Thursday, 29 September 2016

Saudi Open Season Starts.

Baltic Dry Index. 912 -18    Brent Crude 48.61

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

The quickest way of ending a war is to lose it.

George Orwell.

The big news yesterday was Saudi Arabia surrendering in the oil wars. But it all has the feel of too little too late. The real winners out of this output cut, if it actually happens at the end of November, are the Russian, the Iranians and those US frackers that haven’t already gone bust. But this being lying, cheating, stealing OPEC, few think that this is the end of the oil wars.

Below, OPEC sort of reaches an agreement. There will be jam all round tomorrow, maybe.

OPEC reaches understanding on output cut

Published: Sept 28, 2016 3:11 p.m. ET

Cartel considers cut to between 32.5-33 million barrels a day

ALGIERS—OPEC on Wednesday reached an understanding that a crude-oil-production cut is needed to lift petroleum prices, people familiar with the matter said, but the cartel will wait until November to complete a plan to tackle a supply glut that has lasted longer than expected.

The consensus was reached after a 4 1/2 hour meeting in the Algerian capital. It represents the first acknowledgment from the Organization of the Petroleum Exporting Countries that it needed to take action to alleviate an oil-price slump that has wreaked havoc on the economies of oil producers. OPEC, the 14-nation cartel that controls over a third of world oil output, has been producing at record levels as its members compete among themselves for buyers.

A person familiar with the matter said the cartel was considering cutting production to between 32.5 million barrels a day and 33 million barrels a day—down from August levels of 33.2 million barrels a day.

Exactly how the production cuts would be achieved is unclear. The person said a committee would be formed to study how to carry out the cuts and then report to the cartel at its next meeting on Nov. 30 in Vienna.

In U-Turn, Saudis Choose Higher Prices Over Free Oil Markets

September 29, 2016 — 12:41 AM BST Updated on September 29, 2016 — 1:07 AM BST
It took the kingdom’s new oil minister, Khalid Al-Falih, just six months to blink, ending the country’s two-year policy of pump-at-will.

The decision at this week’s meeting of the Organization of Petroleum Exporting Countries in Algiers to cut production was necessitated by Saudi Arabia’s tattered finances. The kingdom has the highest budget deficit among the world’s 20 biggest economies, it’s enduring a delay in its first international bond issue and now faces fresh legal uncertainty as the U.S. Congress voted Wednesday to allow Americans to sue the country for its involvement in 9/11.

“Saudi Arabia wants higher prices,” said Amrita Sen, chief oil analyst at consultancy firm Energy Aspects Ltd. in London.

The consequences could be vast. Giants such as Exxon Mobil Corp. may soon be flush enough to revive abandoned projects. Finances of cash-strapped OPEC countries like Venezuela will get a boost. Russia and other independent oil-rich countries will have to decide whether to follow Saudi Arabia’s lead. U.S. shale producers, which OPEC hoped it could push into bankruptcy, will use higher prices to drill new wells, and American consumers, who’ve enjoyed the lowest gasoline prices in more than a decade, will pay more at the pump.

Doubts linger over OPEC’s preliminary deal on oil output

Published: Sept 28, 2016 5:20 p.m. ET
The Organization of the Petroleum Exporting Countries has a preliminary plan that would cap oil production slightly below its current pace, but traders are debating whether it will make a lasting difference.

“Any production restraint is a big deal,” said Phil Flynn, senior market analyst at Price Futures Group.

The 14-nation group of major oil producers is targeting a production cap that would hold output to between 32.5 million and 33 million barrels a day. OPEC’s latest monthly oil report pegged current member output at 33.24 million barrels a day. But the output agreement won’t be completed until at least Nov. 30.

----“This downshift is likely to help” rebalance the global oil market, said Robert Haworth, senior investment strategist with U.S. Bank Wealth Management. But the market will still have to “work through the excess of U.S. and OECD oil inventories.”

“For now our view remains that upside here is limited, with prices above $50 per barrel likely rekindling U.S. oil production and limiting further prices gains,” he said.

The scale of the production cut isn’t terribly impressive, analysts noted.

“A 2% cut in cartel production is a lawn chair off the Titanic with regards to global supply. Unless OPEC follows up with announcements for the methodology of the cut, the specific magnitude of it, and the intent to enact a program that appreciably affects global supply going forward, expect to see the spot price of oil settle back into the range it’s inhabited since the second quarter of this year,” said Scott Cockerham, managing director at Huron.

Relief arrives for U.S. shale firms as OPEC folds in price battle

Thu Sep 29, 2016 | 12:06am EDT
It was a moment U.S. shale oil producers have been waiting on for more than two years: OPEC nations finally agreed to cut production on Wednesday in a move that lifted low prices ravaging their budgets.

Two sources in the Organization of the Petroleum Exporting Countries said the group would reduce output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd, by around half the amount of global oversupply.

The agreement effectively establishes a floor on prices near $50 a barrel - around where many U.S. shale oil companies can make money and drill new wells. The floor is twice as high as where oil languished in the depths of the downturn.

"This gives U.S. producers more confidence,” said James West, partner at the investment firm Evercore ISI in New York. “They may become a touch more aggressive than they had planned to be.”

U.S. benchmark crude rose more than 5 percent to $47 a barrel on the news, pending final details about the cut, which won't be known until after another OPEC meeting in November.

One U.S. shale oil industry veteran likened the results of the prolonged price war to a bruising 12-round boxing match that ended in a technical draw.

After OPEC in mid-2014 let oil prices fall as it sought to regain market share, dozens of small and high-cost U.S. producers fell into bankruptcy.

Meanwhile, budgets of OPEC members from Venezuela to Angola shrank on a 60 percent slide in crude prices. And two days before the deal was announced, Saudi Arabia cut ministers' salaries by 20 percent and scaled back financial perks for public sector employees.

But in the United States the big shale companies - the ones responsible for the bulk of all new onshore domestic crude output - survived. They confounded OPEC by cutting costs and finding new ways to squeeze more oil from rock.

The other big news yesterday was the US Congress declaring open season on Saudi Arabia’s US assets. Yesterday Christmas came early for America’s tort bar. Now comes the cat and mouse game of hide and try to find the hidden assets. I would expect a whole lot of countries to pass similar legislation.

Congress rejects Obama veto, Saudi September 11 bill becomes law

Wed Sep 28, 2016 | 7:50pm EDT
Congress on Wednesday overwhelmingly rejected President Barack Obama's veto of legislation allowing relatives of the victims of the Sept. 11 attacks to sue Saudi Arabia, the first veto override of his presidency, just four months before it ends.

The House of Representatives voted 348-77 against the veto, hours after the Senate rejected it 97-1, meaning the "Justice Against Sponsors of Terrorism Act" will become law.

The vote was a blow to Obama as well as to Saudi Arabia, one of the United States' longest-standing allies in the Arab world, and some lawmakers who supported the override already plan to revisit the issue.

Obama said he thought the Congress had made a mistake, reiterating his belief that the legislation set a dangerous precedent and indicating that he thought political considerations were behind the vote.

"If you're perceived as voting against 9/11 families right before an election, not surprisingly, that's a hard vote for people to take. But it would have been the right thing to do," he said on CNN.

Obama's 11 previous vetoes were all sustained. But this time almost all his strongest Democratic supporters in Congress joined Republicans to oppose him in one of their last actions before leaving Washington to campaign for the Nov. 8 election.

---- The law, known as JASTA, passed the House and Senate without objections earlier this year.

Support was fueled by impatience in Congress with Saudi Arabia over its human rights record, promotion of a severe form of Islam tied to militancy and failure to do more to ease the international refugee crisis.

The law grants an exception to the legal principle of sovereign immunity in cases of terrorism on U.S. soil, clearing the way for lawsuits seeking damages from the Saudi government.

Riyadh has denied longstanding suspicions that it backed the hijackers who attacked the United States in 2001. Fifteen of the 19 hijackers were Saudi nationals.
---- Obama argued that JASTA could expose U.S. companies, troops and officials to lawsuits if other countries passed reciprocal legislation, and may anger important allies.

Q: How many US lawyers does it take to screw in a light bulb?
A: Three, One to climb the ladder. One to shake it. And one to sue the ladder company.

At the Comex silver depositories Wednesday final figures were: Registered 31.44 Moz, Eligible 141.96 Moz, Total 173.40 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, more on Deutsche Bank’s long goodbye. The on-again, off-again, long awaited rescue by Germany, seems to be off-again. Officially there is no rescue Plan-B. As goes Deutsche Bank, so goes Italy’s Three Card Monte di Sienna. Going once, going twice, …. But wait, will Turkey come to the rescue of failing DB?
“On your resume you wrote that for 3 years you worked as a pianist in a brothel.
Actually, I was a Deutsche Bank banker, but I don’t like to talk about it.”

Germany denies preparing Deutsche Bank rescue plan

Wed Sep 28, 2016 | 7:48am EDT
The German government denied it was working on a rescue of Deutsche Bank (DBKGn.DE) as Germany's biggest lender boosted its balance sheet by selling its British insurance business on Wednesday.

Deutsche is facing a $14 billion fine from the U.S. Department of Justice and concerns over its funding pushed its shares to a record low on Tuesday and heightened concerns about the health of the financial sector in Europe's largest economy.

The finance ministry dismissed a newspaper report that a rescue plan was being prepared in case Deutsche was unable to raise capital to pay for costly litigation.

Weekly Die Zeit had reported that the German government and financial authorities were working on possible steps to enable Deutsche to sell assets to other lenders at prices that would ease the strain on the lender.

The German government would even offer to take a direct stake of 25 percent in an extreme emergency, the paper said without saying where it got its information.

The government was still hoping Deutsche would not need state support and only scenarios for a potential rescue were being discussed so far, Die Zeit added.
"This report is wrong. The German government is not preparing any rescue plan, there is no reason to speculate on such plans," the finance ministry said in a statement.
Two sources close to the matter also said that German financial regulator Bafin was not working on an emergency plan.

Deutsche Bank to Take €800 Million Hit on Abbey Life Sale

September 28, 2016 — 8:05 AM BST Updated on September 28, 2016 — 10:55 AM BST
Phoenix Group Holdings said it’s buying Deutsche Bank AG’s U.K. insurance unit Abbey Life Assurance Co. for 935 million pounds ($1.2 billion).
The U.K. consolidator of closed-life insurance businesses said it will fund the deal with a share sale along with a banking facility, according to a statement Wednesday. The German lender said it will book a pretax loss of about 800 million euros ($895 million) from the sale.
Deutsche Bank CEO John Cryan, under pressure to shore up earnings and bolster the balance sheet, is selling the unit after new European regulations in January forced firms with insurance assets to hold more capital. While the lender is losing money on the Abbey Life sale, the bank said the deal is expected to lift its Common Equity Tier 1 capital ratio by about 10 basis points from the June 30 level.
----Mounting legal bills have led analysts to question the lender’s ability to avoid selling assets or take other steps to raise capital. While a public offering of its German Postbank consumer division has been put on hold, the debate over Deutsche Bank’s finances intensified after it was disclosed that the U.S. Justice Department is seeking $14 billion to resolve a probe of the lender’s pre-crisis mortgage securities business.

Deutsche Bank Should Slash Bonuses of Staff, Autonomous Says

September 28, 2016 — 8:59 AM BST
Deutsche Bank AG could raise as much as 2.8 billion euros ($3.14 billion) by taking a tougher stance on employee compensation and not giving bonuses to thousands of staff, according to Autonomous Research LLP.
“Being very tough on the 2016 bonus pool and requiring the forfeiture of unvested shares could be helpful,” according a note this week by Autonomous’s London-based Chief Executive Officer Stuart Graham seen by Bloomberg News. “This would also provide a strong signal to long-suffering shareholders, who have stumped up 13.5 billion euros of new equity” since the fourth quarter of 2009, excluding capital raised to buy its German retail unit Postbank.
Deutsche Bank, which houses Europe’s largest investment bank, has struggled to adapt to an era of tougher capital requirements and lagging trading revenue. Since laying out his strategy last October, CEO John Cryan has cut risky assets, eliminated thousands of jobs and suspended dividend payments to preserve capital. However, that’s failed to stem a decline in its share price which has slumped 53 percent this year.
Any move to make staff give up their shares could be subject to legal challenges, Autonomous said, while a zero cash bonus could save Deutsche Bank 800 million euros after tax, the report said.
A less painful alternative would be “zeroing the bonus” for the top 3,000 staff, who in 2015 accounted for some 52 percent of the bonus pool, according to the note.

Erdogan Adviser Says Turkey Should Consider Buying Deutsche Bank

September 28, 2016 — 3:53 PM BST
Deutsche Bank AG’s crashing share price is prompting takeover speculation from unexpected places.
Yigit Bulut, a chief adviser to Turkish President Recep Tayyip Erdogan, said the country must consider using a new wealth fund or a group of state-owned banks to buy the Frankfurt-based company. Bulut made the proposal on Tuesday via his Twitter account, saying Germany’s largest lender should be made into a Turkish bank.

The stock of Europe’s biggest investment bank has slumped by more than 50 percent over the past year, falling to a record low on Tuesday, over concerns about its weakening financial position and penalties in the U.S. tied to mortgage-backed securities. Bulut’s comments come after Moody’s Investors Service on Sept. 23 cut Turkey to junk, citing slowing economic growth and deteriorating credit fundamentals.

"For months on TV programs, I’ve been calling on Turkey’s private and public capital: ‘Some very good companies in the EU are going to fall into trouble and we need to be ready to buy a controlling stake in them,’” Bulut wrote on Twitter. "Wouldn’t you be happy to make Germany’s biggest bank into Turkish Bank!!"

Solar  & Related Update.

With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

First quantum photonic circuit with an electrically driven light source

Date: September 27, 2016

Source: Karlsruhe Institute of Technology

Summary: Whether for use in safe data encryption, ultrafast calculation of huge data volumes or so-called quantum simulation of highly complex systems: Optical quantum computers are a source of hope for tomorrow's computer technology. For the first time, scientists now have succeeded in placing a complete quantum optical structure on a chip. This fulfills one condition for the use of photonic circuits in optical quantum computers.
Whether for use in safe data encryption, ultrafast calculation of huge data volumes or so-called quantum simulation of highly complex systems: Optical quantum computers are a source of hope for tomorrow's computer technology. For the first time, scientists now have succeeded in placing a complete quantum optical structure on a chip, as outlined in the Nature Photonics journal. This fulfills one condition for the use of photonic circuits in optical quantum computers.
"Experiments investigating the applicability of optical quantum technology so far have often claimed whole laboratory spaces," explains Professor Ralph Krupke of the KIT. "However, if this technology is to be employed meaningfully, it must be accommodated on a minimum of space." Participants in the study were scientists from Germany, Poland, and Russia under the leadership of Professors Wolfram Pernice of the Westphalian Wilhelm University of Münster (WWU) and Ralph Krupke, Manfred Kappes, and Carsten Rockstuhl of the Karlsruhe Institute of Technology (KIT).
The light source for the quantum photonic circuit used by the scientists for the first time were special nanotubes made of carbon. They have a diameter 100,000 times smaller than a human hair, and they emit single light particles when excited by laser light. Light particles (photons) are also referred to as light quanta. Hence the term "quantum photonics."
That carbon tubes emit single photons makes them attractive as ultracompact light sources for optical quantum computers. "However, it is not easily possible to accommodate the laser technology on a scalable chip," admits physicist Wolfram Pernice. The scalability of a system, i.e. the possibility to miniaturize components so as to be able to increase their number, is a precondition for this technology to be used in powerful computers up to an optical quantum computer.
As all elements on the chip now developed are triggered electrically, no additional laser systems are required any more, which is a marked simplification over the optical excitation normally used. "The development of a scalable chip on which a single-photon source, detector, and waveguide are combined, is an important step for research," emphasizes Ralph Krupke, who conducts research at the KIT Institute for Nanotechnology and the Institute of Materials Science of the Darmstadt Technical University. "As we were able to show that single photons can be emitted also by electric excitation of the carbon nanotubes, we have overcome a limiting factor so far preventing potential applicability."

The monthly Coppock Indicators finished August.

DJIA: 18401  +18 Up NASDAQ:  5213 +16 Up. SP500: 2171 +18 Up.

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