Don’t look now, but natural gas is in free fall! Gas futures plunged almost 10% yesterday, then knifed through $2 per million British Thermal Units (BTUs) this morning.
Market Roundup
That leaves natty at its lowest level since 2012. If it loses another 15 cents or so, it’ll be the cheapest we’ve seen nat gas since 1999.
What’s going on? Warm weather, for one thing. Temperatures are running above average in many parts of the U.S. with the peak heating season right around the corner.
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| Natural gas prices continue to tumble. |
The boom in shale gas drilling has also driven gas supplies through the roof. We have more gas in storage for this time of year than we’ve had in any year since 2006 — roughly 3.956 trillion cubic feet, according to the Energy Information Administration.
As for crude oil, it topped out around $51 a barrel earlier this month and has been falling ever since. It dropped through $45 two days ago, $44 yesterday, then $43 earlier today. That leaves prices at a two-month low.
One major issue here is supply. The Saudis continue to pump full out. Other OPEC members can’t gain any traction on their push for production cuts. Here in the U.S., crude oil inventories are running at the highest level for this time since at least 1930.
What does this mean for markets? Well I find it incredibly interesting that all the new easy-money talk from Europe and China isn’t doing squat for commodities.
I believe the ongoing weakness in crude oil, natural gas, agricultural commodities, and so on proves beyond a shadow of a doubt that investors are no longer getting sucked in. They’re not buying “stuff” the way they used to during previous rounds of global QE because they’ve seen in the last few years that QE doesn’t do anything for the real economy and hence, commodity demand.
| “All the new easy-money talk from Europe and China isn’t doing squat for commodities.” |
The renewed weakness in energy prices is also weighing on energy stocks, which haven’t been able to keep pace with the broader S&P 500 rally at all. The Energy Select Sector SPDR Fund (XLE) broke short-term technical support yesterday, while natural gas-sensitive stocks and the Alerian MLP ETF (AMLP) rolled over sharply.
Now I’m keeping a very close eye on junk bonds — including ETFs like the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG). They rallied somewhat on the latest easy-money promises. But unlike the Nasdaq Composite or the handful of large-capitalization stocks propping up the averages right now, they remain far, far below the highs they set in 2013 and 2014 … much less the shorter-term highs they set this spring.
I don’t care how much funny money the wizards in Frankfurt or Beijing conjure up. If energy prices keep falling, it’s going to put much more pressure on energy bonds and the junk bond market overall.
Bottom line: In the longer term, some tremendous bargains are going to be had in the energy space. But now that the U.S. economy is slowing at a time when many foreign economies have already tumbled into or close to recession, it’s hard to load up on these stocks. I was clearly too early with my bargain-hunting earlier this year.
As for the broader market, I don’t see how it can hold up if energy joins everything else that’s already in the doghouse — from small-caps to biotech to retail to transports and more. So I’ll say it again: Maintain a cautious stance here when it comes to stocks.
I’d like to hear your thoughts on this topic while I’m at it. Is the renewed weakness in natural gas and crude oil a reason for concern? Or are falling prices a positive ahead of the holiday shopping season?
Will falling prices put more pressure on the junk bond or equity markets? Or do you think the weakness in energy stocks will be offset by strength elsewhere? Share your thoughts at the Money and Markets website if you get a minute.
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I’m glad to see that my piece on the counter-intuitive behavior of bonds and stocks got you talking at the website. I also appreciated the feedback on real estate.
On the first topic, Reader David said: “Last week’s rally was a few very large-cap stocks responding to surprisingly good earnings, a la McDonald’s (MCD) and Amazon.com (AMZN). But corporate profits are falling and will continue to fall for the next several quarters as global contraction works its way through.
“So the broad market will trend down as that profit outlook is factored in. This is also why long bonds did not change. Big events down the road are further slowing in China, emerging market debt defaults, energy company loan defaults at U.S. banks, China dropping out of U.S. debt buying, sending rates higher despite Fed policies, and expanding global recession.”
Reader Richard G. suggested Fed policy may be playing a role in the behavior of bonds: “Part of the problem with the bond markets is that the Fed continues to roll over maturing debt, while the supply of Treasuries diminishes. Sort of a behind the scenes QE.”
Finally, Reader Carla said: “I have observed when the equity curve escalates with extreme vertical thrust, a correction or crash is just around the corner. I guess we’ll have to wait and see. I’m personally very fond of revenue muni bonds. They’ve done me very well as a long-term fixed income vehicle.”
As for the issue of real estate, Reader Tommr said: “I currently live in the Phoenix area. I have noticed a huge increase in apartment construction all over the area. I mean, there are hundreds of large units going up all over the place. I feel this may be an indication of a top in this market.”
And Reader Mike M. said: “With regards to Mr. Zell’s move to sell 23,000 apartments, I remember vividly back in 2007 when he sold his commercial properties trust to Blackstone and saying to myself, ‘What does he know that we don’t?’ What a prescient call, and I’m not betting against him here either. I will be selling a few of my rentals as well.”
Thanks for sharing everyone. I continue to believe the stock market is sicker than it looks on the surface, with weakness showing up in many more sectors and capitalization groups than in any previous QE-driven rally. The non-confirmation of this S&P 500 advance from bonds is another yellow flag.
When it comes to real estate, I’ve seen a lot more multifamily construction here in South Florida in the past couple of years, too. I think the increase in supply will definitely help cool the sharp rent increases we’ve seen in recent years. That tells me Zell may be on to something here, too.
Didn’t get a chance to add your comments yet? Have something else you’d like to add? Then go ahead and share at the website.
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Republicans and President Obama achieved a tentative debt limit deal in overnight negotiations. The full House and Senate will need to approve the accord, which boosts spending by $80 billion in the next two years but reduces some Medicare and Social Security benefits.
The government will also sell millions of barrels of oil from the strategic petroleum reserve to raise money between 2018 and 2025. That planned liquidation of 58 million barrels over several years put some additional pressure on oil prices today.
The Federal Reserve has no clue what to do with interest rates. That’s the bottom line apparent from multiple, conflicting comments and speeches in recent weeks, and confirmed by the Wall Street Journal’s “Fed whisperer” Jon Hilsenrath in an article today.
That should make the last two policy meetings of the year very interesting. The first one concludes tomorrow, while the second two-day gathering will wrap up Dec. 16.
What do you think of the budget agreement? The latest drop in durable goods orders? Fed policy? I’d love to hear from you on those or other topics online; here’s the link.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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Come on Mike…. This problem simply goes back to Cheney’s “Secret” meeting with the major producers and refiners back early in the Bush Administration….. Remember how the prices sky rocketed until they left office, then fell and fell and are still falling?… If you push the price beyond it’s normal level into new highs, more and more around the world will start opening capped wells and finding new oil and gas supplies and then you have an over supply and prices fall….. Freshman Economics Class 101!… :(
Remember the 1973 OPEC oil embargo? That was OPEC’s retaliation for US aid to Israel during the 7-day war. The shortage it created led to the oil price hike, and at about the same time, we lived the “price controls” on nat gas that had been in place since the FDR 30’s and had led to shortages here. That’s when prices shot through the roof, and every Tom, Dick and Harry jumped back into the oil bidness, eventually causing supply to exceed demand in both oil and gas around 1982. And that’s when oil and gas prices fell through the floor, with oil dropping to $10/bbl and staying there for almost a decade. And that’s what brought down the Soviet Union, which couldn’t pay it’s bills at $10/bbl.
The price of oil has always been volatile, responding to peaks and troughs in the supply and demand. Bush and Cheney had nothing to do with it. The Saudis have always controlled the supply/demand equation to serve their interests, and right now their interests are served by driving Iran, Russia, and US frackers out of business. They’re the only country with the financial staying power to keep oil prices low for an extended time.
Jeff
Maybe we’re coming close to the time when we protect our own with price controls rather than have some other nation with their own agenda stuff us up?
Brother, you got Bush-Cheney on the brain. The oil business isn’t some political ping pong ball controlled by a couple of hair brained neo-cons. This is business. You guys are the real conspiracy theorists. Your simplistic theories are laughable. If your a high school economics whiz I forgive you. Everyone else on this page has something intelligent to say. Pay attention. As far back as I can remember the Saudi Royal family has controlled the price of oil and will into the foreseeable future.
Thank you very much for asking our opinion on the situation but really we pay good money to read your opinion and learn something useful for our investments. So please, you as a financial professional do tell us where we should put our money and forget about what we poor suckers think.
Us poor suckers need to do more of our own thinking rather than follow blindly along any financial advisor. I’m pretty sure you would have lost money following Larry or Mike’s recommendations for the last couple of months. They have been bearish predictions while the markets have been rallying. They may eventually be right but timing is crucial and quite often you are out of money by the time you are right. Markets make suckers out of most of us quite often and financial advisors are no different. I appreciate what weiss organization does in warning investors about potential problems but one could lose his shirt by just blindly buying their recommendations. Maybe some of you could tell us of all the money you’ve made recently by following their reco’s.
I believe it is part of the bigger picture that the administration has to punish the oil producers and punish those of who work and have a few $$’s. Our overall economy is NOT GOOD and this is something that gets everyone’s attention. I live in Texas and have many contacts and friends in Alberta Canada. Alberta is having lay offs of 500 employees at the time and Texas is right behind them. This will not stay JUST an oil problem……. it will affect everything.
It is good to know in these difficult times that we have a POTUS who has an improving golf game.
Given that the government is planning to sell oil from its strategic reserves between 2018 and 2025, would it not make sense for them to buy cheap oil now and sell it at a profit later on when prices go up. It would not even cost them anything to buy the oil now since they would only have to leave the money printer on for an extra couple of minutes per day.
Pls sign me in if there are no hidden agenda
[25-30%] of U.S. OIL Refiners are in the (3 Week Ave.) conversion from Summer Grade Gasoline to Winter Grade. This causes an Annual Build in Crude Inventories until this Transformation has been Completed. Natural Gas Price is also a Huge Negative to the
Current Crude Price due to the El-Nino caused Seasonally Warmer Fall temperatures across Northern States and Increased Nat Gas Supplies. Before February 2016 Prices
on Crude will Reflect a more Balanced Storage Inventory and [20-30%] Price Adjustments.
That’s the story, but I have a hunch that since the refiners and the producers are in the same club, the refiners are paying the domestic producers more than the world market rate for their oil so the can stay in business, because if they can’t, the refiners won’t be able to, either.
the fed is actually financing the low price of oil. the Saudis are having to sell their foreign holdings to finance their propping up their economy.If interest were allowed to rise they would have to sell more bonds and would give cause for them to stop this charade. It will also stop China from their currency war. Why don’t these supposedly bright economic minds have any common sense. Their mandate is here in the U.S. stop looking at world economies that they are helping to hurt us.
Hello Mark my thoughts is until we get our..bill of rttttights back and the i
Low oil prices should be a USA strategy along with a pact between the USA, Canada and Mexico to form a North American self depend energy agreement. That would continue to put financial pressure on Russia and other countries dependent on oil revenues to support their hegemony. In addition the money we continue to send to the Middle East will be funneled back into our local communities along with the additional savings per household for lower gasoline, household heating and electric costs as the utilities convert over to low cost natural gas. This in turn will increase the money supply, household net worth and the country’s GNP.
Tim, about this time in early October ’14, I was at a party and was talking to an acquaintance in the oil fracking business. I’m a formed Commodities Trading Adviser and well-verse in technical analysis, i.e., chart reading, and I’d jus tnoticed that oil had just fallen through a key support line just below $80, which told me it was probably headed lower. I asked him, “At what price is it no longer feasible or profitable to run an oil fracking operation in Colorado?” He knew the number instantly: “$76.”
One of the problems at the time was that the servicers, the guys who come in and drill and frack the wells, and do the inspections, were charging outrageous fees — like $90,000 to do a well inspection that took less than a day. Over the past year, their fees have had to come down dramatically to find any work at all, to the break-even point is now much lower than $76, but it’s not as low as $43, where the price is today. So why do they keep producing oil if it’s not a profitable price? Because the money is spent up front, and they have to keep producing, even if it’s at a loss, to get back as much of the investment as they can. As a result, the oil glut continues, and prices will keep falling. The Saudi’s cost of production is about $10 or less, and all they have to do to increase production is poke another hole in the ground. No fracking required.
NOT ALL STOCKS ARE FLAT IN UNCERTAIN TIMES
What about select stocks in the retail realm, such as Discretionary Income Stocks like Chipolte (Mexican) Grill. Their stock is on fire with earnings growing double digits. Its really hard to slow down a stock with that kind of upward momentum overnight. Seems you are lumping everything together in a recovery that has been spotty and very selective, hence a “stock picker’s” market.
The real economy has been spotty regionally and selective to specific sectors and companies, like technology or until last year, energy ( oil shale). Without energy, the overall market slowed this year, China went into the doghouse, and uncertainty has increased, causing more volatility. Doubts about Janet Yellen’s indecisions are adding-up to more woes for investors, but not for all sectors or stocks. There are always some winners out there every day.
CMB is trading at over a 49PE and at over ten times book value per share. This stock is 90% flatulence.
I meant CMG, of course.
you have not seen the oil report has of yet its goning to go to a 150 gallon barrels very,very soon and natural gas we be goning threw the roff and will goning up may reach as much has 250 barrels or even higher along to the Chinese is were its goning to they needallthe gas and natural gas they need/and we will be loesing all the oil gashas well and their is nothing we has American can do Russia and china willhave all the oil and gas while the usa will have nothing we lose our super power for letting this happen
Amos,please translate
Gov’t selling 58 million barrels of oil out of the strategic reserve. This means nothing to the price of oil but what I want to know is will this oil be sold for a profit or loss? Anyone want to take a guess?
A Loss,
Our govt. is scrounging for Cash at all sources. Watch the IRS get tougher in near future.
58 million barrels is about 14 hours worth of world consumption. I am at a complete loss as to why this decision was made. Buy high, sell low, I guess. Jim
It is an attempt to con the gullible public into thinking they are getting serious about balancing the budget. It is a drop in the bucket.
we are doomed Russia and chinawill be buying all our oil and their nothing we can do to stop them they will be come the world super powers when this happen be lieve it its goning to happen to run their war nachines just watch its coming soon /amos
Mike I like your clear presentation of what is going on. One side says dooms day
I upon us, others say make it while you can, so clear facts are nice.
Keep it up
Bob
Mike, kudos to you for recognizing you were too early with oil stock bargain-hunting, and for correcting yourself. It’s the right decision, and it’s brave to acknowledge it in your column. Let the whole market and the energy sector bottom out, there will be plenty of time for bargain-hunting in 2016.
What happened on October 7. I didn’t notice anything.
Some cycles that Larry follows came together. Any effects will be felt in the next few months and years, not immediately.
Hi Mike
Fed policy is playing into a weak recovery where those who have put up capital in the real economy face an uncertain future. Normalisation of rates is needed, however years of low rates will have trapped many industries with high debt loads. The Fed is snookered.
It is my understanding that Medicare and Social Security are NOT part of the Federal Budget. They are stand alone, self funded programs. So, how can they be included in the Debt Ceiling debate?
the Obama administration hates oil, and that may have something to do with the budget limit agreement they seem to have reached with Congress. It is a real example of twisted political thinking. Oil is already at such a lows price that over 200,000 people have lost their jobs in the industry, and who knows how many in allied and dependent businesses. So the politicians are going to drive the price lower by selling oil from the Strategic Reserve, and for a longer time, at that. That will put many drillers out of business that might have just made it, if the time of low prices had been shorter. Then, when the supply that has grown so sharply, due to drillers trying to produce enough to pay at least some of their debts, begins to run out, they will use the resulting shortages, the increased need for imports, and the higher prices that result as political ammunition against the “Big Money” in the industry. It can buy them more votes and power. “It will help with the Deficit,” they will crow, ignoring that they will likely sell much of that oil at a loss over what the government originally paid for it. And most of the population will probably fall for the lie – the whole pattern of lies. Go ahead, elect, or re-elect these a**h***s.
Mike,
You have discussed a slow down in US consumer spending and the fact corporate earnings are not meeting expectations in most sectors. Well I just received in the mail my new health insurance rates for 2016. The monthly rates are going up over 40% and they went up basically the same percentage last year. Our costs before the Affordable Health Care Act on a policy for my wife and I were about $750 per month for a $1,500 per person deductible with a $3,000 maximum family out of pocket cost. If I go with what the current policy quote is for 2016, our costs will be $1204 per month with a $6500 deductible per person and a $13,000 maximum out of pocket cost. That means that between our insurance premiums and our deductible, my wife and I will have to spend over $27,000 out of pocket before we both can collect on our insurance. I’m not sure what affordable health care means when you have two years of 40% increases in premiums and end up with significantly worse coverage than we started with before the Affordable Health Care Act.
I bring this up not only to complain a little but also because all consumers are getting their 2016 insurance premium notices about now since the open enrollment period for 2016 is about to take place. If the sticker shock is this way nation wide, it would seem to be high probability that it’s going to also put a further damper on consumer confidence and spending, and it may impact holiday shopping as well.
People look at the markets as different value points on a chart. Sometimes the market actually evaporates and becomes a different market. ie; Food manufacturer stocks seem to be all M&A in order to reduce competition and improve profit. The real M&A moves are because people don’t eat processed food anymore. We get confused about transportation fuel. What happens when we all live in cities and use transit. The change will be a completely different market. Not only are these markets becoming different, it is happening at warp speed. In one year the currency at my store went from 40% electronic to 70% electronic due to a simple change in government policy on paper checks. ( Canada Feds ) So what? you say. Imagine the change in numbers of people now required to be wired. We still talk about gold in a wired world! Really! And on and on…Its time to think ahead, not back…
natgas will always be cheaper than oil. the gas companies have tried many times to raise the price, but the day a btu of natgas costs more than a btu of oil, the industrial and commercial users immediately switch to oil. cheap oil plus an abundant supply of natgas means low prices are here to stay.
there is no better stimulus for the economy than cheap energy prices. there’s no bigger buzzkill for the economy than high oil prices.
Having a key strategic industry shattered is not good for any country. If China starting flooding our markets with artificially low priced cars, semi conductors, software, etc so that GM, Intel, and Microsoft were going bankrupt would that also be good for the economy? We need a healthy energy industry based on reasonably priced oil and gas so that we are not dependent on foreign despots for our energy. Right now, natural gas producers are only taking home about $1.25 after the pipelined companies step on it. I don’t see how anyone can make money at that price. The current price environment is not sustainable. Jim
When I say the current price is unsustainable I don’t mean to imply that I think the price must rise. It certainly doesn’t. There are two clear paths for American oil and gas producers. One is a higher price that allows us to continue a prudent drilling program and the ability to service our debt. The other Is default and all the collateral damage that that implies. Jim
Jim, you are correct.
we still have record high production rates causing rock bottom prices in oil. oil producing countries desperately need the revenues and will continue to pump. oil prices will find a bottom and prices will eventually rise again, but the days of $100/bbl oil are long gone.
there’s no better stimulus for the economy than the cheap energy prices we’re now seeing.
Then where is all the stimulating? I don’t see it. If our economy is so stimulated why are 94 million people sitting at the house? Jim
I have to respectfully contend that the bankruptcy and ensuing default by a large number of American Oil and Gas producers is not good for the country or the economy. If the last five years show us anything, high oil prices resulted in billions staying here in the country rather than heading overseas. Numerous high paying domestic jobs are what’s stimulating. Jim
All I have heard the last 40 years is that it is vital for America to achieve energy independence. We finally begin to achieve this and you want to go back to being dependent on the Middle East? The Saudis are doing what they are doing to keep us dependent on them. You are probably right saying $100 oil is gone but $44 isn’t going to cut it. Jim
give it time, jim. oil will soon find a bottom and the markets and economy will pick up. probably one more scary pullback for china, oil and stocks. when it scares the hell out of me and i want to sell, i’ll buy instead. i’ve never met a correction or recession yet that wasn’t a buying opportunity. as far as oil is concerned, look at it like this. expensive oil sucks the life out of the economy and puts us in recession – that’s easy to see. but what’s hard to see is the opposite – how cheap oil stimulates an economy. it’s coming, but it will take time.
Vic, I wish that sod Jim was not correct 99% of the time,(smile)
the opec cartel is dead forever. the usa (13m/bbl/day) is now producing more crude than the saudis (11m/bbl/day). anytime the price goes up, the frackers will move in and keep a lid on prices – and the rest of the world hasn’t even begun to frack yet. the saudis are screwed.
Shortages and high prices drive innovation and change. Innovation and change drive the economy. Ask the Germans with their brown coal, limestone, and nothing else.
The K-winter historically never has been noted for being good for commodities. So why would it be any different this time? Historically it normally is only good for cash and gold … and for bonds after the bond market crash (which hasn’t happened yet) – Weiss senior told us that long ago (as published by Martin many times). We’re in the deep deflationary part of the K-wave … when old things are torn down … prior to the new start in the K-spring.
Tha Administration and Congress are looking at How Much To Spend and How Much Debt Will Be Needed to cover these expenses; when they should instead be looking at How Much Do We Need To Spend. This proves that both Boehner and Obama need to go.
I find this so hard to believe; that part of the funding for the new budget will come from selling off part of the nation’s oil reserve. This would be doing the Saudies dirty work for them. What a legacy for Obama with Boehner’s support to leave behind. Birds of a feather flock together.
There is more to this story, but what is it?
I’m thinking about the large amount of US debt that China (and other countries) hold. What will happen to relations between China and the US when the US starts defaulting on its debts?
A related point:
China is seen as having large financial reserves. If those reserves are held in bonds of defaulting states, then suddenly China’s reserves go up in smoke. Which means that then China won’t be able to pay its debts either…
All US debt can be covered. Just turn on the computer and send off the credit. Don’t you remember Dick C running his war on a computer that “crashed” and misplaced a trillion or two? It is all a scam. Change will come when individual people and individual countries stop accepting the scam. If you want a better life for all of us start voting with your wallet. Vote every day and be the change.
QUESTION:
I HAVE BEEN INVESTING IN the stock- LNG for years now. bought, sold, again and again. Every time it goes down, I buy more. The first terminal is to be opened by years end to start shipping overseas for trade. The Cushing terminal. It will be the first one of it’s kind. All the excess Nat gas can be liquefied, shipped to Europe, and other countries where Russia has a strong hold, and is overchargingtgp?
per BTU. Golar LNG is the shipping fleet to get it there. Here are my questions……..
#1). Will that help our balance of trade once exporting starts?
#2). Will that help to reduce the excess sitting in our pipes that are not moving?
#3). Will that reduce our excess supply to help prop up Nat Gas Prices?
#4). Will that help start propping up GLNG, LNG and TGP?
IF WE BUY AS THE PRICE CONTINUES TO DROP lowering our average cost per share (Dollar Cost Average), is the probability of higher gas prices at this time next year favorable? If so, will the 3 mentioned stock symbols quite likely go higher? I see this massive coil like a giant spring being s
#3 there are large numbers of small operators and some larger ones in the Appalachian Basin that are shutting in wells or just not taking care of them because wellhead prices are so low (~$1.5+ less than Nymex). Many companies are desperate to survive and most are on a debt treadmill. Once pipelines are in going out of the area, the local prices will go up a little, and national prices will go down a little. That is if there are not a bunch of Utica gas wells that come on line. The Utica appears to cost (which will continue to drop) 2 to 4 times as much and produce (which may rise) 10x the Marcellus. LNG exports will be a fart in the wind. Conclusion: We have a lot of cheap gas!
There is dirt cheap gas all over the world and we are more than willing to export the technology to extract it. The only problem is that the hundreds of thousands of frack sites will contaminate every bit of water and then gas will have zero value in a barren land.
Mike your calls on XLE, FGP, and OKS have cost me a lot of money, so far. Maybe you should stay out of Energy. I have had poor performance following your recommendations. I’ll be surprise if you publish this note. It might be most informative if i don’t see it.
No one can see the future but you need to improve. All I’m getting lately from Weiss is bad advice and a lot of sales pitches for more advice — disappointing.
Yesterday I suggested that the falling prices in oil had to do with an oversupply in oil and natural gas brought on my the “secret” meetings Cheney had with the big producers and suppliers early in their administration….
Another reader blamed it on the Saudi’s and their actions in the 70’s embargo.when for a number of years oil ran up then fell back into the 20’s because of oversupply…
Let’s make it simple… When Cheney/bush took office, Oil was in the 20’s….. When they left office eight years later oil was in the $140’s….. From that point oil fell and fell and today it is in the $40’s and probably going lower…
My comment was that this was simply an example of oversupply caused by a concerted effort to drive prices higher which caused every one and their uncle to begin searching for and finding the oil the was claimed to be running out during Cheney/bush….
I called in Freshman Econ 101….. Could it be any simpler?
If the end result of their actions was plentiful supply and lower prices and greatly increased domestic production, then what is your complaint with them? I just don’t think secret meetings determine market conditions. It is just a matter off high prices causing low prices and visa versa. The Saudis call the shots just because they are the only swing producer with excess capacity. If they want prices high they will be high. If they want low prices the will be low. The Peak Oil warning really wasn’t about running out if oil but running out of cheap oil, which is true. All the new oil flooding our markets is expensive to produce. Jim
Cheney and his fellow conspirators don’t have the ability to move oil prices, in that private companies control less than 20 per cent of world production. Despotic foreign governments control the oil supply. Jim
I agree with what you have said Jim. This is what I read. The Saudis are the worlds cheapest producers of oil. There costs are around the $10 range to bring it out of the ground while fracting costs closer to $60 for most of drillers. Of course they need higher prices to keep the locals happy with all the government giveaways but were losing market share with all the new competition. If they lowered their production as in the past to try raise oil prices other producers would replace their oil and they would just lose market share. So they decided they would increase production and bring the price down to force some competitors out of business. They wanted to bring it down to the $50 to $60 range which would kill many of the fracters but high enough for them to survive. They expected it could take a couple of years to accomplish their goal. Sometimes prices overshoot but I believe you won’t see 20 or 30 dollar oil as some have predicted but oil will move up to that 50 to 60 price range for the coming months.
You are correct, Eagle, Freshman Econ 101, which must not have been chosen by very many of those in government. They keep trying to get away with breaking even the simplest of those concepts.
And the HUGE changes in the American Futures Markets which began within days of those meetings had NOTHING to do with those HUGE price climbs? Come on Jim….. It was an American conspiracy hatched in America and we both know it….:( Now we have a huge oversupply and those prices are coming back down to the pre-Cheny/bush days…… I would not want to be an oilman now as more and more of the world is turning away from Petroleum to produce energy, thanks to that last oil price manipulation which, in the long run, killed the Oil business…..
Killing the oil business, Eagle, will kill a lot more than that. Business, especially expensive business like fracking, is financed by going to banks or other sources of money and selling them bonds or other instruments. The banks, etc., now are potentially on the hook if that business fails, so it sells derivatives of that debt to other banks, and such. This goes through other cycles, and eventually ends up in the funds and ETFs that you buy, hoping to make a buck. If the original business fails, it eventually hits YOU in the pocketbook. So don’t be so blasé about killing off a business.
As Jim said, up above, “Having a key strategic industry shattered, is not good for any country.”. The Obama administration’s sale of oil from the Strategic Reserve, supposedly to reduce the national debt, and extend the period of not exceeding the spending limits, will help to shatter the fracking industry, which gave us the current surplus. It could be quite some years in recovering, which the Saudis and Russians will certainly love. The ultimately resulting higher prices for gasoline and other oil products will not be much loved by the American people and businesses though. But that increase will not occur until well after the next election.
So they need a strategy and increase spending when spending the last 8 years has increased our debt by 18 trillion dollars and then they want to reduce social security as if the spending problems were caused by the people but were instead created by an inept administration with a cow-towing Congress.
Our country has gone to pot and it is the fault of the people who elected this President and our congress who can’t figure out the right thing to do. They don’t suffer….. the tax payer does who also doesn’t have a say in their financial outcome.
That is a wonderful summation of the political process, Jackie. We have done this to ourselves, and WE are the ones who will pay the piper
Addendum: The politicians, and those they owe something to, are the ones who almost always come out on top.
If there is any doubt that the bulls are in control of the markets ; just look at today’s results. All the stock charts for the indexes look pretty identical. How is that possible without manipulation? Out of the gates came the bulls with huge amount of buying then later sold off all the way down to breakeven when they reversed and took off almost vertical and ended up at highs for the day! There are some deep pockets moving these markets. First they want you to climb on board then they try and buck you off leaving you poorer for the ride.
There are bullish signs. The S&P500 has risen above the 200 Day Moving Average, and that average has a slight upturn, but we still need about 43 points to reach a new high, and until we reach and HOLD that high for a month or so, there is still danger. How the averages can be rising when there is so much low grade debt, is a mystery. But then the markets themselves are something of a mystery. They have a logic all their own.
There has been constant pressure from the republicans to increase military spending. If you listen in on so-called “conservative intelligent” talk radionm( a misnomer if I ever heard one), you constantly hear many of the hosts spouting that we need to balance the budget and at the same time we need to increase military spending. They are supposed to be a party of fiscal conservatives but all Obama had to do was wait them out with the proposal that the dems wouldn’t allow more military spending without matching domestic spending being allowed. So I don’t believe the Republicans want to balance the budget. Arms sales and wars are good for the industrialists who finance political campaigns so politicians lie to the saps who elect them (we the people) and then vote in accordance with what lobbyists pay them for, although the voters end up footing the bill.
rob Wednesday, October 28, 2015 at 5:24 pm
HEY LARRY WHY CANT WE POST ON THIS WEEKS REPORT. YA LOOSER,. BARRY,. .
Reply
rob Wednesday, October 28, 2015 at 5:24 pm
LARRY EDELSON,. LOOOSER,.
Reply
rob Wednesday, October 28, 2015 at 5:24 pm
RWR,. YOUD BE A LOOOSER,.
Reply
rob Wednesday, October 28, 2015 at 5:27 pm
I’D LIKE TO POST A COMMENT ON THIS WEEKS RWR REPORT BY Larry Edelson BUT POSTING OPTION AS BEEN DISABLED,. FREE SPEECH??????
MONEYANDMARKETS,. MY BAD,.
If you listen to a Republican politician making promises, you can invest in just the opposite direction and make HUGE profits as that has been the result of their promises going clear back to the 1920’s…
The Republican Revolution began in 1981
Deficits went to the moon from 1981 forward…
The Middle Class got Crushed from 1981 forward
The living standards of the average American fell from 1981 forward
We entered unnecessary Wars and Military Spending went to the moon from 1981 forward
Monopolist went to the mood from 1981 forward
Risky stock market trading reoccurred after 1981 which brought a repeat of 1929 in 2007
The Ultra Wealthy got even wealthier from 1981 forward
Oil went to the moon from 1981 forward
The Ultra Wealthy paid lower taxes from 1981 forward
Many more truths, but you get the drift of what I said on my first two lines, aye?
This is from the comment below. I believe that any reduction in MEDICARE AND SOCIAL SECURITY will end up hurting millions on Americans who worked and paid into Social Security for 10 to 40 years maybe more is a crime. They should remember their parents and friends will be effected also. The government should stop giving away our money to foreign governments that are our enemies and maybe to other foreign governments that our US government is trying to buy for friends.
Since the US government is spending money that it does not have, it should spend on its citizens first.
Hey Mike,
Has everyone forgotten those two words that haven’t been mentioned? “Inflationary depression!” Check the food prices at Safeway, they are still going through the roof. Somebody is “ripping” someone. Disgusting!
Thank you for the auspicious writeup. It actually was once a leisure account it.
Glance complex to far brought agreeable from you!
However, how can we keep in touch?