Energy - What We're Reading - StockBuz2024-03-28T16:16:22Zhttp://stockbuz.ning.com/articles/feed/category/EnergyEnergy Of The Future. Demand By 2050http://stockbuz.ning.com/articles/energy-of-the-future-demand-by-20502016-11-05T19:57:27.000Z2016-11-05T19:57:27.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a href="http://www.mckinsey.com/~/media/McKinsey/Industries/Oil%20and%20Gas/Our%20Insights/Energy%202050%20Insights%20from%20the%20ground%20up/Energy2050_1536x1536_500_Standard.ashx?mw=1536&car=72:35&cq=50&tco=500" target="_blank"><img src="http://www.mckinsey.com/~/media/McKinsey/Industries/Oil%20and%20Gas/Our%20Insights/Energy%202050%20Insights%20from%20the%20ground%20up/Energy2050_1536x1536_500_Standard.ashx?mw=1536&car=72:35&cq=50&tco=500&width=400" class="align-left" width="400" /></a>Wh<strong>en it comes to energy,</strong> there is one matter everyone agrees on. For the near future, at least, the world will need more of it—and how it is produced and used will be a critical factor in the future of the global economy, geopolitics, and the environment. With that in mind, McKinsey took a hard look at the data, modeling energy demand from the bottom up, by country, sector, and fuel mix, with an analysis of current conditions, historical data, and country-level assessments. On this basis, McKinsey’s Global Energy Insights team has put together a description of the global energy landscape to 2050.</p>
<p>It is important to remember that this is a business-as-usual scenario. That is, it does not anticipate big disruptions in either the production or use of energy. And, of course, predicting the future of anything is perilous. With those caveats in mind, here are four of the most interesting insights from this research.</p>
<p><strong><em>Global energy demand will continue to grow.</em></strong> But growth will be slower—an average of about 0.7 percent a year through 2050 (versus an average of more than 2 percent from 2000 to 2015). The decline in the rate of growth is due to digitization, slower population and economic growth, greater efficiency, a decline in European and North American demand, and the global economic shift toward services, which use less energy than the production of goods. For example, in India, the percentage of GDP derived from services is expected to rise from 54 to 64 percent by 2035. And efficiency is a forthright good-news story. By 2035, McKinsey research expects that it will take almost 40 percent less fuel to propel a fossil-fueled car a mile than it does now. By 2050, global “energy intensity”—that is, how much energy is used to produce each unit of GDP—will be half what it was in 2013. That may sound optimistic, but it is based on recent history. From 1990 to 2015, global energy intensity improved by almost a third, and it is reasonable to expect the rate of progress to accelerate.</p>
<h2><strong><em>Demand for electricity will grow twice as fast as that for transport.</em></strong></h2>
<p>China and India will account for 71 percent of new capacity. By 2050, electricity will account for a quarter of all energy demand, compared with 18 percent now. How will that additional power be generated? More than three-quarters of new capacity (77 percent), according to the McKinsey research, will come from wind and solar, 13 percent from natural gas, and the rest from everything else. The share of nuclear and hydro is also expected to grow, albeit modestly.</p>
<p>What that means is that by 2050, nonhydro renewables will account for more than a third of global power generation—a huge increase from the 2014 level of 6 percent. To put it another way, between now and 2050, wind and solar are expected to grow four to five times faster than every other source of power.</p>
<p></p>
<p><strong id="main_0_ctl09_sectionHeadline" class="title headline"><em>Fossil fuels will dominate energy use through 2050.</em></strong> This is because of the massive investments that have already been made and because of the superior energy intensity and reliability of fossil fuels. The mix, however, will change. Gas will continue to grow quickly, but the global demand for coal will likely peak around 2025. Growth in the use of oil, which is predominantly used for transport, will slow down as vehicles get more efficient and more electric; here, peak demand could come as soon as 2030. By 2050, the research estimates that coal will be down to just 16 percent of global power generation (from 41 percent now) and fossil fuels to 38 percent (from 66 percent now). Overall, though, coal, oil, and, gas will continue to be 74 percent of primary energy demand, down from 82 percent now. After that, the rate of decline is likely to accelerate.</p>
<p><strong><em>Energy-related greenhouse-gas emissions will rise 14 percent in the next 20 years.</em></strong> That is not what needs to happen to keep the planet from warming another two degrees, the goal of the 2015 Paris climate conference. Around 2035, though, emissions will flatten and then fall, for two main reasons. First, cars and trucks will be cleaner, due to more efficient engines and the deployment of electric vehicles. Second, there is the shift in the power industry toward gas and renewables discussed above. The countervailing trends are that there are likely to be some 1.5 billion more people by 2035, and global GDP will rise by about half over that period. All those people will need to eat and work, and that means more energy.</p>
<p>The world is full of unpredictable and sometimes wonderful surprises, so I accept that these numbers are unlikely to be perfect. As with any forecast, they are based on assumptions—about China and India, for example—as well as about oil prices and economic growth. Other sources see different outlooks. Concerted global action to reduce greenhouse-gas emissions, for example, could change the arc of these trends. Technological disruptions could also bend the curve.</p>
<p>For business and political leaders, though, the implications are clear. Given that global energy demand will grow, it is likely that prices will continue to be volatile. Better energy efficiency, then, is an important way to reduce related risks. Technology development is critical to ensuring that the world gets the energy it needs while mitigating environmental harm. This will require substantial new investments. Finally, to encourage the creation of the clean and reliable energy infrastructure that the world needs, energy producers will need to work with local, regional, national, and international regulators. Getting things right the first time is essential; there is extensive evidence to show that dramatic changes in policy act as a powerful deterrent to energy investments by producers. Given the scale of the new investments needed, this will be a factor of growing importance.</p>
<p>Courtesy of <a href="http://www.mckinsey.com/industries/oil-and-gas/our-insights/energy-2050-insights-from-the-ground-up?cid=sustainability-eml-alt-mip-mck-oth-1611" target="_blank">McKinsey</a></p>
</div>The Market Deteriorates Further. 'Bout Timehttp://stockbuz.ning.com/articles/the-market-deteriorates-further-bout-time2016-10-30T18:07:13.000Z2016-10-30T18:07:13.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>The stock market continues to weaken, as evidenced by these ETF charts. If you zero in on a sector you wish to short, I would bear in mind that ETFs are comprised of market leaders. I would look for names <em>"outside"</em> of the ETF components; consider them leaders and you want the weaklings to short.</p>
<p><span class="font-size-5">The reasons for weakness are numerous.</span> </p>
<p>Consider the election weight (a Trump win would weigh on equities but Clinton weighs on pharma pricing). Then there are flat-to-dropping sales. Of course the USD movement (up will weigh on commodities and large caps with overseas exposure). Then there's those who feel we are already at or above maximum value and they're not buying here. They're hedged, short some and long financials ahead of the Fed rate hike. Then there's that Fed hike itself. High dividend is flushing down the toilet (SDY) in September. Overseas weakness with China not helping boost confidence for demand. And we also have more failure at the <a href="http://www.reuters.com/article/us-opec-meeting-idUSKCN12T083?feedType=RSS&feedName=businessNews" target="_blank">OPEC talks</a> with no offer from outside countries to participate. They've definitely lost their 'power' over us and crude should continue to weaken.</p>
<p>Consider however, that the weakness has been <strong>growing</strong>, sector by sector. When you accept we have weakness in housing, some retail, some restaurants, small caps, mid caps, pharma, healthcare and now oil. With energy being the second largest sector, this weighs heavily. Banks can't do it all on their own.</p>
<p>Well here they go and there are <strong>many, many</strong> more out there; you'll see. Possibly you can use one here and/or search for more. Cover above the upper trend lines. Targets are all equal to the high/low of the pattern with a partial taken along the way. I usually leave a small piece on the table as well. You never know where the markets heading next. <strong>NOTE</strong>: Most are daily views but there are a few weekly charts. Take note.</p>
<p>You're welcome</p>
<p>(Click on any chart to enlarge)</p>
<p><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291347?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291347?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291393?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291393?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291434?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291434?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291492?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291492?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291558?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291558?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291566?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291566?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291582?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291582?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291587?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291587?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291592?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291592?profile=RESIZE_1024x1024" class="align-full" width="750"></a><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291599?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291596?profile=RESIZE_1024x1024" class="align-full" width="750"></a></p></div>Crude's Continued Slide To Persisthttp://stockbuz.ning.com/articles/crude-s-continued-slide-to-persist2016-07-30T21:00:05.000Z2016-07-30T21:00:05.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>With disruptions fading and Libya now reaching a deal to <a href="http://www.reuters.com/article/us-libya-security-energy-idUSKCN1090TZ" target="_blank">end their brigade</a>, oils top may be in for now.  This man, however, feels it's going to be a very long road ahead for crude oil bulls.</p>
<p><iframe width="640" height="360" bgcolor="#131313" type="application/x-shockwave-flash" src="http://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=3000539047&size=640_360" allowfullscreen="true"></iframe></p>
</div>Saudi Arabia May Go Broke Before US Oil Industry Buckleshttp://stockbuz.ning.com/articles/saudi-arabia-may-go-broke-before-us-oil-industry-buckles2015-08-06T13:31:51.000Z2015-08-06T13:31:51.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><div class="firstPar">
<p>If the oil futures market is correct, Saudi Arabia will start running into trouble within two years. It will be in existential crisis by the end of the decade.</p>
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<div class="secondPar">
<p>The contract price of US crude oil for delivery in December 2020 is currently $62.05, implying a drastic change in the economic landscape for the Middle East and the petro-rentier states.</p>
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<div class="thirdPar">
<p>The Saudis took a huge gamble last November when they stopped supporting prices and opted instead to flood the market and drive out rivals, boosting their own output to 10.6m barrels a day (b/d) into the teeth of the downturn.</p>
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<div class="fourthPar">
<p>Bank of America says <a href="http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11664780/Opec-market-report-Five-graphs-signalling-higher-oil-prices.html" target="_blank">OPEC</a> is now "effectively dissolved". The cartel might as well shut down its offices in Vienna to save money.</p>
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<div class="fifthPar">
<p><img name="crude oil baml" src="http://i.telegraph.co.uk/multimedia/archive/03398/crude_oil_baml_3398974a.PNG" height="278" width="362" /></p>
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<div class="body">
<p>If the aim was to choke the US shale industry, <a href="http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11650577/US-big-oil-tells-Opec-anything-you-can-do-we-can-better.html" target="_blank">the Saudis have misjudged badly, just as they misjudged the growing shale threat at every stage for eight years</a>. "It is becoming apparent that non-OPEC producers are not as responsive to low oil prices as had been thought, at least in the short-run," said the Saudi central bank in its latest <a href="http://www.sama.gov.sa/en-US/EconomicReports/Financial%20Stability%20Report/FINANCIAL%20STABILITY%20REPORT-2015.pdf" target="_blank" rel="nofollow">stability report</a>.</p>
<p>"The main impact has been to cut back on developmental drilling of new oil wells, rather than slowing the flow of oil from existing wells. This requires more patience," it said.</p>
<p>One Saudi expert was blunter. "The policy hasn't worked and it will never work," he said.</p>
<p>By causing the oil price to crash, the Saudis and their Gulf allies have certainly killed off prospects for a raft of high-cost ventures in the Russian Arctic, the Gulf of Mexico, the deep waters of the mid-Atlantic, and the Canadian tar sands.</p>
<p>Consultants Wood Mackenzie say the major oil and gas companies have shelved 46 large projects, deferring $200bn of investments.</p>
<p>The problem for the Saudis is that US shale frackers are not high-cost. They are mostly mid-cost, and as I reported from the <a href="http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11556531/Oil-slump-may-deepen-as-US-shale-fights-Opec-to-a-standstill.html" target="_blank" rel="nofollow">CERAWeek</a> energy forum in Houston, experts at IHS think shale companies may be able to shave those costs by 45pc this year - and not only by switching tactically to high-yielding wells.</p>
<p>Advanced pad drilling techniques allow frackers to launch five or ten wells in different directions from the same site. Smart drill-bits with computer chips can seek out cracks in the rock. New dissolvable plugs promise to save $300,000 a well. "We've driven down drilling costs by 50pc, and we can see another 30pc ahead," said John Hess, head of the Hess Corporation.</p>
<p>It was the same story from Scott Sheffield, head of Pioneer Natural Resources. "We have just drilled an 18,000 ft well in 16 days in the Permian Basin. Last year it took 30 days," he said.</p>
<p>The North American rig-count has dropped to 664 from 1,608 in October but output still rose to a 43-year high of 9.6m b/d June. It has only just begun to roll over. "The freight train of North American tight oil has kept on coming," said Rex Tillerson, head of Exxon Mobil.</p>
<p><img name="rig count v output" src="http://i.telegraph.co.uk/multimedia/archive/03398/rig_count_v_output_3398980a.PNG" height="230" width="358" /></p>
<p>He said the resilience of the sister industry of shale gas should be a cautionary warning to those reading too much into the rig-count. Gas prices have collapsed from $8 to $2.78 since 2009, and the number of gas rigs has dropped 1,200 to 209. Yet output has risen by 30pc over that period.</p>
<p>Until now, shale drillers have been cushioned by hedging contracts. The stress test will come over coming months as these expire. But even if scores of over-leveraged wild-catters go bankrupt as funding dries up, it will not do OPEC any good.</p>
<p>The wells will still be there. The technology and infrastructure will still be there. Stronger companies will mop up on the cheap, taking over the operations. Once oil climbs back to $60 or even $55 - since the threshold keeps falling - they will crank up production almost instantly.</p>
<p>OPEC now faces a permanent headwind. Each rise in price will be capped by a surge in US output. The only constraint is the scale of US reserves that can be extracted at mid-cost, and these may be bigger than originally supposed, not to mention the parallel possibilities in Argentina and Australia, or the possibility for "clean fracking" in China as plasma pulse technology cuts water needs.</p>
<p>Mr Sheffield said the Permian Basin in Texas could alone produce 5-6m b/d in the long-term, more than Saudi Arabia's giant Ghawar field, the biggest in the world.</p>
<p>Saudi Arabia is effectively beached. It relies on oil for 90pc of its budget revenues. There is no other industry to speak of, a full fifty years after the oil bonanza began.</p>
<p><img name="saudi fiscal break-even" src="http://i.telegraph.co.uk/multimedia/archive/03398/saudi_fiscal_break_3398984a.PNG" height="323" width="333" /></p>
<p>Citizens pay no tax on income, interest, or stock dividends. Subsidized petrol costs twelve cents a litre at the pump. Electricity is given away for 1.3 cents a kilowatt-hour. Spending on patronage exploded after the Arab Spring as the kingdom sought to smother dissent.</p>
<p>The International Monetary Fund estimates that the budget deficit <a href="https://www.imf.org/external/np/sec/pr/2015/pr15249.htm" target="_blank" rel="nofollow">will reach 20pc</a> of GDP this year, or roughly $140bn. The 'fiscal break-even price' is $106.</p>
<p><img name="saudi fiscal break-even" src="http://i.telegraph.co.uk/multimedia/archive/03398/saudi_fiscal_break_3398984a.PNG" height="323" width="333" /></p>
<p>Far from retrenching, King Salman is spraying money around, giving away $32bn in a coronation bonus for all workers and pensioners.</p>
<p>He has launched a costly war against the Houthis in Yemen and is engaged in a massive military build-up - entirely reliant on imported weapons - that will propel Saudi Arabia to fifth place in the world defence ranking.</p>
<p>The Saudi royal family is leading the Sunni cause against a resurgent Iran, battling for dominance in a bitter struggle between Sunni and Shia across the Middle East. "Right now, the Saudis have only one thing on their mind and that is the Iranians. They have a very serious problem. Iranian proxies are running Yemen, Syria, Iraq, and Lebanon," said Jim Woolsey, the former head of the US Central Intelligence Agency.</p>
<p><img name="saudi spending" src="http://i.telegraph.co.uk/multimedia/archive/03398/saudi_spending_3398983a.PNG" height="260" width="358" /></p>
<p>Money began to leak out of Saudi Arabia after the Arab Spring, with net capital outflows reaching 8pc of GDP annually even before the oil price crash. The country has since been burning through its foreign reserves at a vertiginous pace.</p>
<p>The reserves peaked at $737bn in August of 2014. They dropped to $672 in May. At current prices they are falling by at least $12bn a month.</p>
<p><img name="saudi capital flows" src="http://i.telegraph.co.uk/multimedia/archive/03398/saudi_capital_flow_3398967a.PNG" height="205" width="307" /></p>
<p>Khalid Alsweilem, a former official at the Saudi central bank and now at Harvard University, said the fiscal deficit must be covered almost dollar for dollar by drawing down reserves.</p>
<p>The Saudi buffer is not particularly large given the country's fixed exchange system. Kuwait, Qatar, and Abu Dhabi all have three times greater reserves per capita. "We are much more vulnerable. That is why we are the fourth rated sovereign in the Gulf at AA-. We cannot afford to lose our cushion over the next two years," he said.</p>
<p>Standard & Poor's lowered its outlook to "negative" in February. "We view Saudi Arabia's economy as undiversified and vulnerable to a steep and sustained decline in oil prices," it said.</p>
<p>Mr Alsweilem wrote in a <a href="http://belfercenter.ksg.harvard.edu/files/Saudi.pdf" target="_blank" rel="nofollow">Harvard report</a> that Saudi Arabia would have an extra trillion of assets by now if it had adopted the Norwegian model of a sovereign wealth fund to recyle the money instead of treating it as a piggy bank for the finance ministry. The report has caused storm in Riyadh.</p>
<p>"We were lucky before because the oil price recovered in time. But we can't count on that again," he said.</p>
<p>OPEC have left matters too late, though perhaps there is little they could have done to combat the advances of American technology.</p>
<p>In hindsight, it was a strategic error to hold prices so high, for so long, allowing shale frackers - and the solar industry - to come of age. The genie cannot be put back in the bottle.</p>
<p>The Saudis are now trapped. Even if they could do a deal with Russia and orchestrate a cut in output to boost prices - far from clear - they might merely gain a few more years of high income at the cost of bringing forward more shale production later on.</p>
<p>Yet on the current course their reserves may be down to $200bn by the end of 2018. The markets will react long before this, seeing the writing on the wall. Capital flight will accelerate.</p>
<p>The government can slash investment spending for a while - as it did in the mid-1980s - but in the end it must face draconian austerity. It cannot afford to prop up Egypt and maintain an exorbitant political patronage machine across the Sunni world.</p>
<p>Social spending is the glue that holds together a medieval Wahhabi regime at a time of fermenting unrest among the Shia minority of the Eastern Province, pin-prick terrorist attacks from ISIS, and blowback from the invasion of Yemen.</p>
<p>Diplomatic spending is what underpins the Saudi sphere of influence in a Middle East suffering its own version of Europe's Thirty Year War, and still reeling from the after-shocks of a crushed democratic revolt.</p>
<p>We may yet find that the US oil industry has greater staying power than the rickety political edifice behind OPEC.</p>
<p>Courtesy of <a href="http://www.telegraph.co.uk/finance/oilprices/11768136/Saudi-Arabia-may-go-broke-before-the-US-oil-industry-buckles.html" target="_blank">Telegraph</a></p>
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</div>Crude Oil Bottom Truly Not A Bottom?http://stockbuz.ning.com/articles/crude-oil-bottom-truly-not-a-bottom2015-07-26T14:07:10.000Z2015-07-26T14:07:10.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p class="p1">When crude oil was stopped by it's 200 month simple moving average in June, I wrote <a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CCkQFjACahUKEwiSrPCz-fjGAhUIGD4KHalHAbE&url=http%3A%2F%2Fstockbuz.net%2Farticles%2Fcrude-oils-overhead-resistance&ei=yOa0VZKoK4iw-AGpj4WICw&usg=AFQjCNGuJOqNtS59ywF9XmpkCbrmBrvI7g&bvm=bv.98717601,d.cWw" target="_blank">here</a> that this posed a problem for the energy sector. We analyzed rig counts and even questioned <a href="http://stockbuz.net/articles/behind-the-saudi-oil-price-approach-are-they-wrong" target="_self">here</a> if the Saudis had it wrong. I had already posed <a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=6&cad=rja&uact=8&ved=0CDsQFjAFahUKEwiSrPCz-fjGAhUIGD4KHalHAbE&url=http%3A%2F%2Fstockbuz.net%2Farticles%2Fno-crude-oil-recovery-in-2015&ei=yOa0VZKoK4iw-AGpj4WICw&usg=AFQjCNHDqLGNkdrD0V7R7zqEqC6ulHZR6A&bvm=bv.98717601,d.cWw" target="_blank">here</a> that there would be no recovery in 2015 and we should be fearful of the nasty word "deflation" <a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CCQQFjABahUKEwiKv5z4-vjGAhXEdR4KHUUwD_Y&url=http%3A%2F%2Fstockbuz.net%2Farticles%2Fdangers-of-underestimating-deflation&ei=ZOi0VYr9HMTrecXgvLAP&usg=AFQjCNHd0qWd7wdvQXVvRXqOicMH4DGATQ&bvm=bv.98717601,d.dmo" target="_blank">here</a> and it doesn't appear I was wrong. Who's feeling the most pain from these prices? We took a look <a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CC8QFjADahUKEwiSrPCz-fjGAhUIGD4KHalHAbE&url=http%3A%2F%2Fstockbuz.net%2Farticles%2Fcountries-hurt-by-lower-crude-oil&ei=yOa0VZKoK4iw-AGpj4WICw&usg=AFQjCNFPOFJpynJfG6HQu6-G7seU9LA5jw&bvm=bv.98717601,d.cWw" target="_blank">here</a> <span class="s1"><a target="_blank" href="http://static3.businessinsider.com/image/55b1477d2acae76e098b811b-4114-3086/rtx1dv5y.jpg"><img class="align-right" src="http://static3.businessinsider.com/image/55b1477d2acae76e098b811b-4114-3086/rtx1dv5y.jpg?width=300" width="300"></a></span> as these countries could pose good buying opportunities down the road. What's being said now on crude oil's recent drop in price is even more interesting.....at least until there's a disruption in supply or the Saudi's change their mind.</p>
<p class="p1"><span class="s1">Back in January, Morgan Stanley <a href="http://www.businessinsider.com/morgan-stanley-stock-overlay-chart-2015-1">drew similarities between the current oil crash and the one in 1986</a>— when oil prices fell 45%. Though they have been making these parallels for six months, analysts are now saying that the current crash could fare even worse. "On current trajectory, this downturn could become worse than 1986," <span>Morgan Stanley’s Martijn Rats wrote in a note to clients on Tuesday.</span></span></p>
<p class="p3"><span class="s1">"We have been expecting the current downturn to be as severe as the one in 1986 – the worst for at least 45 years – but not worse than that," Rats wrote. But now with oil rolling over again, it is starting to look like a worst-case scenario could be in play. </span></p>
<p class="p3"><span class="s1">While most of his initial predictions for oil were correct, Rats said the firm underestimated OPEC production so far this year. In February, <a href="http://www.businessinsider.com/the-oil-recovery-is-near-2015-2">Rats even predicted a market rebalancing later in 2015</a>.</span></p>
<p class="p3"><span class="s1">"We anticipated that OPEC would not cut, but we didn't foresee such a sharp increase," he wrote. "In our view, this is the main reason why the re-balancing of oil markets had not yet gained momentum."</span></p>
<p class="p3"><span class="s1">Now, the forward curve of oil prices is suggesting that there will be little recovery in the coming years, as well as an industrial downturn worse than 1986.</span></p>
<p class="p3"><span class="s1"><span class="KonaFilter image-container display-table"><span><span data-post-image="" class="image"><a target="_blank" href="http://static4.businessinsider.com/image/55b1447a2acae719008b961f-1304-893/screen%20shot%202015-07-23%20at%203.34.09%20pm.png"><img class="align-left" src="http://static4.businessinsider.com/image/55b1447a2acae719008b961f-1304-893/screen%20shot%202015-07-23%20at%203.34.09%20pm.png?width=450" width="450"></a></span></span></span></span></p>
<p><span class="s1"><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291181?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291181?profile=RESIZE_480x480" width="450"></a>Plus, Rats points out that if the oil crash does turn out to be worse than 1986, it will become the worst in at least the last 45 years. This means there will be no precedent for analysts to look at to make sufficient predictions.</span></p>
<p class="p3"><span class="s1">"If this were to be the case, there would be nothing in our experience that would be a guide to the next phases of this cycle, especially over the relatively near term," he wrote. "In fact, there may be nothing in analyzable history."</span></p>
<p class="p3"><span class="s1">After a few months of stable prices, West Texas Intermediate crude oil <a href="http://www.businessinsider.com/closing-bell-july-23-2015-7">re-entered a bear market</a> on Thursday. </span></p>
<div style="overflow: hidden; color: #000000; background-color: #ffffff; text-align: left; text-decoration: none;">
<br> Courtesy of
<a href="http://www.businessinsider.com/morgan-stanley-on-oil-crash-potential-2015-7#ixzz3h0K7dPIW" target="_self">BusinessInsider</a>
</div></div>Behind The Saudi Oil Price Approach. Are They Wrong?http://stockbuz.ning.com/articles/behind-the-saudi-oil-price-approach-are-they-wrong2015-06-30T12:52:05.000Z2015-06-30T12:52:05.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><span style="color: #00ffff;">Received this <span style="color: #ffff99;"><a href="http://www.soberlook.com/" target="_blank"><span style="color: #ffff99;">SoberLook</span></a></span> email from member Ryan and had to chuckle.  Did oil bulls (who are always drooling at the mouth) truly feel OPEC would cut production at some point to satisfy their desire for higher pricing?  Come on.  How much can the U.S.consumer handle with new jobs created at the low end of the scale?  What would happen with $5 gas gasoline?  Carpools would become all the rage here in my locale. At a time when the U.S. consumer needs money to spend, the impact of higher oil would be the last thing we need.</span></p>
<p><span style="color: #00ffff;">With low oil, the weak will fail and M&A will continue in the crowded space.  Let new technology force cost savings (as we're seeing it every where else) and bring O&G production up to 21st century standards.  I've written about it <span style="color: #ffff99;"><a href="http://stockbuz.net/articles/Energy" target="_self"><span style="color: #ffff99;">several times</span></a></span> and I think the Saudis knew it was time.</span></p>
<p>In 2014 the Saudis could no longer accept the loss of crude oil market share as the North American production levels shot up sharply over a three-year period.</p>
<div class="yiv7000530658separator" style="clear: both; text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: 0em; margin-right: 0em;" href="http://3.bp.blogspot.com/-Tqq9y6SLZec/VZA4_YesuoI/AAAAAAAAp_0/UkQy-IKferA/s1600/rotary-drilling-rig-horizontal-directional-crawler-22663-4420807.jpg"><img src="http://3.bp.blogspot.com/-Tqq9y6SLZec/VZA4_YesuoI/AAAAAAAAp_0/UkQy-IKferA/s200/rotary-drilling-rig-horizontal-directional-crawler-22663-4420807.jpg" border="0" width="0" height="0" /></a></div>
<table class="yiv7000530658tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;" cellpadding="0" cellspacing="0" align="center">
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<td style="text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: auto; margin-right: auto;" href="http://3.bp.blogspot.com/-YDPo0Pg7Rhw/VZBF1An2G9I/AAAAAAAAqAM/RFv6pwhTfnw/s1600/US%2Bvs%2Bsaudi%2Bproduction.png"><img src="http://3.bp.blogspot.com/-YDPo0Pg7Rhw/VZBF1An2G9I/AAAAAAAAqAM/RFv6pwhTfnw/s640/US%2Bvs%2Bsaudi%2Bproduction.png" border="0" width="571" height="354" /></a></td>
</tr>
<tr>
<td class="yiv7000530658tr-caption" style="text-align: center;">Source: Yardeni Research</td>
</tr>
</tbody>
</table>
<p><br />
The Saudi response was quite rational. Rather than cutting production to support crude oil prices, the Saudis announced that output will remain the same. In private they were planning to actually <a rel="nofollow" target="_blank" href="http://calgaryherald.com/business/energy/saudi-arabia-to-raise-production-to-maximum-levels-escalating-oil-market-share-battle">increase production</a> in order to meet rising domestic demand as well as to regain market share. The idea was to put a squeeze on the high-cost North American oil firms, halting production growth and ultimately getting prices back into a more profitable range. Other OPEC nations reluctantly agreed to play along.</p>
<blockquote><a rel="nofollow" target="_blank" href="http://money.cnn.com/2014/11/28/investing/opec-oil-price-us-shale/">CNN</a> (November, 2014): - One motivation is to squeeze higher-cost producers in North America, including the booming U.S. shale industry that has reshaped the global energy landscape.<br />
<br />
It's a move Tony Soprano would be proud of. OPEC is betting lower oil prices will force U.S. producers to throw up the white flag and cut back on production because they won't be able to turn a profit.<br />
<br />
"The gauntlet has been thrown down for Western Hemisphere producers like Brazil, Canada and the United States," Bespoke Investment Group wrote in a note to clients on Friday.</blockquote>
<p>Is it working? So far the results have been less than what the Saudis had hoped for. After a bounce from the lows, crude oil has been trading in a relatively tight range, with WTI futures fluctuating around $60/bbl.</p>
<table class="yiv7000530658tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;" cellpadding="0" cellspacing="0" align="center">
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<td style="text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: auto; margin-right: auto;" href="http://1.bp.blogspot.com/-7bk9uU6W2T8/VZA1R1olhYI/AAAAAAAAp-w/qg870i5XKL8/s1600/WTI.png"><img src="http://1.bp.blogspot.com/-7bk9uU6W2T8/VZA1R1olhYI/AAAAAAAAp-w/qg870i5XKL8/s640/WTI.png" border="0" width="571" height="358" /></a></td>
</tr>
<tr>
<td class="yiv7000530658tr-caption" style="text-align: center;">Source: barchart</td>
</tr>
</tbody>
</table>
<p><br />
How is this price stability possible when the common wisdom was that oil prices below $70/bbl will force most US producers to close shop and North American production would collapse? After all we've seen a spectacular decline in active oil rig count. The answer has less to do with rigs that have been taken offline and more with the technology that remains. After the inefficient rigs have been shut, US rig count is starting to stabilize.</p>
<table class="yiv7000530658tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;" cellpadding="0" cellspacing="0" align="center">
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<td style="text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: auto; margin-right: auto;" href="http://4.bp.blogspot.com/-D0SuayPaLRQ/VZA2Ydr5cvI/AAAAAAAAp_A/h8NwKGG29hw/s1600/rig%2Bcount.png"><img src="http://4.bp.blogspot.com/-D0SuayPaLRQ/VZA2Ydr5cvI/AAAAAAAAp_A/h8NwKGG29hw/s1600/rig%2Bcount.png" border="0" /></a></td>
</tr>
<tr>
<td class="yiv7000530658tr-caption" style="text-align: center;">Source: BH</td>
</tr>
</tbody>
</table>
<p><br />
US crude producers are achieving record efficiency with the remaining equipment. The charts below show new-well oil production per rig.</p>
<div class="yiv7000530658separator" style="clear: both; text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: 1em; margin-right: 1em;" href="http://2.bp.blogspot.com/-A7B_T61wnDk/VZA2-hQcLaI/AAAAAAAAp_I/cPkiZ5k6Dwg/s1600/Bakken.png"><img src="http://2.bp.blogspot.com/-A7B_T61wnDk/VZA2-hQcLaI/AAAAAAAAp_I/cPkiZ5k6Dwg/s640/Bakken.png" border="0" width="571" height="352" /></a></div>
<p></p>
<div class="yiv7000530658separator" style="clear: both; text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: 1em; margin-right: 1em;" href="http://4.bp.blogspot.com/-A8PgA2u2HyE/VZA2-ujY8dI/AAAAAAAAp_M/A4cNJvUCwlE/s1600/Eagle%2BFord.png"><img src="http://4.bp.blogspot.com/-A8PgA2u2HyE/VZA2-ujY8dI/AAAAAAAAp_M/A4cNJvUCwlE/s640/Eagle%2BFord.png" border="0" width="571" height="357" /></a></div>
<p></p>
<table class="yiv7000530658tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;" cellpadding="0" cellspacing="0" align="center">
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<td style="text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: auto; margin-right: auto;" href="http://4.bp.blogspot.com/-8Ac78wuXn1o/VZA2-p80pNI/AAAAAAAAp_U/306tEQOLnhI/s1600/Permian.png"><img src="http://4.bp.blogspot.com/-8Ac78wuXn1o/VZA2-p80pNI/AAAAAAAAp_U/306tEQOLnhI/s640/Permian.png" border="0" width="571" height="341" /></a></td>
</tr>
<tr>
<td class="yiv7000530658tr-caption" style="text-align: center;">Source: EIA</td>
</tr>
</tbody>
</table>
<p><br />
From multi-well padding (multiple wells in a single location) to superior drill bits, technology is helping to keep production levels high. Well completion costs and the speed of drilling have improved to levels many thought were not possible.</p>
<table class="yiv7000530658tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;" cellpadding="0" cellspacing="0" align="center">
<tbody>
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<td style="text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: auto; margin-right: auto;" href="http://1.bp.blogspot.com/-zIQyLZRPO8g/VZA3Tt5CVMI/AAAAAAAAp_g/jqOOx7gHi8o/s1600/South%2Btexas%2Beagle%2Bford%2Brig%2Befficiency%2B%2540PlanMaestro.jpg"><img src="http://1.bp.blogspot.com/-zIQyLZRPO8g/VZA3Tt5CVMI/AAAAAAAAp_g/jqOOx7gHi8o/s1600/South%2Btexas%2Beagle%2Bford%2Brig%2Befficiency%2B%2540PlanMaestro.jpg" border="0" /></a></td>
</tr>
<tr>
<td class="yiv7000530658tr-caption" style="text-align: center;">Source @PlanMaestro</td>
</tr>
</tbody>
</table>
<p><br />
With the inefficient rigs mothballed, the remaining capacity is quite lean. It seems that $60/bbl can now sustain a good portion of current production capacity and even turn a profit.</p>
<blockquote><a rel="nofollow" target="_blank" href="http://www.platts.com/latest-news/oil/houston/us-oil-operators-make-plans-to-add-rigs-but-will-21696065">Platts</a>: - ... [US oil producers] have wrung astonishing efficiencies from their operations in a very short period of time, as the number of days to drill a well keeps contracting while initial well production rates and estimated hydrocarbon recoveries expand.<br />
<br />
Also, corporate efficiencies, coupled with cost concessions of around 15%-25% granted by oil services and equipment providers this year, have also lowered well costs and driven up internal return rates in the best plays to the point that operators appear comfortable with the current price environment, even if they privately hope for an eventual return to $80/b oil.</blockquote>
<p>To be sure, there is a significant chance that US production slows in the coming months. Thus far however the results of the recent Saudi efforts to diminish US production have been less than satisfactory.</p>
<table class="yiv7000530658tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;" cellpadding="0" cellspacing="0" align="center">
<tbody>
<tr>
<td style="text-align: center;"><a rel="nofollow" target="_blank" style="margin-left: auto; margin-right: auto;" href="http://4.bp.blogspot.com/-gaxdAzS-QL0/VZA3fQ5Q-1I/AAAAAAAAp_o/oG7UKY-Iwfk/s1600/Production.png"><img src="http://4.bp.blogspot.com/-gaxdAzS-QL0/VZA3fQ5Q-1I/AAAAAAAAp_o/oG7UKY-Iwfk/s1600/Production.png" border="0" /></a></td>
</tr>
<tr>
<td class="yiv7000530658tr-caption" style="text-align: center;">Source: EIA</td>
</tr>
</tbody>
</table>
</div>Crude Oils Overhead Resistancehttp://stockbuz.ning.com/articles/crude-oils-overhead-resistance2015-06-09T01:55:05.000Z2015-06-09T01:55:05.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291194?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291194?profile=RESIZE_1024x1024" width="750" height="305"></a>Had to share this monthly chart of crude oil because I am one that has viewed it bearishly since it broke it's 200 month sma; prior support during the financial crisis. (click chart to enlarge)</p>
<p>Blame it on fracking. Blame it on OPEC. Blame it in fuel efficient cars. Blame it on whatever you wish but just because it was bullish for years, does not mean it will always be the same.</p>
<p>Natural gas has been embraced by the U.S. and continues to grow. Coal is all but dead; being dropped by one country after the next. There obviously is <a href="http://stockbuz.net/articles/amazing-u-s-world-largest-petroleum-producer?context=tag-crude+oil+production+2014" target="_self">no U.S. oil shortage</a> (thank you Bakkens) and our dependency on overseas oil becomes less with each passing day.</p>
<p>Yes they have shut down rigs to cut back on the oversupply but (imo) barring any disruption in production, I see this years move in crude oil as nothing more than back-n-fill. The 200 month is an interesting overhead obstacle. And that strong U.S. Dollar? No, that not going to help it either (again barring a disruption).</p>
<p>It's not a bear market. It's a collapse of an entire sector. Airplanes went through it; why not /CL?</p>
<p>I'm waiting for much M&A and company failures. They'll increase enormously given the over 700+ publicly traded companies in the U.S. </p>
<p>And the <a href="http://stockbuz.net/articles/countries-hurt-by-lower-crude-oil" target="_self">countries reliance</a> on crude oil? It's astounding if you're in the Middle East.</p>
<p>Last month (May) was a Doji. A sign of indecision. What will this month hold? If you're in oil names, I would plan on <span style="text-decoration: underline;">trading</span> them rather than long hold. </p>
<p>It's going to be an interesting few years ahead. I'd rather be long banks and technology than energy. Something with growth.</p></div>Rig Counts Continue Their Plummethttp://stockbuz.ning.com/articles/rig-counts-continue-their-plummet2015-01-23T18:49:12.000Z2015-01-23T18:49:12.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291218?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291166?profile=original" height="345" width="449"></a>As the latest Baker Hughes rig count continues to plummet with the collapse in oil pricing some are still trying to catch a bottom.</p>
<p>Total Rigs down to 1633<br> Down -43 or -2.6% compared to last week<br> Down -144 or -8.1% year-over-year</p>
<p>Gas seems to be shuttering more than oil and inland waters more than land or offshore.</p>
<p>With many pundits forecasting crude to remain low for a few years (barring disruption in supply) this will be interesting to monitor going forward.<a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291189?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291189?profile=RESIZE_320x320" width="300"></a></p>
<p>With Schlumberger (SLB) to layoff 9000 and Baker Hughes (BHI) to layoff another 7000, this is only the tip of the iceberg.</p>
<p>Data courtesy of <a href="http://gis.bakerhughesdirect.com/Reports/StandardReport.aspx" target="_blank">Baker Hughes</a></p>
<p>Click charts to enlarge</p>
<p></p>
<p></p></div>Default Concerns Continue To Weigh on Regional Bankshttp://stockbuz.ning.com/articles/default-concerns-continue-to-weigh-on-regional-banks2015-01-03T17:05:44.000Z2015-01-03T17:05:44.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291179?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291179?profile=RESIZE_320x320" width="300"></a>Dick Evans, chairman and CEO of San Antonio based <a href="https://dwq4do82y8xi7.cloudfront.net/x/Xc7TgWcm/" target="_blank">Cullen Front Bank (CFR)</a> made the rounds in December chatting with <a href="http://www.cnbc.com/id/102251506#." target="_blank">CNBC</a> in an effort to reassure investors that the low price crude oil was only temporary and would not translate into a revisiting of the bloodbath of the 1980's, however their chart says that investors aren't drinking the koolaid. (chart right - click to enlarge)</p>
<p>The same investor fear can be seen in southern lender BOK Financial which operates in Oklahoma, Texas, New Mexico, Northwest Arkansas, Colorado, Arizona, and Kansas/Missouri. (chart below - click to enlarge)<br> <a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291245?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291245?profile=RESIZE_320x320" width="300"></a></p>
<p>I believe that barring an OPEC cut in production or some outside supply disruption, crude will NOT recover in 2015 as explained in <a href="http://stockbuz.net/articles/no-crude-oil-recovery-in-2015" target="_self">this post.</a> Is this what these bank charts are hinting at?</p>
<p>The next question is if these banks begin to see defaults in oil and gas names, just how many dominos lie behind in the high-yield bond financial trail. As Becky Quick points out, hedging only lasts for so long so if crude oil does not recover, 2015 will definitely weigh further on Southern small, regional banks. </p>
<p>In fact the chart of <a href="https://dwq4do82y8xi7.cloudfront.net/x/Xc7TgWcm/" target="_blank">high yield bonds, HYG</a> seem to imply investors <em>do believe</em> there's more pain ahead. With these breakdowns, traders will look to fade any rally at overhead resistance and lower targets are near the 50 month and 100 month simple moving averages (for now).</p>
<p>It may be time for Steven Neil from BOK to hit the airwaves in an attempt to reassure investors but charts don't lie folks. As we've learned in the past, bankers do.</p></div>No Crude Oil Recovery In 2015http://stockbuz.ning.com/articles/no-crude-oil-recovery-in-20152015-01-01T19:43:42.000Z2015-01-01T19:43:42.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><img src="http://storage.ning.com/topology/rest/1.0/file/get/2208480?profile=RESIZE_400x&width=400"></div><div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291322?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291168?profile=RESIZE_320x320" width="300"></a>While guests on <span style="text-decoration: line-through;">CNBS</span> CNBC and Bloomberg are busy encouraging you to buy oil names which are down over 50%, I wouldn't expect to reap any big rewards any time soon. In fact I believe there will be much more pain ahead, depending on the strength of the company you chose. Iran sanctions may be giving it a boost near term but once they're lifted (or eased) their production is expected to <span style="text-decoration: underline;">double</span> which is once again, bearish for this oversupplied market</p>
<p>While everyone is in agreement that crude oil is in a bear market, quite often one strategy is to buy the laggard and anticipate it to outperform the following year. The trouble with crude oil however, are the fundamentals.</p>
<ol>
<li>U.S. consumer Demand (figure 1) Consumption has been dropping since 2000 thanks to more fuel efficient autos and younger Americans (millennials born from 1980 to early 2000s) being drawn to work in and the lifestyles of large metropolitan areas. Baby boomers (born 1946-1964 or 51-69 years of age) will contribute less and less to overall GDP and consumption as they continue to approach retirement age. Gen Xers (children of baby boomers) being the only ones migrating to the suburbs as they have children, pay at the pump and handle the long commute to the office each day.</li>
<li>Production is up; way up (figure 2 to right) The U.S. has been ramping up black gold producing rig counts and oil production since 2000 back to levels not seen in 30 years and projections are that these levels will continue to at least 2020. Abundant supply shall continue.</li>
<li>OPEC feels the least pressure from an operating standpoint to cut production as they have the lowest cost to operate worldwide. They have <a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291208?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291208?profile=RESIZE_320x320" width="300"></a>stated they are completely comfortable with lower crude oil pricing will not cut back production unless someone else joins in the fun (hint to Russia and Venezuela) but this chess game could remain in check for quite some time.</li>
<li>What we are witnessing is mean reversion in crude oil or price reverting back to a long term average in price. (see chart 3 below left) While there are numerous investing strategies when a stock reverts to the mean, an entire "sector" <a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291280?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291280?profile=RESIZE_320x320" width="300"></a>reverting to the mean <em>can translate</em> into an <span style="text-decoration: underline;">underlying problem</span>. According to <a href="http://www.investopedia.com/terms/m/meanreversion.asp" target="_blank">Investopedia</a> mean reversion......</li>
</ol>
<blockquote>
........has led to many investing strategies involving the purchase or sale of stocks or other securities whose recent performance has greatly differed from their historical averages. However,
<span style="text-decoration: underline;">a change in returns could be a sign that the company no longer has the same prospects it once did</span>,
</blockquote>
<p>Now wrap your head around this. According to the <a href="http://www.bls.gov/iag/tgs/iag211.htm#iag211bdmcew.f.P" target="_blank">BLS</a>, in the U.S. alone, there are <em>technically</em> over 9,000 companies cranking out crude oil ,so one can only imagine how many exist world wide. Just mind blowing. F</p>
<p>or the sake of this theory, let's weed out the shell corporations and Mom & Pop operations with a pumper out on their back 40. If we look at just names publicly-traded in U.S. markets and <em>include</em> oil service names who will also be affected by lower prices and lower demand, there are over 700 according an Ameritrade screener. </p>
<p></p>
<p><span class="font-size-3" style="text-decoration: underline;"><strong>The First Domino Is The Price</strong></span></p>
<p>So let's say prices snap back but then continue drop and do not recover. A company only has "so much" in cash reserves to continue to operate. As they watch their market cap evaporate, they have limited options:</p>
<ol>
<li>Cut capital expenditures which we've already <a href="http://www.fool.com/investing/general/2014/12/08/oil-news-150-billion-in-oil-projects-are-at-risk-d.aspx" target="_blank">begun to witness</a> with projects worth billions more in jeopardy of postponement. Just in October alone, shale drilling <a href="http://www.reuters.com/article/2014/12/01/us-oil-prices-shale-permits-idUSKCN0JF2CU20141201" target="_blank">permits dropped 15%</a> in an area which had seen permits double from a year prior.</li>
<li>As <a href="http://www.eia.gov/todayinenergy/detail.cfm?id=17311" target="_blank">cash from operations shrink with price</a>, they can sell assets however this is obviously unsustainable.</li>
<li>Increase their stock buyback program in an effort to "buoy" their stock price. While this can work in a <em>bullish</em> environment, when the market is bearish and you repurchase more than is being bought, it's a cash drain.</li>
<li>Cut their dividend to save money unless they're able to get outside funding (not likely given forecasts). Funds will not like that one bit. Immediately funds will trim their positions even further than they already have seeking yield elsewhere. This has (I believe) already begun as Seadrill Ltd. (NYSE: <a href="http://www.streetinsider.com/stock_lookup.php?q=SDRL">SDRL</a>) and North Atlantic Drilling Ltd. (NYSE: <a href="http://www.streetinsider.com/stock_lookup.php?q=NADL">NADL</a>) announced that the two companies would be suspending dividends. Many are anticipating a cut in RIG's dividend (currently at 16%) but even supposedly strong players such as ESV (10%) have suffered a huge drop in share price.</li>
<li>They'll be forced to cut their forecast - more stock price pain</li>
<li>They'll be forced to eventually lower their prices to attract new or retain current customers. More pain in earnings and this can cause price wars. Remember airfare wars? Great for the consumer but killer for a balance sheet.</li>
<li>Restructure, reorganize, layoff and cut costs.</li>
<li>Pray a supply disruption, OPEC to cut production or for M&A to ramp up in the space and <em>shrink</em> the field of competitors.</li>
</ol>
<p><span class="font-size-3" style="text-decoration: underline;"><strong>Debt Debt Baby<br></strong></span></p>
<p>The low-interest-rate environment and continued central bank stimulus have helped energy companies ramp their capex via cheap, ubiquitous financing. Consequently, debt levels in the energy sector have soared. For example, <strong>Linn Energy, LLC</strong> (<a href="https://dwq4do82y8xi7.cloudfront.net/x/sRFaKe5h/" target="_blank">LINE</a>), a favorite stock for yield hogs due to its 10%-plus yield, has increased its long-term debt levels from $2.7 billion at the end of 2010 to <span style="text-decoration: underline;">$9.6 billion currently.</span></p>
<p>The Energy Information Administration (EIA) estimates that, in the <span style="text-decoration: underline;">last year alone</span>, major oil and natural gas companies added over $100 <span style="text-decoration: underline;">billion</span> in net debt.</p>
<p>It's no better across the pond where a <a href="http://www.telegraph.co.uk/finance/newsbysector/energy/11315956/Third-of-listed-UK-oil-and-gas-drillers-face-bankruptcy.html" target="_blank">third of Britain's</a> listed oil and gas companies are in danger of running out of working capital and even going bankrupt amid a slump in the value of crude, according to new research. Financial risk management group Company Watch believes that 70pc of the UK’s publicly listed oil exploration and production companies are now unprofitable, racking up significant losses in the region of £1.8bn.</p>
<p>Ratings agency <a href="http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11314794/Oil-majors-finances-strained-by-price-slump.html" target="_blank">Standard & Poor’s recently flagged</a> its concern of some of Europe’s biggest oil and gas groups such as Royal Dutch Shell, BP and BG Group. Its primary worry is debt levels which it says have jumped from a combined $162.9bn (£105bn) for the five largest European companies in the sector at the end of 2008 to an estimated $240bn in 2014.</p>
<p>Martin S. Fridson, a prominent figure in the high-yield bond market, sees as much as <a href="http://blogs.cfainstitute.org/investor/2014/10/30/who-will-suffer-from-a-leveraged-credit-shakeout/" target="_blank">$1.6 trillion in high-yield defaults</a> coming in a surge that he expects to begin shortly.</p>
<p>We are already beginning to see the beginning of what I believe will be more pain ahead as Seadrill Ltd. (NYSE: <a href="https://dwq4do82y8xi7.cloudfront.net/x/35RFIdp7/" target="_blank">SDRL</a>) and North Atlantic Drilling Ltd. (NYSE: <a href="https://dwq4do82y8xi7.cloudfront.net/x/HIecdhRM/" target="_blank">NADL</a>) announced that the two companies would be suspending dividends.</p>
<p>So <span style="text-decoration: underline;">barring any disruption in supply,</span> I believe we won't see crude oil with any true, long term rebound in 2015. In fact, with no rebound in price we'll not only see Capex and dividends continue to be cut, but there will be <strong>defaults.</strong> I believe M&A is on the way and yes, failures, Bankruptcies and more dividend/buyback cuts. If you're a long term investor, sure go ahead and buy some shares (making certain they're financially strong) but don't expect a substantial return any time soon. Just pray your company survives or is bought out. Many will not survive.</p>
<p>(As a side note, <a href="http://www.fool.com/investing/general/2015/01/01/3-reasons-these-high-yielding-offshore-drillers-co.aspx" target="_blank">TheMotleyFool</a> has an interesting article on off shore drillers which may be of interest to long term investors. I love to bottom feed and the author makes a great point about retiring rigs. Check it out and let me know what you think)</p>
<p>The good news is once the smoke clears we will have fewer players on the oil field, prices will rise organically based on demand and competitive pricing and you, the consumer will benefit in the interim.</p>
<p></p></div>The Big Market Squeezehttp://stockbuz.ning.com/articles/the-big-market-squeeze2014-12-20T00:12:42.000Z2014-12-20T00:12:42.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291142?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291033?profile=RESIZE_320x320" width="300"></a>Volatility definitely increased leading up to this weeks quadruple witching <em>and</em> the <a href="http://headlines.ransquawk.com/headlines/us-index-changes-and-expiries-quadruple-witching-and-the-s-p-rebalance-due-on-friday-19th-december-2014-15-12-2014" target="_blank">S&P (400, 500 and 600) index re-balancing</a> taking place tonight after the close. Selling the last two weeks resulted in oversold conditions in the near term charts and massive short covering at the market as every fund and investment bank bought new shares (as they rebalanced ahead of the indexes), resulted in two astounding days of back to back two percent gains. Bulls were partying in the streets but is it warranted? Has anything truly changed? </p>
<p>Yes, the Fed has reassured investors that they have no intention of raising rates any time soon which is what everyone wanted to hear but we still have a bull market which has had an incredible six-year run so just "who" is going to buy at these elevated levels for their 2015 portfolio?</p>
<p>I also do not believe that crude oil (and oil/gas companies) are out of the woods yet either. <a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291057?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291057?profile=RESIZE_320x320" width="200"></a>There's that pesky $OVX which is the VIX for crude oil. Note how it's not coming back to earth? Hmmmmm This certainly seems to imply to me that crude oil's fall is not over......but hey, I could be wrong. Let's watch and see if worries of oil & gas name defaults doesn't resurface in the weeks to come.<a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291114?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291114?profile=RESIZE_320x320" width="300"></a></p>
<p>For what it's worth everyone is curious how often the market had two day, two percent moves and here are the numbers as well as a 20-year chart. How you interpret it is up to you. (click to enlarge)</p>
<p>With Christmas and New Years the next two weeks <em>and</em> fund managers headed out to vacation, volumes will be abysmal and algos set to low speed. It's a great time to shut down the computer and take time off yourself. Barring any unexpected news such as defaults, I would expect the market to drift sideways to up. Happy Holidays to all.</p>
<p></p></div>Lower Gasoline Price Not Necessarily Means Higher Demand Aheadhttp://stockbuz.ning.com/articles/lower-gasoline-price-not-necessarily-means-higher-demand-ahead2014-12-17T15:54:40.000Z2014-12-17T15:54:40.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291039?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291039?profile=RESIZE_320x320" width="300"></a>After hearing one analyst commenting that lower prices at the pump would translate into increased oil demand, I had to open up the commentary notepad. (click on charts to enlarge)</p>
<p>The first thing that immediately came to mind was the rising costs <em>elsewhere</em> in Americans pocketbooks that would take up the slack of lower gasoline prices, such as rent. Social Security recipients for example will see an increase of 1.9% in 2015 however this is no where on pace with the increases in average rents which continue to climb. In fact, how about a rent increase of 6.9% in November according to <a href="http://www.trulia.com/trends/" target="_blank">Trulia</a>? Ouch!</p>
<p>Indeed incomes, when adjusted for inflation, have definitely not kept pace since 2000. (chart right). Add to this the fact that the majority of new jobs being created are at the low end of the pay scale and you have a situation where any savings at the pump are not going to translate into further driving and gasoline demand but to holiday spending, consumer staples and yes, pay the rent.</p>
<p>Even the number of miles driven appears to have topped out according to FRED. Again this can be attributed to income growth and lack of it and it doesn't appear this will change any time soon. (second chart)</p>
<p>According to the <a href="http://www.eia.gov/todayinenergy/detail.cfm?id=19211" target="_blank">EIA:</a></p>
<blockquote>
<p>In recent years, gasoline expenditures have accounted for about 5% of household expenditures. In the Bureau of Labor Statistics' (BLS) Consumer <a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291072?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291072?profile=RESIZE_320x320" width="300"></a>Price Index, gasoline accounted for <a href="http://www.bls.gov/news.release/cpi.htm">5.1% of consumer spending</a>, as of October 2014. Reductions in the gasoline price ultimately impact the relative weight of gasoline compared to other expenditures (shelter, clothing, food, entertainment, and so on) in price indices compiled by BLS and the Bureau of Economic Analysis at the U.S. Department of Commerce.</p>
<p>The demand for gasoline is <a href="http://www.eia.gov/todayinenergy/detail.cfm?id=19191">very price inelastic over short time periods</a>, meaning changes in price have little impact on the number of gallons used. Falling gasoline prices allow households to spend their income on other goods and services, pay down debt, and/or increase savings.</p>
</blockquote>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291101?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291101?profile=RESIZE_320x320" width="300"></a></p>
<p>Of course the improvement in fuel efficiency in autos the last 20 years has greatly lowered demand as well but is there still something more?</p>
<p>Well maybe. One last thought on spending. Aging baby boomers. While Obama issued temporary relief from deportation to millions of immigrants in November, the U.S. has an enormous swath of baby boomers reaching retirement age who won't be driving the kiddies to Disney World any time soon. Will these immigrants be able to <em>afford</em> to take up the slack in gasoline demand? That remains to be seen but I'm not holding my breath. </p>
<p>Instead I believe we're going to have to wait to see a pick up in wage growth which comes at the end of the cycle before driving and gasoline demand pick back up.</p>
<p>With a new GOP-held Congress coming in in 2015, hopes of a Federal minimum wage increase are dim so sit back and relax. It may be a while unless Congress (and big business) finally decide to throw the consumer a bone but a near term pick up in demand? I just don't see it happening until something changes in the macro picture.</p></div>Russian Stocks - Blood In The Streetshttp://stockbuz.ning.com/articles/russian-stocks-blood-in-the-streets2014-12-16T14:40:41.000Z2014-12-16T14:40:41.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291042?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291042?profile=RESIZE_320x320" width="300"></a><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291075?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291075?profile=RESIZE_320x320" width="300"></a>Russia's central bank raised interest rates last Friday from <a href="http://www.theguardian.com/business/live/2014/dec/11/russia-central-bank-interest-rate-hike-ecb-loans-live" target="_blank">9.5% to 10.5%</a> in an effort to support the falling currency and battle inflation. When that did nothing, they shocked markets by raising it again overnight from 10.5% to a <a href="http://in.reuters.com/article/2014/12/16/us-russia-cbank-rates-idINKBN0JT2II20141216" target="_blank">whopping 17%</a> in what some are calling an emergency move. This was their sixth interest rate hike this year to support the currency.</p>
<p><span id="articleText">The central bank early on Tuesday also increased the maximum volume of foreign currency it provides to Russian banks via its foreign-exchange repurchase agreement auctions for 28 days to $5 billion from $1.5 billion.</span></p>
<p>Sadly the RUB/USD barely moved. (left image - click to enlarge)</p>
<p>Russia's economy still depends in large measure on sales of oil and gas, which account for about two-thirds of exports, despite liberal policymakers calling for structural <a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291096?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291096?profile=RESIZE_320x320" width="300"></a>economic reform for years.</p>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291106?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291106?profile=RESIZE_320x320" width="300"></a>That means swings in global oil prices have a significant impact on Russia's balance of payments, and therefore the rouble exchange rate. This will continue to worry investors that companies may not be able to pay their debts. While Russia has little debt and large cash reserves, one can imagine those reserves must be draining quickly.</p>
<p>Some may have wondered if the Russian ETF $RSX had a capitulation move yesterday but the currency pair this morning has shrugged off the move completely. (right image) A definite sign that money continues to flee the country enmass.</p>
<p>While crude oil continues to fall, the pressure mounts for Putin to cut crude oil production which represents 60% of the countries exports as Putin's popularity continues to drop.</p>
<p>Russian stocks (<strong><span style="text-decoration: underline;">not in the energy sector</span></strong>) are also showing the same pain include Sberbank ($SBRCY), Mobile TeleSystems ($MBT), VimpelCom ($VIP), Millicom International Cellular ($MICF) and Internet search player Yandex ($YNDX). Are you into buying when things are hated and there's blood in the streets? These along with $RSX may be names you may wish to research further. </p>
<p>How low will they go? Just ask Putin. One thing is for certain, the bottom is at zero.</p></div>What About The Santa Claus Rally? S&P500 Top Deja Vuhttp://stockbuz.ning.com/articles/what-about-the-santa-claus-rally-s-p500-top-deja-vu2014-12-15T21:00:51.000Z2014-12-15T21:00:51.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>According to <a href="http://www.cityindex.co.uk/market-analysis/market-news/35785172014/dangerous-signal-in-the-sp-500-other-equity-indices/?cid=0000215115" target="_blank">Ashraf Laidi:</a>  The following sobering analysis on the <a href="http://www.cityindex.co.uk/range-of-markets/indices/">S&P500</a> reinforces our expectations that recent record highs in US equity indices will not be revisited before at least six weeks.</p>
<p>A decline of at least 10% is expected to follow.</p>
<p>-        Last week’s 3.6% decline in the S&P500 single-handedly erased all of the prior seven weeks’ consecutive gains.<a target="_blank" href="http://wordpress.cityindex.co.uk/market-analysis/files/2014/12/SPX-Oct-207-vs-Now-Dec-15.jpg"><img class="align-right" src="http://wordpress.cityindex.co.uk/market-analysis/files/2014/12/SPX-Oct-207-vs-Now-Dec-15-530x179.jpg?width=530" width="530" /></a></p>
<p>The <span style="color: #ff0000;"><span style="color: #ff00ff;"><strong>last time the S&P500 erased at least three weeks’ of consecutive gains was the week after the October 2007 record</strong></span>.</span> Stocks fell more than 50% thereafter and took six years to regain that high.</p>
<p>-        And for an unprecedented finding, last week’s S&P5 500 decline took place after SEVEN weekly consecutive gains, which had NEVER been seen before in the index.</p>
<p>Seven consecutive weekly gains have occurred in the past (Aug-Jul 1989, Aug-Sep 1993, Apr-May 1997, Feb-Mar 1998, Dec 2003-Jan 2004, Apr-May 2007, Mar-Apr 2009, Dec 2010-Jan 2011, Jan-Feb 2013), but never in any of those cases has the streak-breaking week fallen by more than 2.0%.</p>
<p><span style="color: #ff00ff;"><strong>The fact that the magnitude of last week’s declines was nearly 4.0%, following as many as seven rising weeks, shows an unprecedented departure in sentiment from greed to fear.</strong></span></p>
<p>Kos here.  I've been saying that yes, oil's plunge <a href="http://stockbuz.net/articles/will-oils-fall-hurt-the-rally" target="_self">would affect our rally</a> although <span style="text-decoration: line-through;">CNBS</span> CNBC was telling us no,  For those who like to point fingers at reasons "why", take your pick:</p>
<ul>
<li>Year-end tax selling</li>
<li>Even JNK, a proxy for risk, is seeing heavy selling.</li>
<li>Strong dollar in a weak economy</li>
<li>Maybe this is the market........without the benefit QE.</li>
<li>Who wants to "buy" at these high levels, not me.</li>
<li>There's an over supply in crude oil and price is finally reverting to reflect that</li>
<li>It's not an oil correction, it's a bear market in commodities; period and oil finally joined the club.</li>
<li>Oil and gas names have begun to postpone projects (see massive drop in permits in Oct/Nov. to the right) and ALL of their suppliers will feel the pinch as a result which <em>widens</em> the number of stocks which are weak.</li>
<li>Sure the average American will have more $ in their pocket to spent at Christmas but that's a drop in the bucket compared to the cut in spending in the oil arena as they tighten their belts with low oil.</li>
<li>Risk of defaults from heavily-indebted oil names.  Just ask regional name $CFR</li>
<li>When the VIX for crude oil $CVX is closing on the highs, oil's drop isn't over.  Watch for a capitulation move.</li>
<li>Saudi Arabia announced they will not cut supply even if crude oil is at $40.<a target="_blank" href="http://watchdog.wpengine.netdna-cdn.com/wp-content/blogs.dir/1/files/2014/12/drilling-approvals-dropping-chart-from-seeking-alpha-website.jpg"><img class="align-right" src="http://watchdog.wpengine.netdna-cdn.com/wp-content/blogs.dir/1/files/2014/12/drilling-approvals-dropping-chart-from-seeking-alpha-website.jpg?width=438" height="129" width="280" /></a></li>
<li>They would cut production if someone else does and if Putin were to cut, what would that do to his economy?  Russia's obviously not easily bullied.</li>
<li><a href="http://www.bloomberg.com/news/2014-12-15/ruble-weakens-to-record-before-russia-auction-to-ease-squeeze.html" target="_blank">Russia's central bank</a> announced a rate hike which has sent the Ruble to lows not seen since 1998.  Can you say recession in Russian?  This of course has traders pressuring the central bank to intervene.</li>
<li>Don't expect demand to increase any time soon with much of the globe in recession or with weak economies.   This of course, barring any disruption in supply.</li>
<li>And just how many cars can people buy when they're taking jobs at minimum wage?</li>
<li>The Fed may raise rates mid-2015 however watch the 10 year ($TNX).  It will rise long before the Fed lifts a finger.</li>
<li>All commodity currencies are struggling.</li>
<li>China's economy is slower than we hoped for with still high property prices.</li>
</ul>
<p><a target="_blank" href="http://www.bespokeinvest.com/storage/sectorweights1212.png?__SQUARESPACE_CACHEVERSION=1418402340937"><img class="align-left" src="http://www.bespokeinvest.com/storage/sectorweights1212.png?__SQUARESPACE_CACHEVERSION=1418402340937&width=300" width="300" /></a>So what sector could "step up to the plate" and help lead the market higher..........when we're already stretched in valuation? </p>
<p>I think financials will have their worries.  That's 16% of the S&P500 weighting - not going to rally.  Knock off Industrials thanks to crude. -10% and materials?  Another -3%.  How about Consumer Discretionary?  Poor $F was downgraded today by Deutsche Bank stating that with lower gas prices, consumers may be less apt to shell out cash for a new, more efficient auto, and well all know how TSLA has been falling.  Count them out.  Can technology, staples and healthcare give us a Santa Claus rally alone?  Hopefully there will be no downside surprise with the recent good retail sales numbers.</p>
<p>As volume dries up near the holidays, there tends to be no heavy selling but I'm not placing any bets on anything related to energy.  We shall have to see but it won't be easy.</p>
<p>There's enormous pressure on Russia at this juncture and the other slippery slope is for the Fed........how to raise rates in 2015 after halting quantitative easing and not encourage deflation from persisting. </p>
<p><em>Edited 4:35pm to update Sector Weightings graph.</em></p>
</div>Will Oil's Fall Damage The Rally?http://stockbuz.ning.com/articles/will-oils-fall-hurt-the-rally2014-12-15T00:40:22.000Z2014-12-15T00:40:22.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_blank" href="http://www.brimg.net/images/slideshows/investing/2013/investment-ideas/4-reversion.jpg"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291003?profile=RESIZE_320x320" width="250"></a>I have to throw a flag in from the sidelines calling foul on the learned men on CNBCs Fast Money table Friday (video below) as traders remain bullish on the big screen. In fact, they do not believe crude's fall will impact our rally. Really? Josh Brown stated there was <a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291063?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291063?profile=RESIZE_320x320" width="300"></a>no correlation b/w the price of oil and the S&P500 and did their level best to downplay the selling in crude oil. Alright, overlay a comparison chart (left) and you won't see black gold having an enormous impact on the market with a few exceptions BUT, the energy complex represents an average of 6.9% of U.S. GDP. </p>
<p>If it's a bear market, this changes the scenery. Come on Josh; there's much more that you're <em>not</em> saying and we know it. Stay with me here. So typically if we saw a ten percent correction in crude, another sector in the S&P would merely step up to the plate and help lead such as tech or financials.</p>
<p>This time, however, we see regional banks such a Cullen-Frost (who <span style="text-decoration: underline;"><strong>lend</strong></span> to oil names down here in Texas for oil and gas projects) not only falling, but falling HARD on heavy volume......right OUT of a wide range top. It not only took out a years worth of stops, it fell hard below the 20 month SMA which has historically been solid support for this Texas regional bank. Risk of defaults in regional banks? In these parts, one would say "esto no es bueno".</p>
<p>Concurrently, the Barclays high yield bond fund, $JNK and iShares high yield corporate bond fund $HYG (proxys for risk appetite) have all but taken out not only their 2014 gain, but the 2013 as well......closing in on the May/June 2012 low now. If this isn't telling you this is more than a typical correction, it should be.<a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291099?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291099?profile=RESIZE_320x320" width="300"></a></p>
<p>Now here's where I believe the sell off in crude becomes more important than being said: Capital expenditures being lowered and postponed in energy names and THAT, my friend, is a huge difference than past corrections in black gold. You never had these worries in financials and bonds when crude itself had a 10% correction.</p>
<p>As pointed out by Ashraf Laidi</p>
<blockquote>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291112?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291112?profile=original" width="259"></a>Yes, Joe the Plumber will have more cash to spend with gasoline near $2/gallon BUT the benefit will be nothing in comparison to the cutback on capex spending. With such low crude prices, companies will postpone capital expenditures, new wells, new machinery, whatever they can which is going to impact every one of their suppliers............and you can see it in all the oil and gas suppliers such as SLB.</p>
</blockquote>
<p>Now *IF* Russia, Saudi Arabia or someone were to balk and cut production, then supply will tighten and prices will rise however at this juncture, no one is blinking. Russia holds almost no debt and tons of cash reserves. They can bide their time as can Saudi Arabia with only $10/barrel needed to remain profitable. Unless a pipeline explodes, this could go on for some time. O&G names with heavy debt I'm sure are already feeling the pain. Just look at the oil services ETF $OIH and you won't want to catch that knife. </p>
<p>If commodities are, in fact, <a href="http://stockbuz.net/articles/reverting-to-the-mean" target="_self">reverting to the mean</a>, I won't be buying any energy names just yet. It could be a while as they postpone projects, tighten their belts, reorganize, restructure and yes, some definite M&A may be ahead. But M&A alone is not a reason for "me" to buy a stock. I want my money <em>working</em> for me; not sitting with losses hoping there's a buyout. Call me crazy but I'm staying away from the energy complex or shorting it further on any spike. By the time all the dust settles, I don't think it will be pretty.</p>
<p>Bottom line on the rally, yes, I think it's going to weigh on the rally. How much is yet to be seen but this is not your typical 10% oil correction. Financials may not be able to help take up the slack. Then there's the strong U.S. dollar. Oye. The holidays can't get here fast enough. With them comes lower volume and <em>usually,</em> less selling pressure. Unless it's different this time.</p>
<p><object id="cnbcplayer" width="400" height="380" classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0" bgcolor="#000000"><param name="allowfullscreen" value="true"> <param name="allowscriptaccess" value="always"> <param name="quality" value="best"> <param name="scale" value="noscale"> <param name="wmode" value="transparent"> <param name="salign" value="lt"> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/3000338656/code/cnbcplayershare"> <param name="pluginspage" value="http://www.macromedia.com/go/getflashplayer"> <embed wmode="opaque" id="cnbcplayer" width="400" height="380" type="application/x-shockwave-flash" src="http://plus.cnbc.com/rssvideosearch/action/player/id/3000338656/code/cnbcplayershare" allowfullscreen="true" allowscriptaccess="always" quality="best" scale="noscale" salign="lt" pluginspage="http://www.macromedia.com/go/getflashplayer" bgcolor="#000000"></object></p></div>Parabolic Moves Are Never Sustainable - Liquified Natural Gashttp://stockbuz.ning.com/articles/parabolic-moves-are-never-sustainable-liquified-natural-gas2014-12-11T14:31:40.000Z2014-12-11T14:31:40.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291018?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291018?profile=RESIZE_320x320" width="300"></a>China's state-controlled energy giant Sinopec wants to sell some long-term liquefied natural gas (LNG) import deals as a slowing economy makes them unprofitable, sources say, signalling the end of a five-year boom fueled by rising Chinese demand.</p>
<p><em>Kos here: Note <a href="https://dwq4do82y8xi7.cloudfront.net/x/oQLLrVrD/" target="_blank">LNG</a> and <a href="https://dwq4do82y8xi7.cloudfront.net/x/kOqUhGtk/" target="_blank">GLNG</a> are two names in this space. LNG shown left - click chart to enlarge..</em></p>
<p>Asia's thirst for energy has helped drive a "dash for gas" in producer countries from Australia to Canada, with LNG emerging as the fastest growing fuel source since the beginning of the century on the back of soaring Chinese imports. But just as long-planned projects start to come on stream China's economy is stuttering, which is likely to crimp demand and pull down domestic gas prices to levels that make imports unprofitable.</p>
<p>"We talk about China choking on LNG. There's just too much coming onto the market," said Gavin Thompson, Head of Asia Gas Research at Wood Mackenzie. Analysts say falling crude prices, which have dropped around 40 percent since June, are another factor weighing on Chinese gas prices. "Based on the recent fall in oil prices... there is an increased risk that there could be a near-term cut in natural gas price (in China) for the first time," Bernstein Research said on Tuesday, adding that at lower levels "LNG and pipeline imports make little sense for producers". And even if retail prices do not fall, imports may not be needed as the high gas price at home caps demand. "Slower economic growth and higher domestic prices ... are tempering demand," said Michal Meidan, director of consultancy China Matters.</p>
<p>In response, China is trying to find buyers for contracted LNG on the international market, which is already oversupplied due to slowing demand and rising output that have seen Asian LNG prices halve this year, with analysts expecting another 30 percent fall by 2015.</p>
<p>"There is at least one SPA (Sales and Purchase Agreement) being negotiated with a Chinese buyer that has a lot of destination flexibility, including to terminals outside of China," said one source involved in LNG shipments from Australia to China.</p>
<p>UNPRECEDENTED EXPANSION Sinopec is planning to offload LNG from new export plants in Australia and potentially Papua New Guinea to BP, advisory and trading sources with knowledge of the matter said, amid growing unease over the scale of an unprecedented expansion that has seen the construction of 11 LNG import terminals since 2006 and includes plans for 25 more projects.</p>
<p>BP and Sinopec declined to comment, but the sources said that, beyond selling excess cargoes into the spot market, other options being discussed included selling parts of its long-term agreements to another company.</p>
<p>Three industry sources said Sinopec was in early talks to sell off chunks of the 20-year, 4.3 million tonne per annum (mtpa) supply it bought from Origin Energy's Australia Pacific LNG plant due to start in 2015. Sinopec invested in the Australia Pacific LNG in 2011 and 2012, when Asian spot LNG prices averaged $14.8 per mmBtu, compared with less than $10 per mmBtu now. It may also sell excess volumes coming from its 2 mtpa stake in Exxon Mobil's Papua New Guinea LNG, in which it invested in 2009, when LNG prices were low but China's LNG demand was expected to grow for decades to come.</p>
<p>FIRE SALE Tumbling energy prices may make reselling LNG difficult as consumers across Asia also scramble to offload excess volumes, contributing to an emerging glut.</p>
<p>Sinopec is exploring options to sell BP up to 1 mtpa over 2016 and 2017 from its Australian project, which could be extended to run until 2020, the sources said.</p>
<p>While oil traders, including in China, often take advantage of low prices to build up long-term reserves in preparation for supply disruptions or higher prices in the future, stocking LNG is more costly as the gas has to remain liquefied in super-cooled facilities or pumped into pressurized gas storage tanks after being regasified. The sell-offs could also end a race by Chinese energy firms to enter the LNG market. Sinopec, CNOOC, CNPC and PetroChina all made big LNG investments in the past years, racing to outdo competitors from Japan and South Korea, which remain the world's biggest LNG importers.</p>
<p>"The build-out was driven by competition between the companies for market share," Meidan said. LNG importers also face stiff competition from other fuels such as pipelined gas, hydroelectric and coal-fired power generation, as well as domestic shale gas production. "Coal and hydro are hard to beat over price," one LNG trader said. "Russian and central gas Asian pipelines will come in, and one day Chinese shale will add to our long list of competitors."</p>
<p>Courtesy of <a href="http://www.reuters.com/article/2014/12/09/china-gas-imports-idUSL6N0TN1HM20141209" target="_blank">Reuters</a></p></div>Energy Contagion - The Big Unknownhttp://stockbuz.ning.com/articles/energy-contagion-the-big-unknown2014-12-08T17:35:22.000Z2014-12-08T17:35:22.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_blank" href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/12/20141208_energy2_0.jpg"><img class="align-right" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/12/20141208_energy2_0.jpg?width=400" width="400" /></a>Indeed, I've read much concern over this area as oil collapsed so it does merit a warning.  From <a href="http://www.zerohedge.com/news/2014-12-08/energy-bond-risk-soars-fresh-record-high-stocks-slump-20-month-lows" target="_blank">ZeroHedge</a>:</p>
<p>The S&P 500 Energy sector stocks are down over 12% year-to-date, tumbling over 3% today to fresh 20-month lows. <strong>The spread (or risk) of high-yield energy credits surged again today, breaking above 850bps for the first time</strong>... The overall high-yield credit market is being dragged wider by this contagion as hedgers try to contain <a href="http://www.zerohedge.com/news/2014-11-30/imploding-energy-sector-responsible-third-sp-500-capex">the collapse that is possible</a>. For now, <a href="http://www.zerohedge.com/news/2014-11-30/imploding-energy-sector-responsible-third-sp-500-capex">the S&P 500 remains entirely ignorant of the fact that over a third of its CapEx was expected to come from this crushed sector</a>...</p>
<p>According to DB</p>
<blockquote>
<blockquote>
<p><strong>US private investment spending is usually ~15% of US GDP or $2.8trn now</strong>. This investment consists of $1.6trn spent annually on equipment and software, $700bn on non-residential construction and a bit over $500bn on residential. Equipment and software is 35% technology and communications, 25-30% is industrial equipment for energy, utilities and agriculture, 15% is transportation equipment, with remaining 20-25% related to other industries or intangibles. Non-residential construction is 20% oil <strong>and gas producing structures and 30% is energy related in total</strong>. We estimate global investment spending is 20% of S&P EPS or 12% from US. <strong>The Energy sector is responsible for a third of S&P 500 capex. 35% of S&P EPS from investment and commodity spend, 15-20% US</strong></p>
<p><strong> </strong><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/11/capex%20spending.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/11/capex%20spending_0.jpg" height="260" width="600" /></a></p>
</blockquote>
</blockquote>
<p>In short, while nobody knows just how many tens of billions in US economic "growth", i.e., GDP, will be eliminated now that energy companies are not only not investing in growth spending or even maintenance, being forced to shut down unprofitable drilling operations and entering spending hibernation territory, the guaranteed outcome is that US GDP is set to slide as the CapEx cliff resulting from Brent prices dropping below the $75/bbl <em>red line</em> under which shale is broadly no longer profitable will offset any GDP benefit unleashed from the "supposed" increase in consumer spending.</p>
</div>Breakeven Price On Oilhttp://stockbuz.ning.com/articles/breakeven-cost-on-oil2014-12-04T21:33:26.000Z2014-12-04T21:33:26.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>It's been bandied about a great deal lately so I thought I would post these graphics from <a href="http://video.cnbc.com/gallery/?video=3000335240&play=1" target="_blank">CNBC</a> to make things simpler to understand. Clearly some drilling projects require higher prices to remain profitable while others, maybe not so much. To explain a little on the price spreads, it all comes down to "when" each project was established where older ones may be require updating technology speaking and higher maintenance costs where newer ones are utilizing higher-tech equipment and can operate at a lower price on oil to break even. Cost is also affected by how deep they have to drill to reach oil and how many barrels per day it puts out versus how much you invested in the well. Clearly Saudi Arabia has the advantage but as they do, they drain their cash reserves (as does everyone else).</p>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291090?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291090?profile=RESIZE_1024x1024" width="750"></a><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291127?profile=original"><img class="align-full" src="http://storage.ning.com/topology/rest/1.0/file/get/1291127?profile=RESIZE_1024x1024" width="750"></a></p></div>Energy On Sale But Few Are Buyinghttp://stockbuz.ning.com/articles/energy-on-sale-but-few-are-buying2014-12-01T15:38:12.000Z2014-12-01T15:38:12.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291010?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291010?profile=RESIZE_480x480" width="375"></a>After Friday's spectacular 10% sell off in black gold, I went back to my earlier post on <a href="http://stockbuz.net/articles/short-black-gold-commodity-deflation" target="_self">shorting crude oil</a> and felt pretty darn good as I made myself a turkey sandwich for lunch. Some would say it was a capitulation bottom but I just didn't see the volume which would come with such a move. Yes there was heavy selling but it was funds getting OUT of energy names and forced selling - not buying a dip. Sure, it can snap back and a near term bottom is most likely in but I will not be trading that. The top is in in my opinion. I will view any move higher (without an event risk occurring) as an opportunity to re-short at a higher level.</p>
<p>I still believe the entire sector is extremely over crowded with over 100 oil companies just in the U.S. alone. While deflation in any sector is difficult to swallow, I may not be too far from the truth. According to the <a href="http://online.wsj.com/articles/even-after-selloff-energy-stocks-find-few-buyers-1417376208" target="_blank">WSJ:</a></p>
<blockquote>
<p>Energy stocks are on sale following a five-month plunge in crude oil, but so far few investors are heeding the temptation to bargain-hunt. Portfolio managers and analysts are bracing for a wave of dividend cuts, share-repurchase delays and capital-spending reductions that will likely ripple across the industry.</p>
</blockquote>
<p>Consider Norwegian offshore driller Seadrill (<a href="https://dwq4do82y8xi7.cloudfront.net/x/gVhmAJPa/" target="_blank">SDRL</a>) announced just a week ago it will halt it's dividend payments and refiner CVR (<a href="https://dwq4do82y8xi7.cloudfront.net/x/tT35ZRHv/" target="_blank">CVRR)</a> who only debuted it's IPO in 2013, cut it's dividend by 18% in <a href="http://www.dividendcut.com/2014/10/cvr-partners-lp-cuts-distribution-by-182.html" target="_blank">October</a> and we could be seeing the beginning of a slightly unsettling energy top. No, certainly two dividend cuts does not a top make but consider the five-month drop in crude oil prices and what happened in the past when there was deflation in a sector.</p>
<p>As one of thereformedbroker's readers <a href="http://thereformedbroker.com/2014/11/29/plot-twist-the-oil-crash-kneecaps-high-yield-which-halts-buybackpalooza/" target="_blank">pointed out</a>:</p>
<blockquote>
<p><a target="_blank" href="http://thereformedbroker.com/wp-content/uploads/2014/11/Screen-Shot-2014-11-29-at-10.56.13-AM.png"><img class="align-right" src="http://thereformedbroker.com/wp-content/uploads/2014/11/Screen-Shot-2014-11-29-at-10.56.13-AM.png?width=200" width="200"></a>Energy companies are the 2nd largest issuer of HY debt. With the ongoing massacre in crude oil my thought has been that the highly leveraged players would have debt issues which would just facilitate industry consolidation. But with the state of the credit market excluding sovereigns, we could have something else entirely. The energy sector makes up a large segment of the HY bond market and it’s about to take a big hit.. Sooner or later it’s coming. <strong>If the high-yield market in it’s fragile state is given a push we could see a real route in the markets.</strong> It’s starting to look like energy debt could go bidless for a time and take HY with it if action isn’t taken soon. And that action, in part should be for the orgy of debt issuance that is being used for buy-backs to stop asap.</p>
</blockquote>
<p>So what do buybacks do for the stock market? Push prices higher. What happens when a buyback program or a dividend is cut? Prices fall as dividend funds get out of their positions. They are, after all, THERE for the yield. </p>
<p>Last let us consider their debt vs. increased costs. According to <a href="http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html" target="_blank">TheGuardian:</a></p>
<blockquote>
<div class="secondPar">
<p>The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets.</p>
</div>
<div class="thirdPar">
<p>This is a major departure from historical trends. Such a shortfall typically happens only in or just after recessions. For it to occur five years into an economic expansion points to a deep structural malaise.</p>
<p>The EIA said the shortfall between cash earnings from operations and expenditure -- mostly CAPEX and dividends -- has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011.</p>
</div>
</blockquote>
<p>Right now there's a price war going on in crude oil with OPEC unwilling to cut production (lest they risk losing customers to the U.S. or Russia). The worldwide glut of excess supply will continue to weigh on price and operational costs. This drop will definitely weigh on economies who depend heavily on crude oil for <a href="http://stockbuz.net/articles/countries-hurt-by-lower-crude-oil" target="_self">GDP growth</a> such as the Middle East, Venezuela and Russia. Oddly enough India's economy stands to lose the least as they <em>import</em> over 80% of their energy needs.</p>
<p>With no driver to push crude higher, what will oil and gas companies have to do to offset the lower price of oil? Cut costs - big time. Certainly the stronger names will be able to survive longer than the smaller, heavily indebted ones but we're already seen five months of price decline. If I were the CFO of an energy company, I would already have been exploring the ways to survive. Renegotiate with suppliers, equipment manufacturers, drillers, and railroads who haul it (so watch them all to be pressured as well as the dominos fall). Let's assume they have already refinanced their debt prior to the credit crisis. Now we may see more selling of non-performing assets, restructuring and cost cutting..........and yes, cuts in buybacks and dividends. It won't be pretty. Just ask the airlines how it felt after they went through airfare wars and cost cutting measures. Many didn't survive. Others were merged with large players; thus <em>shrinking</em> the number of competitors. Years of pain.........but once the smoke cleared, they are now lean and mean EPS generators. </p>
<p>Hold on to your hats in you're in the energy sector. It's going to be a bumpy ride.</p>
<p><em>(Edited 10:40am to add EIA data)</em></p></div>Countries Hurt By Lower Crude Oilhttp://stockbuz.ning.com/articles/countries-hurt-by-lower-crude-oil2014-11-04T21:04:01.000Z2014-11-04T21:04:01.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>As the price of oil extends a free fall that began this summer, countries around the world that rely on oil revenues are bracing for an imminent economic and budget hit.  The drop is widening budget gaps in the Gulf states like <a class="inline_asset" href="http://www.cnbc.com/id/10000304" data-nodeid="10000304" target="_blank">Saudi Arabia</a>, the <a class="inline_asset" href="http://www.cnbc.com/id/10000308" data-nodeid="10000308" target="_blank">United Arab Emirates</a>, <a class="inline_asset" href="http://www.cnbc.com/id/10000303" data-nodeid="10000303" target="_blank">Qatar</a>, Oman and Bahrain that rely heavily on oil to pay government services.</p>
<p>With oil and gas production accounting for some 70% of Russia's government spending, Moscow also faces a big shortfall—after budgeting based on $100-a-barrel oil for 2015. Russia's economic growth was already slowing before the plunge in oil prices. Trade sanctions imposed by the U.S. and Europe—in response to the invasion of the <a class="inline_asset" href="http://www.cnbc.com/id/10001247" data-nodeid="10001247" target="_blank">Ukraine</a>—will further crimp growth and government spending.</p>
<p>The impact of budget gaps among big producers like Saudi Arabia and <a class="inline_asset" href="http://www.cnbc.com/id/10000054" data-nodeid="10000054" target="_blank">Russia</a>, though, will be softened somewhat by large reserves built up during boom years. But a protracted era of cheap oil would force them to undertake serious belt-tightening.</p>
<p>Note:  Click on a country to see what % of it's GDP is derived from crude oil.</p>
<p></p>
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</div>Short Black Gold? Commodity Deflationhttp://stockbuz.ning.com/articles/short-black-gold-commodity-deflation2014-11-04T15:41:24.000Z2014-11-04T15:41:24.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_blank" href="https://dwq4do82y8xi7.cloudfront.net/x/faj76OF8/"><img class="align-left" src="https://dwq4do82y8xi7.cloudfront.net/x/faj76OF8/?width=300" width="300"></a>Oil production in North America is booming, crude oil today hitting new 4-year lows, and it is now beginning to have a huge impact on global hydrocarbon markets. In fact, some believe that the <a href="http://www.reuters.com/article/2012/11/12/us-iea-oil-report-idUSBRE8AB0IQ20121112">U.S. will eventually overtake Saudi Arabia</a> and Russia as the world’s biggest producer of the key commodity, with some calling for the surge to happen by the end of the decade and OPEC is left if in a precarious situation. If they cut production, prices may rise but they also risk losing customers to another provider (the U.S. or Russia). If they do not cut production, prices will likely continue to fall due to excess capacity worldwide. </p>
<p>This push towards energy self-sufficiency is largely thanks to the combination of fracking and oil shale, as previously unobtainable supplies are now being unlocked with relative ease. The amounts are so impressive that the <a href="http://www.iea.org/media/news/MTOMR_2013_OVERVIEW.pdf">International Energy Agency</a> last year declared the production surge as a ‘supply shock’ that is causing ‘ripple effects through all aspects of the oil industry’.</p>
<p>There are also those who feel the U.S. is beginning to see the deflation and crude oil (and other commodities) would seem to signalling he's right. While no one likes to see deflation (falling prices), it <em>is</em> beneficial to those who utilize those commodities when their input costs drop. Lower gas prices is also a form of tax cut to the U.S. consumer, giving them more net income to spend within the economy. Deflation in commodities will also force more M&A and closures as smaller players are forced out of the game and larger players take out their competitors in an effort to shrink the playing field.</p>
<p></p>
<p>Falling commodity prices also impact emerging market countries which <em>produce</em> and depend on their exports to support their GDP. <a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290975?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290975?profile=RESIZE_480x480" width="375"></a>According to <a href="http://blogs.barrons.com/emergingmarketsdaily/2014/10/31/citi-cheap-commodities-hurt-all-emerging-markets-but-help-curb-inflation/" target="_blank">Citi:</a></p>
<blockquote>
<p>“Our results suggests that a 10% decline in oil leads to 70-90bp lower rates in Brazil, Chile, Turkey, Korea and Thailand. Meanwhile, 10% lower oil results in 50-80bp higher rates in Hungary, Indonesia and Russia. But since lower oil leads to weaker EM exchange rates by and large.”</p>
</blockquote>
<p>The CRB index (left) has been falling and you chartists out there may agree; it doesn't appear to be bottoming yet (mean reversion?). Click on image to enlarge.</p>
<p>From a contrarian point of view, one may feel it's too late to short black gold but for those who day trade or believe the weakness will persist and see setups going forward, these are the names I would recommend.</p>
<p><strong>Proshares Ultrashort Oil & Gas: ($DUG) Shorts oil & gas companies directly impacted by lower crude oil prices.<br></strong></p>
<blockquote>
<p>ProShares UltraShort Oil & Gas seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Oil & Gas Index. Component companies include oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies.</p>
</blockquote>
<p><span style="text-decoration: underline;"><span class="font-size-4"><strong>2x Short Oil ETF Choices</strong></span></span></p>
<p><strong>ProShares UltraShort DJ-UBS Crude Oil ETF</strong> ($SCO)</p>
<blockquote>
<p>Easily the most popular in the short oil ETF market is SCO, a product that tracks the daily performance of the Dow Jones-UBS Crude Oil Sub-index. This approach gives twice the inverse performance, on a daily basis of WTI crude oil (see <a href="http://www.zacks.com/stock/news/97338/More-Trouble-for-Oil-Services-ETFs">More Trouble for Oil Services ETFs?</a>).</p>
</blockquote>
<p><strong>PowerShares DB Crude Oil Double Short ETN</strong> ($DTO)</p>
<blockquote>
<p>For an ETN approach to inverse crude oil investing, consider the popular DTO for exposure. This product follows a benchmark of crude oil futures contracts with -2x exposure that rebalances on a monthly basis. Thanks to this monthly rebalancing, the decay is likely to be less in the product, while it is also a relatively cheap choice in the space, coming in at 75 basis points a year in fees. While AUM isn’t that great for DTO-- $65 million—the volume is relatively solid at about 200,000 shares a day so this product should be quite tradable.</p>
</blockquote>
<p><span style="text-decoration: underline;"><strong><span class="font-size-4">Other (less popular) short oil ETFs. </span></strong></span></p>
<p><strong>A warning: trading names with lo</strong><strong>w volume can make <em>exiting</em> a trade riskier to get a fill price.</strong></p>
<p><strong>PowerShares DB Crude Oil Short ETN</strong> ($SZO)</p>
<blockquote>
<p>This is arguably the least risky of the bunch, offering investors -1x short exposure to WTI crude. The ETN is rebalanced on a monthly basis though, so decay rebalancing issues are minimized, while it also adds in the yield from short-term T-bills as well. The product charges investors 75 basis points a year for exposure, making it a relatively cheap choice in the inverse ETF market. SZO doesn’t have that much volume though, so bid ask spreads might be a little wide in this fund.</p>
</blockquote>
<p><strong>VelocityShares 3x Inverse Crude ETN</strong> ($DWTI)</p>
<blockquote>
<p>This product is one of the riskier plays in the short oil market, utilizing -3x exposure with daily rebalancing. This is accomplished by following the S&P GSCI Crude Oil Index, which offers up exposure to WTI crude oil. This note is also a bit on the pricier side, as costs come in at 1.35% a year, putting at the high end even in the leverage market. Additionally, volume and assets are quite low, so this might not be the most tradable note out there.</p>
</blockquote>
<p><span style="text-decoration: underline;"><span class="font-size-4"><strong>Bottom Line</strong></span></span></p>
<p>The outlook for oil in the near term isn’t that great. Demand from key countries is quite sluggish while a strong dollar is keeping a lid on commodities as well. Then, when you add in the incredible production statistics that are hitting the oil market, you get a great case to be bearish in the near term. Fortunately though, there are a number of ways to play this trend with ETFs, allowing investors to profit from a bet on a supply shock and lower oil prices in the near term.</p></div>Lower Oil Spawns Numerous Opportunitieshttp://stockbuz.ning.com/articles/lower-oil-spawns-numerous-opportunities2014-10-31T14:12:14.000Z2014-10-31T14:12:14.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290973?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290973?profile=RESIZE_480x480" width="375"></a>As many Western economies are seemingly slowing down again, with most of them still struggling with stubbornly high unemployment levels, they will only benefit from the current sharp drop in oil prices which will stimulate the global economy. Moreover, countries now have the opportunity to replenish stocks and protect themselves against future price hikes. Stockpiling begs the question: how long will prices remain relatively low compared to recent years? Will they fall further? $60 would certainly kick start substantial economic activity or will supply be rained back?</p>
<p>In the past, we have seen the US and its Western partners put pressure on OPEC, and the world's only swing producer Saudi Arabia, to increase supply so as to lower prices or maintain price stability. Are we about to see them create further price fixing market imperfections by asking the Saudis to cut production so as to create a return to higher prices? Much of the Western economic commentaries are suggesting the Middle East will fall apart as falling oil revenues will create unaffordable budget deficits, cuts in government spending, and political uprisings amongst their populations and ultimately scare Middle Eastern governments into considering cutting back on OPEC supply.</p>
<p>The recent period of high but stable oil prices has induced an economic recovery in the US based on lower oil and energy prices, propped up Putin's government and economy which has become more heavily dependent upon its oil revenues, and increased the sovereign wealth funds of the GCC countries of the Middle East. Meanwhile, the rest of the world has suffered economic malaise consigning a generation to a life of unemployment and it appears that some commentators may want to maintain this status quo. Lower oil prices would likely benefit all via economic growth, and not just a few nations self-interests. This brings us to ask: have we been sacrificing economic efficiency for US energy self-sufficiency?</p>
<p>Food prices are also likely to fall, as food production, processing and sales distribution are energy intensive activities, thereby benefiting lower income groups further. Increased consumption will stimulate aggregate demand, creating investment opportunities and economic growth. Governments in the west may also have the opportunity to increase fuel taxes to cover the real cost of the negative externalities of carbon emissions, or raise revenue to improve public transportation systems. Furthermore, governments in the Middle East and Asia will reduce spending on their fuel subsidies and may take the opportunity to improve the workings of market forces, which the IMF and Western powers have been seeking for them to do.</p>
<p>If we can enjoy a period of sustained low oil prices where consumer disposable incomes rise and increase world aggregate demand, we may witness recovery in Europe and rising growth rates again in Asia. This would fuel economic activity at a time when a generation has been lost to unemployment, and maybe allow them to regain for a better future. In this case oil prices will either recover, or rise in demand may equally bring about a rise in supply, ultimately increasing the revenues of oil produces.</p>
<p>Economic theory suggests that a lower price delivered by lowest cost producers is economically efficient. The lower prices will either force high cost producers out of the market or encourage them to seek lower cost technological solutions to stay in the market. The economic solution to our energy requirements is to invest in low cost producers instead of preventing them from reaching the market by financing chaos in the Middle East and Africa. Instead, supporting the development of low cost oil reserves in the Middle East and Africa would benefit these populations. The wealth created from oil revenues could be used to develop infrastructure, education, and health systems, rather than being frittered away by corruption and cronyism. However, this requires international oil and gas companies as well as the US government to rethink their geopolitical strategies and adopt the capitalist model of economic efficiency, rather than supporting a model of imperfect competition and short term self-interest. As the world's largest open economy, the US would benefit more in the long run from encouraging world economic growth, rather than trying to protect its high oil price by fair means or foul.</p>
<p>Read more at <a href="http://www.brookings.edu/research/opinions/2014/10/30-oil-a-question-of-economics-alkhatteeb?utm_campaign=Brookings+Brief&utm_source=hs_email&utm_medium=email&utm_content=14723391&_hsenc=p2ANqtz-9TS-vfqSvTWKZ3NLrvPVtRQGWv8RU15eG7f7WWn8UH5k1R8bqBSme1hNcS-a3-wvDgzBcfu6F8KRMEAF5rbdyxNCa1xw&_hsmi=14723391" target="_blank">Brookings.edu</a></p></div>Sonic Cannons And Noise Levelshttp://stockbuz.ning.com/articles/sonic-cannons-and-noise-levels2014-07-19T16:51:53.000Z2014-07-19T16:51:53.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_blank" href="http://newsbcpcol.stb.s-msn.com/amnews/i/23/17dd3c47a2e3f6e51033499228e8db/_h353_w628_m6_otrue_lfalse.jpg"><img class="align-right" src="http://newsbcpcol.stb.s-msn.com/amnews/i/23/17dd3c47a2e3f6e51033499228e8db/_h353_w628_m6_otrue_lfalse.jpg?width=628" height="203" width="362" /></a>Just some numbers on sonic cannon mapping I thought were interesting after the Obama administration announced approval for use of sonic cannons off of the Eastern US coast for geological survey purposes; much to the dismay of environmentalists and people who owe their livelihoods to fisheries and tourism.  Energy companies however, need the data as they prepare to apply for drilling leases in 2018, when current congressional limits expire.</p>
<p>The cannons create noise pollution in waters shared by whales, dolphins and turtles, sending sound waves many times louder than a jet engine reverberating through the deep every ten seconds for weeks or monthly at a time.</p>
<p>They are already used in the western Gulf of Mexico, off Alaska and in other offshore oil operations around the world. They are towed behind boats, sending down pulses of sound that reverberate beneath the sea floor and rebound to the surface. Hydrophones capture the results, which computers translate into high resolution, three-dimensional images.</p>
<p>So just "what" are whales and dolphins in for?  This makes it simple:</p>
<p>60 decibels. This is how loud humans normally talk.</p>
<p>140 decibels. Even momentary exposure to sound at this level can cause permanent hearing damage in humans.</p>
<p>180 decibels. The maximum underwater noise from sonic cannons allowed within 500 meters, mitigating physical damage to marine mammals.</p>
<p>2,500 miles. How far away lower levels of noise pollution from the cannons have been recorded by hydrophones.</p>
<p>138,000. The minimum number of whales, turtles and other sea creatures that could be harmed, according to government estimates.</p>
<p>280,000. The number of jobs the American Petroleum Institute says could be created by offshore drilling in the Atlantic.</p>
<p>4.72 billion. The number of barrels of "technically recoverable oil" beneath federal waters from Florida to Maine, according to government estimates.</p>
<p>$23.5 billion. The annual economic contribution that Atlantic oil drilling could bring to the U.S. economy, according to the oil industry.</p>
<p>It's difficult to imagine that this will go well for the whales and dolphins in the Atlantic.  As if Deepwater Horizon wasn't devastating enough to the Gulf; now this.  You've gotta love Capitalism.</p>
<p>Hat tip to <a href="http://MSN.com" target="_blank">MSN</a> and <a href="http://www.startribune.com/business/267750391.html" target="_blank">StarTribune</a></p>
</div>Obama Approves Sonic Cannon For Oil Explorationhttp://stockbuz.ning.com/articles/obama-approves-sonic-cannon-for-oil-exploration2014-07-18T14:36:27.000Z2014-07-18T14:36:27.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_blank" href="http://cdn.abclocal.go.com/content/wtvd/images/cms/automation/images/197738_630x354.jpg"><img class="align-left" src="http://cdn.abclocal.go.com/content/wtvd/images/cms/automation/images/197738_630x354.jpg?width=300" width="300" /></a>The Obama administration has approved the use of sonic cannons to explore for oil and gas off the <a href="http://abc11.com/politics/obama-approves-sonic-cannons-opening-us-eastern-seaboard-to-oil-exploration/197726/" target="_blank">Eastern Shore</a> using seismic survey ships which tow airguns that emit underwater explosions over thousands of miles along the coast.  These blast results would transform into a survey of the seabed floor to reveal potential drill sites.<br />
<br />
The Bureau of Ocean Energy Management on Friday formally approved guidelines for using air cannons along the Eastern seaboard in the Atlantic Ocean from Florida to Delaware.  <a href="http://www.huffingtonpost.com/2013/12/23/offshore-drilling-atlantic-white-house-seismic-exploration_n_4493799.html" target="_blank">Energy companies</a> could buy new oil and gas leases and begin drilling in 2018 if they find profitable reserves.<br />
<br />
The guidelines are meant to protect endangered whales and other creatures from the loud noises and increased vessel traffic, but the government's environmental impact study estimates that more than 138,000 sea creatures could be harmed.</p>
<div style="float: left; margin: 0 10px 5px 0;"><iframe width="560" height="315" src="//www.youtube.com/embed/IyAyd4WnvhU" frameborder="0" allowfullscreen=""></iframe></div>
<p>The decision opens an area of the Eastern Seaboard larger than two California's to exploration for the first time in decades, jeopardizing (or overruling?) a 30 year+ bipartisan offshore drilling moratorium that protects America's most sensitive coastal national treasures</p>
<p>We pondered just what was a sonic cannon and enjoyed a chuckle at the BBC demonstration of a (ground) vortex cannon.  Pretty cool!</p>
<p>We get the idea.  <a href="http://www.greenpeace.org/usa/en/news-and-blogs/news/big-oil-pushes-to-blast-coasts/" target="_blank">Greenpeace</a> however, had been fighting the move for a decade claiming the potential for harm to fish and mammals.</p>
<p>In June we had pointed to a <a href="http://stockbuz.net/articles/on-the-docket-help-coming-for-oil-drillers" target="_self">House resolution</a> that had the potential to lower gasoline costs by expanding drilling.  Were you watching? </p>
<p>Full disclosure I am long two drillers (NE and RIG)</p>
<p>(edited @ 1:18 to add link)</p>
<p></p>
</div>On The Docket. Help Coming For Oil Drillers?http://stockbuz.ning.com/articles/on-the-docket-help-coming-for-oil-drillers2014-06-25T17:39:33.000Z2014-06-25T17:39:33.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290758?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1290758?profile=RESIZE_480x480" width="349"></a>While it's obvious nothing will be done until after mid term elections this Fall and new officials are sworn it, it would appear there's hope for appropriations in the drilling and exploration area going to next year. Per <a href="https://www.govtrack.us/congress/bills/113/hres641?utm_campaign=govtrack_email_update&utm_source=govtrack/email_update&utm_medium=email" target="_blank">GovTrack.us</a></p>
<h1><span class="font-size-4">H.Res. 641: Providing for consideration of the bill (H.R. 4899) to lower gasoline prices for the American family by increasing domestic ...</span></h1>
<div class="info" style="background: none;">
<p id="h1_overflow">... onshore and offshore energy exploration and production, to streamline and improve onshore and offshore energy permitting and administration, and for other purposes; providing for consideration of the bill (H.R. 4923) making appropriations for energy and water development and related agencies for the fiscal year ending September 30, 2015, and for other purposes; and for other purposes.</p>
<dl>
<dt>
Introduced:
</dt>
<dd>
Jun 24, 2014
</dd>
<dt>
Status:
</dt>
<dd>
Reported by Committee on Jun 24, 2014
</dd>
<dt>
Prognosis
</dt>
<dd>
99% chance of being agreed to
</dd>
</dl>
</div>
<p>Read <a href="https://www.govtrack.us/congress/bills/113/hres641/text" target="_blank">full text</a></p>
<p>I had previously recommended accumulating <a href="http://stockbuz.net/charts/rig-daily-breakout?context=category-Long+Setups" target="_self">RIG near $40</a> and NE in Chat while it was near it's 200month SMA. That, to me, is good company to have an average price with. This not a recommendation for a quick trade but for a long hold. Throw 'em in a drawer and <em>fuhgettabotit</em>. Risk to your tolerance but I go with 10% on most trades and take partials at major moving average or fibonacci levels. Use alerts - not stops so that market makers don't "see" you. If it loses 10% and breaks that major of a support, you won't be the only one being stopped out. So will major funds. Chart of $NE is shown - click on image to enlarge.</p></div>Because Demand Is What Drives Price, Sure........http://stockbuz.ning.com/articles/because-demand-is-what-drives-price-sure2014-06-25T15:32:54.000Z2014-06-25T15:32:54.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>Filling up at the pump yesterday, paying $3.79 for <span style="text-decoration: underline;">low</span> grade made me wonder. Aren't you supposed to be kissed before you get screwed over? Captain Obvious over the last few years is the disconnect between gasoline demand/usage in the U.S. vs. price when it comes to the stinky stuff and that price chart certainly looks like a large, bull flag which should make your head spin at the potential increase ahead unless something changes. Surely the gentleman next to me would have to sell a body part or small child to fill up his enormous SUV. Fool with that huge tank but he thinks he looks slick. The powers that be decided they wanted us to become accustomed to $3/gal and it seems that we have unfortunately but I have to keep saying it, the demand just does not justify the price of oil without a supply disruption or military crisis in the Middle East. As much as I hate to say it, the Prius is beginning to look good. Maybe a scooter? It worked well for Larry Crowne. Someone save me.</p>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290777?profile=original"><img class="align-full" src="http://storage.ning.com/topology/rest/1.0/file/get/1290777?profile=RESIZE_1024x1024" width="750"></a></p>
<p></p></div>Germans Leaving The U.S. In the (Coal) Dust On Renewable Energyhttp://stockbuz.ning.com/articles/germans-leaving-the-u-s-in-the-coal-dust-on-renewable-energy2014-06-23T18:06:10.000Z2014-06-23T18:06:10.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_blank" href="http://i1024.photobucket.com/albums/y304/dpk0802/german_solar_farm_zpsf739d698.jpg"><img class="align-right" src="http://i1024.photobucket.com/albums/y304/dpk0802/german_solar_farm_zpsf739d698.jpg?width=320" height="210" width="265" /></a></p>
<p>(<em>edited 1:18pm to add U.S. projections)</em></p>
<p>Germans have now achieved goals, which coal industry skeptics have been claiming for the last 40 years could not be achieved even by 2050 and is is rapidly becoming a model country for transitions to renewable and sustainable energy proving that "<em>yes</em>, a transition to a renewable energy economy can be done, and it can be down with continuous improvement to existing technology.</p>
<p>Germans have a special word for it -"'Energiewende', or energy transformation - which aims to power the entire country by renewable resources by 2050." Germans are now laying down a challenge for other countries saying there is no longer any excuse for countries to say this is impossible.</p>
<p>June 6, 2014 was a record breaking day for the solar power industry in Germany when the country broke through the symbolic barrier of generating more than <strong>50%</strong> of its total electricity needs with solar power for one hour in an all time record, according to Tobias Rothachter, and expert on renewable energy at Germany's Trade and Invest.</p>
<p><a target="_blank" href="http://www.inforse.org/europe/images/EU27-vision-RE.gif"><img class="align-left" src="http://www.inforse.org/europe/images/EU27-vision-RE.gif?width=511" height="244" width="367" /></a>Indeed, the EU has taken an <a href="http://www.inforse.org/europe/VisionEU27.htm" target="_blank">aggressive vision</a> <font face="Arial, Helvetica, sans-serif" size="2">for the transition of the energy supply and demand for the 27 EU countries to 100% renewable energy together with phase-out of fossil and nuclear energy until 2040. With the vision and the underlying scenario is a reduction of CO<font size="1">2</font> emissions from energy use of just above 40% until 2020</font></p>
<p>Incredibly it would appear solar power is now the dominant #1 producer of electric power in Germany, and wind electric is the second with the two together providing 74% of all the countries electrical power needs in 2014.  Simply amazing stuff.  It should also be noted that Wind also set a single day record producing 39% of the countries electricity in December.</p>
<p>Another recent study has shown that solar electrical generation in German has just achieved the longed-for, but illusive, <strong>grid parity</strong> with other forms of electrical generation in the country.  Andres Loubrielhttp of The Guardian brings us all this good news in <a href="http://guardianlv.com/2014/06/50-percent-of-the-energy-produced-in-germany-is-solar-new-record/">50 Percent of the Energy Produced in Germany Is Solar: New Record.</a></p>
<p><a target="_blank" href="http://www.rmi.org/cms/Image.ashx?type=rfgraph&media=%2fContent%2fImages%2fKnowledgeCenter%2fRFGraph%2fUS_installed_wind_solar_power_capacities.jpg"><img class="align-right" src="http://www.rmi.org/cms/Image.ashx?type=rfgraph&media=%2fContent%2fImages%2fKnowledgeCenter%2fRFGraph%2fUS_installed_wind_solar_power_capacities.jpg" /></a></p>
<p>The U.S. meanwhile seems to have been completely asleep as the renewable wheel as the chart to the right demonstrates.  Even states such as Oklahoma seem determined to make out on the renewable game with their <a href="http://stockbuz.net/articles/list/tag/oklahoma" target="_self">passage of a tax</a> in April on anyone installing solar to offset existing electric grid infrastructure costs.  Don't even get me going on that rant.  Grrrrr</p>
<p>Sadly renewables accounted for a pitiful <strong>9.29%</strong> of total energy production in the U.S. in 2012 according to EIA.gov. (according to data <a href="http://www.eia.gov/beta/MER/index.cfm?tbl=T01.02#/?f=A" target="_blank">accessed today</a>) which begs the question: "will oil-baron-billionaire-dominated America ever catch up?"</p>
<p>Hat tips to the <a href="http://guardianlv.com" target="_blank">Guardian</a> and <a href="http://dailykos.com" target="_blank">DailyKos</a></p>
</div>LNG Has "No Climate Benefits" Says DoEhttp://stockbuz.ning.com/articles/lng-has-no-climate-benefits-says-doe2014-06-05T22:22:38.000Z2014-06-05T22:22:38.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>An explosive <a href="http://energy.gov/fe/downloads/life-cycle-greenhouse-gas-perspective-exporting-liquefied-natural-gas-united-states">new report</a> from the U.S. Department of Energy makes clear that Liquefied Natural Gas (LNG) is likely a climate-destroying misallocation of resources.</p>
<p>That is, if one uses estimates for methane leakage based on actual observations.</p>
<p>This is the same conclusion I reached <a href="http://thinkprogress.org/climate/2012/08/16/699601/exporting-liquefied-natural-gas-lng-bad-for-climate-poor-long-term-investment/">back in 2012</a>, based on</p>
<ul>
<li>Emerging analyses of how even a relatively low leakage rate in the natural gas production and delivery system negate its climate benefit, and</li>
<li>A 2009 EU report on how the energy-intensive liquefaction process and transportation further increase LNG emissions.</li>
</ul>
<p><a target="_blank" href="http://thinkprogress.org/wp-content/uploads/2014/03/How-LNG-Reaches-Consumers.gif"><img class="align-right" src="http://thinkprogress.org/wp-content/uploads/2014/03/How-LNG-Reaches-Consumers.gif" /></a>Again, natural gas is <a href="http://thinkprogress.org/climate/2011/04/13/207884/natural-gas-is-mostly-methane/">mostly methane</a>, and <a href="http://thinkprogress.org/climate/2013/10/02/2708911/fracking-ipcc-methane/">some 86 times</a> (to as much as <a href="http://onlinelibrary.wiley.com/doi/10.1002/ese3.35/full">105 times</a>) better at trapping heat than carbon dioxide.</p>
<p>One of the country’s leading experts on natural gas leaks told me, “a close reading of the DOE report in the context of the recent literature indicates that exporting natural gas from the U.S. as LNG is a very poor idea.”</p>
<p>So you may wonder why the Financial Times had <a href="http://www.ft.com/intl/cms/s/0/9aaf2a3a-e801-11e3-9af8-00144feabdc0.html#axzz33fytQ1bF">this headline</a> on its story: “US LNG exports could help countries curb emissions.”</p>
<p>To make LNG a climate winner, you’d have to assume levels of methane leakage that are a factor of 2 to 3 lower than what recent observations reveal. That is exactly what DOE’s National Energy Technology Laboratory (NETL) does in its <a href="http://energy.gov/sites/prod/files/2014/05/f16/Life%20Cycle%20GHG%20Perspective%20Report.pdf">analysis</a>, “Life Cycle Greenhouse Gas Perspective on Exporting Liquefied Natural Gas from the United States.”</p>
<p>Here is the stunning (if confusing) chart from the DOE report:</p>
<div class="wide-photo-box"><img src="http://thinkprogress.org/wp-content/uploads/2014/05/LNG1-638x388.jpg" alt="LNG DOE" />
<p class="photo-caption">FIGURE 6-9 depicts the life cycle GHG emissions for the U.S. LNG and Russian natural gas scenarios as a function of the methane leakage that occurs during extraction, processing, and transport on a 20-year basis. It also includes a reference line for the coal power scenario. The diamond-shaped data points represent the modeled leakage for each scenario and the circular data points represent the breakeven leakage at which the life cycle GHG emissions for natural gas power would equal those for the coal reference case.</p>
</div>
<p>Yes, despite multiple studies to the contrary, the DOE is asserting that the leakage rate is very low in the U.S. (but not in Russia, of course) — so low that U.S. LNG just happens to be better for Europe than its own coal:</p>
<blockquote>
<p>“The high modeled leakage rate for the U.S. LNG scenarios (1.6 percent) is still less than the breakeven percentage for the European scenario (1.9 percent), but slightly higher than the breakeven for the Asian scenario (1.4 percent)…. As previously noted, the calculated breakeven points are the most conservative, so these results do not indicate that natural gas has a higher GHG than coal on a 20-year basis in all cases.”</p>
</blockquote>
<p>The DOE is actually asserting that the absurdly low leakage rate of 1.6 percent is conservative! How conservative? Look at this table:</p>
<div class="wide-photo-box"><img src="http://thinkprogress.org/wp-content/uploads/2014/06/LNG2-638x114.jpg" alt="LNG2" /></div>
<p>For DOE, <em>1.6 percent leakage is the highest leakage rate they considered</em>!! And 1.4% is what they expect for shale gas. #FAIL</p>
<p>In fact, leakage rates are almost certainly at least double that! Yes, the EPA has <a href="http://www.climatecentral.org/news/limiting-methane-leaks-critical-to-gas-climate-benefits-16020">lowered its estimate to about 1.5 percent</a> — based solely on industry-provided numbers. But multiple studies in the last two years based on actual observations have made clear the EPA was simply wrong.</p>
<p>Back <a href="http://thinkprogress.org/climate/2013/11/25/2988801/study-methane-emissions-natural-gas-production/">in November</a>, fifteen scientists from some of the leading institutions in the world — including Harvard, NOAA and Lawrence Berkeley National Lab — published a seminal observation-based study, “<a href="http://www.pnas.org/content/early/2013/11/20/1314392110.abstract">Anthropogenic emissions of methane in the United States</a>.” The authors took the unusual step of explicitly criticizing the EPA: “The US EPA recently decreased its CH4 emission factors for fossil fuel extraction and processing by 25–30% (for 1990–2011), but we find that CH4 data from across North America instead indicate the need for a larger adjustment of the <em>opposite</em> sign.”</p>
<p>How much larger? The study found greenhouse gas emissions from “fossil fuel extraction and processing (i.e., oil and/or natural gas) are likely a factor of two or greater than cited in existing studies.” In particular, they concluded, “regional methane emissions due to fossil fuel extraction and processing could be 4.9 ± 2.6 times larger than in EDGAR, the most comprehensive global methane inventory.”</p>
<p>This suggests the methane leakage rate from natural gas production is in fact 3 percent or higher.</p>
<p>A comprehensive Stanford study from February <a href="http://news.stanford.edu/news/2014/february/methane-leaky-gas-021314.html">suggested things might even be worse</a>: “A review of more than 200 earlier studies confirms that U.S. emissions of methane are considerably higher than official estimates. Leaks from the nation’s natural gas system are an important part of the problem.” Their analysis finds:</p>
<blockquote>
<p>“… an excess percentage leakage of 1.8% to 5.4% of end use gas. Coupled with the current estimate of 1.8% leakage of end use gas consumed, <strong>this generates a high-end estimate of 7.1% gas leakage</strong>.”</p>
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<p>Ouch.</p>
<p>After discussing the matter with the lead author, Stanford’s Adam Brandt, I wrote that given the risks to humanity from climate change, it seems conservative to take the middle of the range, 5.4%. That’s particularly conservative given that 3 separate studies by NOAA found leakage rates just from NG production of <a href="http://thinkprogress.org/climate/2012/02/08/421588/high-methane-emissions-measured-over-gas-field-offset-climate-benefits-of-natural-gasquot/">4%</a>, <a href="http://www.esrl.noaa.gov/csd/news/2013/140_0514.html">17%</a>, and <a href="http://thinkprogress.org/climate/2013/09/19/2646881/study-fracked-wells-methane-emissions-super-emitters/">6-12%</a>!</p>
<p>[In case you wondered if the Stanford study was too recent for NETL to include in its May 29 report, NETL released <a href="http://www.netl.doe.gov/File%20Library/Research/Oil-Gas/publications/NG_Literature_Review3_Post.pdf">another report</a> on natural gas emissions the same day that cites it several times.]</p>
<p>If one were to use 3 percent as the leakage rate, LNG-fueled power plants would be worse than coal from a climate perspective for decades. If you use 5.4 percent, then Figure 6.8 makes clear <em>LNG-fueled power plants are worse than coal for a century</em>!</p>
<p>Finally, the recent observation-based calculations of methane leakage are quite similar to that estimated in the much-maligned (but apparently correct) 2012 <a href="http://thinkprogress.org/romm/2011/04/12/207875/shal-gas-bridge-fuel/">Cornell study</a> led by Cornell’s Bob Howarth. So I asked Howarth for comment on NETL’s report. He replied:</p>
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<p>The NETL report seems determined to prove that LNG export from the US is desirable from a climate perspective, and the authors have torqued their analysis in several ways to reach this conclusion. A big omission is their failure to consider methane emissions from the LNG tankers and storage tanks: “boil off,” or the purposeful release of LNG that provides evaporative cooling to maintain the liquid status of the LNG. LNG tankers try to capture most of this boil off, but even small losses are highly significant and can make LNG a disastrous fuel from the standpoint of global warming. I find it remarkable that the NETL report does not even mention methane emissions from boil off.</p>
<p>Despite these shortcomings, <strong>a close reading of the NETL report in the context of the recent literature indicates that exporting natural gas from the US as LNG is a very poor idea</strong>. For instance, their figure 6.9 shows that coal has a lower greenhouse gas footprint than exported LNG if the upstream methane emission rates are greater than 1.6% to 1.9%, when considered over an integrated 20-year time period following the methane emission, even when though they are ignoring the boil-off emissions. Because of risk of hitting tipping points in the climate system due to climatic warming from methane emissions over the cover few decades, this shorter time frame of analysis is critical. And current upstream methane emissions from shale and other unconventional natural gas are almost certainly greater than these break-even values of 1.6% to 1.9%, as shown by much recent literature summarized in my paper published last month (online <a href="http://onlinelibrary.wiley.com/doi/10.1002/ese3.35/full">here</a>).</p>
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<p>Precisely.</p>
<p>One final point: Contrary to the implication of NETL’s analysis, natural gas doesn’t just displace coal — it also displaces carbon-free sources of power such as renewable energy, nuclear power, and energy efficiency. A <a href="http://co2scorecard.org/home/researchitem/28">recent analysis</a> finds that effect has been large enough recently to wipe out almost the entire climate benefit from increasing natural gas use in the U.S. utility sector if the leakage rate is only 1.2 percent.</p>
<p>BOTTOM LINE: Investing billions of dollars in new shale gas infrastructure for domestic use is, as we’ve seen, <a href="http://thinkprogress.org/climate/2014/02/19/3296831/natural-gas-climate-benefit/">a bridge to nowhere</a> — especially until we put in place both a CO2 price and regulations to minimize methane leakage. The extra emissions from LNG completely eliminate whatever benefit there might be of building billion-dollar export terminals and other LNG infrastructure, which in any case will last many decades, long after we need a nearly carbon-free electric grid. At best, investing billions in LNG infrastructure is a waste of enormous resources better utilized for deploying truly low-carbon energy. At worst, it helps accelerate the world past the 2°C (3.6°F) warming threshold into <em>Terra incognita —</em> <a href="http://thinkprogress.org/climate/2012/10/14/1009121/science-of-global-warming-impacts-guide/">a planet of amplifying feedbacks and multiple simultaneous catastrophic impacts</a>.</p>
<p>*If one uses estimates for methane leakage based on actual observations.</p>
<p>Courtesy of <a href="http://thinkprogress.org/climate/2014/06/04/3443211/energy-department-lng-no-climate-benefits/" target="_blank">Thinkprogress</a></p>
</div>Seasonal Demand Trades June 2014http://stockbuz.ning.com/articles/seasonal-demand-trades-june-20142014-06-01T21:39:07.000Z2014-06-01T21:39:07.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>Seasonal demand is just what it sounds like. What seasons certain things see higher demand such as natural gas for A/C and heating or gold for jewelry manufacturing and sales. With that in mind I thought I'd flip through our <a href="http://stockbuz.net/charts/Seasonality" target="_self">Seasonal Charts</a> for hints of possible trades here and in the months approaching. My unscientific belief has been that larger players begin to buy long futures contracts <em>before</em> the season hits so I begin to watch for divergences and support in charts. Click on the charts below for a better view. Let's take a look:</p>
<p><a target="_self" href="http://stockbuz.net/charts/consumer-staples-seasonality?context=category-Seasonality"><img class="align-left" style="padding: 10px;" src="http://storage.ning.com/topology/rest/1.0/file/get/1290688?profile=RESIZE_480x480" width="375"></a><a href="http://stockbuz.net/charts/consumer-staples-seasonality" target="_self"></a></p>
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<p><a href="http://stockbuz.net/charts/consumer-staples-seasonality" target="_self">Consumer Staples</a> Which can be traded via $XLP or one of it's components are items which consumers feel they cannot do without. They're considered non-cyclical, meaning that they are always in demand, no matter how well the economy is performing (or not performing). Think diapers $KMB, personal hygiene $PG, discounters like $WMT, beverages such as $KO, cigarettes $MO and $PM, pharmacies such as $WAG and $CVS. There are many other names, but you get the picture. They're slow but steady growers with dividends which heat up in the Summer and ramp until end of year. The type of thing yo can buy at the 20d SMA but back up the truck at the 200d. </p>
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<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290707?profile=original"><img class="align-left" style="padding: 10px;" src="http://storage.ning.com/topology/rest/1.0/file/get/1290707?profile=RESIZE_480x480" width="348"></a><a href="http://stockbuz.net/charts/nat-gas-seasonality?context=category-Seasonality" target="_self"></a></p>
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<p><a href="http://stockbuz.net/charts/nat-gas-seasonality?context=category-Seasonality" target="_self">Natural Gas</a> Yes as much as I hate to think it, nat gas demand increases as the Summer heats up. It's one to watch the weather channel however. Mild temps and it will fall like a rock. Extreme heat and you have a trade as the shorts are squeezed. I wouldn't recommend investing via $UNG (very flawed) but rather prefer $FCG or one of it's components.</p>
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<p><a target="_self" href="http://stockbuz.net/charts/30-year-bond-seasonality"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290735?profile=RESIZE_480x480" width="375"></a></p>
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<p><a href="http://stockbuz.net/charts/30-year-bond-seasonality" target="_self">Bonds</a> Whether it's the 2yr, 5yr or 30yr (shown) bonds or flight to safety tends to ramp up Spring through end of year when tax receipts are into the government via income taxes and "sell in May, go away" begins. idk if I'd chase them here but on a pullback, maybe for a trade. $BND is just one of the numerous bond ETFs out there as well as the well-known 20yr treasury$TLT</p>
<p>They are TRADES right now - not investments. Stay nimble.</p>
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<p><a href="http://stockbuz.net/charts/corn-seasonality-1?context=category-Seasonality" target="_self">Corn</a> and <a href="http://stockbuz.net/charts/soybean-oil-seasonality?context=category-Seasonality" target="_self">Soybean</a> shorts. Once they're in the ground, seasonal demand drops through Fall. $JJG and $CORN are two ways to short grains although thinly traded.</p>
<p><a href="http://stockbuz.net/charts/crude-oil-seasonality?context=category-Seasonality" target="_self">Crude Oil</a> and <a href="http://stockbuz.net/charts/gasoline-seasonality?context=category-Seasonality" target="_self">Gasoline </a> longs. We're talking Summer driving season, then a lull when the kiddies return to school but then a ramp again into the Fall/Winter holidays. We've already recommended <a href="http://stockbuz.net/charts/uso-breakout?context=category-Long+Setups" target="_self">long $USO</a> and will most likely be adding to that position this week. Stay tuned.</p>
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<p><a target="_self" href="http://stockbuz.net/charts/gold-seasonality?context=category-Seasonality"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290757?profile=RESIZE_480x480" width="375"></a>Lastly we have everyone's favorite <a href="http://stockbuz.net/charts/gold-seasonality?context=category-Seasonality" target="_self">Gold</a> which catches a season bid going into India's festive wedding season however it should be noted that purchases of the yellow metal <a href="http://blogs.wsj.com/indiarealtime/2014/05/20/indias-gold-demand-falls-in-first-quarter/" target="_blank">fell in Q1 by 26%</a> supposedly due to government restrictions and tariffs. Still India is #2 to China in gold importing and with China's slowdown, one has to wonder if India will come out on top in 2014. </p>
<p>$GLD is deeply oversold; maybe a short covering rally? Watch the charts for a signal.</p></div>The Truth And Myths Of Greentechhttp://stockbuz.ning.com/articles/the-truth-and-myths-of-greentech2014-05-11T00:39:51.000Z2014-05-11T00:39:51.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>We are witnessing the maturation of an industry and the adoption of proven management practices. Successful cleantech companies are making their offerings competitive by focusing on excellence in operations, marketing, sales, and distribution. The principles that apply to any manufacturing business, such as reducing procurement costs and improving productivity through lean manufacturing, are increasingly important for clean technologies as well.</p>
<p>The cleantech space is diverse; it cannot be painted with a broad brush. We looked at 16 important clean technologies and found that while every single one has made progress over the past decade, some are moving much faster than others. Just over half of them—advanced building technologies, advanced agriculture, food life-cycle optimization, grid analytics, grid-scale storage, intelligent transport, next-generation vehicles, solar PVs (photovoltaics), unconventional natural gas, and water treatment—could become truly disruptive to the incumbent industries. The others have enormous potential and could well succeed, but without disrupting the status quo.</p>
<p>Total installed costs that US residential consumers pay for solar PV have also been falling fast, from <a target="_blank" href="http://www.mckinsey.com/%7E/media/McKinsey/dotcom/Insights/Energy%20Resources%20Materials/Myths%20and%20realities%20of%20clean%20technologies/SVG_CleanTech_ex.ashx?mw=510"><img class="align-right" src="http://www.mckinsey.com/%7E/media/McKinsey/dotcom/Insights/Energy%20Resources%20Materials/Myths%20and%20realities%20of%20clean%20technologies/SVG_CleanTech_ex.ashx?mw=510&width=510" width="510" /></a>nearly $7 per watt of peak system capacity in 2008 to less than $4 in 2013. We think that could fall to as little as $1.60 by 2020.<sup> </sup> The bottom line: cleantech is getting more economically competitive.</p>
<p>Four critical elements—cost, access to capital, the go-to-market approach (broadly defined), and regulation—typically must come together to create successful cleantech businesses.</p>
<p>As the industry matures, the relative importance of these factors is changing: regulation is becoming irrelevant in many cases as clean technologies find their competitive footing. LED lighting is one example: in 2013, LED light sources accounted for the majority of the sales of several large lighting manufacturers, even in markets where incandescent bulbs are still widely available. That figure could rise to more than 80 percent by 2015.</p>
<p>Trends can accelerate, slow down, or even reverse. But it’s unlikely that all these technologies will fail, and many are now at the stage where management practices, and not regulation or subsidies, are the defining factor for success. Those that do succeed could be highly disruptive to incumbents, even (or especially) well-entrenched ones. Big changes in resource use and business models are just around the corner.</p>
<p>To be sure, some cleantech companies will go bust, and some technologies will not make the cut. But these ups and downs are simply the nature of business—part of progress. Notwithstanding the failures of individual companies, cleantech is not going away, either on the ground or as an investment opportunity. And that’s no myth.</p>
<p><a href="http://www.mckinsey.com/insights/energy_resources_materials/myths_and_realities_of_clean_technologies?cid=other-eml-nsl-mip-mck-oth-1405" target="_blank">Full post at McKinsey</a></p>
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