Recently we posted the following article commenting on the impact of USD appreciation and dollar circulation among oil exporters, as well as how the collapsing price of oil is set to reverberate across the entire oil-exporting world, where sticky high oil prices were a key reason for social stability. Following today's shocking OPEC announcement and the epic collapse in crude prices, it is time to repost it now that everyone is desperate to become a bear market oil expert, if only on Twitter...
Oil Slumps To 4 Year Low Ahead Of OPEC, Eurozone Yields New Record Lows: Summary Of Overnight EventsSubmitted by Tyler Durden on 11/27/2014 06:46 -0500
While the US takes the day off after another near-record low volume surge to a new all time high in the S&P500, a level which is now just 125 points away from Goldman's year end target for 2016, the rest of the world will be patiently awaiting to see if oil's next step, as a result of today's OPEC meeting will be to $60 or to $100. For now at least the answer is the former (see more here from the WSJ), with Brent recently touching a fresh 4 year low in the mid-$75s, as WTI doesn't fare much better and was down 2% at last check to $72.20 after touching a low of $71.89. It appears the prepared remarks by the OPEC president to the 166th conference have not eased fears that despite all the rhetoric OPEC will be unable to get all sides on the same story, even though the speech notes "ample supply, moderate demand and warns that "if falling price trend continues, “long-term sustainability of capacity expansion plans and investment projects may be put at risk."
Is the oil cartel impotent? Is the price of oil going to fall further? What to expect from tomorrow's OPEC meeting.
With President Obama proclaiming this morning "it's too early to tell" if a nuclear-deal with Iran is still possible; and apparent confirmation this afternoon that differences are "still significant," the US is said to be discussing extending the nuclear-deal deadline. Yet again no consequences (for a newfound 'ally') and yet again John Kerry finds himself purposeless... and now we hear Vladimir Putin will be calling Iran's Rouhani tomorrow (one can only imagine the topic of conversation).
OPEC faces numerous dilemmas this week as it meets to decide what, if anything, is to be done about falling oil prices. As Goldman notes, consensus expectations have shifted to only expecting a modest cut announcement on Nov 27th. Furthermore, any large cut that would lead to a large price rally would be self-negating as it would enable US producers to hedge 2015 production and sustain elevated production growth.
Some of the major problems that humanity faces today transcend borders, and as such international cooperation is of vital importance. But recent events make such cooperation increasingly more challenging. Without going into the wisdom of the decision, sanctions imposed on Russia over its foreign policy in Ukraine have a wide range of implications that go much beyond the economic sphere. For one, international dialogue is breaking down fast; just this week Russian President Vladimir Putin unceremoniously left the G20 meeting early. Inevitably, this will have repercussions on major international cooperation initiatives, perhaps irreversibly in some cases. Here are a few notable examples...
Russia finds itself in familiar territory after a controversial half-year, highlighted by the bloody and still unresolved situation in Ukraine. Nonetheless, the prospect of further sanctions looms low and Russia’s stores of oil and gas remain high. Shortsighted? Maybe, but Russia has proven before – the 2008 financial crisis for example– that it can ride its resource rents through a prolonged economic slump. Higher oil price volatility and sanctions separate the current downturn from that of 2008, but Russia’s economic fundamentals remain the same – bolstered by low government debt and a large amount of foreign reserves.
As Hilary Clinton starts to ponder the curtains she wants to hang in the Oval Office, there is only one person who can realistically stand in her way: Rand Paul.
Senate leaders failed to get the 60 votes needed to advance The USA Freedom Act - which would have limited the National Security Agency’s bulk collection of phone records - and as Bloomberg reports, it's unlikely a new version can be drafted for another vote before the congressional term expires this year. The 58-42 vote to move the measure forward came mostly along party lines as Senator Saxby Chambliss - the top Republican on the intelligence committee - rambling that the bill "eliminates tools critical to the intelligence community’s ability to prevent terrorist attacks, and its adoption would greatly degrade our ability to fight domestic terrorism in particular." In other words - it's for own good, now shut up!
"Back in the heyday of the old Soviet Union, a phrase evolved to describe gullible western intellectuals who came to visit Russia and failed to notice the human and other costs of building a communist utopia. The phrase was “useful idiots” and it applied to a good many people who should have known better. I now propose a new, analogous term more appropriate for the age in which we live: useful hypocrites. That’s you and me, folks, and it’s how the masters of the digital universe see us. And they have pretty good reasons for seeing us that way."
ISIS Beheads Another American After Report "Jihadi John" Injured In Air Strike; Gen. Dempsey Arrives In IraqSubmitted by Tyler Durden on 11/16/2014 10:05 -0500
Perhaps in prompt and direct refutation that the infamous executioner "Jihadi John" had been injured, a few hours ago, ISIS release its latest execution video. Yet, oddly, as in several previous instances, the 15-minute video released Sunday doesn’t show the beheading according to the WSJ, but closes with a masked man clad in black standing above what he claims is Mr. Kassig’s severed head. The extremist spoke with a British accent, and appeared to be the same man who appeared in four videos released over the past few months showing the killing of British and American hostages, i.e., the same Jihadi John who was said to have been injured.
"I write this letter, my last letter, to you, Mr. Bush and Mr. Cheney. I write not because I think you grasp the terrible human and moral consequences of your lies, manipulation and thirst for wealth and power. I write this letter because, before my own death, I want to make it clear that I, and hundreds of thousands of my fellow veterans, along with millions of my fellow citizens, along with hundreds of millions more in Iraq and the Middle East, know fully who you are and what you have done."
In the past 3 months there has been much discussion regarding the gruesome and barbaric beheadings by ISIS of western hostages. Yet surprisingly, a similar and just as barbaric tradition has been taking place for ages just a few hundred miles east of ISIS, in Saudi Arabia. It has been met with nothing but silence by the same indignant western societies who are quick to condemn ISIS villainy. Why the disconnect? According to the following interview by Canada's CBC reporter Anna Maria Tremonti with Newsweek's Janine Di Giovanni looking at the "shock over ISIS beheadings but silence over Saudi Arabia beheadings" the answer why few if any dare to criticize the Saudis is simple: oil.
Endless War Is the Agenda
The key event overnight was the release of European Q3 GDP data, which saw Germany averting a recession by the narrowest of margins when following a -0.2% drop in Q2 economic growth, Germany grew by the smallest amount possible in Q3, or 0.1%, in line with expectations, thus averting two consecutive quarters of decline, the technical definition of a recession. The French economy likewise posted a modest increase in Q3, although one wonders how aggressively the data had to be fudged for a country whose PMIs all indicate a -1% or greater contraction. Italy however was less creative with its use of "hookers and blow", and continued its recession with a 3rd negative print, contracting at -0.1% as expected, while Portugal also missed third quarter growth estimates.