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Brent Plunge To $60 If OPEC Fails To Cut, Junk Bond Rout, Default Cycle, "Profit Recession" To Follow

Tyler Durden's picture




 

While OPEC has been mostly irrelevant in the past 5 years as a result of Saudi Arabia's recurring cartel-busting moves, which have seen the oil exporter frequently align with the US instead of with its OPEC "peers", and thanks to central banks flooding the market with liquidity helping crude prices remain high regardless of where actual global spot or future demand was, this Thanksgiving traders will be periodically resurfacing from a Tryptophan coma and refreshing their favorite headline news service for updates from Vienna, where a failure by OPEC to implement a significant output cut could send oil prices could plunging to $60 a barrel according to Reuters citing "market players" say.

By way of background, the key reason OPEC is struggling to remain relevant is because, as the FT reported over the weekend, "US imports of crude oil from Opec nations are at their lowest level in almost 30 years, underlining the impact of the shale revolution on global trade flows. The lower dependence on imports from the cartel, which pumps a third of the world’s crude, comes amid advances in hydraulic fracturing that has propelled domestic US production to about 9m barrels a day – the highest level since the mid-1980s."

The US "shale miracle" is best seen on the following chart showing the total output of the US compared to perennial crude powerhouse, Saudi Arabia:

It is this shale threat that has become the dominant concern for OPEC, far beyond whatever current US national interest are vis-a-vis Ukraine, and Russia's sovereign oil revenues, and as reported previously, Brent has to drop below to $75 or lower for US shale player to one by one start going offline.

 

Unfortunately, it may bee too little too late for the splintered cartel. As Bloomberg reports, "the days when OPEC members could all but guarantee consensus when deciding production levels for oil are long gone, according to a veteran of almost two decades of the group’s meetings."

The global glut of crude, which has contributed to a 30 percent decline in prices since June 19, has left the Organization of Petroleum Exporting Countries disunited and dependent on non-members to shore up the market, said former Qatari Oil Minister Abdullah Bin Hamad Al Attiyah. The 12-member group is set to meet in Vienna on Nov. 27.

 

“OPEC can’t balance the market alone,” Al Attiyah, who participated in the group’s policy meetings from 1992 to 2011, said in a Nov. 19 phone interview. “This time, Russia, Norway and Mexico must all come to the table. OPEC can make a cut, but what will happen is that non-OPEC supply will continue to grow. Then what will the market do?”

...

 

“OPEC had been enjoying easy meetings, and decisions were taken without a sweat,” Al Attiyah said. “Now the situation is different.”

 

Oil markets are oversupplied by about 2 million barrels a day, and global economic growth is below expectations, he said. “The U.S., which was a major market for OPEC, is no longer welcoming imports. It’s now striving to become an oil exporter. It’s already exporting condensates.”

So if OPEC is unable to reach an agreement, what is the worst case? Back to Reuters, which says that "The market would question the credibility of OPEC and its influence on global oil markets if there was no cut," said Daniel Bathe, of Lupus alpha Commodity Invest Fund.

That could send Brent down to around $60, Bathe said.

 

"Herding behavior and a shift to net negative speculative positions should accelerate the price plunge," he added.

 

Fund managers are divided over whether OPEC will reach an agreement on cutting output. Bathe put the likelihood at no more than 50 percent.

 

The oil price has been falling since the summer due to abundant supply -- partly from U.S. shale oil -- and low demand growth, particularly in Europe and Asia.

 

As a result, some investors believe a small cut -- of around 500,000 bpd -- would not be enough to calm the markets.

 

If OPEC fails to agree a cut, prices will drop "further and quite quickly", with U.S. crude possibly sliding to $60, he said. U.S. crude closed at $76.51 on Friday, with Brent just above $80.

It's not all downside: there is a chance that OPEC will agree on a 1 million barrel or more cut, which would actually send prices higher:

"The market really wants to see that OPEC is still functioning ... if there is a small cut, with an accompanying statement of coherence from OPEC that presents  a united front, and talks about seeing demand recovery, and some moderation of supply growth, then Brent could move up to $80-$90."  "Prices below $80 are putting significant strain on the cartel's weakest members such as Venezuela," said Nicolas Robin, a commodities fund manager at Threadneedle. He said a bigger cut -- of 1 million bpd or more -- was an "outlier scenario", but such a move would rapidly push prices above $85.

Then again, even thay may be insufficient if the market prices in an ongoing deterioration in global end-demand: "Doug King, chief investment officer of RCMA Capital, sees Brent falling to $70, even with a cut of 1 million bpd."

So in a worst case scenario, where Brent does indeed tumble to $60, what happens? We already know the answer, as it was presented in "If WTI Drops To $60, It Will "Trigger A Broader HY Market Default Cycle", Says Deutsche":

... it is not just the shale companies that are starting to look impaired. According to a Deutsche Bank analysis looking at what the "tipping point" for highly levered companies is in "oil price terms", things start to get really ugly should crude drop another $15 or so per barrell. Its conclusion: "we would expect to see 1/3rd of US energy Bs/CCCs to restructure, which would imply a 15% default rate for overall US HY energy, and a 2.5% contribution to the broad US HY default rate.... A shock of that magnitude could be sufficient to trigger a  broader HY market default cycle, if materialized. "

This explains why the HY space has been far less exuberant in recent weeks, and the correlation between HY and the S&P 500 has completely broken down.

 

Finally it is not just the junk bond sector that is poised for a rout should there be no meaningful supply cuts later this week: recall that in another note over the weekend, DB said that should crude prices take another leg lower, then the most likely next outcome is a Profit recession, which while left unsaid, will almost certainly assure a full-blown, economic one as well.

So keep an eye on Vienna this Thanksgiving: the black swan may just be coated with an layer of crude oil this year.

 

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Mon, 11/24/2014 - 09:02 | 5481078 HedgeAccordingly
HedgeAccordingly's picture

Won't happen. Maybe WTI Sees 60's. Then USA will shut in production.
Http://www.hedge.bz

Mon, 11/24/2014 - 09:20 | 5481086 GetZeeGold
GetZeeGold's picture

 

 

Never say never bitch. We're pumping oil out of the Dakotas like it's water.

 

Here's a little blast from the past.....

 

The speculation of oil price has been out there since the spike of 2008. Matt Taibbi devoted an entire book Griftopia to the topic. It was a feature of his seminal article in Rolling Stone about Goldman Sachs.

And what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical-commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

Mon, 11/24/2014 - 09:37 | 5481138 Haus-Targaryen
Haus-Targaryen's picture

So gas is even CHEAPER!? 

 

That is awesome.  Why is everyone bitching about this?  Yes, lots of worthless shithold oligarchs will go bankrupt -- but I can fill up me car for less.  I am all for that.  

Looking forward to the greenies shitting their pants about how cheap it is.  

Mon, 11/24/2014 - 09:48 | 5481154 GetZeeGold
GetZeeGold's picture

 

 

I'll buy the beer....I have all this new disposable income.....what kind do you like?

Mon, 11/24/2014 - 09:54 | 5481178 Haus-Targaryen
Haus-Targaryen's picture

Here in the Beer capitol of the world, I would take a Tigenseeer or an Augustiner, however, given you are state side, I would almost be willing to murder someone for Sam Adam's Winter Ale or a good Schiner Boch.  

 

I was thinking about using my additional funds the way all the shithead "banking conculstants" use their cash here in FFM -- hookers and blow, but then I figured I'd keep stockign up on AG and AU, and when they throw themselves off the roof here in the next 12-24 months, I'll buy their repo'ed Porsche on the cheap. 

Mon, 11/24/2014 - 10:12 | 5481235 Scotch-n-Soda
Scotch-n-Soda's picture

Hate to piss you off bro, but I had a bunch of the Sam WInter's last night, about 4 big ass glasses, and it was GOOD!

Mon, 11/24/2014 - 10:22 | 5481272 NoDebt
NoDebt's picture

BREAKING NEWS:  DefSec Hagel just resigned (was fired).

Oh, it's on like Donkey Kong in the Middle East now, baby!  Shit just got real, yo!

Mon, 11/24/2014 - 11:10 | 5481451 GetZeeGold
GetZeeGold's picture

 

 

 

Did Chuck refuse to sign the litmus test?

Mon, 11/24/2014 - 12:27 | 5481770 greyghost
greyghost's picture

opec will agree to a million barrel per day cut......oil will rally in price on these words alone......by Jan. everyone will see it was all talk. opec may even increase production, that's happened before.

Mon, 11/24/2014 - 13:42 | 5482156 Debeachesand Je...
Debeachesand Jerseyshores's picture

That's the way I see it too greyghost...

Mon, 11/24/2014 - 12:29 | 5481791 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Chuck refused to go down on Obammy?

Mon, 11/24/2014 - 11:51 | 5481605 Haus-Targaryen
Haus-Targaryen's picture

Tell you what -- 

You send two thirty packs my way and I'll send you a Kasten (German 24 pack which is 12 liters of beer) your way.  

You will have the only Augustiner in the USSA, keep it in your basement and drink it sparingly until Fergson comes to your front door, then drink it all at once, at least you'll die happy. 

Mon, 11/24/2014 - 13:10 | 5481975 walküre
walküre's picture

I like the way you think. You can keep your beer in the basement until the Russians come knocking? At least according to Handelsblatt, there are some Germans stocking up on guns and ammo at the Easter "front" already... For real or just b.s.?

Mon, 11/24/2014 - 17:57 | 5483224 Haus-Targaryen
Haus-Targaryen's picture

No idea.  

Russians going after Germany would be suicidal for Putin.  He could take it, but it would be the end of him in the process.  

However, if I was in Poland ...  

Mon, 11/24/2014 - 10:19 | 5481256 tarsubil
tarsubil's picture

You're alright. But I wouldn't bank on this thing imploding and the Au/Ag payoff within the next 1 to 2 years. That's setting yourself up for disappointment. No one knows what tomorrow will bring.

Mon, 11/24/2014 - 11:49 | 5481598 Haus-Targaryen
Haus-Targaryen's picture

Sure, you're probably right.  It gives me more time to get more of it.  

I am really looking forward to the AG/AU -- Real Estate swaps I'll be doing after this whole cluster fuck comes apart.  

I think I'll buy a Castle or two.  (Literally)

http://www.schloss-burg-verkauf.de/verkauf-schloss-wasserlage-schwerin-m...

Mon, 11/24/2014 - 10:40 | 5481346 The_Dude
The_Dude's picture

Augstiner Brau in Salzburg...some of the finest hours of my life spent under those trees with friends. Plus beer made in a cathedral = manna from heaven, right?

I am not one for voyeuristic videos but this one takes me back....just love it.

http://m.youtube.com/watch?v=3GD5vE3yYeE

Mon, 11/24/2014 - 11:45 | 5481587 Haus-Targaryen
Haus-Targaryen's picture

Salzburg is beautiful, but the Austrians just need to get annex by Germany and get done with it.  The Austrian inefficieny when compared with right across the border is mind-boggling.

But Salzburg is beautiful.  Did you know there is a little Dorf (village) in Austria called "Fucking"  

No shit.  Look it up.  

Mon, 11/24/2014 - 13:10 | 5481986 walküre
walküre's picture

maybe this can be part of AfD's strategy going forward

Mon, 11/24/2014 - 17:34 | 5483121 Haus-Targaryen
Haus-Targaryen's picture

Nah.  

AfD should add extending the Right of Return to all nations world-wide.  

Mon, 11/24/2014 - 11:24 | 5481502 GOSPLAN HERO
GOSPLAN HERO's picture

Why is Munich beer so good?

 

I love it !!!

Mon, 11/24/2014 - 11:43 | 5481576 Haus-Targaryen
Haus-Targaryen's picture

Having lived in Oberbayern for a while -- I'll tell you its the water. 

 

Beer's largest ingrediant is water.  What water do you think tastes better? 

Alpine glacial melt

Wherever American beer gets their water.

 

Answer is pretty easy.  

Mon, 11/24/2014 - 11:45 | 5481586 Momauguin Joe
Momauguin Joe's picture

Das bier frauen.

Mon, 11/24/2014 - 11:46 | 5481588 Haus-Targaryen
Haus-Targaryen's picture

Die Bier Frauen. 

Mon, 11/24/2014 - 11:48 | 5481595 Momauguin Joe
Momauguin Joe's picture

Ya!

Mon, 11/24/2014 - 11:53 | 5481626 Urban Redneck
Urban Redneck's picture

You don't happen to work at the SEC by any chance?

Mon, 11/24/2014 - 17:35 | 5483124 Haus-Targaryen
Haus-Targaryen's picture

lol - no. 

 

That would be one hell of a job though.  

"Yes Mr. Deutsche Bank schmuck, tell me honestly, how fucked are you? 

1) Fucked
2) Elton John fucked
3) Rake Fucked

Select two." 

Mon, 11/24/2014 - 20:08 | 5483773 Urban Redneck
Urban Redneck's picture

I admit my german sucks... I had to look up the gender of Transsexuelle in the dictionary.  It makes sense (sort of) but how does one know which to use under different circumstances?

Tue, 11/25/2014 - 02:15 | 5485054 Haus-Targaryen
Haus-Targaryen's picture

There is no logic to the German genders.  For example, the German word for "skirt" is "der Rock" "der" indicating masculine.  However, the world for "girl" "das Mädchen" "das" is neuter -- ask a group of Germans what the gender of "Butter" is, and watch it devolve into the "coke v soda v pop" debate -- German style.  

Easy answer is just simple memorization.  Over time you kinda get the feeling what something should be after hearing it enough times.   

Mon, 11/24/2014 - 10:03 | 5481205 McCormick No. 9
McCormick No. 9's picture

@HT:

This is all a factor of Peak Oil. That the end of cheap oil coincides with massive financial skullduggery is no coincidence. The end of cheap oil wanted to bring about a debt-restructuring depresion around 2000, but Greenspan woudn't let it happen. Even without Goldman, referenced by Tiabbi above, oil would have been expensive. The glut we now see is caused by the financial markets, pumping ponzi is what is driving the oil pumping. As demand shrinks, and puts pressure on the tight oil/fracking ponzi operation, this will cause a collapse in the HY markets. Where is Michael Miiken when you need him?

What are the dominoes after that?

Derivatives

Equities

Futures

Mon, 11/24/2014 - 11:50 | 5481611 Haus-Targaryen
Haus-Targaryen's picture

Makes sense. Excellent post. 

Mon, 11/24/2014 - 12:00 | 5481653 de3de8
de3de8's picture

How soon that we forgot under $2 gas. They trained the Sheeple well.

Mon, 11/24/2014 - 17:30 | 5483109 Matt
Matt's picture

"Why is everyone bitching about this?  Yes, lots of worthless shithold oligarchs will go bankrupt -- but I can fill up me car for less.  I am all for that.  "

Incorrect. Lots of pension funds and insurance companies will go bankrupt. I bet it will be mostly retirees and soon-to-retire that will bear the brunt.

Tue, 11/25/2014 - 02:16 | 5485055 Haus-Targaryen
Haus-Targaryen's picture

Good -- its this generation of people that fucked the system my generation now has to fix. 

Mon, 11/24/2014 - 11:28 | 5481521 Rusty Shorts
Rusty Shorts's picture

Looks like Lindsey Williams was right!!

https://www.youtube.com/watch?v=CZFO1tq5OeI

sarc/

Mon, 11/24/2014 - 11:33 | 5481544 MalteseFalcon
MalteseFalcon's picture

Exactly.  All that is being removed here is a very large speculators margin that was going to the banks and was destroying the real economy.  Of course the banks have handed off to "institutional investors".

Oh well.  Bend over.

Mon, 11/24/2014 - 10:12 | 5481237 post turtle saver
post turtle saver's picture

not a single party listed has incentive to cut production... they all need the revenue... race to the bottom... if Brent hits US$60 bbl then WTI is going to come in at around US$50 bbl... yes, projects will be shelved and wells will be capped at that point... this is also the real reason that we won't see Keystone XL built... there's no money in it for TransCanada at these price levels

Mon, 11/24/2014 - 12:04 | 5481673 disabledvet
disabledvet's picture

Plus you have natural gas when you get all that oil. Since the breakeven price for natural gas is about a ten cents instead of well north of four bucks where it is today...

Mon, 11/24/2014 - 11:12 | 5481456 Bunga Bunga
Bunga Bunga's picture

Right, why OPEC must shut production? It looks like the US created all this oversupply. Nonetheless,Oil is heading to $10.

Mon, 11/24/2014 - 09:09 | 5481087 Brazen Heist
Brazen Heist's picture

$60/b, Frack Off!

Mon, 11/24/2014 - 15:38 | 5482591 Coast Watcher
Coast Watcher's picture

Too right. $60 oil would shut down the shale oil industry within weeks.

Mon, 11/24/2014 - 09:11 | 5481089 philipat
philipat's picture

And the winner. Of course, China. It's a bit like with Gold. Watch these idiots play their silly games and use the opportunity to buy, buy, buy at the best prices, to replenish reserves.

Mon, 11/24/2014 - 09:12 | 5481092 GetZeeGold
GetZeeGold's picture

 

 

China thinks ahead in terms of thousands of years.....you can't keep Wall Street's attention for more than milliseconds.

Mon, 11/24/2014 - 10:07 | 5481211 winchester
winchester's picture

nano.... nanoseconds.

Mon, 11/24/2014 - 10:23 | 5481273 tarsubil
tarsubil's picture

Are you kidding me? Is that what they were thinking with communism and central planning? Yeah, China is run by super geniuses and that explains the pollution and buildings falling over in ghost cities.

China has been raped in terms of human resources. This whole idea that China has it all figured out is complete bunk.

Mon, 11/24/2014 - 11:03 | 5481430 GetZeeGold
GetZeeGold's picture

 

 

Is that what they were thinking with communism and central planning?

 

No....they just went first.....but we're catching up to them.

Mon, 11/24/2014 - 13:13 | 5482005 walküre
walküre's picture

Oil can't be stored for thousands of years above ground. Unless the Chinese buy up vast oil reserves and claim ownersip of oil in the ground, the price collapse is meaningless to the Chinese. Even they can't profit from it LONG TERM.

Mon, 11/24/2014 - 10:13 | 5481242 McCormick No. 9
McCormick No. 9's picture

Who will China sell all their worthless plastic crap to?

When the treasuries market collapses, How will China make out?

This has something to do with Treasuries maturity.

http://johnhcochrane.blogspot.com/2012/11/debt-maturity.html

Mon, 11/24/2014 - 11:16 | 5481471 legolasladlf
legolasladlf's picture

China will back its currency to gold

Chinese products will be indeed unafordable...for 6 billions people but not CHINESE themselves : 1 billons consumers.

They have gold

They have the people 

They produce food

They will have cheap energy.

In one night checkmate : back yuan to gold.

Bangladesh, malaysia, thailand, they will product cheap stuff for them. High ends products fromneurope and usa will be soooo cheap too.

Why do they need to export while their own domestic population will become rich thanks to the reevaluation?

Think about ghost cities... In one night people could buy an appartement in these ghost cities thanks to yuan reevaluation. Ghost cities no more ghost in 2 months.

In one night, we could be useless to them.

In one night, no more debt buying.

In one night, we could be the thirld world.

 

 

 

Mon, 11/24/2014 - 13:17 | 5482017 BigJim
BigJim's picture

No country's PTB want to limit credit by tying their money to gold. They derive their advanbtages over the average man by being immediately downstream of the money spigots.

Mon, 11/24/2014 - 13:22 | 5482038 walküre
walküre's picture

Nice, but do you actually know Chinese people? Imagine millions of peasants moving from villages into condos? Where would they raise the pigs and keep the chickens? Which jobs would these ex farmer new condo dwellers go to? Production as you say would be outside of China because labor is cheaper there.

China has gold (supposedly) so does the US (supposedly). Not sure what a gold backed yuan would accomplish that a gold backed dollar couldn't.

They're both fucking shyster fiat and will be manipulated with or without gold backing. Who would be able to tell any different?

Since we're dreaming here, I'm telling you what I would like to see happening.

I'd like to see the fruits of our labor be paid in gold and silver instead of any paper crap. That's the only way to guarantee nobody is fucking with my income.

Mon, 11/24/2014 - 09:15 | 5481093 NoDebt
NoDebt's picture

So, Warren will be able to go play with all his empty full-scale trains that were previously used to haul that stuff around?  

"Toot toot!  I'm a train conductor!" he'll say.

Mon, 11/24/2014 - 09:40 | 5481149 philipat
philipat's picture

Whilst sucking on a popsicle......

Never mind, the tax writedoens and other "Concessions" from DC will offset any problems. This crony capitalism workd beautifully.

Mon, 11/24/2014 - 09:13 | 5481095 JustObserving
JustObserving's picture

Lowering oil prices is part of US undeclared war against Russia.  The same strategy served to break up the Soviet Union in the 1980s.  Now Biden is constantly threatening Russia:

In Ukraine, US Vice President Biden issues new threats against Russia

 

By Niles Williamson 
24 November 2014

 

US Vice President Joe Biden visited Ukraine at the end of last week to threaten Russia with “rising costs and greater isolation.” His visit heralds an intensification of the suppression of pro-Russian separatists in the east, increasing austerity for the working class throughout Ukraine and the ratcheting up of tensions between the United States and Russia.

This was the third time in the last seven months that Biden has made an official visit to Ukraine. His latest visit came exactly one year after the beginning of the Maidan protests in Kiev—protests that were encouraged and instigated by the US and Germany as part of a regime-change operation on Russia’s doorstep. The campaign, which was supported by extreme right-wing and fascistic groups, resulted in the ousting of then President Victor Yanukovych as part of an effort to place Ukraine firmly in the orbit of the United States and Europe.

Speaking at the Presidential Administrative Building in Kiev, Biden encouraged the Ukrainian government to press forward with its draconian economic reform agenda to meet the demands of the International Monetary Fund (IMF). The IMF has promised $17 billion in loans to prop up the collapsing Ukrainian economy. Biden reassured his audience that the American government is “looking for opportunities to improve Ukraine’s business climate and increase trade and investment.”

One of the new business opportunities in Ukraine that has already directly benefitted the Biden family is in the field of natural gas. Less than two months after the institution of the pro-Western government, Joe Biden’s son Hunter was appointed to the board of directors of Burisma Holdings, the largest private producer of natural gas in Ukraine. Burisma currently holds permits to drill for gas in the Dnieper-Donets and Azov-Kuban Basins, covering much of eastern Ukraine.

http://www.wsws.org/en/articles/2014/11/24/ukra-n24.html

Mon, 11/24/2014 - 09:19 | 5481104 Brazen Heist
Brazen Heist's picture

Was checking out Ukrainian bond issuances lately because was curious about their funding situation....turns out all were "guaranteed" and underwritten by Uncle Sam...

The US government is investing in Ukraine for a good reason....watch this space.

Mon, 11/24/2014 - 09:33 | 5481135 GetZeeGold
GetZeeGold's picture

 

 

Joe Biden for President 2014....we'll worry about it next year.

Mon, 11/24/2014 - 09:40 | 5481147 Brazen Heist
Brazen Heist's picture

Biden Jnr is already strategically placed in the oil sector in Ukraine. Porky turns out was a US stooge.

http://www.globalresearch.ca/president-petro-poroshenko-our-ukraine-insi...

Mon, 11/24/2014 - 09:47 | 5481156 philipat
philipat's picture

And Biden was booed off the stage in Kyiv. The Secret Servive would not allow him to appear with Poroschenko. Nuland might like to recosider her comments....

Which also explains why Holland got it's Gold back for hiding the MH017 findings, whereas Germany didn't for getting too close to Russia?

Mon, 11/24/2014 - 09:45 | 5481160 GetZeeGold
GetZeeGold's picture

 

 

 

We put Junior in Ukraine where he couldn't screw anything up......oops!

Mon, 11/24/2014 - 10:00 | 5481192 Latina Lover
Latina Lover's picture

Brazen Heist   do you have a reference for the US gov. support of  Ukrainian Bond Issuances?

Mon, 11/24/2014 - 10:18 | 5481255 Chump
Chump's picture

I don't know about anything recent, but this is from May 2014.

http://www.usaid.gov/news-information/press-releases/may-16-2014-governm...

Mon, 11/24/2014 - 10:52 | 5481398 Latina Lover
Latina Lover's picture

Thank You.

Mon, 11/24/2014 - 11:24 | 5481501 Atomizer
Atomizer's picture

Covered story. Keep up the passion.

Company In Which Joe Biden's Son Is Director Prepares To Drill Shale Gas In East Ukraine

http://www.zerohedge.com/news/2014-07-25/company-which-joe-bidens-son-director-prepares-drill-shale-gas-east-ukraine

Mon, 11/24/2014 - 12:07 | 5481685 Dien Bien Poo
Dien Bien Poo's picture

thats utter bullshit, having participated in same deals. there is zero US implicit guarantee on these bonds.

Mon, 11/24/2014 - 10:34 | 5481311 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Shale oil is uneconomical at $60 so this war against Russia using low oil prices will backfire massively.

Stupid fuckers!

Mon, 11/24/2014 - 13:19 | 5482028 BigJim
BigJim's picture

The majors will buy up the frackers and shale. In a couple of years when the price of oil resumes its upward march they'll make out like bandits.

Mon, 11/24/2014 - 11:16 | 5481475 basho
basho's picture

who is biden?

Tue, 11/25/2014 - 06:35 | 5485292 LostandFound
LostandFound's picture

Its a bitch when he has permits to drill something he cannot get access to, lol.

Epic Fail.

Mon, 11/24/2014 - 09:21 | 5481102 falak pema
falak pema's picture

When the commodity wars up-end the existing currency wars, the second plank of US hegemony goes rotten. 

Now both dollar and petrol wars are making America's convoluted balancing act look like that of a drunken sailor at a teetotaler's reunion. 

Saud says f*** u Opec, and it has as collateral f*** u Putin and US Shale ! 

Now the world gets moar and moar uncertain as the money line and the commodity lines look like they have just come out of a toilet without any toilet paper for a butt swipe! 

Smells very bad all around! 

What will Draghi/Yellen/Abe do to stop the carry trades from going berserk?

'Cos if they dry up on their own we have a true liquidity trap in a global spider's web toilet that needs badly to get flushed.

Mon, 11/24/2014 - 11:18 | 5481466 DaveyJones
DaveyJones's picture

well said

The "Shale Miracle" as more than one has put it, is more like a retirement party. These fields take tremendous energy, water, poison, and road damage to put out. And they peak incredibly early compared to traditional easy oil fields.

As you said, the more things unravel, the less honor amongst thieves as everyone looks over their shoulder and constantly repositions

despite anything our fuel tanks say today, there is a growing number of people in the world (not the first world) using this stuff, it's getting harder and more expensive to get, and the "substitutes" are poor ones.

Mon, 11/24/2014 - 09:21 | 5481110 Peter Pan
Peter Pan's picture

At this rate it won't be long before the barrel is worth more than the oil in it.

It is clear that a complex mix of politics, manipulation, output levels, recession and alternative fuel sources is playing havoc with the market and its suppliers.

Let's see who cracks first or let's see if there are unexpected events which will break this downward spiral.

Mon, 11/24/2014 - 09:45 | 5481161 SmallerGovNow2
SmallerGovNow2's picture

"alternative fuel sources"  ahhhh no....

Mon, 11/24/2014 - 10:07 | 5481213 photonsoflight
photonsoflight's picture

LOL my cousin drives his mercedies with vegatable oil he gets real cheap from a few resteraunts. It smells like french fries as he laughs at the rest of us.

Mon, 11/24/2014 - 10:43 | 5481363 oldschool
oldschool's picture

Your cousin?  Why not you?  Why not everyone?

Think about it, and don't be so quick to accept his laughter.

Mon, 11/24/2014 - 17:43 | 5483159 Matt
Matt's picture

Because most people will not choose to go process used vegatable oil. Most people will not maintain their own cars. Think about it. People prefer to pay someone to change the oil, most people would rather pay $5 per gallon than spend time getting free fuel (monetarily free, not economically free).

Mon, 11/24/2014 - 10:47 | 5481378 Keyboard Kommando
Keyboard Kommando's picture

Mercedies?!? Is that a new kind of car or are you just a shitty speller?!?

Mon, 11/24/2014 - 09:23 | 5481115 ekm1
ekm1's picture

Brent will drop to $60 or even far lower for one reason only:

 

World cannot afford any cent above $70 brent and never did.

Economy will spiral towards death if oil stays above $70 for longer now, due to shortage of energy.

 

It is that simple.

 

Costs do not define price. Price defines costs. (As long as technology exists)

Mon, 11/24/2014 - 10:10 | 5481226 winchester
winchester's picture

110. not 70

check 101 youtube about oil.

Mon, 11/24/2014 - 09:24 | 5481119 DCon
DCon's picture

Have ISIS joined OPEC yet?

 

Mon, 11/24/2014 - 09:35 | 5481137 GetZeeGold
GetZeeGold's picture

 

 

I don't think OPEC wants anything to do with the CIA.

Mon, 11/24/2014 - 09:29 | 5481125 Brazen Heist
Brazen Heist's picture

It will be interesting to observe who cracks first and fires the first retaliatory shot in this downward spiral of crude. At $77/b most net oil exporters have surpassed their break-even points. I guess it depends on how large their SWFs and Forex Reserve Accounts can buffer the decline. Russia is considering floating the RUB so they can regain an independent monetary policy and set interest rates based on the needs of the local economy rather than reacting to FX pressures.

I'm curious if this will rip OPEC apart, given the current antagonism between the Saudis and Iranians getting worse and worse.

Mon, 11/24/2014 - 10:12 | 5481236 photonsoflight
photonsoflight's picture

There is really only one choice for Russia. They must destroy the saudi oil fields. That would destroy the petro-dollar and end Americas hegemony.

Mon, 11/24/2014 - 10:16 | 5481249 post turtle saver
post turtle saver's picture

good luck with that

Mon, 11/24/2014 - 11:04 | 5481437 GetZeeGold
GetZeeGold's picture

 

 

That would fill the air with nukes.....really fast.

Mon, 11/24/2014 - 09:30 | 5481129 withglee
withglee's picture

comes amid advances in hydraulic fracturing that has propelled domestic US production

The real advance is "directional drilling" Rather than tapping the pay zone with a straw, they drill horizontally through the pay zone and tap it with a french drain. Claiming it is fracking that is the efficiency, and then showing how damaging that process can be to aquifers, opponents of carbon based energies can attack the efficiencies of directional drilling.

Mon, 11/24/2014 - 09:31 | 5481130 juggalo1
juggalo1's picture

Defaults among junk-rated US-shale plays?  How about Venzuela?  As for Saudi Arabia supporting US over OPEC, I'm not sure the scenarios outlined are particularly good for the US if there are rolling bankruptcies in shale oil plays.  Perhaps Saudi Arabia is acting in its own interests?

Mon, 11/24/2014 - 10:15 | 5481244 photonsoflight
photonsoflight's picture

Perhaps the saudis interest overlap some of the rulers in dc also.

Mon, 11/24/2014 - 10:19 | 5481260 forwardho
forwardho's picture

Damn right they are.

Its econ 101, If entity A makes a profit on any price over 30, and entity B can only make a profit if prices are over 80, yet they compete in the same market. Entity A can afford a drop in amount of profits till B lies dying in the dust of bankruptcy.

Its precisely what they should do.

 

Mon, 11/24/2014 - 09:39 | 5481144 spankfish
spankfish's picture

Sorry for this, but totally off topic.  My first pre Thanksgiving WTF?...

"The Taliban insurgents, ousted from power by a U.S.-led coalition in 2001, could not immediately be reached for comment."

http://www.reuters.com/article/2014/11/24/us-afghanistan-usa-idUSKCN0J810C20141124

Mon, 11/24/2014 - 09:39 | 5481145 gatorengineer
gatorengineer's picture

Have you noticed all of those fuel surcharges dropping?  Airline tickets plummeting?  Thought so....

Mon, 11/24/2014 - 10:18 | 5481257 post turtle saver
post turtle saver's picture

I have noticed I used to pay $3.89 per gallon to fill up the tank, and now it's $2.99... far cry from what it used to be but that is a 23% price drop in a shade under six months... seems about right...

Mon, 11/24/2014 - 11:46 | 5481581 Rusty Shorts
Rusty Shorts's picture

$2.51 here

Mon, 11/24/2014 - 12:02 | 5481669 Dien Bien Poo
Dien Bien Poo's picture

here in CT, i paid as high as 4.89 and now im paying 3.85 and still feel robbed.

Tue, 11/25/2014 - 00:20 | 5484802 Buckaroo Banzai
Buckaroo Banzai's picture

If you live in CT, you get robbed everywhere-- not just at the gas pumps.

Mon, 11/24/2014 - 09:42 | 5481152 WTFUD
WTFUD's picture

This is all good but what are the underlying fundamentals going forward for BLOW?

Mon, 11/24/2014 - 09:42 | 5481153 orangegeek
orangegeek's picture

Lots of supply side talk - consumers aren't spending.  Wealth is highly concentrated.

 

WTI, similar to Brent, will continue to fall as USD climbs.

 

http://bullandbearmash.com/chart/wti-oil-weekly-usd-trend-continue-week/

 

The pump is coming from Yellen and her central bank cronies trying to keep key commodities and stocks up - legalized fraud by CBs mortgaging the future of the world.

Mon, 11/24/2014 - 09:49 | 5481165 NubianSundance
NubianSundance's picture

Supply > Demand = Price falls.

As everyone knows, China accounted for most of the oil price rise, that trend is now over. Oil at $50 by spring if not lower.

Mon, 11/24/2014 - 09:52 | 5481171 observer007
observer007's picture

MH17: german private eye now 47 Mio. $ reward for real cause of crash

latest

http://tersee.com/#!q=MH17&t=text

Mon, 11/24/2014 - 09:53 | 5481176 NubianSundance
NubianSundance's picture

Is that why Netherlands got their gold and Germany didn't?

Mon, 11/24/2014 - 09:59 | 5481198 graveheart
graveheart's picture

"and thanks to central banks flooding the market with liquidity helping crude prices remain high regardless of where actual global spot or future demand was"

 

Strange how central banks flooding the market with liquidity didn't move gold and silver higher, odd, very odd.

Mon, 11/24/2014 - 10:01 | 5481203 Latina Lover
Latina Lover's picture

If the banks could rig LIBOR,  the Gold Market could also be rigged.

Mon, 11/24/2014 - 10:18 | 5481248 graveheart
graveheart's picture

So what you are saying is "they" haven't buying naked shorts on the oil market like "they" have on the metals markets?

Mon, 11/24/2014 - 13:36 | 5482112 walküre
walküre's picture

I think that's correct. The gold players just don't have that much clout in DC.

Mon, 11/24/2014 - 10:21 | 5481263 Toolshed
Toolshed's picture

NO WAY!!!!!

 

Mon, 11/24/2014 - 10:08 | 5481222 Smegley Wanxalot
Smegley Wanxalot's picture

Oh fuck, say it aint so! 

I really dont wanna pay less for gas and deny shieks' worthless children of the Bugattis they are owed from us!

Mon, 11/24/2014 - 10:14 | 5481229 THE DORK OF CORK
THE DORK OF CORK's picture

A drop in the worlds fossil fuel production / consumption in  2015 will mean the total rather then today's partial collapse of the European & jap entrepots

 

 

Mon, 11/24/2014 - 10:17 | 5481250 Byte Me
Byte Me's picture

FFS Durden, at least employ a friggin' MONKEY to type your teaser headlines.

Mon, 11/24/2014 - 10:19 | 5481258 Ignorance is bliss
Ignorance is bliss's picture

I wonder how declining energy costs will affect Russia's energy power play over Europe this winter. Seems odd that oil prices are falling, especially since Japan imports almost all of its energy since Fukashima.

Mon, 11/24/2014 - 10:20 | 5481262 q99x2
q99x2's picture

Invade Saudi Arabia for taking down the World Trade Centers. Arrest Rumsfeld and Cheney for treason.

Mon, 11/24/2014 - 10:34 | 5481318 THE DORK OF CORK
THE DORK OF CORK's picture

Its not just oil and gas baby.

When once coal  production / consumption was localised to a region, it is now a globalized commodity

Half of British coal imports was of a Russian origin in 2013 according to the energy trends publication.

 

Mon, 11/24/2014 - 10:43 | 5481359 esum
esum's picture

makes no sense to me.... CARTELS dont price according to supply and deamnd... THEY SET A PRICE... and so if ussa suppliers were smart they would send reps to the cartel meeting and agree to set the price at $100/bbl.... no one breaks the price... 

Mon, 11/24/2014 - 10:43 | 5481370 Keyboard Kommando
Keyboard Kommando's picture

Jump, you bastards!

Mon, 11/24/2014 - 11:10 | 5481449 Atomizer
Atomizer's picture

Make it USD$30 and we have a deal. Winks.

Mon, 11/24/2014 - 11:22 | 5481491 Ignorance is bliss
Ignorance is bliss's picture

Once all the players figure out Uncle SAM manipulates asset prices because he owns the money supply how many nations will continue to participate? Today all oil producers are being punished. Tomorrow it will be an attack on bananas because Central America is building a canal bypass in Nicaragua. Who plays monopoly when the bank is a game participant?

Mon, 11/24/2014 - 11:28 | 5481523 Atomizer
Atomizer's picture

Report a Ponzi fraud or Scam. Hahahahahahaa

http://www.newyorkfed.org/aboutthefed/tips_and_complaints.html

Mon, 11/24/2014 - 13:38 | 5482129 walküre
walküre's picture

It's been like this since 1913. The monopoly bank also has the biggest guns at the board game.

Mon, 11/24/2014 - 11:27 | 5481510 viedoklis_lv
viedoklis_lv's picture

The falling oil price is costing Putin regime up to $100bn a year, while Western sanctions have hit the Putin regime by $40bn, its finance minister has said.

http://www.bbc.com/news/business-30174650

Putin regime Is Losing The Currency Wars

http://www.businessinsider.com/russia-is-losing-the-currency-wars-2014-11

Mon, 11/24/2014 - 13:38 | 5482136 walküre
walküre's picture

who benefits if Putin loses and Russians go hungry?

open your fucking eyes you tool

Mon, 11/24/2014 - 11:32 | 5481541 KittyStix
KittyStix's picture

I am not some kind of "economic" guru. But I can speculate that we are seeing "corrections" from QE.

First in commodity prices and then spreading corrections through the rest of the market.

The game may just be afoot.

Mon, 11/24/2014 - 12:07 | 5481679 Dr_Snooz
Dr_Snooz's picture

When did economists decide that falling energy prices are bad for the economy? Maybe if we blame it on Keynes, that will fix it. It seems to be ZH's solution for every other problem, including bad weather. Could we maybe have our war-criminal, Emperor-In-Chief make a pretty speech and sign another couple hundred Executive Orders while Congress fiddles? That's Washington's solution for all problems. Or maybe we could get the Queen of Hearts to chop off the Mad Hatter's head and that will fix it. It does seem as if we've gone down the rabbit hole here.

 

Either I've gone insane, or the world has.

Mon, 11/24/2014 - 12:53 | 5481886 Amerikan Patriot
Amerikan Patriot's picture

$60s would be bliss indeed.  American consumers would love it.  The Russians would love it.

What's not to like?

Mon, 11/24/2014 - 13:44 | 5482138 IBelieveInMagic
IBelieveInMagic's picture

Unfortunately the lowered prices don't appear to be benefiting consumers. I just got renewal notice from my 'competitive electricity generator' who has proposed a rate increase of 35% starting next month. Deregulation in electricity has been a unmitigated disaster for consumers in California and Montana and now coming to all the other states that have foolishly deregulated. After the initial 'teaser' rates, the consumer is hit with huge increases when the deregulation issue is no longer catching public's attention...

Mon, 11/24/2014 - 15:27 | 5482555 viator
viator's picture

Much of the cost increases in electrical power are the result of environmental restrictions on electrical generators and transmission companies. Preventing expansion of the pipelines supplying power stations, the upgrading and expansion of the power grid and the shutdown of coal and nuclear power generating capacity have all led to higher electrical costs. Then add the costs of cap and trade and carbon taxes and you have a perfect storm for cost increases. You haven't seen anything yet. This last Friday the EPA dumped many costly new rules on the American people.

Mon, 11/24/2014 - 14:06 | 5482246 falconflight
falconflight's picture

All in spite of the DemPerv-Sierra Club-EPA Axis powers.

Mon, 11/24/2014 - 15:06 | 5482487 viator
viator's picture

"About 80 percent of shale “oil production coming into the system in 2015 would be economic between $50 and $69 a barrel,”  Daniel Yergin said. “I think there was an assumption among OPEC countries and, you know, Europeans and others, kind of below $90 the shale gas, the shale oil, would not be viable.”

Mon, 11/24/2014 - 15:08 | 5482488 My Days Are Get...
My Days Are Getting Fewer's picture

How long do you think these cheap oil prices will hold.

The White House (as proxy) is waging war against Russia.  Low oil prices will supposedly bring Russia to her knees.

Does anyone out there seriously believe that any of these prices are not contrived.

We are probably a couple of months from bottom.  Should we pity the pensions funds long at $100+.

June 2018 WTI bottomed hard this January at $79, rose to $90 and are trading now at $78.

Mon, 11/24/2014 - 17:04 | 5482984 RealistDuJour
RealistDuJour's picture

The best fix for low oil prices is low oil prices.  Let the OPEC cartel burn through their hoard of cash to fund their deficits.  They're only punishing themselves when they try to punish others.  They'd be better served keeping oil where it was and burning through their hoard on investments for their countries.  But that's just me not thinking like a despot.

Tue, 11/25/2014 - 14:32 | 5487026 dadcss
dadcss's picture

 

The critical thinker in me leans towards articles like this as being government propaganda.

Take a short term trend and extend it out forever and present as scientific fact.

Another attempt to get the Russians to start shooting first???

 

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