Posts Tagged ‘Oil’

A brief perspective on the geopolitical strategic posturing and amalgamation occurring in real time. Political commentary by Chris Anthony.

 

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After dropping more than 80% in two years, oil prices have started to recover. But a full rebound remains uncertain, stuck at the crossroads of a worldwide recession and the House of Saud’s suicide mission to keep pumping more oil.

In February 2016, the oil industry and energy dependent countries panicked as oil prices collapsed from a high of $145 per barrel to a low of $27 per barrel. Market analysts speculated that the collapse in oil prices would cause unrest in oil-rich countries and whiplash investors who had tossed their fortunes into speculative US shale oil fields.

Since then, oil prices have rebounded considerably. Resting just below $50 per barrel, many hope the catastrophe has been averted. But with market turmoil surrounding the recent Brexit referendum potentially sparking a global recession and the Saudi Kingdom’s pledge to continue flooding the market, many risks remain for the oil industry.

The best case scenario may be that we are now seeing a new normal, with oil prices hovering between $40 and $60 per barrel for the foreseeable future as market oversupply comes off of the market due to a wave of bankruptcies in the US shale industry. Since 2015, over 130 US oil and gas companies have filed for bankruptcy, with US and Canadian oil production sagging by over 2 million barrels per day.

The question remains whether the crash was due to a surge of new supplies that came onto the market during the boom time by countries like the US and Canada, or if the collapse in prices was part of an intentional Saudi strategy to force competitors out.

Did Saudi Arabia Crash the Market Intentionally? Likely.

In 2015, market analysts prepared for the threat of a global recession after Chinese economic data showed signs that Beijing may face headwinds in the coming years. While everybody was preparing for demand to fall, the Saudi Kingdom made a curious decision to increase oil production.

Saudi Arabia increased production by 2 million barrels of oil per day, a roughly 20% increase, with the Crown Prince demanding an additional 20% hike in oil production by 2017. Nonetheless, market watchers believed that Saudi Arabia, whose budget is based on a $66.70 per barrel oil price, would back away from pumping oil as prices started to cascade – they were wrong.

As energy analyst Marin Katusa explained on Radio Sputnik, Saudi Arabia forced US shale oil properties out of business and proceeded to purchase those same US oil sites for pennies on the dollar in bankruptcy. The Saudi Kingdom not only ravaged America’s energy renaissance, but also sought to preserve market share from Iran, no longer hindered by international sanctions in the wake of the historic nuclear deal.

On Monday, Loud & Clear’s Brian Becker sat down with Ed Hirs, the Managing Director for Hillhouse Resources, and Zafar Bangash, author of the book “The Doomed Kingdom of the House of Saud,” to separate fact from fiction on Saudi Arabia’s role in the oil price meltdown, and what to expect next.

Oil Prices Made a Surprise Recovery Since February – Will it Last?

“The oil market is following the path that OPEC lined out for it,” said Hirs. “If you look back at the OPEC statements in 2015, the ministers said that they would continue producing and let the attrition of supply from high cost resources slip away from the market and let the ever growing demand set the floor for the market, at which point prices would begin to increase as the excess inventory gets worked out of the system.”

Hirs explained that although the collapse in oil prices has been devastating for many countries oil-based economies, the market waves have matched very closely with what oil analysts expected, with most experts predicting a rebound to well over $50 per barrel by the end of the year.

Was this a Deliberate Effort by the Saudis to Target Rivals?

Hirs said that while it could be argued that Saudi Arabia intentionally undercut the market, a separate line of thought is that the US shale oil was the last to enter an already crowded market and failed to offer competitive prices.

In support of this secondary line of thought, he pointed to oil industry models showing that for every 1% increase in oil supply, prices fall by 25%. In his estimate, consistent with previous reports from OPEC, the world oil market is oversaturated by roughly 2%, explaining at least 50% of the collapse from the high of $145 per barrel.

Zafar Bangash disagreed with the economist’s assertions that the phenomenon was solely a matter of supply and demand, arguing that Saudi Arabia fabricated the market dislocation in order to penalize the United States and Iran over the 2015 nuclear agreement.

“The Saudis were extremely upset and frightened by the agreement that Iran signed with the P5+1 countries that led to Iran coming on board with respect to their production,” he said. “Iran is producing quite a substantial amount of oil on the market right now, so the Saudis were trying to punish Iran as well undercut American shale oil production because they see Iran as not only a challenger, but also as an existential threat to their hegemony in the Muslim world.”

“In addition to this economic war, there is a political war, and I don’t see how the Saudis can win that, and they caused a lot of economic grief for themselves as well, with their budgets running deficits for the first time,” Bangash added.

“On the one hand they have been able to undermine shale oil considerably, but on the other hand they will continue to pay the price both economically and politically.”

Iran has been supplying over 200,000 barrels of oil per day to Japan over the last three months, according to the director of international affairs at the National Iranian Oil Company (NIOC).

MOSCOW (Sputnik) — Japan has been importing more than 200,000 barrels of Iranian oil per day over the past three months, the director of international affairs at the National Iranian Oil Company (NIOC), Seyed Mohsen Ghamsari, said Tuesday.

“The oil sale contract between Iran and Japan pertains to 120 thousand barrels per day; nevertheless, the East Asian country has purchased more oil from Iran over the past three months,” Ghamsari said, as quoted by Mehr news agency, pointing to the number as high as 200,000 barrels daily.

According to the NIOC official, Tehran expects to deliver 160,000-200,000 barrels per day to Tokyo to increase its share in Japanese oil supplies.Iran began stepping up international trade and investment cooperation after reaching a historic deal on its nuclear program to ensure its peaceful nature in exchange for the suspension of international anti-Iran sanctions, in particular on its oil sector, in July 2015.

In mid-January, the sanctions were removed after the International Atomic Energy Agency verified Tehran’s compliance with the nuclear agreement.

 

By V. The Guerrilla Economist

 

The New Trade Order

As the sun sets on the American empire, the reality that it is fated to end up on the trash heap of history comes ever more into focus. Allow me to highlight the latest moves on the global economic chessboard that further cement this reality.

For years now, The Guerrilla has howled that most countries will refuse to participate in so-called “trade pacts” like the Toilet Paper Protocol (TPP). Look, for example, at the difficulties Exceptionalistan is having when it comes to getting even Europe’s neutered pantywaists to accept the TTP’s ugly stepsister, the Transatlantic Trash Investment Partnership (TTIP). What a joke these pieces of diplomatic garbage are. The idiocrats leading the Empire of Stupid still operate like the year is 1980 and the Cold War is in full swing. They seem to believe that other nations have no choice but to worship at the feet of King Dollar.

Ah, but Exceptionalistan’s delusional neocons have a poor understanding of the modern world! In their hubris they think they hold all the cards and that the rest of the world cannot figure out their dastardly schemes. They are soon going to find out just how wrong they are.

 

The Bear in Judea

Russianspecialforces

Russian Spetsnaz Special Operations Forces

 

Recently, Israeli Prime Minister Benjamin Nutzinyahoo (aka Netanyahu, aka Mileikowsky) visited with Russian President Vladimir Putin in Moscow. They met in private and judging by their statements afterward both men seemed very pleased by what they discussed. The Guerrilla has said for years that Israel will transition from being a war economy that engages in the bankster practice of perpetual war to an independent economy that is not living off U.S. largesse. In his speech after the meeting Nutzinyahoo said, “Russia is a world power and the relationship between us is getting closer all the time. I’m working to tighten this connection; it serves us and our NATIONAL SECURITY  at this time, and has also prevented superfluous and dangerous confrontations on our northern border.”

 

In other words, Nutz and Putin are both happier than pigs in sh** that Russia got involved in Syria. What’s more, Nutz also revealed that Russia’s Gazprom will help develop the Leviathan energy feild. He also noted that additional defense deals were possible. It’s really no wonder that political leaders and the press in Israel are calling their nation’s new relationship with Russia a “budding romance.” The truth of the matter is that trade, security, and diplomatic relations between Russia and Israel are the friendliest they’ve ever been thanks to the masterful policies of the Odumbo administration.

 

Mark my words, it will only be a matter of time before we see Russian military equipment in the hands of the Israeli Defense Force. It helps that Avigdor Liberman, the current Israeli Defense Minister, is a Russophile who’s had a keen interest in Russo-Israeli integration since 2009 when Agent Zero took the White House. The Israelis are quite pleased with how the Russians handled the Daesh-bags (USIS) and how their northern border with Syria is now quiet.

 

The other angle here is that Israel is being wooed by Russia to act as a buffer against the terror kingpin that is now Turkey. Hamas has a forward operating base on the Turkish border where it receives the Erdogan government’s full military and financial support. What better way is there for Putin to stick a finger into the eye of the Atlanticists and get Ankara back for shooting down a Russian jet than to cozy up to Israel?

Putin vs The Turd In The Hummus Bowl Erdogan

 

With the large number of Russian-Jews in Israel, many of whom have relatives that happen to be part of the “-stan” nations on the New Silk Road, what The Guerrilla has been saying since 2013 is coming to pass. Israel will integrate with the New Silk Road and the new Suez Canal development.

The Suez Canal expansion project is integral not only to trade and integration into the New Silk Road, it is also key for developing the Leviathan energy fields. Peace in the Middle East will be a reality as soon as King Dollar rasps out his last dying breath.

It’s not a perfect union, but Russia is playing a stronger role than the West is in maintaining a peaceful Middle East, a role that includes keeping all of the region’s actors, including Israel, in check. The point is that for the first time in decades the U.S. and the UK are on the outside looking in at the Middle East and there is nothing they can do about it.

The Russian-Israeli rapprochement takes place within the context of other moves involving Iran that The Guerrilla believes are related. Basically, Iran is courting Europe by announcing that they will accept petro-payments made in euros. Teheran’s game here is to work with Russia to shore up their combined share of the European energy market. This move prevents the Atlanticists from presenting an alternative (e.g., Qatar) to energy-hungry Europeans. Iran’s offer also leaves Russia free to work with Israel and it’s Leviathan energy fields as a way of crushing the Saudis. Do you see how things have changed, dear readers? Do you see how Russia has been one step ahead of the amateurs at work in the Empire of Stupid?

Royal Flush

The House of Fraud, I mean The House of Saud, has lost the oil war in spectacular fashion, just as The Guerrilla predicted it would years ago. The original intent of the oil war started by the Atlanticists with the collusion in July 2014 of a dying King Abdullah and his merry oil minister, Ali Al-Naimi, was to cripple both Russia and the booming U.S. shale oil business.

I can see my readers shaking your heads now. Why on earth, you wonder, would the Atlanticists want to hurt oil business in the United States? The reason is simple – because the petrodollar has less to do with oil than it does with keeping the debt-based Ponzi scheme going. Remember, the Anglo-American power players have no loyalty to any country, not even their own. They are loyal only to the paper wealth their system generates and the schemes they employ to leverage the power of that paper. It is the philosopher’s stone realized!

Fast forward from 2014 to today and what we see is Saudi Arabia circling the toilet bowl of irrelevance. Everything that she and the corrupt West have done to undermine Russia’s economy, markets, and her oil production has backfired. Is anyone surprised by this? They shouldn’t be. The Empire of Chaos doesn’t care what happens to it’s allies. What it cares about is full spectrum dominance over the worlds resources, a goal it achieves through economic hitmen, assassinations, coups, color revolutions, and outright invasions, what it calls “kinetic actions.” This has been American foreign policy for the last few decades no matter who has occupied the White House.

The Guerrilla remembers with disgust the moves made in 2001-2002 to maintain Exceptionalistan’s preeminence on the global stage. Recall for instance General Wesley Clark’s revelation at the California Commonwealth Club in October 2007 when he said that the decision to go to war with Iraq had been made “on or about the 20th of September” in 2001. Clark explained further that his contact in the Joint Staff informed him a few days later of a memo he had received from the Office of the Secretary of Defense, a memo that described how the U.S. was “going to take out seven countries in five years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off with Iran.”

Can we now lay the “American troops are fighting for your freedom” BS to the side?

Since King Salman came to power in Saudi Arabia he has tried, but failed, to reverse the disastrous course set by Abdullah. His first order of business was to fire Ali Al-Naimi and put in an ARAMCO chairman named Khalid Al-Falih to shore up the Kingdom’s bleeding finances. Alas, Al-Falih, surely inspired by western central banks, decided to keep the “pump to oblivion” strategy of his predecessor in place. As a result, the Saudis are only months from a total collapse.

The cards are stacked against them. U.S. shale oil firms are still in operation, having come up with new technologies to lower the cost of drilling and exploration. This will buy them 5 to 10 years at the most (shale oil fields are short-lived) before they go belly up, but by that time the Kingdom of Saudi Arabia will have also bitten the dust. The Kingdom is hemorrhaging the foreign currency reserves that it uses to keep the riyal pegged to the U.S. dollar. This has ruined domestic social programs, leading to unrest and now the House of Saud is facing a popular revolt because it pissed away its wealth on some harebrained scheme cooked up by idiots in Mogadishu-on-the-Potomac.

Over the last year and especially in the last few months, the exchange rate of the riyal has been swinging wildly. Recent Fed talk of rate hikes have not helped the situation either. At some point, the Saudis will be forced to de-peg the Riyal from the USD. When that happens they will need to sell U.S. dollars on the open market from their sovereign wealth fund. The more the Fed flirts with interest rate increases, the more the Saudis will deplete their reserves … until they run out of dollars. Of course, another option is keep the peg, but this will kill the Kingdom’s growth by forcing it to raise its interbank rates, prompting a drain on its GDP. Add to this soap opera the fact that Iran has rejected the OPEC demands to cap oil production, further lowering the price of oil. What’s more, Iran plans to increase oil production to 4 million barrels a day through March 2017!

Yes, my friends, heed what The Guerrilla is saying. Blood is in the water! The House of Saud is in serious financial trouble from which it cannot escape without maximum pain. While mainstream talking heads and lesser analysts focus on the funds and pegs of the Kingdom, The Guerrilla reminds his fans to recall the untold billions of dollars that Saudi Arabia has dumped into proxy wars in Syria and Yemen. Those wars are the Kingdom’s Vietnam. They are bleeding out the last remaining wealth the Kingdom has.

Then there is the U.S. Federal Reserve, headed by that troll, Janet Yellen. Thanks to the Riyal-Dollar peg, the last Fed interest rate hike caused the Saudis to raise their rates thereby wreaking havoc on the Riyal in the process. Saudi Arabia also sold billion in bonds to shore up the holes in its books. The Kingdom is about to learn the hard way that raising rates while oil prices plummet doesn’t work out too well in Dollar pegged Gulf Cooperation Council countries. As corporate and household borrowing costs begin to rise Saudi Arabia will experience credit contraction and a liquidity crisis the likes of which the Kingdom has never seen. Throw in social-political unrest and Riyal devaluation, de-pegging, and Dollar dumping are right around the corner.

In conclusion, the policy of chaos employed by the Empire of Chaos is about to come full circle. Exceptionalistan is about to meet the snarling bitch that is karma head-on. The drooling slack-jawed morons that run the U.S. are in for a rude awakening soon … very, very soon.

 

 

By Kenneth Schortgen

Because the government and other ‘official’ statistics agencies have pretty much removed every standard consumer expenditure from their weekly, monthly, and quarterly reporting models, there are very few items available for Wall Street and the Fed to use to determine the strength of the American consumer.  One of these of course is automobile sales, and is an item that the mainstream loves to boast about over and over to say, ‘Look Here!  The Consumer is FINE!  They are buying lots of cars!’

So then what happens when all of a sudden all U.S. automobile manufacturers see a decline in sales at the same time?

“You can’t say we weren’t warned. As reported over a month ago, the biggest drag on recent consumer spending was auto sales.

And this is happening as Automaker inventories are at their second highest in 23 years. If sales are collapsing, then the violent spike in relative inventories as seen in 2008 is not far away.

GM sales plunged 18 percent, missing estimates for a 13 percent drop, with all four brands reporting declines of at least 14 percent. Ford’s light-vehicle sales slid 6.1 percent, according to Bloomberg, compared with an average estimate for a 4.9 percent decline. GM projects a sales pace for the month that is slower than analysts had predicted. GM said retail sales fell 13 percent and it continued to pull back on deliveries to rental-car fleets. The largest U.S. automaker said it sold 22,000 fewer rental cars in the month, the biggest reduction in the past two years.

Sales of Ford and Lincoln passenger cars plunged 25 percent, led by a 37 percent slide for the Taurus sedan, once the company’s flagship. Even the redesigned Mustang saw its momentum fade as deliveries dropped 24 percent. Sales of the recently restyled Ford Edge sport utility vehicle fell 14 percent. F-Series truck sales rose 9 percent and van sales had their best May since 1978 on the strength of a 16 percent gain by the full-size Transit.

To be sure, all of the six largest carmakers were estimated to report declines for May, but the severity of the drop has taken many by surprise. As Bloomberg notes, “even as auto sales gained in April and the U.S. consumer continues to spend, there have been signs of wavering economic confidence, and the industry may struggle to maintain its record pace. As a kickoff into summer on the back of Memorial Day weekend promotions, May is a bellwether for gauging buyer appetite.””

— Zerohedge

In a real world environment we would more often than not look at this monthly dip as an anomaly, or perhaps tied to some other circumstantial blip.  However, we know from looking at the real data outside the mainstream that consumers as a whole are in extremely dire straits.

In an article entitled, “The Secret Shame of Middle Class Americans‘, in this month’s issue of the Atlantic, writer Neal Gabler came out as one of the many millions of apparently middle-class Americans who are in fact living in a ‘more or less continual state pf financial peril’… scrabbling around to make ends meet, and mostly failing.

“Gabler draws attention to a regular survey by the Federal Reserve, which asks consumers a set of questions, including how they would pay for a $400 emergency. “The answer: 47% of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all”, writes Gabler. “Four hundred dollars! Who knew? Well, I knew. I knew because I am in that 47%.”

Does the data support this?

Yes. Research into this niche area of microeconomics – day-to-day “financial fragility” – has boomed since the Great Recession, according to David Johnson, an economist at the University of Michigan who specialises in income and wealth inequality. A 2014 survey study found that only 38% of Americans would cover a $1,000 emergency medical bill or a $500 car repair bill with money they had saved.

Another academic study found that a quarter of households would definitely fail to get their hands on $2,000 within 30 days in an emergency, and a further 19% would be able to do so only by pawning possessions or taking out a payday loan.”

— Moneyweek.com

If nearly half of all middle-class Americans are unable to even find between $400-2000 to use in case of an emergency today, how bad will this get in the coming months when Obamacare premiums are expected to rise for them from between 14-20% in 2017?

The bottom line is that the American consumer is spent, and there is little that the illustrious Federal Reserve or Federal government can do about it.  And since consumer spending makes up more than 65% of the total GDP each year, even the smallest drop will drive the economy right into recession, or perhaps towards the  calamity that Japan’s Prime Minister Shinzo Abe is calling for as being imminent for the entire global economy.

imagesCASL0ORB

Britain and Argentina are at it again!! It has been 30 years since the first war over the Falkland islands occurred. British Priminister, David Cameron, has rebuffed demands from Argentina to negotiate a solution to disputes over the Falkland Islands. President Christina Fernandez sent an open letter asking for communication and asserting the country’s sovereignty claim, reiterating the invitation to abide by the resolutions of the United Nations. On March 19, 1982 Argentine Military personnel accompanied a group of Argentine merchants working on the South Georgia Island. Britain asked that Argentina remove its military presence, but got no response. On April 2, Argentina Navvy landed on the Falklands. The small detachment of Royal Marines put up a futile resistance until Governor Rex Hunt ordered them to surrender. The Argentine never effectively settled or administered the Falklands so they can not be given back as they were never officially theirs in the first place and the future the Falklands should be up to the residence of Falkland Island themselves. The people who live there. Whenever they have been asked their opinion, they said they wanna obtain their current status with the United Kingdom. I believe ultimately, it is over oil, power and the natural resources of the surrounding land. The Governments of the world are never satisfied even when they control everything on the planet. It points out the misinterpretation of the Mayans prophecies teaching us that December 21, 2012 was not the end but rather a significant choice humans would make, to live or die. It seems as if it is intrinsic of us to choose death over life. We are destroying the very fabric of life as we know it. War for personal gain, power and control over mankind. I fear the United States as a country that is supposed to be “free” will have to face tremendous challenges such as this someday because the people who are in charge are infinitely corrupt.