportunity to help the president fund those new projects by 22 cents per gallon every time they fill up.

The danger isn’t that the president’s bill has any chance in the Republican-controlled Congress, this being an election year and all. What is dangerous is that

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As Oil Price Drops, Iraq Faces Existential Threat

This article appeared online at TheNewAmerican.com on Monday, February 1, 2016:  

In Iraq the culture of dependency is so great that the drop in the price of oil threatens the country’s very existence. With every Iraqi dependent upon the government for essentials like sugar, tea, rice and cooking oil, and the government dependent upon oil for more than 90 percent of its budget, the existential threat is real.

In January 2015 the government, headed up by President Fuad Masum and Prime Minister Haider al-Abadi, passed a budget that

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Energy Expert Sticks With Prediction of $18 Oil

This article appeared online at TheNewAmerican.com on Monday, February 1, 2016:  

The day after Saudi Arabia executed Shiite cleric Nimr al-Nimr, John Kildruff, the founder of energy trading company Again Capital, appeared on CNBC’s Squawk Box to say that oil prices would likely decline as tension between Iran’s Shiite majority and Saudi Arabia’s Sunni majority escalated. Nimr al-Nimr was a popular voice for the Shiite minority in Saudi Arabia, and his execution sparked the ransacking of the Saudi embassy in Tehran by Shiites. The two states follow different strands of Islam, and al-Nimr’s execution added to the gulf between the two members of the OPEC cartel. Said Kildruff:

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Oil Prices Down, Oil Bankruptcies Up, Industry Safe

This article appeared online at TheNewAmerican.com on Tuesday, January 12, 2016:  

Just before Christmas Bruce Richards, CEO of Marathon Asset Management, predicted that not only would the price of a barrel of crude oil drop into the $20s but that it would take a third of America’s energy companies with it. As head of a vulture capitalist fund, described as “focused on opportunistic investing,” he was expressing more hope than despair.

Managing more than $13 billion, Richards is waiting for

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Saxo Bank’s Outrageous Predictions for 2016

This article was published by The McAlvany Intelligence Advisor on Tuesday, December 22, 2015:  

Every year about this time the Copenhagen-based Saxo Bank offers up its most outrageous predictions for the coming year. Some of them are doozies:

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OPEC Ignores Crude Oil Glut, Vows to Continue Pumping Flat Out

This article appeared online at TheNewAmerican.com on Monday, December 7, 2015:  

Following a contentious six-hour meeting on Friday, OPEC oil ministers meeting in Vienna announced that nothing will change: They will continue to pump at maximum rates despite the growing glut of oil in the world. Predictably, crude oil prices dropped, along with wholesale gasoline prices.

The fragile cartel’s members are pumping close to 31.5 mbd (million barrels per day) and would pump more if they could. They are already above the mythical “ceiling” of 30 mbd. When Iran, which currently provides 2.7 mbd to that number, recovers from U.S.-imposed sanctions, it expects to pump four mbd by next summer, adding further downside pressure on crude oil prices.

At these prices nearly every barrel OPEC members sell to the world market is sold at a loss. But the ministers are persuaded that,

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On December 4, Watch for an Epic “Suicide Squeeze” by OPEC

English: Kingdom Centre, Riyadh, Saudi Arabia....

English: Kingdom Centre, Riyadh, Saudi Arabia. Taken by BroadArrow in 2007. (Photo credit: Wikipedia)

In baseball terminology, a “suicide squeeze” is a play in which the runner on third base breaks for home plate on the pitch, counting on the batter to lay down a bunt. If he doesn’t, the runner is an easy out.

On December 4th, at the regular annual meeting of the thirteen members of the OPEC cartel, the “suicide squeeze” will be in play. And they will find, to their chagrin, that the batter didn’t cooperate.

A year ago Saudi Arabia, the head of OPEC, made a fateful decision,

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Saudi Arabia Announces Its Willingness to “Stabilize” Oil Prices

This article appeared online at TheNewAmerican.com on Tuesday, November 24, 2015:  

On Monday Saudi Arabia’s council of ministers confirmed the rumors that the leader of the OPEC cartel is now willing to “stabilize” world oil prices, saying in its announcement:

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A Black Swan Event and $4 Oil?

This article was published by The McAlvany Intelligence Advisor on Friday, November 20, 2015:  

Eight years ago Nassim Taleb’s book The Black Swan was named by the Sunday Times as one of the twelve most influential books since World War II. Now serving as Distinguished Professor of Risk Engineering at the New York University Polytechnic School of Engineering, Taleb continues to build on his view that “black swan” events have a greater impact on culture and the economy simply because they are unexpected. As Chris Anderson explains in his review of Taleb’s book:

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Oil: How Much Lower?

This article appeared online at TheNewAmerican.com on Thursday, November 19, 2015:  

Cover of "The Black Swan: The Impact of t...

Cover via Amazon

Speaking at the Irish economics forum Kilkenomics last weekend, former successful derivatives trader, professor of Risk Engineering at New York University, and author of The Black Swan, Nassim Taleb said he thinks the price of a barrel of oil could go as low as $4 a barrel. This could be the result of a

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World Oil Glut Swells to 3 Billion Barrels, Driving Prices Down Further

This article appeared online at TheNewAmerican.com on Monday, November 16, 2015:  

Friday’s November report from the International Energy Agency (IEA) confounded so-called experts who have repeatedly predicted a bottom in oil prices. After West Texas Intermediate (WTI) briefly dropped below $40 a barrel in August, bulls were delighted to see prices for crude bounce up over $50 and stay there — right up until October.

The IEA report tried to corral all the complexities of the oil market into its two-page report:

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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.