- 20 July 2021
They continue lower because those that buy oil in USD
1. but has that equation changed this time with oil being able to be purchased in various currencies , sure not everybody will buy in a non-US currency , but will there be enough to take the sting out the UST sell-down , and there are other reasons why some sovereign actors are reducing UST holdings .
2. to me , it looks like this time might be extra complicated , for instance would the US have to crank up oil exports when the Strategic Reserves are low ( and it should really be topping up the Reserve ) while coming into storm season ( reducing some production and also diverting some shipping )
3. please note , sometimes rising 'bond yields' means that bonds are being sold or less than face value ( say 95 cents in the dollar ) not increased interest paid on the face value
firstly the West is kicking it's own butt , i have never seen 'a business ' run so badly ( and remain funded )Mr divs,
1. It is the BRICS coalition that are forcing the use of non-USD currencies. Essentially what has happened is that Yuan can be used to purchase oil from OPEC. This net expense is settled in Chinese exports to OPEC. The difference is settled in gold. Gold therefore, at least for BRICS is the reserve asset, replacing UST.
This means if you are say the UK who need to import significant energy, you can print pounds sterling, buy your oil at whatever the price in pounds is calculated as an exchange rate against USD and obtain oil without needing USD. Of course, the more you do this without netting out some exports to someone, the faster the pound devalues. But what it does do is return sovereignty to your purchases of energy, ie. you don't need to obtain USD first.
For China, this means that its stash of UST are no longer required as a reserve asset to convert into USD to buy oil. China can use Yuan. That has significant ramifications to the cache of UST held. These UST are now a weapon. The US through stupidly weaponising the UST/USD against Putin, have accelerated the conversion of gold to the reserve asset, which collapses the USD over time.
Japan who is a US ally has $1.7T in UST. As the USD rises and the Yen falls, Japan must and will sell down UST to obtain USD to purchase energy if net-net their trade balance with OPEC is in deficit. A rising POO and USD compounds this process. Japan selling UST creates a UST market collapse that requires the Fed to bail out the UST market. It has happened 3 times already in the last 4 years.
The war in the ME is the worst thing that could have happened to the US.
Oil is rising again after the oil market had been attacked and manipulated lower last week. Oil must be lower for the US to avoid an increasingly unstable bond market.
2. The US can't crank up oil exports. Shale oil is in decline and accelerating. Shale needs higher prices for increased investment. A lower POO just accelerates the decline of shale. A higher POO drives increased inflation in the PPI and CPI. The Fed is making noises about a pause currently, but accelerating inflation could see another round of rate rises.
3. Of course. And that is exactly what is happening. Holders of UST (Japan, UK, etc) are selling UST to obtain USD to buy energy. The issue is that the current marginal buyer are the Hedge Funds, levered 500:1 on a basis trade. If that is forced to unwind, only the Fed will be able to buy the supply. Which is outright money printing.
Next year $5T in debt needs to be rolled over + the deficit needs to be funded. There is no-one with a Balance Sheet large enough to absorb that supply. That's just assuming China doesn't tactically sell down its holding of UST as say Japan does, magnifying the sales of UST. The West's fiat system is breaking down.
The apologists would have you believe that the West is winning this war. Not even close. The West is getting their arse kicked.
The double whammy of peak driving season being over and high crude prices have brought US gasoline demand much lower than it seasonally should be, shedding some 1 million b/d in demand since the July peak.
- Supplies of finished gasoline in the US market fell to 8 million b/d in the latest weekly EIA numbers, which combined with soaring gasoline stocks (up 6.5 million barrels last week, the highest week-on-week jump in 20 months) adds to the pressure on light distillates.
- NYMEX RBOB gasoline futures have lost more than 15% in the past month alone, currently trading at $2.24 per US gallon, well below last year’s October readings.
- Peaking at $30-35 per barrel in the summer, gasoline cracks are down to $5-6 per barrel across all continents - in Europe they’re the lowest as gasoline inventories in the ARA region (Amsterdam-Rotterdam-Antwerp) surged to the highest level since 2008.
- Germany’s embattled utility giant Uniper (ETR:UN01) is preparing to sell its German district heating business, having hired Rothschild to run the transaction and eyeing $400-500 million from the deal.
- Canada’s oil major Suncor Energy (NYSE:SU) agreed to buy the 31% stake of TotalEnergies (NYSE:TTE) in the Fort Hills oil sands mine for $1.07 billion, adding 61,000 b/d of bitumen production capacity.
- The 290,000 b/d Corpus Christi refinery operated by US refiner Valero (NYSE:VLO) was partially shut down after a fire, the second at the plant in 2023 already, stretching diesel supply even further.
Tuesday, October 10, 2023
The rapid escalation of the military conflict between Israel and Palestine’s Hamas allowed oil prices to regain some of the lost ground from last week, with ICE Brent adding almost $4 per barrel Monday and closing at $88 per barrel. The focus is on Iran now, with ramifications of the Gaza standoff potentially impacting the country’s oil exports if the US political establishment enforces stricter enforcement of sanctions.
OPEC Raises Oil Demand Outlook. In its recently published 2023 World Oil Outlook, OPEC defied IEA calls to abandon fossil fuels and raised its world demand forecast, expecting peak demand by 2045 at 116 million b/d, which is a whopping 6 million b/d increase compared to last year’s report.
Exxon-Pioneer Deal Hard to Derail. The White House would struggle to thwart ExxonMobil’s (NYSE:XOM) mulled $60 billion takeover of Pioneer (NYSEXD) despite its previous adverse disposition towards the US major, as it’s usually refinery or retail deals that trigger antitrust risks.
Russia Lifts Ban on Diesel Exports. Following Friday’s announcement that Russia would lift the ban on most diesel exports, the world’s top seaborne exporter of the fuel has resumed full-blown port operations, though the prohibition of gasoline exports remains in place.
EU Set to Launch Chinese Steel Anti-Subsidy Probe. According to the Financial Times, the European Union is planning to announce an anti-subsidy investigation against Chinese steelmakers, aligning with the US so as to avoid the re-imposition of Trump-era tariffs on EU steel.
Uganda’s Drilling Bonanza Halted. Ugandan authorities have suspended works at the Kingfisher oil field operated by China’s state-owned firm CNOOC (HKG:0883) after a fatal incident during drilling operations, with a resumption only expected after security checks are fully over.
China Issues Fourth Round of Import Quotas. The Chinese Ministry of Commerce issued a new batch of crude import quotas totaling 9.54 million tonnes (70 million barrels), mostly to independent refiners that didn’t receive their full allocation for 2023, boosting the outlook for China’s oil imports.
US-Venezuela Sanctions Relief Talks Ongoing. The United States and Venezuela have progressed in negotiations that would see at least one additional foreign company, believed to be the French upstream firm Maurel & Prom (EPA:MAU), would be allowed to resume operations alongside PDVSA.
Israel Shuts Largest Field Amidst Hostilities. Israel has suspended operations at the Tamar offshore gas field operated by US major Chevron (NYSE:CVX) off the southern coast of the country, fearing a retaliatory strike by Hamas as the platform is within rocket fire range from the Gaza Strip.
Subsea Gas Pipeline Leak Puts Pressure on Gas. European gas prices moved above the €40 per MWh threshold after a subsea gas pipeline connecting Finland and Estonia experienced a sudden drop in pressure, with the operator saying it might take months or more to repair the leak.
Copper Outlook Worsens by the Day. The International Copper Study Group (ICSG) announced that the balanced 2023 copper market will transition to a major supply surplus next year, with the production surfeit hitting 467,000 metric tonnes, aggravated by a worsening demand outlook in China.
Iraq Launches Upstream Licensing Round. Iraq’s oil ministry called on international oil companies to submit letters of intent into the country’s 6th oil and gas licensing round, expected to award 14 oil and gas projects with a new profit-sharing agreement, eyeing increased gas output to meet demand.
Pemex Cuts Production Outlook, Again. Mexico’s national oil company Pemex cut its production forecast for 2024 to 1.89 million b/d, significantly lower than the initial 2.6 million b/d plan and even lower than the 1.95 million b/d announced a mere three months ago as legacy fields continue to decline.
US Gasoline Prices Decline Across the Board. With gasoline demand decreasing and oil prices dropping below 90 per barrel, US gasoline prices have declined in virtually all 50 states and edged lower to a national average price of 3.704 per gallon, down 3% week-on-week.
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The charts that need watching: USD, Yields, Oil. All positive for the market today.
The tremendous growth in the Shadow banking system.
History of market reactions to unexpected events.
Michael Pento: always entertaining:
Mr @ducati916 , puzzled by the list of funds with circle representations just posted.i miss a legend, does it represent growth on size, growth of bonds ownership..do I miss something or have lost the legend display.
when you have a sec.
Amazed that oil is not going thru the roof with potential Iran involvment..or at least seen that way by the US.
Or will the US stay quiet..as higher POO is a death sentence for both USD and economy so Biden regime...