Tag Archives: Oil

08/24/16

OPEC’s Output Freeze: What Has Changed Since Doha?

It’s possible that OPEC is crying wolf with hints of an output freeze next month in Algiers; but it’s also possible that they are ramping up production to take the sting out of a freeze. This is a delicate balancing act that the Saudis need to play very carefully.

The official chatter is that the OPEC meeting in Algeria from September 26 to 28 could conclude with an agreement to freeze production by the member nations, with even Russia joining forces in a freeze that may prevent further oil price erosion. But everyone’s a bit gun-shy after the false hopes of the last round in Doha—even if a freeze at levels that existed then wouldn’t have meant much either—and it’s hard to blame them. The question is, how many times can the Saudis cry wolf without forever losing the ability to leverage this chatter to affect a rise in oil prices?

But lets rewind a bit to the nature of the recent chatter. The Saudi Energy Minister has indicated that Saudi Arabia, OPEC’s largest producer, is willing to proceed with a production freeze.

“We are, in Saudi Arabia, watching the market closely, and if there is a need to take any action to help the market rebalance, then we would, of course in cooperation with OPEC and major non-OPEC exporters,” said Saudi Energy Minister Khalid Al-Falih, reports Reuters.

“We are going to have a ministerial meeting of the International Energy Forum in Algeria next month, and there is an opportunity for OPEC and major exporting non-OPEC ministers to meet and discuss the market situation, including any possible action that may be required to stabilize the market.”

The hopes of reaching an agreement in Doha were scuttled by Saudi Arabia, because it wanted its arch rival, Iran, to participate in the freeze. Unfortunately for oil prices, Iran had made it clear that it would not join any such discussion until they reached pre-sanction levels of oil production.

What has changed from Doha to Algeria?

Iran

Iran’s oil production is close to its pre-sanction levels, meaning that its first cited prerequisite for any discussion has now been met—a criteria that was not met at the time of the Doha meeting. In addition, increasing oil production further by Iran is a big ask—it would need billions of dollars worth of investments in both upstream and downstream facilities to make this happen. With oil prices languishing below $50 a barrel, major oil companies are reluctant to commit huge sums of money for new oil projects.

Iran’s oilfields are mature, and more than half of its wells have an annual decline rate of 9 percent to 11 percent, according to Michael Cohen, an analyst at Barclays in New York. Therefore, at their existing production levels, they need an additional 200,000 to 300,000 barrels a day annually to replace the shortfall from their aging wells.

Iran needs more money and investment to continue pumping at the current rate, making it more likely for Iran to agree to some kind of an arrangement where they continue to pump oil at a rate close to their target of 4 million barrels a day.

That said, the last thing that Iran wants is to be sidelined, so Tehran is bound to make its presence felt at the meeting with strong statements. But at the end of the day, it is unlikely that Iran will scuttle an agreement where it has everything to gain and nothing to lose.

“There may be a little bit more to it this time. I’m still very skeptical, but it’s just with Iran being where they are production-wise, they’ll be more inclined to eventually go along with a deal,” said Again Capital’s John Kilduff, reports CNBC.

Saudi Arabia

The oil-rich nation underestimated the resilience of the U.S. shale oil drillers when they declared war on them in 2014. American oil has not only kept flowing—the shale producers have managed to bring down production costs considerably. This ability was not anticipated by Saudi Arabia.

Meanwhile, Saudi Arabia has burned more than $175 billion in reserves since August 2014. The Saudis have introduced austerity measures and plans to monetize their crown jewel Saudi Aramco to survive the oil downturn. Nevertheless, things are not going well for this nation, which youth is struggling to find jobs as shown in the chart below.

IMG URL: http://cdn.oilprice.com/images/tinymce/2016/Oil%20Graphs%201.png

A large population of unemployed youths who cannot take care of their families can sow seeds of frustration, and the Arab Spring will still be fresh in the memory of the rulers.

Saudi Arabia is struggling to grow in this oil downturn. Barring the 2009 dip, the current growth rate of 1.5 percent is the worst in a decade, according to data compiled by Bloomberg.

IMG URL: http://cdn.oilprice.com/images/tinymce/2016/Oil%20Graphs%202.png

If oil prices remain low, the Saudi plan to sell shares in Saudi Aramco might not fetch them the valuations they expect, and a nation that cannot provide the most basic of amenities—food for its foreign workers—says a lot about their financial condition.

Saudi Arabia has seen the recent slide in crude oil prices towards the $40/barrel mark, which could have gone deeper without the chatter of a production freeze. And since they have already cried wolf once in Doha, doing so again in Algiers decrease the importance of any ‘chatter’ leverage they have in the future.

Rest of the nations already onboard

Barring Iran and Saudi Arabia, the rest of the nations were in agreement about the need to freeze production during the Doha meeting.

From OPEC to Russia, everyone is at record production levels

The oil-producing nations want to ensure that even if there are talks of a production freeze, they should not feel the pinch. Hence, even before the meeting, they will try to produce more, rather than less. The recent ramping up may very well be an indication that a freeze—although at a level higher than what would have likely come out of the Doha meeting—may be on the horizon.

The oil markets are so sensitive that even a statement of agreement by OPEC at the end of the meeting is enough to send oil prices flying above the resistance level of $51 a barrel.

What about the shale oil producers?

Though U.S. production is declining and experiencing a flurry of bankruptcies, the remaining companies are much better positioned to continue pumping at lower levels to survive the downturn.

Though the risk remains that the shale oil drillers will come back in full force when oil prices recover, the risk is worth taking. OPEC and Russia have realized that any new world order will have to include the shale oil companies. They are a large enough force not to be neglected or defeated.

With all of this in mind, an agreement between OPEC and Russia is more feasible in Algiers than it was in Doha. It might not mean much though, with output levels soaring ahead of the meeting. A freeze at current levels—or levels reached by the time of the meeting—won’t do much to change the fundamentals, nor is there any indication that a freeze would have long legs.

Link to original article: https://oilprice.com/Energy/Energy-General/OPECs-Output-Freeze-What-Has-Changed-Since-Doha.html

By Rakesh Upadhyay for Oilprice.com

08/4/16

Today’s Downturn Sets Markets Up For A Dramatic Oil Price Spike

Another oil price downturn threatens to deepen the plunging levels of investment in upstream oil and gas production, which could create a more acute price spike in the years ahead.

Oil and gas companies have gutted their capex budgets, necessary moves as drillers went deep into the red following the crash in oil prices. But the sharp cutback in investment means that huge volumes of oil that would have otherwise come online in five or ten years now will remain on the sidelines.

The industry will cut spending by $1 trillion through 2020, according to Wood Mackenzie. Those reductions are creating a “ticking time bomb” for oil supply. The consultancy projects that the market will see 5 million barrels of oil equivalent per day (mboe/d) less this year, compared to expectations before the collapse of oil prices. And next year, the industry will produce 6 mboe/d less than it otherwise would have had the spending cuts not been made.

This is creating the conditions for a supply crunch and a price spike. The reason is simple: demand continues to rise by some 1.2 million barrels per day each year, but supplies are no longer growing because of the spending cuts. That is not a problem today as production still slightly exceeds demand and high levels of crude oil and refined products sit in storage. But by as early as the end of 2016 the oil market could tip into a supply deficit. And because the industry has scaled back so intensely on capex, global supplies could fall short of demand for quite a while. The end result could be a dramatic price spike.

This scenario has been described before by Wood Mackenzie, which published an estimate earlier this year that put the total value of cancelled projects over the past two years at $380 billion, projects that would have yielded 27 billion barrels of oil and gas.

So far, the markets are not pricing in the brewing supply crunch. Oil prices continue to fall, and speculators have taken the most pessimistic position in months, selling off long bets and buying up shorts.

Oil analysts and forecasters do not see a rapid rise in prices either. A Bloomberg survey of 20 analysts revealed a median price forecast of just $57 per barrel in 2017. No doubt that record levels of inventories are on their minds – even if oil production itself flips into a supply/demand deficit, it could take years to work through storage levels.

“We’re looking at a market that’s still in a very slow process of rebalancing and we don’t think that you’ll get a sustainable deficit until the second quarter of 2017,” Michael Hsueh, a strategist at Deutsche Bank AG, told Bloomberg. “Those deficits are necessary to draw down global inventories, but that will still take until the end of 2018, it appears.”

But the swing from surplus to deficit could be more dramatic than many think. Now that oil is once again entering a bear market, with WTI and Brent dropping to $40 per barrel, the industry could be forced to slash spending even deeper than it already has, leaving even more oil reserves undeveloped. And in any case, it is possible that high storage levels and the two-year production surplus is leading to a myopic view of the future – just because the markets are oversupplied today does not meant that they will in several years’ time.

Wood Mackenzie says that while U.S. shale has been the hardest hit by the steep fall in investment, the shale industry will be the first to bounce back because of the short-cycle nature of shale drilling. The price spike will lead to a resurgence in shale, and Wood Mackenzie is predicting that shale production doubles from the 2015 high-watermark of 4.5 million barrels per day to 8.5 mb/d by the mid-2020s.

But that is a long way off for oil executives dealing with deteriorating balance sheets and rising debt levels.

Link to original article: http://oilprice.com/Energy/Energy-General/Todays-Downturn-Sets-Markets-Up-For-A-Dramatic-Oil-Price-Spike.html

By Nick Cunningham of Oilprice.com

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

03/17/16

Oil Won’t Stage A Serious Rebound Until This Happens

Oil prices have shown signs of life over the past few weeks, as production declines in the U.S. raise expectations that the market is starting to adjust. As a result, Brent crude recently surpassed $40 per barrel for the first time in months.

A growling list of companies are capitulating, announcing production cuts for 2016. Continental Resources, for example, could see output fall by 10 percent. A range of other companies have made similar announcements in recent weeks. The energy world has been speculating about declines from U.S. shale, and the declines are finally starting to show up in the data.

Despite the newfound optimism that oil markets are balancing out, crude oil sitting in storage is at a record high in the United States. Energy investors may have preferred to focus U.S. production declines, or the fall in gasoline inventories in early March, but meanwhile crude oil stocks continue to signal that oversupply persists.

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02/13/16

T. Boone Pickens On Obama Oil Tax: “Dumbest Idea Ever”

The Obama administration’s proposed $10.25 per barrel oil tax adds up to approximately $32 billion a year, and critics are coming out of the woodwork in defense of both the oil industry and end users who would foot the bill for transportation system reforms-but it may be a moot point since the effort will simply be killed off by Congress.

At the end of the day, this proposal is simply meant to start a discussion and possibly add to the Obama environmental legacy. The proposal has sparked immediate backlash, with critics blasting it as an impossible production tax, the death knell for the already struggling oil industry, and an unfair policy that would render gas at the pumps more expensive for consumers.

Oil tycoon T. Boone Pickens has sensationally dubbed the Obama proposal “the dumbest idea ever.”

The $32 billion tax per year would be consistent with a production tax, tweeted Ed Crooks, the energy editor of The Financial Times.

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01/15/16

War Between Saudi Arabia And Iran Could Send Oil Prices To $250

The rift between Saudi Arabia and Iran has quickly ballooned into the worst conflict in decades between the two countries.

The back-and-forth escalation quickly turned the simmering tension into an overt struggle for power in the Middle East. First, the execution of a prominent Shiite cleric prompted protestors to set fire to the Saudi embassy in Tehran. Saudi Arabia cut off diplomatic relations and kicked out Iranian diplomatic personnel. Tehran banned Saudi goods from entering Iran. Worst of all, Iran blames Saudi Arabia for an airstrike that landed near its embassy in Yemen.

Saudi Arabia’s Sunni allies in the Arabian Peninsula largely followed suit by downgrading diplomatic ties with Iran. However, recognizing the dire implications of a major conflict in the region, most of Saudi Arabia’s Gulf State allies did not go as far as to entirely sever diplomatic relations, as Saudi Arabia did. Bahrain, the one nation most closely allied with Riyadh, was the only one to take such a step.

Many of them are concerned about a descent to further instability. Nations like Kuwait and Qatar have trade links with Iran, plus Shiite populations of their own. Crucially, Qatar also shares a maritime border with Iran as well as access to massive natural gas reserves in the Persian Gulf. These countries are trying to split the difference between the two belligerent nations in the Middle East. “The Saudis are on the phone lobbying countries very hard to break off ties with Iran but most Gulf states are trying to find some common ground,” a diplomat from an Arab country told Reuters. “The problem is, common ground between everyone in this region is shrinking.”

The effect from the brewing conflict on oil is murky, but for now it is not having a bullish impact. In the past, geopolitical tension in the Middle East, especially involving large oil producers, would add a few dollars to the price of oil. This risk premium captured the possibility of a supply disruption into the price of a barrel of crude. However, recent events barely registered in oil trading. That is because the global glut in oil supplies loom larger than any potential for a supply disruption. Oil dropped to nearly $30 per barrel on January 12 and oil speculators are not paying any attention to the tension in the Middle East. Also, the conflict could simply manifest itself in an intensified battle for oil market share. Iran has put forth aggressive goals to ramp up oil production in the near-term. And Saudi Arabia continues to produce well in excess of 10 million barrels per day while discounting its crude in several key markets, particularly in Europe in order to box out Iran.

But what if the current “Cold War” between Saudi Arabia and Iran turned hot?

Saudi Arabia has a variety of reasons to not back down, not the least of which is the very real sense of being besieged on multiple fronts. An article in The New Statesman by former British Ambassador to Saudi Arabia, John Jenkins, clearly laid out the threats that Saudi Arabia sees around every corner: extremists at home; a growing Iran; toppled allies from the Arab Spring; low oil prices; and a fractured relationship with the United States. The nuclear deal between Iran and the West was confirmation on the feeling in Riyadh that it is becoming increasingly insecure.

Already the two rivals have engaged in proxy battles in Yemen and Syria, supporting opposite sides in those wars. A full on direct military confrontation would be something entirely different, however. It would have catastrophic consequences for oil markets, even when taking into account the current supply overhang. Dr. Hossein Askari, a professor at The George Washington University, told Oil & Gas 360 that a war between the two countries could lead to supply disruptions, with predictable impacts on prices.

“If there is a war confronting Iran and Saudi Arabia, oil could overnight go to above $250, but decline [back] down to the $100 level,” said Askari. “If they attack each other’s loading facilities, then we could see oil spike to over $500 and stay around there for some time depending on the extent of the damage.”

While not impossible, war is speculative at this point. Also, $250 and $500 per barrel are numbers pulled out of thin air, and may seem a bit sensationalist. But despite the glut in global oil production – somewhere around 1 mb/d – the margin from excess to shortage is thinner than most people think. OPEC is producing flat out and spare capacity is actually remarkably low right now. The EIA estimated that OPEC spare capacity stood at just 1.25 mb/d in the third quarter of 2015, the lowest level since 2008.

As a result, even though it remains a remote possibility, direct military confrontation between Saudi Arabia and Iran could well put oil back into triple-digit territory in short order.

Article Source: http://oilprice.com/Energy/Oil-Prices/War-Between-Saudi-Arabia-And-Iran-Could-Send-Oil-Prices-To-250.html

By James Stafford of Oilprice.com

12/31/15

$10 Trillion Investment Needed To Avoid Massive Oil Price Spike Says OPEC

OPEC says that $10 trillion worth of investment will need to flow into oil and gas through 2040 in order to meet the world’s energy needs.

The OPEC published its World Oil Outlook 2015 (WOO) in late December, which struck a much more pessimistic note on the state of oil markets than in the past. On the one hand, OPEC does not see oil prices returning to triple-digit territory within the next 25 years, a strikingly bearish conclusion. The group expects oil prices to rise by an average of about $5 per year over the course of this decade, only reaching $80 per barrel in 2020. From there, it sees oil prices rising slowly, hitting $95 per barrel in 2040.

Long-term projections are notoriously inaccurate, and oil prices are impossible to predict only a few years out, let alone a few decades from now. Priced modeling involves an array of variables, and slight alterations in certain assumptions – such as global GDP or the pace of population growth – can lead to dramatically different conclusions. So the estimates should be taken only as a reference case rather than a serious attempt at predicting crude prices in 25 years. Nevertheless, the conclusion suggests that OPEC believes there will be adequate supply for quite a long time, enough to prevent a return the price spikes seen in recent years.

Part of that has to do with what OPEC sees as a gradual shift towards efficiency and alternatives to oil. The report issued estimates for demand growth five years at a time, with demand decelerating gradually. For example, the world will consume an extra 6.1 million barrels of oil per day between now and 2020. But demand growth slows thereafter: 3.5 mb/d between 2020 and 2025, 3.3 mb/d for 2025 to 2030; 3 mb/d for 2030 to 2035; and finally, 2.5 mb/d for 2035 to 2040. The reasons for this are multiple: slowing economic growth, declining population rates, and crucially, efficiency and climate change efforts to slow consumption. In fact, since last year’s 2014 WOO, OPEC lowered its 2040 oil demand projection by 1.3 mb/d because it sees much more serious climate mitigation policies coming down the pike than it did last year.

Of course, some might argue that even that estimate – that the world will be consuming 110 mb/d in 2040 – could be overly optimistic. Coming from a collection of oil-exporting countries, that should be expected. Energy transitions are hard to predict ahead of time, but when they come, they tend to produce rapid changes. Any shot at achieving the world’s stated climate change targets will require a much more ambitious effort. While governments have dithered for years, efforts appear to be getting more serious. More to the point, the cost of electric vehicles will only decline in real dollar terms over time, and adoption should continue to rise in a non-linear fashion. That presents a significant threat to long-term oil sales.

At the same time, OPEC also issued a word of caution in its report. While oil markets experience oversupply in the short- to medium-term, massive investments in exploration and production are still needed to meet demand over the long-term. OPEC believes $10 trillion will be necessary over the next 25 years to ensure adequate oil supplies. “If the right signals are not forthcoming, there is the possibility that the market could find that there is not enough new capacity and infrastructure in place to meet future rising demand levels, and this would obviously have a knock-on impact for prices,” OPEC concluded. About $250 billion each year will have to come from non-OPEC countries.

In a similar but more disconcerting conclusion, the Oslo-based Rystad Energy recently concluded that the current state of oversupply could be “turned upside down over the next few years.” That is because the drastic spending cuts today will result in a shortage within a few years. To put things in perspective, Rystad says that the oil industry “needs to replace 34 billion barrels of crude every year – equal to current consumption.” But as a result of the collapse in prices, the industry has slashed spending across the board and “investment decisions for only 8 billion barrels were made in 2015. This amount is less than 25% of what the market requires long-term,” Rystad Energy concluded. The industry cut upstream investment by $250 billion in 2015, and another $70 billion could be cut in 2016. The latter figure did not take into account the recent decision by OPEC to abandon its production target, which sent oil prices falling further.

So what are we to make of this? There could be plenty of oil supplies in the future, but as it stands, the industry is massively underinvesting? This illustrates a troubling tension within the oil industry. Oil prices will be set by the marginal cost of production, and recent efficiency gains notwithstanding, marginal costs have generally increased over time. Low-cost production depletes, and the industry becomes more reliant on deep-water, shale, or Arctic oil, all of which require higher levels of spending. In many cases, these sorts of projects are not profitable at today’s prices. The price spikes seen in 2011-2014 sowed the seeds of the current bust, but the pullback today could create the conditions of another spike in the future. OPEC could be a bit too sanguine with its call for $95 oil in 2040.

At the same time, future price spikes set up the possibility of much greater demand destruction, especially if alternatives become more viable. This is the difficult balancing act that the industry must pull off over the next few decades.

Article Source: http://oilprice.com/Energy/Crude-Oil/10-Trillion-Investment-Needed-To-Avoid-Massive-Oil-Price-Spike-Says-OPEC.html

By Nick Cunningham of Oilprice.com

12/5/15

Putin’s “War on Terror” Could Backfire

By: Cliff Kincaid
Accuracy in Media

There can be no doubt that the Russians are winning the Middle East propaganda war. But it’s not just the Marxist far-left that is willing to believe whatever Vladimir Putin and his mouthpiece Russia Today (RT) are saying. Some conservatives and self-described Tea Party leaders have also accepted the disinformation the Russians are putting out, even to the extent of affirming the Russian president as a Christian statesman leading the global war on terror.

Consider Chuck Baldwin’s piece, “Rootin’ for Putin,” which insists that “Russia’s Vladimir Putin is the only one fighting a Just War in the Middle East right now.” Baldwin, a Christian pastor “dedicated to preserving the historic principles upon which America was founded,” was the presidential candidate in 2008 of the Constitution Party, a group associated with the late conservative icon Howard Phillips.

It is simply amazing that any conservative would insist that Putin, who, despite dropping the communist label is still allied with Iran, Communist China, North Korea and Cuba, is somehow doing the right thing in Syria, a long-time Soviet/Russian client state. What Putin is doing is entirely consistent with what the Soviets always did. They are trying to save a client state from what started out as a popular rebellion.

In his column, Baldwin went on to label Barack Obama, David Cameron of Britain, Benjamin Netanyahu of Israel, King Salman of Saudi Arabia, and Recep Tayyip Erdogan of Turkey as “international gangsters.”

It is true that Obama, through a few of America’s Arab “allies,” has been supporting the cause of some jihadists and terrorists in the Middle East. Saudi Arabia and Qatar have been implicated in these dangerous schemes, one of which culminated in the Benghazi massacre of four Americans in Libya. That was a treasonous action that should sink Hillary Clinton’s presidential campaign and could have justified impeachment charges against Obama himself. Mrs. Clinton was Obama’s Secretary of State at the time.

These operations in the Middle East have been characterized by former CIA officer Clare Lopez of the Citizens’ Commission on Benghazi as “switching sides in the War on Terror.”

But the idea that Putin has clean hands in the Middle East is absolutely ridiculous. Considering that he was a Soviet KGB spy and actually headed one of the KGB’s successor agencies, the idea that Putin has suddenly had a Damascus Road conversion to Christianity is simply ludicrous. His foreign policy is very similar to that of the old Soviet Union.

Since the foreign policy has mostly remained the same, Soviet financing and sponsorship of international terrorist networks, many of them linked to Arab and Muslim groups, also have to be taken into consideration here. It is reasonable to assume that the Russians have maintained at least parts of these networks for a purpose that we see in the backing of Bashar Assad in Syria. Indeed, writer and researcher Christian Gomez has traced the roots of ISIS to the Islamic Revival Party, created by the KGB, during the final days of the old Soviet Union. U.S. Army Colonel Steve Warren, a spokesman for Combined Joint Task Force Operation Inherent Resolve, has noted that the Russians are doing little in Syria to fight ISIS terrorists and that “Everything they [the Russians] are doing is to support Assad, to keep Assad in power.” In other words, Putin is continuing a clever Soviet-style strategy that seeks to maintain Assad in power while using ISIS for his own purposes. One of those purposes, as reflected in RT propaganda, is to make Putin look like a terrorist fighter.

Baldwin isn’t the only personality on the right duped by Putin and his propaganda machine. The CEO of a group calling itself simply the Tea Party has distributed an article claiming that Russia has produced “stunning photographic evidence” that ISIS oil was being smuggled into Turkey on an industrial scale.

The “stunning photographic evidence” shows nothing of the sort. Natasha Bertrand of Business Insider examined the Russian maps and found that the three main routes the Russians claim ISIS had allegedly been using to transport illicit oil into Turkey are not primarily controlled by the Islamic State. Turkish President Erdogan has countered: “Who is buying oil (from ISIS)? Let me say it. George Haswani, holder of a Russian passport and a Syrian national, is one of the biggest merchants in this business.” He noted that the U.S. Treasury Department imposed sanctions on Haswani, who was also placed on an EU sanctions list, “for serving as middleman for oil purchases by the Syrian regime from the ISIS group.”

If you haven’t heard about the sanctions on the individuals and networks providing support to Syria and facilitating Syrian oil purchases from ISIS, you are a victim of the slick propaganda that is being spread around the world by such outlets as RT. It is a fact that the Russian claims against Turkey are taking precedence, even in the Western media, over the facts on the ground, as determined not only by the U.S. Treasury but the U.S. Army. Colonel Warren said, “We flatly reject any notion that the Turks are somehow working with ISIL,” he said. “That is preposterous.”

The “Tea Party” article about the Russian claims was lifted directly from the Infowars.com site of Russian apologist Alex Jones, who just scored a major interview with GOP presidential candidate Donald Trump. No respectable Tea Party group should have anything to do with Alex Jones, who defended the Russian invasion of its former republic Georgia in 2008. Trump’s decision toappear on his show was extremely foolish. He apparently was not aware that Jones promotes claims that actual terrorist attacks, such as the Boston Marathon bombings carried out by two Muslims from Russia, were “false flags” perpetrated by U.S. police and law enforcement agencies. His website ran a “Voice of Russia”story claiming the dead and wounded were actors plastered with fake blood.

Rather than treat Putin as a good guy or ally, GOP presidential candidate Senator Marco Rubio (FL) argues that Turkey is a member of NATO and an ally that “deserves the full backing of the United States.” He noted that the Russians were “targeting Turkmen-populated pockets of northern Syria rather than territory controlled by ISIS” and that “Most Russian military strikes since the end of September have been non-ISIS targets, including many civilian areas, revealing that Russia does not share our interest in confronting and defeating ISIS but instead is intent on propping up the Assad regime.”

Before he assumed the role as a leader of the Sunnis in the Middle East, mobilizing forces against Shite Iran and Syria, Erdogan was known for his anti-Soviet views. Indeed, he was an anti-communist in his youth. As a result of Russia’s increased military involvement in Syria, he seems to have awakened to the fact that Putin has returned to his Soviet roots and that Turkey’s future lies with NATO and the West. Turkey joined NATO, originally conceived as an anti-Soviet military alliance, in 1952.

Assuming Erdogan is an Islamist of some kind, as some conservatives contend, it might make strategic sense for the West to back him for that reason alone in his battle with Russia. After all, most of Russia’s 14 million Muslims are Sunnis. RT itself recently highlighted how thousands of Muslims had gathered in central Moscow “to witness the opening of one of the biggest mosques in Europe.” The ceremony was attended by Putin and Erdogan, who had been considered to be on friendly terms.

Their relationship turned sour after Turkey shot down the Russian war plane, and it seems to be deteriorating further.

As noted by Ilya Arkhipov of Bloomberg Business, Putin used his annual state-of-the-nation address to attack Turkey and Erdogan in very personal and religious terms. Putin said, “Only Allah knows why they did this. And it seems that Allah decided to punish the ruling gang in Turkey by stripping it of common sense and reason.” Analyst Timothy Ash told Bloomberg that “The religious angle being used by Putin is unlikely to go down well in the region, where Erdogan is still seen as a defender of the Sunni faith.”

One observer has noted, in regard to Russian involvement in Arab/Muslim terrorism and now ISIS, that the monster that the USSR created may have grown too big, and that it may eventually attack its creator.  In the case of Turkey, Putin is facing a Muslim problem of his own making.

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