Black Swan Coated With Crude Oil

[crashmonitor]

It should make for some interesting inflation numbers in the new year. Guess anything approaching deflation will cause a panic, even though it will be all about the energy price.

[zugzwang]

It should make for some interesting inflation numbers in the new year. Guess anything approaching deflation will cause a panic, even though it will be all about the energy price.

This is a perfect example of what happens when central banks promote excess speculation in financial assets and commodities through virtually unlimited credit creation.

Global oil supply has hugely outpaced demand for most of the past six years yet the price per/bbl remained almost constant post-2009... until this summer (2014). Since then oil has sold off steadily until its final price capitulation in October and November. These moves have all been broadly synchronous with the Fed's pronouncements about the introduction and withdrawal of QE (not to mention my own Black September/October thread!). Clearly, speculators who had been using oil as a hedge against central bank monetary expansion sold out their positions this year as Yellen's determination to run the taper to its conclusion grew unassailable. Now a bubble economy built on speculation and malinvestment threatens to implode catastrophically, just like its predecessor. It's simple supply and demand.

How soon before they start muttering about a resumption of QE ?

[interestrateripoff]

Banks' $650bn bet on oil backfires as Brent prices slump

Lenders sitting on billions in losses after rise in risky debt to oil and gas companies raises prospect of impairments

Well it could be worse I suppose and lets be honest no body is bothered now about billions when it's all about trillions.

[interestrateripoff]

The Oil-Drenched Black Swan, Part 1

"Every sustained action has more than one consequence. Some consequences will appear positive for a time before revealing their destructive nature. Some will be foreseeable, some will not. Some will be controllable, some will not. Those that are unforeseen and uncontrollable will trigger waves of other unforeseen and uncontrollable consequences."

[choox]

Banks' $650bn bet on oil backfires as Brent prices slump

Lenders sitting on billions in losses after rise in risky debt to oil and gas companies raises prospect of impairments

Well it could be worse I suppose and lets be honest no body is bothered now about billions when it's all about trillions.

The gift that keeps on giving! Punishing banks, stopping Putin in his tracks, reducing the cost of living....

What's not to love?

I just hope some other commodities follow it down!

[The Masked Tulip]

The gold and silver move today is interesting isn't it.

It seems to be caught up in the oil move re the OPEC decision but appears to be doing the opposite of what everyone thought it would do re falling oil prices and also the Swiss NO vote.

Is it just money deciding that they can't make any serious cash in oil for the time being so they have decided to move into gold and silver? Or is something else going on? Pump and dump?

There were big volumes on GDXJ last Friday AFTER hours which were unusal but especially so considering the then forthcoming Swiss vote.

Maybe some of those banks sitting on those high yield oil bond losses are trying to recoup via PMs?

[The Masked Tulip]

Ooooh. Scarey unforeseen and unknowable things lurking in the darkest corners of our minds that are out of our control.

[Errol]

China is emerging as the winner from OPEC’s battle with rival oil producers as the world’s biggest energy consumer stockpiles crude

The nation’s efforts to boost reserves may increase its imports by as much as 700,000 barrels a day in 2015, according to London-based Energy Aspects Ltd. That’s more than half the global glut forecast by Citigroup Inc. after the Organization of Petroleum Exporting Countries refrained from cutting output at its meeting last week.

China boosted imports by 8.3 percent, or 460,000 barrels a day, in the first nine months of this year, the fastest pace since 2010, customs data show. The country will overtake the U.S. as the world’s biggest oil consumer within two decades, according to the International Energy Agency in Paris.

http://www.zerohedge.com/news/2014-12-01/and-biggest-winner-opec-price-war

[interestrateripoff]

China is emerging as the winner from OPEC’s battle with rival oil producers as the world’s biggest energy consumer stockpiles crude

The nation’s efforts to boost reserves may increase its imports by as much as 700,000 barrels a day in 2015, according to London-based Energy Aspects Ltd. That’s more than half the global glut forecast by Citigroup Inc. after the Organization of Petroleum Exporting Countries refrained from cutting output at its meeting last week.

China boosted imports by 8.3 percent, or 460,000 barrels a day, in the first nine months of this year, the fastest pace since 2010, customs data show. The country will overtake the U.S. as the world’s biggest oil consumer within two decades, according to the International Energy Agency in Paris.

http://www.zerohedge.com/news/2014-12-01/and-biggest-winner-opec-price-war

However if the price keeps failing China is over-paying for it's oil reserve.

[Steppenpig]

This is a perfect example of what happens when central banks promote excess speculation in financial assets and commodities through virtually unlimited credit creation.

Weird thing is, everyone knew, but no one mentioned it (or rarely. And none of the MMS)

And the scary thing is, that the financial markets are able to keep a commodity price so far above its equilibrium price for 7 years. I find it hard to believe that's possible, without some sort of cartel agreement.

[Errol]

However if the price keeps failing China is over-paying for it's oil reserve.

If they are paying in dollars, it's a good way to get rid of the paper.

[interestrateripoff]

Beige Book: "Lower Oil Prices A Concern For The Oil Industry"

Submitted by Tyler Durden on 12/03/2014 - 14:15

While superficially the November Beige Book, which is chronically bad at spotting actual trends as was the case in the 2005-2007 period when it came to the housing bubble and the BB had absolutely no warnings about what only in retrospect would be a glaringly obvious bubble, was among the more optimistic ones seen in recent months (there were only 13 instances of "weather" in the document), here is what the Fed's assessment had to say about the only thing that matters currently for the US economy (in addition to the soaring US Dollar of course): oil. One example: 'Energy and mining activity was higher on net, though lower oil prices were a concern for the oil industry in the Atlanta and Dallas Districts."

Utter genius!

[rollover]

New US Oil Well Permits Collapse 40% In November

With a third of S&P 500 capital expenditure due from the imploding energy sector (and with over 20% of the high-yield market dominated by these names), paying attention to any inflection point in the US oil-producers is critical as they have been gung-ho "unequivocally good" expanders even as oil prices began to fall.

http://www.zerohedge.com/news/2014-12-03/new-us-oil-well-permits-collapse-40-november-fed-still-not-worried

4,520 new well permits were approved last month, down from 7,227 in October.

[interestrateripoff]

150 Billion Reasons Why Low Oil Prices Are Not Good For The Global Economy

While the clear narrative forced upon the investing (and consuming) public is that lower oil prices are great for the economy - which is utter crap (as we have explained here and here) - the fact of the matter both primary and secondary effects are extremely significant... and already occurring. As Reuters reports, global oil and gas exploration projects worth more than $150 billion are likely to be put on hold next year as plunging oil prices render them uneconomic as the cost of production has risen sharply given the rising cost of raw materials and the need for expensive new technology to reach the oil. As one analyst notes, "at $70 a barrel, half of the overall volumes are at risk."

[rollover]

Lawsuit Filed Calling for Ban on Fracked Oil Bomb Trains

Earthjustice has filed a lawsuit on behalf of Sierra Club and ForestEthics, challenging the Department of Transportation’s rejection of their July request for an immediate ban of DOT-111 rail tanker cars carrying volatile crude oil from the Bakken shale formation. The National Transportation Safety Board (NTSB) called in 2012 for an immediate ban for these tankers, which are prone to puncture in the case of accidents, crashes and rollovers, causing explosions and fires. Two-thirds of the rail cars carrying crude oil through the U.S. are DOT-111s.

Most of the explosive crude oil on U.S. rails is moving in tanker cars that are almost guaranteed to fail in an accident.

http://ecowatch.com/2014/12/03/lawsuit-fracked-oil-bomb-trains/

[Venger]

December 7, 2014

[..] This is what makes the falling oil prices so dangerous.

[..] Traders who tried to catch these stocks have gotten their fingers sliced off since then:

Goodrich Petroleum -88% since June. Energy XXI -86% since June. Sanchez Energy -78% since June. Oasis Petroleum -75% since July. Etc.

[..These investors – such as your bond mutual fund or your pension fund – loaded up on energy junk bonds and leveraged loans. And now the Fed-inspired financial house, where all risks have been eliminated by QE Infinity and ZIRP, is rediscovering risk. Turns out, the Fed, so ingeniously prolific in buying financial assets to inflate their prices, can’t buy oil.

..much more http://davidstockmanscontracorner.com/more-than-a-quantum-of-fragility-cdos-are-back-leveraged-to-the-shale-patch/

[interestrateripoff]

BP to slash hundreds of UK jobs

Oil firm to cut office jobs in London, Sunbury and Aberdeen combat plunging oil prices and costs of Deepwater Horizon spill

[stormymonday_2011]

BP to slash hundreds of UK jobs

Oil firm to cut office jobs in London, Sunbury and Aberdeen combat plunging oil prices and costs of Deepwater Horizon spill

Not exactly a huge surprise.

The oil and gas sector has historically seen boom and busts both for investors and employees

The same thing happened in the mid 1980s when oil prices tanked

http://dailyreckoning.com/oil-booms-and-busts/

Edited December 8, 2014 by stormymonday_2011

[spyguy]

Not exactly a huge surprise.

The oil and gas sector has historically seen boom and busts both for investors and employees

The same thing happened in the mid 1980s when oil prices tanked

http://dailyreckoning.com/oil-booms-and-busts/

Coming from the NE, I know quite a few people who work offshore inc. my sister's kn0bhead bf.

Most got their foot in the door in the NorthSea. Most - post PiperAlpha - have moved onto jobs much further afield - and with better weather on the rig (Thailand) if not great polictics/safety (Angola, Libya).

Its a good job - providing you adjus tto 1month on/1month off - and keep away from the prozzies - or at least don't marry one (Despite the travel + dry rigs, oil workers tend to be naive + drunks).

They've all been busy since 99-ish. The mid-to-late 90s did see a lot of them totally brassic for a number of years - thats sub $50/barrels for you.

I exect a lot to by similar brassic now - they've all gone for deepsea work which pays well - but only if Oil > $90/barrel.

[interestrateripoff]

Oil keeps sliding on oversupply fears

The price of oil hits another five-year low as fears of oversupply continue to mount.

• Hooray for cheap oil
• Price of oil falls to a five-year low Watch
• Tax reform planned for oil industry

[rollover]

Canada's oil sand producers under fire after an unexpected drop in Chinese imports added to fears that crude demand from the world's second largest economy could weaken further.

http://www.ft.com/fastft/247571/post-247571

[zugzwang]

US railroad stocks took another beating today thanks to crude.

Decliners: Canadian Pacific (NYSE:CP) -5.5%, Canadian National Railway (NYSE:CNI) -1.7%, Genesee & Wyoming (NYSE:GWR) -2.9%, Kansas City Southern (NYSE:KSU) -2.7%, Union Pacific (NYSE:UNP) -3.1%, CSX Corporation (NYSE:CSX) -2.8%, Norfolk Southern (NYSE:NSC) -3.5%, Pioneer Railcorp (OTCPK:PRRR) -4.3%.

Edited December 8, 2014 by zugzwang

[zugzwang]

Deutsche: NO drop in global oil demand.

[interestrateripoff]

Brent hits five-year low below $66 on oversupply worries

And the price has collapsed on the forecourts as well...

[Venger]

Deutsche: NO drop in global oil demand.

Drop in monetary velocity, or money unable to support the price of every bloated asset class out there?

Something has to give. Stock-markets at such heights (ex Russia), house prices with Medusa-style asking prices on Rightmove for younger people/renters,... £25Bn new BTL lending last year to surpass the £24Bn BTL lending year before (according to a Property-Tribes Shawbrook Bank video discussion I watched last night), US housing markets like SoCal in crazy house-price bubble.

Aberdeen has so many 'HPI-forever' fanatical home-owners/investors. It won't be pretty if Aberdeen house prices slide, and the sentiment change that could occur quickly. (For sake of others who have waited for better value, bring it on!).