Tuesday 31 March 2015

The Oil Glut To Enlarge?



Baltic Dry Index. 599 +03     Brent Crude 55.86

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

"In economics, hope and faith coexist with great scientific pretension."

J. K. Galbraith.

If all goes well today, Iran will be shortly re-entering the crude oil market as a major seller. But will all go well today? The market appears to think not. Brent crude remains trading in the mid-50s. But if a US – Iran nuclear deal works out today, Iran could be selling off its stored oil as early as June, probably sooner.

We open on oil with the latest on the oil glut in America. With or without Iran, America’s fracking bust just keeps getting worse. Will the Saudis new war in Yemen come to the rescue of oil prices?

These Charts Show Clearly Why Oil Prices Crashed

In 2014 U.S. oil expanded the most since at least 1900
5:45 PM BST  March 30, 2015
The geopolitics of oil are complicated, but last year's oil crash isn't. There's one reason above all others for the drop in prices: The U.S. oil boom. Last year was the biggest spike in U.S. oil production since at least 1900, according to a new analysis by the Energy Department.

U.S. production jumped by 1.2 million barrels per day in 2014, to 8.7 million barrels per day. That was the biggest expansion in U.S. crude since record-keeping began in 1900 (which makes it a pretty good bet for the biggest expansion ever). Here's a chart going back to 1960, published today by the U.S. Energy Information Administration.

----The world’s oil supply is outpacing demand in the most uncomfortable way for the oil industry. Some blame OPEC, or Saudi Arabia specifically, for not slowing production. But as the EIA's analysis shows, it’s really America’s relentless oil boom that’s flooded this market.

Most of last year's surge came from shale-oil production in North Dakota, Texas and New Mexico. Advances in horizontal drilling—specifically, fracking—have made more oil available, at a faster rate, than before. 
More

Oil extends losses as deadline for Iran nuclear deal looms

SINGAPORE | Mon Mar 30, 2015 10:52pm EDT
(Reuters) - Oil futures extended losses on Tuesday, as Iran and six world powers ramped up the pace of negotiations to reach a preliminary deal that could ease sanctions and allow more Iranian crude onto world markets.

With a deadline less than 24 hours away, United States, Britain, France, Germany, Russia and China were trying to break an impasse in negotiations aimed at stopping Iran from having the capacity to develop a nuclear bomb, in exchange for an easing of international sanctions.

Officials said talks on a framework accord, which is intended as a prelude to a comprehensive agreement by the end of June, could yet fall apart over disagreements on enrichment research and the pace of lifting sanctions.

"Iran has built up significant oil inventories and could immediately increase exports if sanctions are lifted," analysts at ANZ said in a note.

Shipping sources say Iran is storing at least 30 million barrels of oil on its fleet of supertankers, as Western sanctions keep a lid on sales.

---- Iran could increase oil production by some 500,000 barrel a per day (bpd) in three to six months if sanctions are removed, and by an additional 700,000 bpd within another year, according to estimates by Facts Global Energy.

"Iran will be very reluctant to accept a lower quota given that it has given up so much production due to sanctions," the consultancy said in a note.
More

Saudi oil infrastructure at risk as Mid-East conflagration spreads

The war against Yemen further entrenches al-Qaeda in the country and threatens to ignite a sectarian backlash within Saud Arabia itself

Saudi Arabia’s escalating intervention in Yemen is a high-stakes gamble that risks back-firing in a series of complex ways, ultimately endangering Saudi oil infrastructure and the security of global energy supply.

Military analysts say there is little chance that air strikes by a Saudi-led coalition of Sunni countries will subjugate the Iranian-backed Houthi forces in Yemen. It may require a full-blown invasion by land forces to secure control. Large concentrations of Saudi armour and artillery are already massing near the border, though this may simply be a negotiating ploy.

The longer the conflict goes on, the greater the risks that it will stir up internal hatred in a country that has traditionally been relatively free of sectarian violence. Adam Baron, from the European Council on Foreign Relations, said the inflammatory comments about the Sunni-Shia struggle by politicians across the region are becoming “self-fulfilling prophecies”.

Al-Qaeda in the Arabian Peninsular (AQAP) – thought to be the most lethal of the jihadi franchises, and a redoubt for Saudi jihadis – already controls a swathe of central Yemen and is the chief beneficiary of the power vacuum.

AQAP can plan terrorist strikes against Saudi targets from a deepening strategic hinterland with increasing impunity. All US military advisers have been withdrawn from Yemen, and much of the country’s counter-terror apparatus is disintegrating. It is becoming harder to harry al-Qaeda cells or carry out drone strikes with precision.

The great unknown is whether a protracted Saudi war against Shia forces in Yemen – and possibly a “Vietnam-style” quagmire – might tug at the delicate political fabric within Saudi Arabia itself. The kingdom’s giant Ghawar oil field lies in the Eastern Province, home to an aggrieved Shia minority.

“If the Saudis continue this war – and if they keep killing civilians – this is going to create internal instability in Saudi Arabia itself,” said Ali al-Ahmed, from the Institute for Gulf Affairs in Washington.

Large numbers of Saudi youth are disaffected. An estimated 6,000 have been recruited by al-Qaeda and a further 3,000 have fought for ISIS in Syria and Iraq. While the Saudis have a formidable security apparatus, with a 30,000-strong force guarding the oil infrastructure, the risk of infiltration is high even among clans linked to the royal family.
More

In Asian news, Taiwan is to join the AIIB. But will China let them in? That leaves only Japan sticking to Uncle Scam’s line, probably because they need Uncle Scam’s Navy in their dispute over the Diaoyu Islands.

Taiwan to apply to join China-backed AIIB investment bank

Tue Mar 31, 2015 12:47am EDT
(Reuters) - Taiwan will submit an application to join the Beijing-led Asian Infrastructure Investment Bank (AIIB) on Tuesday, despite historical animosity and a lack of formal diplomatic relations between the island and China.

In a statement released late on Monday, Taiwan presidential office spokesman Charles Chen said joining the AIIB will help Taiwan in its efforts at regional economic integration and raise the possibility of joining other multinational bodies.

It was not immediately known whether Beijing would accept Taiwan's application to join the AIIB. The bank is seen as a significant setback to U.S. efforts to extend its influence in the Asia-Pacific region and balance China's growing financial clout and assertiveness.

Most countries, including the United States, do not recognize Taiwan due to pressure from China. Taiwan is not a member of the United Nations, the World Bank or the International Monetary Fund.
More

We close for today, “dress up stocks for the end of quarter day,” (though they seem to have started yesterday,)  with more on the Greek “Russian Roulette” battle. Germany and Greece play on round after round. But how long before someone’s luck runs out?

Greek PM says wants 'honest compromise' but not at any cost

ATHENS |  Mon Mar 30, 2015 9:25pm EDT
(Reuters) - Prime Minister Alexis Tsipras on Monday appealed for an "honest compromise" with lenders but warned Greece would not agree to an "unconditional" one, after its biggest creditor demanded it do more to show commitment to reform.

With its cash coffers emptying rapidly, Athens is running out of time to convince euro zone and IMF lenders that it will implement reforms and is worthy of fresh aid. Athens could run out of cash by April 20, a source has previously said.

"It is true that we are seeking an honest compromise with our lenders but don't expect an unconditional agreement from us," Tsipras told parliament at a special session on the status of talks with lenders.

The radical leftist premier gave away litle on progress made in talks, but, in a boost for the government, said a new law making it easier to repay tax arrears had already resulted in 100 million euros flowing into state coffers in a week.

---- "Whatever you do, do it fast," said Samaras, who lost the January national election to Tsipras, accusing the 40-year-old leader of facing "deadlocked talks and panic".

The comments came after Greece's biggest creditor Germany said the euro zone would give Athens no further aid until it has a more detailed list of reforms and some are enacted into law, adding to scepticism over plans presented last week.
More

“It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale."

J. K. Galbraith. The Great Crash: 1929.

At the Comex silver depositories Monday final figures were: Registered 70.58 Moz, Eligible 106.50 Moz, Total 177.08 Moz.  

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Today we celebrate the anniversary of man’s first powered flight. Richard Pearse, Waitohi, New Zealand, March 31, 1902. Yes that’s right a Kiwi beat the Wright brothers by almost two years, but Wilbur and Orville generally get the credit on December 17, 1903.

Man's First Powered Flight

Popular history has it that the Wright Brothers at Kitty Hawk [in the United States] were the first to fly [a heavier-than-air craft], but this is not true! The first flight was by a twenty-five year old New Zealander, Richard Pearse on March 31, 1902. Pearse, (1877 - 1953), is not generally known for this wonderful feat as [until recently?] there has been very little publicity about it. In fact the first formal mention of his achievement was some seven years later in the newspapers of 1909.

Pearse was an enthusiast, and perhaps a turn of the century 'mad scientist' inventor. Certainly his other creations - mostly farm machinery - were far from the mainstream and thus [ also ] didn't get much credit. But he did get a few things right on his flying machine that were amazingly advanced for the time.

Accounts by witnesses of the flight vary, from "50 to 400 yards in length", but it seems most likely that it was around 350 yards long, and ending prematurely when the flying machine landed in a large hedge - 4 metres off the ground ! The aircraft was the first to use proper ailerons, instead of the inferior wing warping system that the Wright's used. 

The flying machine also had a modern tricycle type landing gear, thus negating the need for ramps, slides, or skids. Any suitable road would do. The flying machine was aerodynamically crude, for sure, but did the job on the day, and in fact for months afterwards.

By the end of July 1903, Pearse had achieved flights of around one kilometre in length, and perhaps even more amazingly, some of them included turns ! An absolutely fantastic achievement for the time. Pearce also built the engine, which was estimated at about 15 - 22hp, but hampered by a much cruder propeller than the Wright's machine.

The Flights

Mch 31, 1902 - First powered flight. Estimated distance around 350 yards. Similar to the first Wright Brothers flight, ie, in a straight line, and barely controlled.

Mch  ? 1903 - After spending a year working on the engine, and tending to his farm, Pearce made another flight, this time with a distance of only about 150 yards.

May  2, 1903 - Distance unknown, but as usual the aircraft ended up stuck in a gorse hedge 15' off the ground!

May 11, 1903 - This, my opinion, [ie. the opinion of Bill Sherwood] was man's first real flight. Pearse took off along the side of the Opihi River, turned left to fly over the 30' tall river bank, then turned right to fly parallel to the middle of the river. After flying nearly 1,000 yards, his engine began to overheat and lost power, thus forcing a landing way down the dry-ish riverbed. One of the locals, Arthur Tozer, was crossing the river at the time and was rather surprised to have Pearse fly right over his head!
More

Richard Pearse


In a time of universal deceit, telling the truth is a revolutionary act.

George Orwell.

The monthly Coppock Indicators finished February

DJIA: +120 Down. NASDAQ: +213 Down. SP500: +169 Down.  

No comments:

Post a Comment