Baltic Dry Index. 1187 -52 Brent Crude 72.08
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
There can be few
fields of human endeavour in which history counts for so little as in the world
of finance. Past experience, to the extent that it is part of memory at all, is
dismissed as the primitive refuge of those who do not have the insight to
appreciate the incredible wonders of the present.
J. K. Galbraith.
They came (to Vienna,) they saw (the oil price collapsing,) and the old
men of OPEC did nothing. The result was a somewhat predictable start of a rout.
I suspect it’s a rout that will be deeper and longer than most think. Next week
we will likely see Brent crude trading down in the 60s. My guess is that, short
of World War Three, we won’t see $100 oil again for several years. Fracking in Europe is dead as the Dodo. It
remains to be seen if US frackers can live up to their brave words about living
with lower prices. Sell Angola, sell Brazil, sell Canada, sell Nigeria, sell Russia,
sell Texas. We haven’t seen anything yet.
If
all else fails, immortality can always be assured by spectacular error.
J. K.
Galbraith.
Oil in New Era as OPEC Refuses to Yield to U.S. Shale
Nov 28,
2014 6:03 AM GMT
OPEC’s decision to cede no ground to rival producers underscored the price
war in the crude market and the challenge to U.S. shale drillers. The 12-nation Organization of Petroleum Exporting Countries kept its output target unchanged even after the steepest slump in oil prices since the global recession, prompting speculation it has abandoned its role as a swing producer. Yesterday’s decision in Vienna propelled futures to the lowest since 2010, a level that means some shale projects may lose money.
“We are entering a new era for oil prices, where the market itself will manage supply, no longer Saudi Arabia and OPEC,” said Mike Wittner, the head of oil research at Societe Generale SA in New York. “It’s huge. This is a signal that they’re throwing in the towel. The markets have changed for many years to come.”
The fracking boom has driven U.S. output to the highest in three decades, contributing to a global surplus that Venezuela yesterday estimated at 2 million barrels a day, more than the production of five OPEC members. Demand for the group’s crude will fall every year until 2017 as U.S. supply expands, eroding its share of the global market to the lowest in more than a quarter century, according to the group’s own estimates.
Benchmark Brent crude fell the most in more than three years after OPEC’s decision, sliding 6.7 percent to close at $72.58 a barrel. Futures for January settlement extended losses and were at $71.69 a barrel in London today. Prices peaked this year at $115.71 in June.
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Ruble, loonie driven lower after OPEC keeps output target
Published: Nov 27, 2014 12:08 p.m. ET
LONDON (MarketWatch)— The currencies of Russia, Norway and Canada dropped
against the U.S. dollar, with the oil-producing countries feeling the weight of
a decision by the Organization of the Petroleum Exporting Countries not to cut
its production target. The 12-country cartel said it would stick with its current production target of 30 million barrels a day. Leading up to the meeting in Vienna, there was speculation in the markets that the organization would cut production in an effort to stop a recent drop in global oil prices.
The decision to keep the target was made “in the interest of restoring market equilibrium,” said OPEC in a statement.
U.S. crude futures CLF5, -7.38% and Brent crude futures each tumbled more than 7% after the decision. The Russian ruble USDRUB, +0.11% was also swept lower, with the greenback buying 48.795 rubles, more than the 47.384 rubles it bought late Wednesday in North American trade.
The dollar fetched 6.939 Norwegian krone USDNOK, +0.30% up from 5.979 krone on Wednesday. “Norway derives nearly 70% of its exports from crude oil and petroleum products, representing 20% of GDP, so changes in the price of oil have a massive impact on the nordic nation’s economy,” said Forex.com in a note earlier this month.
The greenback after the OPEC statement bought 1.134 Canadian dollars USDCAD, +0.12% from 1.124 Canadian dollars in the previous session.
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US shale boom is same as dotcom bubble, says Russian oil executive
Vice-president of Lukoil, Russia’s second-largest oil producer, says many companies will simply 'vanish'
The rise of US shale is similar to the dotcom boom of the late Nineties and will cause many companies to fail, one of Russia's top oil executives has warned.Leonid Fedun, vice-president of Lukoil, Russia’s second-largest oil producer, believes that with the price of Brent crude and WTI at multi-year lows, fracking companies will struggle to make fracking profitable.
These fears were given extra weight on Thursday after Opec's members agreed to leave oil production quotas unchanged, sending oil prices plummeting.
Some believe Opec, which controls the majority of the world's oil output, is threatened by the emergence of US shale and is trying to force many American drilling companies out of business.
“In 2016, when Opec completes this objective of cleaning up the American marginal market, the oil price will start growing again,” Mr Fedun told Bloomberg.
He said the current oil market was similar to the rise of the technology sector more than a decade ago that saw companies' stock prices surge before collapsing several years later.
“The shale boom is on a par with the dotcom boom. The strong players will remain, the weak ones will vanish,” added Mr Fedun, who is worth around $4bn.
----Much of America’s shale oil is expensive to produce and the industry is comprised of numerous small companies who were forced to leverage their operations with debt to fund the high cost of drilling wells through a process known as hydraulic fracturing, or fracking.
Should oil prices fall for a prolonged period of time many who have been forced to borrow at a higher rate could be forced out of business.
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"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."
Henry Hazlitt
At the Comex silver
depositories Wednesday final figures were: Registered 64.28 Moz, Eligible 112.55
Moz, Total 176.83 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more on the growing fiat currency anarchy.
The Swiss voting initiative this coming Sunday, identifies the right problem,
but comes up with the wrong overkill solution. Not to worry though, polls show
the initiative failing by quite a large margin. Still the gold initiative is a
direct result of the increasingly dysfunctional Great Nixonian Error of fiat
money. There is no central bank on the planet with anything remotely like a
stable, secure form of currency money. The collapse of the crude oil price
might yet be the trigger that ends the Great Nixonian Error of fiat money
forever.
"The fate of the nation and the fate of the currency are one and the same."
Dr. Franz Pick
Swiss vote provokes '6,000-year gold bubble' attack
'Save Our Swiss Gold' referendum is a primordial scream against a world of quantitative easing but would paralyze the Swiss National bank
Five million Swiss voters will decide on Sunday whether to force the Swiss National Bank to repatriate all its gold from vaults in Britain and Canada, boost its holdings of bullion to 20pc of foreign reserves and then keep the metal forever.The “Save Our Swiss Gold” referendum is a valiant attempt by Switzerland’s army of gold bugs - and the populist Swiss People’s party (SVP) – to lead the world back to the halcyon days of the international Gold Standard. It is a primordial scream against a quantitative easing and money creation a l’outrance by the leading central banks.
Yet there is a snag. The Swiss National Bank (SNB) is the biggest printer of them all in relative terms, far outstripping the Bank of Japan, let alone the US Federal Reserve or the Bank of England – mere amateurs at this game.
The SNB has boosted its balance sheet to a colossal 83pc of GDP in a maniacal – but fully justified – effort to stop the Swiss franc appreciating beyond 1.20 to the euro, and to head off deflation. It vowed to print whatever is necessary to buy foreign bonds and defend the exchange rate. It has been true to its word since 2011.
At
one stage it was mopping up half of the entire sovereign bond issuance of the
eurozone each month, a scale of action that the European Central Bank’s Mario
Draghi can only dream of. During the eurozone debt crisis, Standard &
Poor’s even accused the SNB of becoming a conduit for capital flight, via
Switzerland, to German, Dutch and French bonds, and therefore indirectly
exacerbating Euroland's North-South rift.
----The result of this buying blitz is that the SNB now has a balance sheet of 522bn francs (£345bn). Only 7.5pc of this is in gold, some 1,040 metric tonnes. It will have to buy 1,733 tonnes to reach the 20pc target mandate by 2019 if the vote passes.
Gold bulls are snorting. The world’s annual mine output is roughly 2,500 tonnes. We can all do the arithmetic. The SNB might persuade a friendly central bank to sell a few crates, but last year the central banks were net buyers. Led by Russia and other BRICS states, they bought 367 tonnes.
Citigroup’s Willem Buiter has poked fun at the Swiss plan, and at metal fetishism in general, in a lascerating report entitled Gold: a six thousand year-old bubble revisited.
“Making it illegal to ever sell any of the gold the central bank has now or acquires in the future would make the gold useless as an international reserve. The gold stock can never be used for foreign exchange market interventions and it cannot be used as collateral. The gold becomes useless as a store of value of any kind. Its value is therefore zero.”
Mr Buiter says gold is a “fiat commodity” of almost no intrinsic value, coveted only as an asset “to the extent that enough people believe it has value as an asset”.
Personally, I find this a rarefied argument, bordering on Jesuitical, a subjective preference dressed as science. Nothing has intrinsic value beyond what we give it, including the things that Mr Buiter likes. But let us not quibble.
----The gold revivalist wave is a window into our age, an anthropological phenomenon. Establishments are fighting a rear-guard battle as well-organised campaigns force a change in policy. The Dutch central bank has repatriated 122 tonnes from New York. The Bundesbank is shipping its gold home to placate the “Bring Back Our Gold” movement and its allies in the Bundestag.
What it shows is a breakdown in trust. A system of custodial holdings that survived the First World War and even the Second World War – to a high degree – is unravelling. When it comes to foreign reserves, Europe’s states are becoming even more nationalist than they were in the 20th century.
More
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
Another weekend, and the traditional start of the Great Christmas
Consumerism Insanity. Half of the world goes into unrepayable debt, to
celebrate the Greatest Retailing Con of the new lawless consumerist age. Having
just turned 65, sadly for me, the odds are high that I will get to live on
through coming biggest bust of all times, as the Great Nixonian Error comes to
its end. Thanks to the many trillions of
unrepayable, unbacked, gambling and consumer debt racked up since August 15th,
1971, the end when it comes is likely to be like 479 AD, but on speed. Have a
great weekend everyone.
The monthly Coppock Indicators finished October.
DJIA: +137 Down. NASDAQ: +275 Down. SP500: +210 Down.
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