10/12/16

For How Long Can OPEC Talk Up Oil Prices?

Not a day passes without OPEC making oil and gas headlines, and today is surely no exception. Seemingly in lockstep with OPEC, the market is once again pacified on the promise that changes to the global oil supply glut are a’ comin’.

Yesterday, the Wall Street Journal quoted anonymous sources close to the matter who had it on good authority that the Saudi’s were willing to cut “up to” 400,000 barrels per day (and that they had planned to do so all along, with or without an OPEC agreement). We can assume this figure is off August or September levels, which are near-record highs for the oil-rich country.

Of course, there are 400,000 different possible production cut figures included in this “up to 400,000” range—including a big fat zero—so fundamentally speaking, like so much of the OPEC speak, this could mean nothing.

But this isn’t the first time OPEC chatter or supposition or guesswork has moved markets, and it won’t be the last. Because, as Oilprice contributor Rakesh Upadhyay pointed out back in August, just a month before the freeze was announced, fundamentals aren’t what’s driving the oil market—speculation is. And nothing feeds speculators like OPEC.

As Upadhyay wrote, “Though most analysts agreed that a production freeze was not going to alter the fundamentals, prices rose sharply, with the hedge funds adding record long positions,” as evidenced by the chart below, which shows what happened in February when OPEC cuts were on the table for Doha. Fundamentals didn’t change—the glut wasn’t easing—yet hedge funds and speculation on OPEC rumors drove up prices.

IMG URL: http://oilprice.com/images/tinymce/saap1.png

The hope quickly faded when the Doha meeting fell short of expectations, but prices continued to climb. Then, the market found new hope in the Vienna meeting. We then wondered—this time quite wistfully—if a freeze could… maybe, possibly… happen in that meeting over the summer, much in the same way one might hold onto hope that we might someday win the lotto. Our hopes were dashed yet again—but not before the market reflexively inched up again.

Soon after, Saudi comments, which indicated that a new spirit of cooperation among OPEC members might be taking shape, sending prices upward yet again. An unofficial meeting was announced. Algiers, they said. “Stabilize the market” they said (which can apparently be done with talk, rather than production cuts). Russia chimed in, vacillating between joining the “market stabilization” efforts and not. We asked ourselves, this time ever more cautiously, dare we hope again? Most thought not, but speculators threw caution to the wind, moving markets this way and that on almost a daily basis in response to every utterance regarding the freeze.

Then the announcement came that OPEC had reached a deal. The earth shook, moving markets again— this time by a large percentage—and this time backed up by a more tangible hope.

Meanwhile, the industry scrambled to make sense of what it all meant. How big would the cut be? Which members would do the cutting? How did Saudi Arabia and Iran reach any kind of consensus when they were worlds apart—on multiple fronts? And then there was the ultimate question that had every analyst from here to Venezuela furiously figuring and calculating and refiguring and recalculating: just how high could prices go?

Speculators continued to largely disregard the ins and outs of the deal, which were absent at the time, and we saw markets tick up happily in response.

When the size of the production cut—between 240,000 and 740,000 barrels per day—was announced, one could feel the weight of the disappointment within the industry overall. The analysts wanted more; wanted deeper. Most OPEC members had been scrambling to reach record high oil production leading up to the meeting, some successful. Given current production levels, the small cut was seen by most analysts as a mere token gesture that would do very little to address what most would agree is the reason behind the price “problem”—the global supply glut.

And further skepticism surfaced over the fact that no specific member had agreed to any specific cut—they just agreed that as a group, “they” would do some cutting—some months down the road—and that the “they” in that equation wouldn’t be Iran. And it wouldn’t be Nigeria. And it wouldn’t be Libya.

And still, amid all this ambiguity and mystery, and with some distant promise to shave a mere 240,000 barrels of oil per day off OPEC’s record production figures, oil climbed above $50 a barrel. Today, Brent is trading at $52.64, which is a 12-month high-a monumental swing on mere talk.

And sure, some minor fundamentals have changed, such as five weeks of crude oil inventory draws in the U.S., but those inventory numbers are still way too high. In reality, OPEC hasn’t actually done anything to ease the glut. They’ve just talked… about talking… two months from now. In fact, the only actions that OPEC has taken is to pump oil at record paces, adding to the glut, and hoping that speculators will lap up what they’re dishing out in rhetoric. That’s what OPEC is doing today.

So happy are the markets on this wispy nothingness, in fact, that some are suggesting the oil markets are poised for a major meltdown, as speculators buy up contracts that are equal to a year’s worth of U.S. consumption—amounts that can’t possibly be delivered and will be pushed off to next month’s contracts or cancelled. To put this in perspective, there are 480 million barrels of oil on order for delivery in November to Cushing, Oklahoma—a facility that is capable of handling only 50 million per month.

What will also be pushed aside are some other cold, hard facts, such as Libya’s production increases, or Iraq’s, or Iran’s, and how fundamentally, this means the remaining OPEC members would have to make deeper cuts to offset these increases and still meet the organization’s promised cut. Deeper cuts that could hurt whichever member is tasked with taking on this burden.

But to keep the market’s eye on the OPEC ball despite market saturation, the Algerian Energy Minister, desperate to save his country from an economic collapse, made yet another announcement on behalf of OPEC that the bloc would be willing to cut yet another 1% “if we need to” on top of the cuts proposed out of the meeting in Algiers, adding that there would be even more meetings forthcoming—the first of which will be in Istanbul on Oct 9-13, again, on the sidelines of another energy meeting, the World Energy Congress. But this time, the informal talks about the freeze will include non-OPEC Russia and non-OPEC Azerbaijan.

As Reuters reports, the meeting signals that OPEC “is more serious now about managing the global supply glut.” Russia apparently doesn’t share this perceived seriousness, with Russia’s Energy Minister Alexander Novak saying on Friday that he doesn’t expect to sign a deal with OPEC during this meeting. Just more talk.

And yet another meeting is scheduled in Vienna for October 28 and 29, according to OPEC sources, followed by a “long-term strategy” meeting on November 1-4, and a technical meeting again in Vienna on November 23 and 24, and possibly a follow-up meeting of the High Level Committee a day later on November 25. Finally, recommendations will be presented at the previously disclosed and much anticipated meeting on November 30.

That’s plenty of evenly spaced talk that is sure to keep OPEC in media headlines, and give the oil speculators something to play with until that time. After that, it’s anyone’s guess as to how long prices will hold, but it’s likely that regardless of the outcome of the 30 November recommendation meeting, OPEC will continue to feed the beast with talk—and the market will readily accept the handout, even if it’s in lieu of the fundamentals.

By Julianne Geiger for Oilprice.com

Link to original article: http://oilprice.com/Energy/Energy-General/For-How-Long-Can-OPEC-Talk-Up-Oil-Prices.html

06/6/16

The Red Guards Are Green

By: Cliff Kincaid | Accuracy in Media

World Leaders Speak At UN Climate Summit

The media have given the misleading impression that the policies of Senator Bernie Sanders (I-VT), a self-declared socialist, are radically different than those of President Obama or Hillary Clinton. In reality, they all propose to use government power to control the economy by either confiscating the assets of private firms or running them out of business.

Technically, this may be fascism, rather than socialism. But the totalitarian nature of what is taking place is unprecedented in American history. America is becoming a socialist state that not only determines the fate of private industry, but attempts to control what people think and read about important public policy issues.

In Venezuela, which is admittedly ruled by a socialist regime, an iconic firm called Empresas Polar, which provides everything from pasta to beer, is suffering under government price controls and regulations, and has been declared an enemy of the state. The Wall Street Journal has been covering the fate of this firm in detail in a dramatic series of articles.

Here, the problem is actually worse. Rather than targeting just one firm, the Obama administration has been seeking to destroy the entire coal industry, along with the jobs of tens of thousands of workers that the old-style Marxists used to claim to represent. In their latest move, “the Obama Administration is giving the industry its last rites by halting new coal leases on federal lands where mining is still profitable,” the Journal noted.

This is not just Obama’s policy. Former Secretary of State Hillary Clinton said that if she became president, “we’re going to put a lot of coal miners and coal companies out of business.”

The official Democratic Party policy of destroying the coal industry is being done in the name of saving the environment from alleged global warming. Toward that end, Obama signed the Paris Climate Agreement for the purpose of reducing global CO2 emissions. But he refused to submit the agreement for Congressional approval. The Global Warming Policy Foundation has published an academic paper which says the agreement is essentially a fraud, adding that it exempts countries such as China and India from undertaking any reductions.

In order to stifle debate over the job-destroying policies of the Obama regime, a group of Democratic state attorneys general are using legal tactics in an effort to criminalize and prosecute those challenging the global warming theory.

In an interview conducted by Ginni Thomas and carried by The Daily Caller, Dr. Kim Holmes, author of The Closing of the Liberal Mind, says the criminalization of dissent on climate change is “truly Orwellian” and “borderline totalitarian.” It is another sign of the decline of American democracy, documented in another important book, Democracy: And Why It Will Fail in America.

At the same time, the Portland (Oregon) Public School Board has voted to ban textbooks and other materials that do not support the theory of climate change. Patrick Wood, Editor of Technocracy News & Trends, asks, “Will they ban materials from the homes of students? What will be the punishment for being caught with such materials on Portland Public School campuses?”

The left-wing group Rethinking Schools calls this Portland, Oregon, board decision “the country’s most far-reaching policy on teaching climate justice in the schools.” It says the policy commits Portland schools to “abandon the use of any adopted text material that is found to express doubt about the severity of the climate crisis or its roots in human activity,” and requires the school district to develop a comprehensive plan to “address climate change and climate justice in all Portland Public Schools.”

This is, of course, occurring on a local level. But one could easily anticipate the Obama administration adopting this policy on a national basis, in the form of a directive to local districts, similar to the federal dictate on bathroom policy.

This agenda can be called fascism or socialism. But another “ism” also rears its ugly head.

Bill Bigelow, a former teacher and current curriculum editor of Rethinking Schools, has referred to Howard Zinn as “the great historian and activist.” Zinn, whose books are force-fed to young people on many college campuses, was not only a member of the Moscow-controlled and Soviet-funded Communist Party USA (CPUSA) but lied about it. Zinn taught in the political science department of Boston University for 24 years, from 1964 to 1988.

Bigelow is the co-editor of a textbook on environmental education, A People’s Curriculum for the Earth. It looks like his campaign is at least partly designed to get his own textbook into the schools. Indeed, the group reports that Portland’s resolution “began in a workshop” led by the book’s co-editors, Bill Bigelow and Tim Swinehart. Swinehart, who teaches at Lincoln High School in Portland, is an alumnus of the Lewis & Clark Graduate School of Education and Counseling.

Commenting on the campaign to criminalize dissent on climate change, Dr. Kim Holmes said, “Once you break that barrier and tell scientists they will be punished, this is like the Inquisition in the 16th century or the Red Guard in the Cultural Revolution in China.”

Ironically, the Roman Catholic Church is involved in this modern-day inquisition, since Pope Francis has already issued a papal encyclical on climate change in an “unholy alliance” that includes anti-capitalist and pro-population control advocates.

The Red Guards were groups of students, formed under the auspices of the Chinese Communist Party, which eliminated remnants of the old order.

How different is that from what is happening in the U.S. today? The group Rethinking Schools  says that what happened in Portland could inspire similar efforts around the country, leading to “millions of public school students” who would then become part of a nationwide army of activists recognizing “a climate emergency” that requires “shutting down coal-fired power plants, banning new pipelines and off-shore drilling.”

Swinehart declares, “Now the real work begins: transforming the principles of this resolution into the education of climate literate students across the district who feel empowered to work toward a more just and sustainable future.”

These new Red Guards are coming to a school district near you. Can we rescue America from mysticism and tyranny?


Cliff Kincaid is the Director of the AIM Center for Investigative Journalism and can be contacted at [email protected]View the complete archives from Cliff Kincaid.

06/1/16

3 Years Of Painful Cuts Sets Markets Up For Serious Supply Crunch

Total global oil production could decline for the next several years in a row as scarce new sources of supply come online.

According to data from Rystad Energy, overall global oil output will fall this year as natural depletion overwhelms all new sources of supply. But the deficit will only widen in the years ahead due to the dramatic scaling back in spending on new exploration and development.

Statoil says that global capex is set to fall for two years in a row, and is on track to fall for a third year in 2017 as more spending cuts are likely. “For the first time in history, we’ve seen cutting of capex two years in a row and potentially we risk a third year as well for 2017,” Statoil’s Chief Financial Officer Hans Jakob Hegge told Bloomberg in a recent interview. “It might be that we see quite a dramatic reduction in replacing the capacity and of course that will have an impact, eventually, on price.”

Oil companies are making painful cuts to spending, which will translate into much lower production than expected in the years ahead.

Although markets have dealt with the supply overhang for the better part of two years, the surplus could flip to a deficit as early as this year, as declines exceed new sources of production by a few hundred thousand barrels per day. That widens to more than a million barrels per day in both 2017 and 2018. To be sure, there are extremely large volumes of oil sitting in storage, which will take a few years to work through. That will prevent any short-term price spike even if depletion surpasses new production. But Statoil’s CFO said the world could start to see supply problems by 2020.

According to a separate report from SAFE, a Washington-based think tank, the oil industry has cut somewhere around $225 billion in capex in 2015 and 2016, which will lead to global supplies 4 million barrels per day lower in 2018-2020, compared to what market analysts expected as of 2014.

Of course, these figures are not inevitable. A sharp rise in oil prices would spur new investment and new drilling. In other words, deficits create profit opportunities for drillers, ushering in new supplies. The price acts as a self-correcting mechanism.

The problem is that, unlike many other industries, resource extraction is extremely volatile, with supply responses very delayed. Many oil projects, after all, take years to develop. Supply overshot demand, crashed prices, and in response, supplies will undershoot demand in the next few years. The industry has always suffered from booms and busts, and there is little reason to think that it will change, at least in the short run.

But we tend to have a myopic view on what to expect. When oil prices go up, people buy fuel efficient cars. When they go down, SUVs are back in style. When the world is dealing with too much supply, market watchers predict oil prices will stay low for years to come. If spot oil prices suddenly rise, forecasts are revised sharply upwards.

Here’s another example: the WSJ reports that oil prices are entering a “sweet spot,” a range between $50 and $60 per barrel that could finally be good for the global economy – low enough to provide consumers with a bit of a stimulus, but high enough to keep the industry and capital spending afloat. Also, crude at $50, as opposed to $30, can provide a bit of inflation to the deflation-beset economies in Europe and Japan. “Crude between $50 and $60 would be the absolute sweet spot,” Mark Watkins, regional investment manager at U.S. Bank Wealth Management, told the WSJ. “Everybody wins there.”

That is all well and good, but who expects oil to trade between $50 and $60 for any lengthy period of time? If there is one thing that we have learned over the past two years, it is that nobody has a crystal ball on prices. And if the industry indeed cuts capex for three consecutive years, at a time when demand continues to rise, the one thing we can be sure of is more volatility.

Link to original article: http://oilprice.com/Energy/Crude-Oil/3-Years-Of-Painful-Cuts-Sets-Markets-Up-For-Serious-Supply-Crunch.html

By Nick Cunningham of Oilprice.com

11/27/15

Oil Jobs Lost: 250,000 And Counting, Texas Likely To See Massive Layoffs Soon

Crude oil just capped off a third straight week of declines, as WTI nears the $40 per barrel threshold. Goldman Sachs is once again raising the possibility of oil dipping into the $20s per barrel.

That spells more pain for the energy sector. Many companies have already slashed spending and culled their payrolls, but the total number of job losses continues to climb.

According to Graves & Co., an industry consultant, oil and gas companies have laid off more than 250,000 workers around the world, a tally that will rise if oil prices remain in the dumps.

“I was surprised it’s gotten this far,” Graves & Co.’s John Graves told Bloomberg in an interview. In an eye-catching statistic that highlights who exactly is bearing the brunt of the downturn, Graves says that oilfield service companies account for 79 percent of the job losses.

Still, upstream E&P companies are also being substantially squeezed by another plunge in oil prices. According to an analysis by the Texas Alliance of Energy Producers, a new round of layoffs could be underway in Texas, for example. The Texas Alliance predicted that the first drop in oil prices last year would lead to 40,000 to 50,000 layoffs in Texas. But the renewed drop since the end of the summer could force many more cuts. Right now, the group is putting a conservative estimate at 56,000 job cuts so far, but they say the real tally is probably higher.

Beyond oilfield services and E&Ps are not the only ones feeling the heat. Pipeline companies are also starting to lay off workers as well. Last week Enbridge confirmed that it was laying off 500 workers and leaving 100 positions unfilled, according to the Financial Post. The job losses account for about 5 percent of Enbridge’s North American workforce.

Fellow Canadian pipeline company TransCanada says that it will be issuing pink slips as well. While TransCanada confirmed that it would cut payroll, it declined to put an exact number on how many people would lose their jobs. TransCanada, reeling from the rejection of the Keystone XL pipeline, is struggling to get several major pipeline projects through the permitting phase, although it just won the go-ahead to build a large natural gas pipeline in Mexico.

Article Source: http://oilprice.com/Energy/Energy-General/Oil-Jobs-Lost-250000-And-Counting-Texas-Likely-To-See-Massive-Layoffs-Soon.html

By Charles Kennedy of Oilprice.com

07/8/15

Sessions: Obama Climate Agenda Is ‘Driving Up The Cost Of Americans’ Whole Existence’

“The American people are getting frustrated that we have individuals executing policies that affect their everyday life, driving up the cost of their whole existence, based on legal theories that are so tenuous as to be almost breathtaking in its thinness… So here we are, [with] a group of elitists in this country through the thinnest of legal arguments, imposing huge costs on the American economy, and I’m worried about it.”

07/7/15

Pro-Marxist Sells Greece to Moscow

By: Cliff Kincaid
Accuracy in Media

The coverage of the economic disaster in Greece, a strategic NATO country, has mostly ignored the role of Vladimir Putin’s Russia in the growing global turmoil.

Reports continue to circulate that a new European Union (EU) bailout deal with Greece is possible, as Yanis Varoufakis, a self-described “erratic Marxist,” has resigned as finance minister. But these developments appear to be for the purpose of diverting attention away from the fact that Greece has already become, in effect, a satellite of Moscow.

The Greek regime is a Moscow-backed left-right coalition led by Alexis Tsipras, the pro-Marxist and pro-Russia head of Greece’s “Coalition of the Radical Left.” Tsipras, who presented himself as a moderate when he spoke at the Brookings Institution on January 22, 2013, was a member of the youth wing of the Greek Communist Party, the KKE.

The political party known as ANEL (The Independent Greeks) is supposed to be a “conservative” party in the ruling government and yet it is pro-Russian. This reflects Putin’s cultivation of right-wing forces throughout Europe and even in America.

Back from a recent visit to Russia, Tsipras is now counting on cheaper gas and increased Russian investment from Moscow. The prospect of Russian military bases in NATO territory—Greece—cannot be ruled out at this point.

Tsipras previously signed a memorandum that is designed to make 2016 into the “Year of Greece-Russia relations.”

After his coalition won the elections in January, Tsipras received a congratulatory call from President Obama. The two leaders “reviewed close cooperation between Greece and the United States on issues of European security and counterterrorism,” the White House reported.

That alleged “close cooperation” has been replaced by a Greek deal with Moscow.

It seems like just another foreign policy disaster under President Obama, except in this case the stakes are huge. NATO notes that “Greece is strategically located in the Southern region of the Alliance, in close vicinity to South Eastern Europe, the Eastern Mediterranean, the Middle East and North Africa.”

But other than expressing a vague hope that European leaders would devise a plan to allow Greece “to return to growth and debt sustainability within the Eurozone,” Obama has been AWOL on the crisis, leaving it mostly in the hands of German Chancellor Angela Merkel.

The subject of reports and even a book suggesting she is a Russian agent, Merkel knows full well that Tsipras and Putin have been undermining the NATO alliance at a time when the West fears a Russian invasion of another former Soviet republic.

For example, in the report, “Stop Putin’s Next Invasion Before It Starts,” Terrence K. Kelly of the Rand Corporation argues that “The United States needs to seriously consider stationing forces in Eastern Europe to support the nation’s commitment to protect the independence of the Baltic republics of Estonia, Latvia and Lithuania—NATO members all—against the specter of Russian aggression.”

Some news organizations have alluded to Russia’s role in the current crisis. “Russian President Vladimir Putin feted Tsipras in St. Petersburg last month as bailout negotiations took place in Brussels,” noted Michael Birnbaum and Griff Witte in The Washington Post.

During that meeting Tsipras discussed energy and the “Greek Stream” gas pipeline project with Russian Gazprom chief Alexei Miller during a meeting in St. Petersburg. In fact, Russia and Greece signed a deal to construct a Turkish pipeline across Greek territory. Tsipras also met with representatives of the new development bank for BRICS countries, referring to Brazil, Russia, India, China and South Africa, “who expressed their intense interest in cooperating with Greece,” one report noted.

“Russia has its eye on Athens, trying to break European unity to put an end to economic sanctions imposed over its actions in Ukraine,” Birnbaum and Witte noted in the Post.

But the situation is far more serious than the Post lets on. Syriza’s 40-point program includes undermining NATO, the global battle against Islamic terrorism, and Israel:

  • Closure of all foreign bases in Greece and withdrawal from NATO.
  • Withdrawal of Greek troops from Afghanistan and the Balkans. No Greek soldiers beyond our own borders.
  • Drastically cut military expenditures.
  • Abolition of military cooperation with Israel. Support for creation of a Palestinian state within the 1967 borders.

Syriza, a Greek political party, is a member of The European Left (EL). Member Parties of the EL are described as “socialist, communist, red-green and other democratic left parties of the member states and associated states of the European Union (EU) that work together and establish various forms of co-operation at all levels of political activity in Europe, based on the agreements, basic principles and political aims laid down in the EL Manifesto.” The chairperson of EL is Pierre Laurent of the French Communist Party. Tsipras is the Vice-Chairperson.

In addition to the support from these international Marxist political parties and groups, Tsipras met with the leftist Pope Francis on September 19, 2014. Tsipras said, “We pleaded with him to continue struggling against poverty and to speak in behalf of the dignity of humans as well as the structural causes behind poverty which are the inequality in the distribution of wealth and the rampant behavior of the financial markets. …we agreed that the dialogue between the Left and the Christian Church must go on. We may have different ideological starting points; however, we converge on common values, like solidarity, love for the fellow human being, social justice, and our concern regarding world peace.”

“For the first time ever the head of the Catholic Church will meet a leader of the radical Left,” is how Tsipras described the meeting with the pope at his “Change Europe” website.

In their book, EUSSR, Vladimir Bukovsky and Pavel Stroilov argued that the European Union was itself a project of the old Soviet Union, and that the EU has always been subject to manipulation by Moscow and its agents. Based on this analysis, what’s happening in Greece is part of a process of pulling Europe as a whole to the left and away from the United States.

The eventual goal, some observers say, is the removal of the U.S. dollar as the world’s reserve currency, a development that would strike a mortal blow to the global capitalist system.