Natural Gas

Energy investors got clobbered in 2015, and are hoping for things to turn positive as we head into the New Year. What can we expect in 2016? Here is a rundown of some key trends to watch for...

The South China Sea is continually paraded as a region rich in oil and gas deposits; however, no one really knows what’s there with any degree of accuracy. Furthermore, these possible deposits are shrouded in conflict that will not abate anytime soon, and will most likely worsen with an intensification of the security competition between China and the United States along with its regional allies, which is tightly related to these disputes. So, what deposits do these areas contain?

Rail volumes provides a mixed picture of the US economy at this point: oil & gas and mining-related sectors are taking a real beating, some consumer sectors seem to be holding up and there are signs of weakness in the housing sector. 2016 should witness some type of a resolution here.

Happy New Year Californians - behold the power of monopoly and regulatory capture.

Elections, elections, and more elections is the 'regime change' meme for 2016 but, as Bloomberg details, the key events of the year ahead vary from a California marijuana referendum to Brazil's Olympics, and from Davos to SCOTUS. No matter what, 2016 holds a lot of opportunity for volatility, and without The Fed's safety net, who knows what that means for markets...

• Oil ends 2015 in downbeat mood; hangover to be long, painful (Reuters)
• Recession, retrenchment, revolution? Impact of low crude prices on oil powers (Guardian)
• Midwest Flooding Might Make the Oil Glut Worse (BBG)
• From Oil Glut to Shortage? Some Say It Could Happen (WSJ)
• Ten Years After Blowup, Amaranth Investors Waiting to Get Money Back (WSJ)
• China Fires a Warning Shot at Yuan Speculators With Bank Bans (BBG)

It has come down to this: a year in which the US stock market (led by a handful of shares even as the vast majority of stocks has dropped) has gone nowhere, but took the longest and most volatile path to get there, is about to close either red or green for 2015 based on what happens in today's low-volume session following yesterday's unexpected last half hour of trading "air pocket" which brought the S&P back to unchanged for the year.

With just two days left in 2015, the main driver of overnight global stocks and US equity futures remains the most familiar one of all of 2015 - crude oil, which, after its latest torrid bounce yesterday has resumed the familiar "yoyo" mode, and again stumbled dropping below $37 on yesterday's surprising API 2.9 million crude inventory build, as well several more long-term "forecasts" by OPEC members, with Kuwait now budgeting for $30 oil, while Venezuela's Maduro said the oil price fell to $28/bbl and is "headed downward." As a result U.S. futures declined and European stocks fell, extending their worst December drop since 2002 in thin volume on the last full trading day of the year.

"At current prices we estimate that valuations for the oil and gas group reflect an implied Brent crude oil price in the range of $65-70/bbl while natural gas leveraged companies reflect a Henry Hub natural gas price in the range of $3.00/Mcf."

After a Q1 collapse, the Dallas Fed Manufacturing Outlook managed a bounce for a few months (though never got back above zero). It appears, Dallas Fed's aptly-named 'Dick' Fischer was entirely wrong when he progonosticated that "on net, low oil prices are good for Texas." December's Dallas Fed print crashed to -20.1 (from -4.9) massively missing expectations of -7.0 and back at the lows not seen since June 2009.

The last trading week of 2015 begins on a historic precipice for stocks: as reported over the weekend, the U.S. stock market has not been lower for any year ending in a “5? since 1875. That streak is now in jeopardy, because following Thursday's shortened holiday session which ended with an abrupt selloff, the overnight session has seen continued weakness across global assets in everything from Chinese stocks which tumbled the most since November 27, to commodities (WTI  is down 2.5%) to European stocks (Stoxx 600 -0.4%), to US equity futures down 0.4% on what appears to be an overdue dose of Santa Rally buyers' remorse.

Since initially reporting on California's Alison Canyon gas leak, more details have emerged on the scale (and potential for no solution) of the problem... "the enormity of the Aliso Canyon gas leak cannot be overstated. Gas is escaping through a ruptured pipe more than 8,000 feet underground, and it shows no signs of stopping." Methane - a greenhouse gas 72 times more impactful in the atmosphere than carbon dioxide - has been leaking with force equivalent “to a volcanic eruption” for about two months now.

With all the action in Syria, the Ukraine is no longer a subject for discussion in the West. In Russia, where the Ukraine is still a major problem looming on the horizon, and where some 1.5 million Ukrainian refugees are settling in, with no intentions of going back to what's left of the Ukraine, it is still actively discussed. But for the US, and for the EU, it is now yet another major foreign policy embarrassment, and the less said about it the better. In the meantime, the Ukraine is in full-blown collapse - all five glorious stages of it - setting the stage for a Ukrainian Nightmare Before Christmas, or shortly after.

The news out of Canada - and especially out of Alberta, the heart of the country's oil patch - has just gone from disturbing to downright terrifying. 

When the word 'bloodbath' just doesn't quite sum it up, distressed debt investors's bonuses have been obliterated in 2015. Despite seeking safety away from oil and coal companies, one trader exclaimed, the pain is "like cancer, it's spreading throughout the body," as every industry from materials to retail and industrials has collapsed... though, as Bloomberg reports, some investments stood out in their awfulness.