Canary in the oil field
The sell off began in June 2014.
Yes the demand for oil dropped, as did demand for all currencies.
Russia, the world’s largest oil producer, increased its crude oil output by 0.1 percent to 10.48 million barrels (44.3 million metric tonnes) per day in May, almost reaching a year high and a Soviet record.
Russia out-produced traditional leading supplier Saudi Arabia by 1.15 million barrels per day in May.
But this overproduction by Russia will not last. Enter the Saudi Oil Minister Ali al-Naimi who says that Saudi Arabia is producing near record levels of crude in April, underscoring the kingdom’s willingness to defend market share at a time when oil markets have staged a fragile recovery.
Then we have America…US shale oil sales outstripped even Wall St.’s most optimistic estimates, the Saudis for the first time ever, refused to play the swing producers role, Iraq stabilized and brought a few MMbbl/day back on line, then with the Arab Spring passing in Libya and abated for the the temporary loss of 1MM bbl/day it had caused, etcetera, in an awful lot of places actually. It’s not that traders were dumb it’s that they (rightly) never believed that the confluence of circumstances that occurred would ever come to pass simultaneously.
The storage at Cushing, Oklahoma, reached 95% capacity, a new high. Cushing is important to monitor because it’s the nation’s largest storage facility and serves as the pricing point for WTI. Maximum capacity now stands at 85 million barrels.
Then we have a new player on the market, although the timing and volume of Iran’s exports remain uncertain, the market perception surrounding increased future supplies will apply downward price pressure to near-term crude oil prices. If and when significantly increased volumes of Iranian barrels start entering the market, the price effect could be greater.
The uncertainty of the impact lies in the secondary effects on production outside of Iran, including in the United States, as well as any increases in global consumption as a response to lower oil prices, among other factors.
Current oil prices do not bode well for all producers.
2014 Breakeven Oil PriceUSD / bbl
Saudi Arabia. 93.10
(Sorry if not aligned properly, new to this)
So there you have it, with the oil price around US$50 a barrel, a lot of Countries, Companies and Investors will be feeling the pinch. The longer the price stays at this level, the worse this scenario is going to get.
If you look at the listed Energy companies, then reality meets surreality. It is mind boggling to even try and understand the stock prices compared to the P/E ratio.
Check this chart out…
(Click on all charts to emblazon)
But then, when one looks at the cash raised by oil companies, either someone forgot to tell these investors that their is a downward trend in the oil market or these investors are just lemmings looking for a disaster to happen….
Please remind me… What is this ‘froth’ in the market in light of over production and decreasing storage facilities?
In March I emailed a friend about Oil Options and enclosed the charts below. Whoever these people are buying the leveraged long’s on the ETF market have very deep pockets. In fact so deep that they are dictating to the market that they will continue going long on each move down. Just look at the volume every time the market dips.
I told him that this has to be crazy, in fact against the trend of the fact that the oil price has been dropping due to low demand, then Cushing, Oklahoma is nearing capacity and all producers are dumping more oil on the markets, what is one to think?
It is going against the trend and the contango that exist in the market.
“Contango is a situation where the futures price (or forward price) of a commodity is higher than the expected spot price. In a contango situation, hedgers (commodity producers and commodity users) or arbitrageurs/speculators (non-commercial investors), are “willing to pay more [now] for a commodity at some point in the future than the actual expected price of the commodity [at that future point]. This may be due to people’s desire to pay a premium to have the commodity in the future rather than paying the costs of storage and carry costs of buying the commodity today.”
This is either stupidity (which I doubt, due to the volumes and monies being pushed through) or these investors know something that no one else knows….
Look at this article, do not just look at it read it…. twice!
“We’re very bullish on the energy sector. In fact, we’d say probably there is no other sector in the world that we are as bullish on as we are on energy,” said David Rubenstein, the co-founder and co-CEO of private equity firm The Carlyle Group (CG), on CNBC Monday.
In trading anything on the markets “the trend is your friend”.
The only thing that will disrupt the trend is war. Is war the ‘froth’?
Simple, the demand has dropped on all commodities and that therefore means lower prices.
Historically the only event that has reversed a trend is war.
The question is then, why are these rich f&ckers buying all of these long oil options against the trend?
The answer should be obvious, to make money, as they have done since the company was established in 1987, by David Rubenstein, a policy assistant in then Pres. Jimmy Carter’s administration.
And I am being nice just calling them rich f&ckers. These arseholes are called “the Ex-Presidents Club”, Carlyle Group has ex-politicians and big league bankers on its board. Former secretary of state James Baker is managing director, while ex-secretary of defence Frank Carlucci is chairman (note that Carlucci a good friend of neo conservative aka war mongered) Donald Rumsfeld.
George Bush senior is an adviser.
John Major heads up its European operations.
Do some research and the reason I call them f&ckers and arseholes is simple, “since the start of the “war on terrorism”, the firm – unofficially valued at $3.5bn – has taken on an added significance. Carlyle has become the thread which indirectly links American military policy in Afghanistan to the personal financial fortunes of its celebrity employees, not least the current president’s father. And, until earlier this month, Carlyle provided another curious link to the Afghan crisis: among the firm’s multi-million-dollar investors were members of the family of Osama bin Laden.”
(Additional data on Carlyle after posting. Carlyle – whose high-profile investors include George Soros and Saudi Arabia’s Prince Alwaleed bin Talal – refutes suggestions it profits from war. Co-founder William Conway even went on record saying ‘no one wants to be a beneficiary of 11 September.’
This may be true, but unfortunately for the Carlyle Group its investments are beneficiaries of this new era of multilateral conflict. Indeed, a case can be made that even those companies Carlyle wouldn’t class as defence investments – and which aren’t examined by Briody – have benefited.
Mother f&ckers !!
What do they know, that we plebs do not know?
No, it is not tin foil hat stuff, as US politicians cannot be charged with insider trading.
If you check Carlyle history they made money out of wars, being on the other side of the trade. This backdrop is simple, look at the disruptions to oil…miscellaneous but connected events….. Libya, Yemen, ISIL…
Yes that would push oil to buggery…
Russia avoided this; I will give this much to Putin, he is a good diplomat; as Russia are in the spotlight and saved Syria from war, when accusations were leveled at the Syrian armed forces using chemical weapons and they started negotiations on Ukraine, with Merkel and Hollande, excluding the US…
Plus if you care to notice Russia via Putin approached Cuba and Iran months before Obama got involved.
Then I read this morning in the New York Times….
“In periods of heightened tensions and reduced decision times, the likelihood of human and technical error in control systems increases. Launch-on-warning is a relic of Cold War strategy whose risk today far exceeds its value. Our leaders urgently need to talk and, we hope, agree to scrap this obsolete protocol before a devastating error occurs.
Carlyle Group purchases of these ETF’s can’t last, costs on these purchases of ETF’s is horrendous and these arseholes with money are awaiting the next false flag… I am keeping my fingers crossed that I am wrong..
Update: 24th April 2015
Okay, put the tin foil hat away, no conspiracy. The adjustment upwards of the oil price, more to do with the drop in the USD. Market reacting to the currency, mind you some one still buying ETF’s…
Rig count still dropping
Exxon CEO Expects Oil Prices to Remain Low in Coming Years
Then this “A market in contango allows traders who control or have access to storage tanks to make money if the cost of storing oil or petroleum products is less than the difference between current and future prices.”
“There is no doubt that a contango market is a more interesting trading environment than a backwardated one,” said Beard. Glencore, the second-largest independent oil trader, is more exposed to the contango in oil-products trading rather than in crude, he said.
Switzerland’s $21 billion a year commodity trading industry accounts for about 3.5 percent of the country’s gross domestic product, making it bigger than tourism, according to Swiss government figures. In Geneva, where Trafigura, Mercuria Energy Group Ltd., Gunvor Group Ltd. and Vitol all have major operations, trading accounts for more than 10 percent of GDP, according to the Swiss Trading and Shipping Association.
Then we have Carlyle and crew buying leveraged Oil ETF’s….
This chart speaks volumes for ETF market dictating price of an essential commodity … as I mentioned previously, what is the froth that they are looking for?