[QUOTE=cmakin;177020]A US Standard of living is not culturally likely in China and India. . .[/QUOTE]
I agree 100%. It is not desirable either.
Let us hope that they don’t fall into the trap of equating ownership of stuff with “standard of living”.
Quality of living is more important than materialistic “standard of living”.
[QUOTE=ombugge;177026]I agree 100%. It is not desirable either.
Let us hope that they don’t fall into the trap of equating ownership of stuff with “standard of living”.
Quality of living is more important than materialistic “standard of living”.[/QUOTE]
China is trying to convert their economy to one that is more consumer driven, closer to that of the US as not to depend entirely on a manufacturing base driven by outside forces. Not that wanting or desiring “stuff” is what life is all about, but people buying stuff simply employs a lot of people.
I would argue that ownership of stuff does in-fact increase standard of living. Think of the time saved for family by having a washer and dryer, and not having the wife on the scrub board. You can correlate that to many things. It’s in most everyone’s interest that people with too much money buy stuff, stupid materialistic things, things that they may hardly use and certainly do not need. Who cares what materialist value is placed on that stuff, and what status it may ensue. At the end of the day, someone will be employed to facilitate that craziness, and will buy themselves a washer and dryer because of it.
[QUOTE=anchorman;177033]China is trying to convert their economy to one that is more consumer driven, closer to that of the US as not to depend entirely on a manufacturing base driven by outside forces. Not that wanting or desiring “stuff” is what life is all about, but people buying stuff simply employs a lot of people.
I would argue that ownership of stuff does in-fact increase standard of living. Think of the time saved for family by having a washer and dryer, and not having the wife on the scrub board. You can correlate that to many things. It’s in most everyone’s interest that people with too much money buy stuff, stupid materialistic things, things that they may hardly use and certainly do not need. Who cares what materialist value is placed on that stuff, and what status it may ensue. At the end of the day, someone will be employed to facilitate that craziness, and will buy themselves a washer and dryer because of it.[/QUOTE]
Yes having washer, dryer and other things increase the family time, but maybe more important is working hours and holidays.
The car you drive and the size of your TV screen is not as important as the leisure time available and how you spend it.
Security and safety in the form of economy, health care, job security and not having to worry about crime is also part of quality of life.
[QUOTE=ombugge;177041]Yes having washer, dryer and other things increase the family time, but maybe more important is working hours and holidays.
The car you drive and the size of your TV screen is not as important as the leisure time available and how you spend it.
Security and safety in the form of economy, health care, job security and not having to worry about crime is also part of quality of life.[/QUOTE]
The US is a very large and very diverse country in many many ways.
As we have seen, if the US economy catches a cold, most of the rest of the world catches pneumonia.
Most of the US has fair quality health care. Insurance is expensive and not everyone has it, but no one is left untreated for life threatening conditions because they cannot pay.
There is no job security except in government and education employment.
Crime is a problem in any big city. It’s not much of a problem in most rural areas.
Most mariners earn enough to live comfortably.
the hemorrhaging continues without pause
[B]US oil settles down $1.75, or 5.28%, at $31.41 a barrel[/B]
A brutal new year selloff in oil markets deepened on Monday, with prices plunging more than 6 percent to new 12-year lows as further ructions in the Chinese stock market threatened to knock crude into the $20s.
On Monday, China’s blue-chip stocks fell by another 5 percent and overnight interest rates for the yuan outside of China soared to nearly 40 percent, their highest since the launch of the offshore market.
Morgan Stanley warned that a further devaluation of the yuan could send oil prices spiraling lower still, extending the year’s nearly 15 percent slide.
While China’s ructions are spooking traders over the outlook for demand from the world’s No. 2 consumer, drillers in the United States say they are focused are keeping their wells running as long as possible, despite the slump, executives told a Goldman Sachs conference last week.
U.S. West Texas Intermediate (WTI) crude settled at $31.41 a barrel, down $1.75, or 5.28, having early fallen to $31.88, an intraday low going back to December 2003.
Brent crude futures were down by $1.99 at $31.56 a barrel, after falling to the lowest level since April 2004.
The markets are positioned in a way where “traders are afraid to be long,” said Clayton Vernon, a trader and economist with Aquivia LLC in New Jersey. “The firm push for normalization with Iran has taken the last shred of geopolitical risk out of traders’ minds.”
The European Union said on Monday that the lifting of sanctions on Iran could come soon, following a deal last year to curb the Middle East nation’s nuclear program. Many market participants that Iran’s return to the oil markets would add more pressure to the global glut that has knocked prices from more than $100 in mid-2014.
Even so, many big investors are still shifting more of their bets to the bearish side of the market. Speculators cut their net long position to the small since 2010 in the week to last Tuesday, with short positions rising in a sign that they are losing faith in a price rise any time soon.
“If the first week is anything to go by we are in for a long, volatile and very exhausting year. The week started on a bad note and ended on a good one but the market response, worryingly, was the same to both — sell, sell, sell,” David Hufton, of oil brokers PVM Oil Associates, wrote in a note.
“China has torpedoed the hopes of the optimists. The third leg of the financial crises involving emerging markets that the IMF, World Bank, BIS and various messengers of doom had warned of has come into play,” he said.
Goldman Sachs analysts, who have also said oil could hit $20 a barrel, said in a note on Friday that sustained lower prices were needed in the first quarter “so producers will move budgets down to reflect $40 a barrel oil for 2016.”
Oil prices have fallen over 70 percent since the downturn began in mid-2014 as soaring global production sees hundreds of thousands of barrels of crude produced every day without a buyer.
“If you actually look at how low (prices) need to go to hit variable-cost production, then you need a two-handle on crude and we could well be in that world now,” Citi head of energy research Seth Kleinman said.
“Q2 looks brutal. You could have refiners coming offline, just as Middle East production comes back online, including Iran.”
Adding to overproduction is slowing demand, especially in China where growth has dropped to its lowest rate in a generation and experts see few signs of improvement for the next few years.
CRINGE!
and then this
[B]Crude Oil Tumbles to 12-Year Low as Hedge Funds Head for Exit
[/B]
January 10, 2016 — 3:40 PM PST
Is $20 Crude Oil a Real Possibility?
Crude declined to a 12-year low, confirming the view of hedge funds that turned the least bullish since 2010.
Futures dropped 5.3 percent in New York, adding to last week’s 10 percent slide. Speculators’ net-long position in West Texas Intermediate crude shrank 24 percent in the week ended Jan. 5, U.S. Commodity Futures Trading Commission data show. Producer prices in China fell for a record 46th month, bolstering concern about the world’s second-biggest economy. A rapid U.S. dollar gain may send Brent oil to as low as $20 a barrel, Morgan Stanley said.
“We want to see a sign that China has hit bottom and haven’t gotten it yet,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “I’m not convinced that Brent is likely to go to $20 because of the stronger dollar, but it’s certainly a realistic possibility.”
Oil slumped last week as volatility in Chinese markets fueled a rout in global equities and U.S. stockpiles remained more than 120 million barrels above the five-year average. Saudi Arabian Oil Co., the world’s biggest crude exporter, confirmed on Jan. 8 it was studying options for a share sale, including listing “a bundle” of refining subsidiaries.
WTI for February delivery fell $1.75 to settle at $31.41 a barrel on the New York Mercantile Exchange. It’s the lowest close since Dec. 5, 2003. Total volume traded was 47 percent above the 100-day average at 2:50 p.m.
Bullish Bets
Brent for February settlement decreased $2, or 6 percent, to end the session at $31.55 on the London-based ICE Futures Europe exchange. It was the lowest close since April 2004. The European benchmark crude ended at a 14-cent premium to WTI.
Commodity producers led declines on the Standard & Poor’s 500 Index. The S&P 500 Oil & Gas Exploration and Production Index dropped 5.1 percent, led by Cabot Oil & Gas Corp. and Marathon Oil Corp. Freeport-McMoRan Inc., the top publicly traded copper producer, dropped 19 percent, making it the worst performer on the S&P 500.
Speculators’ net-long position in WTI declined by 23,863 contracts to 76,934 futures and options, the lowest since July 2010, CFTC data show.
“The hedge funds are saying that this isn’t a good time to try and find a bottom in the oil market,” said Bob Yawger, director of the futures division at Mizuho Securities USA in New York
Crude also fell as the U.S. dollar climbed, diminishing the appeal of commodities denominated in the currency. The Bloomberg Commodity Index, a gauge of 22 raw materials slumped to the lowest level since 1999.
Dollar Impact
Oil is particularly leveraged to the dollar and may fall between 10 to 25 percent if the currency gains 5 percent, Morgan Stanley analysts including Adam Longson said in a research note dated Monday. Societe Generale SA cut its average 2016 Brent forecast to $42.50 a barrel from $53.75 in a report Monday, while Bank of America Corp. trimmed its forecast to $46 a barrel from $50.
“There are no technicals holding up the price so we’re looking at a falling knife,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. “Concern about global economic sentiment and dollar strength are continuing to weigh on the market.”
Saudi Arabian Oil Co., known as Aramco, is studying whether to list “an appropriate percentage” of shares of the parent or a bundle of “downstream” units, according to an e-mailed statement Jan. 8. The findings of the review will be presented to the board of directors, which will make recommendations to the state-owned company’s Supreme Council, Aramco said.
Ample Stockpiles
A U.S. Energy information Administration is projected to report on Jan. 13 that inventories of crude oil, gasoline and distillate fuel increased last week, according to a Bloomberg survey of analysts.
“Another bearish storage report will send us to new lows and this week’s has the potential to be a doozy,” Yawger said.
Fuel futures followed crude to new lows. Gasoline for February delivery dropped 1.3 percent to $1.113 a gallon, the lowest close since February 2009. Diesel for February delivery decreased 3.5 percent to settle at $1.0149, the lowest since June 2004.
DOUBLE CRINGE!
who wants to bet what we’ll bust the $30/bbl mark before the end of the week? How bout Wednesday?
.
Yeah that would make you happy wouldn’t it? What an asshole…
you are free to believe whatever you want to believe but I am not gleeful at all…I am only the messenger of the horrible news.
now, what GoM mariners make of this terrible situation is what is important. When there is a recovery one day, they can flock back to the big money and false promises. Yes, we all know that Joe has a right to downsize his workforce when his revenues fall but it is HOW he goes about such downsizing that needs to be changed.
I am going to ask if there is anyone here who has been laid off in a manner they consider fair and equitable? That maybe they received assistance with the transition from being gainfully employed and “valued” by the Boss to being kicked to the gutter?
Lastly, I do want there to be bankruptcies in the GoM. Since it won’t be ECO, may it at least be HGIM. They are the two of the rottenest of the bad apples in the barrel.
looks like that $30/bbl level is already here today
[B]WTI Crude Oil Price Forecast: The Unthinkable $30 Level Approaches[/B]
Tuesday, Jan 12, 2016 7:05 am -08:00
by Tyler Yell
Talking Points:
Crude Oil Technical Strategy: Oil August Low Holds As Resistance, Focus Below $30 Intermarket Analysis Turns Focus of Price Pressure On US Dollar Strength WTI Closed at 12-yr low of $31.41/bbl yesterday, and hit $30.39 this morningAre you here to pay your respects for Oil? 2016 has surprisingly started off worse than 2015 for 2 main reasons. China is in more economic trouble than we thought and Oil producers are pumping more than they should give the economic backdrop. Now, Oil hovers around $30 and the message being sent now by investment banks to their clients is that a move below $30 could send ~33% of US Producers into bankruptcy. Currently, Hedge funds are positioning themselves to brace for more losses as they hold their largest net-short bet across raw materials in 10 years. Today, we heard the ‘Sell Everything’ warning from one specific bank as 2016 is expected to be a cataclysmic year as we learn more about China, and what Central Banks plan to do next. Everything, they said, but high-quality bonds.
The close on January 11, 2016 was the lowest close in 12 years. While price may move marginally higher from here, the YTD high of $38.36 will be resistance with many sell-side desks on Wall Street looking at the upper $20/barrel range as the more probable next level. Without a change in the fundamentals and a continued bid in the US Dollar that is taking the US Dollar Index toward its own 12-year highs, Crude oil prices will likely remain low lower. For now, the zone around the August 24 low of $37.73 up to the YTD intraday high of $38.36 is resistance, and until price closes above that level, the downside remains favored as the macro picture favors further selling.
We have cleared through the downside targets recently shared with you. The price targets look below the current low of $30.19/bbl toward the ~$29 level. Of course, between there, you have the psychologically important $30 support, but in a strong downtrend like we are in now. Support is made to be broken and that is likely just what will happen. The warning that oil may continue to fall even lower as inventories swell remains appropriate and China pushes up the US Dollar by weakening the Yuan aligns with our Speculative Sentiment Index or SSI. Our internal readings are showing an SSI reading of +1.783.We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are bullish provides a signal that US Oil may continue lower.
well today’s close is just above $30/bbl but I have no doubt that we’ll go through that threshold tomorrow.
I found this chart which shows the great similarities between the run up in the period before the 1980’s great price crash and today’s. It took almost 20years before the damage from that earlier bust was undone and I fear we are looking at nothing less than a decade this time.
what is this monster that we allow ourselves to be led so easily by into the morass?
[QUOTE=c.captain;177124]well today’s close is just above $30/bbl but I have no doubt that we’ll go through that threshold tomorrow.
I found this chart which shows the great similarities between the run up in the period before the 1980’s great price crash and today’s. It took almost 20years before the damage from that earlier bust was undone and I fear we are looking at nothing less than a decade this time.
what is this monster that we allow ourselves to be led so easily by into the morass?[/QUOTE]
Not a good chart by any stretch, although with history as a guide, and for years, people that survived the 80’s always conveyed to the younger generation to save and be responsible with money, because there will be another crash - it’s the nature of the business. Right they are.
The bright spot is if you were responsible and are liquid at this moment of time, and positioned yourself by upgrading while managing to stay employed, there will be investment opportunities, and the majors generally outpace the service companies during a slow recovery.
I do like the chart from above. You can see how steady everything was in the early part of the century, and most economist will tell you this is attributed to less information available to investors and very little realtime speculation. As soon as automation entered wall street and realtime information became more pronounced to investors, volatility entered the markets by speculators.
I managed to do pretty good thus far by hedging a downturn by investing in Delta stock some time back. This investment will need to be flipped for a recovery in the future. The major players are heading for the refiners at this moment of time. I’m not that confident on that being the best long term investment, although with all of the oil sitting around, oil does not become a product until going through that process. Maybe Warren Buffet is on to something with doubling down on Phillips 66.
One thing for certain, in terms of the natural decay if oil production, and with an estimated 1 million barrel (on the low end) year over year increase in demand, a third of the worlds oil will need to be replaced in the new few years, and that does not happen without the people that visit this forum playing a role in the oil feild. Fracking will not generate 32 million in new production by 2020, it will take the combination of all.
The danger in all of this in my opinion is the time span it is taking to find a bottom, with low 20 dollar oil being the bottom. Big money speculators are playing the volatility and moving the markets in both directions to make money on both sides, long and short positions and jumping back in forth as the wind blows. This is only eating up what reserve cash the service companies do have to weather this downturn, and that is a finite amount, and exactly where this is going, which has yet to happen. This will be a long downturn. M&A may not happen until 2017, as most companies have positioned themselves for a difficult 2016 and seem to able to sustain that for now.
I believe your fears are correct. This will only get worse, but it will certainly get better over time. Thanks for posting the chart.
well, my prediction that we’d bust through $30/bbl today didn’t some to pass. The day ended up pretty much at even from yesterday closing at $30.48 up .04 cents. Don’t know what the rest of the week is going to bring but it would be wonderful if we are at the bottom here.
btw, that chart I posted with in inflation adjusted dollars but it is the trend which is important to note. Huge price run ups followed by frantic drilling and new production all finding its way to the market at the same time flooding it leading to a surplus condition. What is also important is that it doesn’t take a massive surplus of supply to cause a massive drop in prices. Right now there is only a 2 to 3 million bpd overage in the world which is only a couple percent above global demand yet we have a 70-80% loss in its value as a result. MADNESS!
here is the chart in non inflation adjusted dollars which shows the percentage drop in crude this time is much worse that the percentage drop in the 1980’s. This time it is nothing short of a complete collapse.
DOUBLE MADNESS!
It has been reported that Morgan Stanley expects oil to go to $20 based solely on the strong appreciation of the dollar against other currencies. Regardless of the fundamentals in the oil market.
utter quadruple madness!
.
And tons more Iranian oil coming into the market…?
[QUOTE=z-drive;177177]And tons more Iranian oil coming into the market…?[/QUOTE]
Add to this a warm winter with a lot less heating oil consumption.
Add to that a huge reduction in diesel consumption by the oil industry which is estimated to be a 15 percent reduction in total diesel consumption in the US.
Add to that a worldwide economic slow down, the bubble bursting in China, and the worldwide stock market bubble losing air.
Worst of all, hundreds of desperate former Gulf of Mexico mariners with Master of Towing seeking any tugboat job anywhere else at 1985 wage levels.
Sorry, Fraq,; That line on the right is the cost of Solar. See the trend?
Me thinks a lot of companies in the O&G will not exist in their current forms by the end of the year.
The maritime market in particular I can see a lot of changes. I know of 2 large companies just waiting to grab a deal.
Looks like oil is I fact going to drop below $30/bbl. Sadly, I guess we will have to keep waiting to see how much further it can go. Good for my gas tank by bad for my career.
indeed, things look very ugly these days
[B]$20 Oil No Longer Mirage as World Confronts 12-Year Low[/B]
Dan Murtaugh & Robert Tuttle
Wednesday, January 13, 2016
(Bloomberg) – The world mostly ignored Ed Morse 11 months ago when the head of commodities research at Citigroup said oil could drop as low as $20.
It’s paying attention now that crude has tipped below $30.
BP Plc slashed 4,000 jobs, Petroleo Brasileiro SA slashed its spending plan and Petroliam Nasional Bhd. warned that it faces several tough years before crude futures in the U.S. sank into the $20s for the first time in more than 12 years. Morse, who wrote in a Feb. 9 research note that oil could fall “perhaps as low as the $20 range for a while,” said Tuesday in Calgary that the world is now “confronting $20 oil."
“The $20 number is something you have to talk about,” Morse said. “When you’ve seen a $10 price slide and WTI is trading just slightly above $30, the likelihood is fairly great. Clearly oil markets cannot maintain a price at below the $30 level for very long. The question is how much longer.”
Financing Challenges
Low oil prices could cause problems for U.S. oil companies with debt covenants that specify certain debt-to-earnings ratios or interest coverage, and will make it even harder for those companies to obtain financing to continue to operate, said Mark Sadeghian, a senior director for the energy and commodities group at Fitch Ratings Ltd.
The Bloomberg Commodities Index fell to the lowest level since at least 1991 as demand from slowing emerging-market economies fails to keep pace with a flood of supply from investments made during the price boom of a half-decade ago.
Malaysia stands to lose 300 million ringgit ($68 million) for every $1-a-barrel decline in crude, according to government estimates. ConocoPhillips is losing $1.79 billion in net income each quarter for every $10 drop in prices, according to analysts at Barclays Plc.
Petrobras, as Brazil’s state-controlled oil producer is familiarly known, cut its five-year business plan to $98.4 billion, the latest adjustment to the original $130 billion announced last year.
The U.S. Energy Information Administration reduced its forecast for WTI prices for 2016 by 24 percent to $38.54 a barrel. In its monthly Short-Term Energy Outlook, the agency said the oil market would come back into balance in 2017.
The call for oil in the $20s grew louder in recent months, with Goldman Sachs pinning a 50 percent chance of oil falling to $20 in September and Morgan Stanley saying Monday that a strong dollar could drop oil below $30. Morse was first with the $20s call, although he said last February that it could happen in the first half of last year followed by the market balancing.
“Right now the real driving factor is access to capital markets,” Sadeghian said by phone from Chicago. “$20 oil just digs an even deeper hole from where you need to be before the markets open up again.”
