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OPEC's Crude Bloodbath Sends 10 Year To 2.20%, Energy Companies Tumble
The biggest, and most market-moving, event overnight continues to be yesterday's shocking OPEC announcement, which is still reverberating across the energy space as markets largely ignore European and Japanese inflation data which is once again sliding back dangerously fast, or Italian unemployment which rose more than expected, and joined France in hitting a new record high. As a result European shares remain lower, close to intraday lows, with the oil & gas and industrials sectors underperforming and telco and travel outperforming as oil continues its decline. EU inflation slowed in Nov. to 0.3%. Italian and Swedish markets are the worst-performing larger bourses, Spanish the best. The euro is weaker against the dollar. And while US equity futures are largely unchanged even as, or perhaps because, the world is screaming economic slowdown, bonds are finally getting the message with U.S. 10yr bond yields falling to only 2.20% as Japanese yields also decline.
Some more detail from RanSquawk:
European equities enter the North American crossover in negative territory albeit off their worst levels. The sole catalyst for price action thus far has been the fallout of yesterday’s decision by OPEC to refrain from altering their output ceiling. More specifically, the energy sector has naturally been substantially weighed on by the ramifications of yesterday, with the top 10 laggards in the Stoxx 600 all being from the sector, with the FTSE 100 feeling the squeeze with BP and shell notably lower, with the two Co.’s accounting for just over 12% of the index. Nonetheless, airliners have provided stocks with some modest reprieve as the lower energy prices will benefit the sector, although the implications for airliners are less substantial than those of oil producers. Elsewhere, in fixed income markets, Bunds opened at fresh contract highs, although now reside in relatively modest territory after failing to make a break above the 153.00 level. One thing to be aware of looking ahead, is that the lower energy prices are likely to filter through to global inflation prospects and thus could have further considerations on central bank policies, notably the ECB, with this also coming in the backdrop of the heightened expectations of a sovereign QE programme.
Market Wrap
- S&P 500 futures down 0.3% to 2067.1
- Stoxx 600 down 0.5% to 345.7
- US 10Yr yield down 5bps to 2.2%
- German 10Yr yield up 0bps to 0.7%
- MSCI Asia Pacific up 0.1% to 140.9
- Gold spot down 0.8% to $1181.5/oz
Bulletin Headline Summary from RanSquawk and Bloomberg
- The OPEC oil-slide continues to cause further turmoil for oil producers and commodity currencies, while lower energy prices provide airline names with some reprieve.
- Looking ahead, today’s calendar is exceedingly thin with ECB’s Weidmann due on the speaker slate, although volumes are expected to be surprised by yesterday’s US Thanksgiving Holiday
- Treasuries head for weekly gain amid well-received 2Y and 5Y auctions and as oil prices slide after OPEC refrained from reducing output at meeting yesterday.
- OPEC’s decision to cede no ground to rival producers underscored the price war in the crude market and the challenge to U.S. shale drillers
- Euro-area inflation slowed in November to match a five-year low, prodding the ECB toward expanding its unprecedented stimulus program
- Draghi yesterday said the ECB is open to buying a wide variety of assets for further stimulus as German and Spanish inflation data highlighted the struggle to revive the euro-area economy
- David Cameron raised the prospect of Britain leaving the EU unless fellow leaders agree to let him restrict access to welfare payments for migrants
- Rating companies say defaults in China will spread as the central bank’s interest rate cut will do little to stop a wave of maturities from worsening record debt downgrades
- China asked state-owned companies to investigate risks associated with commodity trading, said people familiar with the matter, as the government seeks to avoid losses amid a price slump for raw materials
- Brazil’s economy expanded 0.1% in 3Q, less than forecast, as the world’s second biggest emerging market recovers from recession
- Brazil’s Finance Minister-designate Joaquim Levy pledged to adopt more rigorous fiscal discipline without providing details on how he will reduce the country’s debt levels
- Sovereign yields mostly lower. Asian stocks gain; European stocks, U.S. equity-index futures fall. Brent crude falls; WTI reached $67.75 yday, lowest since May 2010; gold and copper lower
FX
In FX markets, the notable focus has been on commodity currencies with the NOK reaching a 5 year low against the EUR, while CAD has continued its OPEC-inspired losses, with USD/CAD steadily approaching the 1.1400 level; should we trade above 1.1400 in the pair then the 6th of November 2014 high comes in at 1.1443 to the upside. Furthermore, the RUB has also felt the squeeze of lower energy prices and earlier printed a fresh record low against the greenback, with the USD broadly stronger after breaking above the 88.00 level during Asia-Pacific trade, which subsequently saw USD/JPY break above 118.00 overnight. EUR was provided a modest uptick as Y/Y CPI came in-line with expectations at 0.3%, although was not as low as some participants had feared. Furthermore, today is the last trading day before the results of the Swiss national gold referendum with results due on Sunday.
COMMODITIES
In the energy complex, as to be expected, yesterday’s OPEC decision has continued to take centre-stage with energy prices continuing to plummet lower and seemingly unable to find a floor, with analysts at Barclay’s suggesting that Crude prices to drop another USD 10/bbl before new floor is discovered. Elsewhere in metals markets, a strong USD capped any potential pullback in prices and also weighed on metals with COMEX copper, spot gold and spot silver all slipping to their 1-week lows. Elsewhere, Spot iron ore prices rose to around USD 70/ton overnight, boosted by Dalian iron ore futures rising for their 3rd consecutive day as investors covered short positions
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Dax 10000 still on the cards here with any crazy US ramp German banks well well bid, Deutsche up >5% Commerzbank up >3% Aareal up 2.8%
Oil wars......strap in and hang on.
For once we get to wear the strap on, and give it good and hard to OPEC.
DAX 10,000 ---
WTF is wrong with these people?
Who can hang on longer, OPEC or the frackers?
In theory OPEC, since it has lower break-even margins being the old timers in the market and all. But that depends if the cartel can remain unified.
Lower yields seem counterintuitive. But maybe an oil glut appears to be good news to some folks.
Lower break-evens means lower production costs. If frackers can break-even at $50/b, OPEC will do so at $30 for example.
We oiled some folks.
OPEC (Orgasmic Penile Erectile Catpictures) ... and Unicorns
What about Swiss gold initiative?
Today is the last day to make a gold-trade before Sunday's vote.
Do anybody see some risk-assymetry here?
it seems that market overreacted to OPEC-decision locally.
I thought it was quite obviouis that they will stay pat and market discounted this information in the price before meeting,
but fundamentals of course still supportind downtrend
What this says is like every other market, crude was rigged, and is shaking out. Some hedgies likely got hit pretty hard. Canada is tottaly fucked, and when the markets figure that out exchange should go to 1.20. Only way I see this as market positive is that its deflationary, and increases liklihood of more printing....
The Swiss Gold initiative was nothing more than a mirage. It never really was anything of substance, just something the gold hawkers could throw out there, and see if any suckers would bite on it. The metals are going to retest their old lows, and if support doesn't hold: LOOK OUT BELOW!!
Hope you'reright. (;
This chart says that is right:
http://stockcharts.com/public/1890263/tenpp/2
Thanks to Daneric's blog
I am so desperate and lost , i feel just like a broke zombie in a casino with no way out... no quite but almost and soon to be there.
The point is might as well pick a chart and stick to it, especially if you don,t have a choice.
"THIS" chart PREDICTION indicates to me , that the swiss pass a yes vote and we get a huge run up on gold as the end game nears And WE get a last chance to GET OUT of PMS and NOT IN?
FUCK YEA sign me up, one monster run up to 1750 in that time frame in paper gold, silver and miners, FUCK yes PLEASE.
So i can get OUT of the system before BING BANG with winnings or getting back losses buy LAND and or property here in PATAGONIA , AND see the SHOW with popcorn ...FUCK yea.
AND get back in PHYSICAL metals with all my power AFTER the mighty crash and mass suicide? FUCK yea.
IT IS A DREAM , IT is MY PLAN, THE FUCKING CHART Is MY PLAN.
Sad but true. So GO CHART.
See if after all this time and my shit comments on here i can get ONE decent comment.
So you want to cash your insurance policy at a profit, buy a bunch of other shit with the cash, and then try and get more insurance once the world is on fire? I don't think that will work for you but good luck.
LAnd or property in PAtagonia SHIT?>>
Please enlight me with a better suggestion.
Shit was used in a quantity sense "a lot of shit" not in a quality sense "that's some nice shit".
PATAGONIA???
You are a lucky man. I love that place. And BTW don't look too long and hard at technical observations and predictions. The markets are totally rigged. There is no technical explaination for anything now. And the inverted pyrimid theroy shows us that the so called last man standing in the real collateral world is GOLD. It will go through all the talk up and down but in the end it will be the last thing of real value. There is a reason that China, Russia, India and others are buying it up. And its not because they read some blog from Eric Sprott that says buy my gold. Sprott and others are there because they all agree on the same point. Fiat money is going down. It always has and it always will. Fiat is the product of goverments and that means politicians with promises they need to get elected and cannot deliver. Plain and simple. The problem is they have become very good at the extend and pretend game but their time is running out. Be patient and you will be rewarded.
Patient as in cash US$ ?? or holding on to my shit market positions? The likes of SRDL and miners down around 50%..or my options down 80%
I have a bunch of PSLV , do i had more , how safe is SPRott man when the shit hits the fan >?. the problem is the PHYS>!? Everyone talks about. No coin shop in Patagonia , and even if i do go to Buenos aires and pay 20% over spot. How do i afford the army to defend my house and the gold?
Gold at home is great, maybe up to 100k then what?
I need to diversify more the little wealth i have left.
HOW THE FUCK DO I DO IT??
ps.
If by some fucking miracle the chart works out , you are super invited all expenses paid.
It was a mirage? What kind of dumb are you? There's a vote happening Sunday and there's actually a box on the ballot that says "Save our Swiss Gold" please explain to me how that's all a mirage? Are you not aware what a mirage is?
If it doesn't pass we could retest the lows of $1130 (BTW, WTF are these "old lows" - we just broke the old low of $1180 last month and everyone was screaming Gold was going to $800 and we bottomed at $1130 so what old lows are you talking about?) but that doesn't mean gold is going to die.
Interesting to note that despite an absolute slaughter in Crude Oil Gold only dropped $20 and I would also point out to you and everyone else that the GOFO rates have been dropping like a stone all week and have hit record negative levels across the board while the 12month is about to go negative for the first time in 15 years - all in the face of this so called Mirage that's happening Sunday and the LBMA now stating they will discontinue publishing GOFO after January 2015.
Keep dreaming dumbass the physical markets can't take gold much lower than what we already saw this month and if the so called Mirage comes through on Sunday you may never get a chance to buy $1100 gold again.
There are several curious factoids about the ongoing shenanigans with oil:
- WTF is Saudi playing at? It is widely believed that lowering oil prices was the result of a conspiracy between Washington/Riyad to crush Putin's oil exports. Washington had a floor which they didn't want the price to go below. Just low enough to screw Putin but not too low to damage US domestic shale oil production.
Why then has Saudi continued to drag down the oil price by maintaining output levels which now gives the US a serious shale production price problem?
- It is widely believed among non-government oil geologists/oil experts that Saudi's beloved Ghawar oil field has long peaked (even Matt Simmons said the Ghawar water cut was over 50% several years before he mysteriously died) and production costs are steadily rising.
This action is to ignore the lower demand due to gathering depression around the world and that the world is going thru "Peak Oil". Surely, cutting production at this time is the sane thing to do.
Who the hell is calling the shots?
The real economy imploding, that's who!
It's China bro... they gain the most with this crap going on.
-Screws over the US - Check
-Screws over Russia - Check
-Gets China a sale on Oil - Check
Think about it... it's the Chinese doing this. They weaken America even further and force Russia to continue to move towards the Chinese for trade. China now consumes more crude than America so it would be in the Saudi's best interest to start taking their marching orders from them. Makes me think Oil for Yuan is not too far off...
Either that or Washingtob needs to do the world a favor and bomb Riyad.
When the short term bites the long term perspective you know dystopia is coming.
1° The MIC plays have created permanent overcapacity in armaments and the subsequent necessity to do "planned obsolescence" in third world surrogates, (asymmetric wars), which is eating into the budgets of all nations for no betterment of people, just that of the first world MIC bureaucracies, bent on despotism and warmongering. This is a cancer in itself socially and economically speaking. Unless you believe in herd thinning.
2° The hyperconsumerist-- Outsourced on cheap (slave) labour-- Oligarchy model has made permanent overcapacity in the industrial, physical goods economy.
Chindia can never achieve the per capita consumptions that USA enjoys today; no way.
There ain't enuff RM or energy (fossils dominate as renewables are intermittent as impossible to flux or store) to maintain a supercycle on the planet (and I won't talk about ecological and planet destruction downside as this Forum is in total deniability on that front).
3° The financial world has now created overcapacity of electronic money of the Reserve type, that cannot be used and costs more and more as counter party risk explodes and interest payments on leveraged games makes the Casino a place of diminishing returns. Derivative gambling by definition is a ZERO sum game. Somebody loses so that the 0.1 % Oligarchy wins via HFT and fixing. That somebody is :
a) future generations as the public ledger etc. keeps getting bigger in debt.
b) Current generation as buying power of workers continues to slide down. As the wealth inequality has huge collateral damage.
c) Pension funds, aka past working generations of first world, are gonna be the next suckers. Bail outs mean that.
So, if the THREE MAIN strategic threads of Pax Americana's global game :
aka MIC/Commodity+Industrial goods/Financial electronic exuberance are all corrupted and hitting an asymptote, what is the solution to the conundrum?
The Keynesians say Invest and pray for growth.
But in fact the Oil slide is an alarming indication, in the short term, of a huge deflation of the global economy. Jack's beanstalk is now stagnating and its stagnation implies rapid putrefaction !
Inspite of CB co-ordinated plays and incidental currency wars, we are heading towards the 1930s scenario if King $ loses its reserve, just like king £ then ! We don't know what happens in that vacuum.
What is worse is that the Paradigm of Pax Americana's hyperconsumerist capitalism has now hit a serious and seemingly impassable physical asymptote. Not enuff RM and fossil energy down the road!
Whatever the short term perspective, this model is all based on cheap energy. It runs out of cheap fossil 30-50 years down the road, depending how fast we blow it all up in waste and over-haste.
I don't know what the solution is in the next thirty years until we make headway in renewable fluxing and storage. Do you?
Tipping times.
"Asymptote"???? Really???
The things one can learn here are remarkable.
we are talking about fossil fuels declining from 2030 onwards, and its effect on extraction rates of oil/gas.
If the world increases annual production to 120million or even 100 million BPD oil to satisfy Chindia, at growth rates of 5-7% in BRIC (previous projections), then either COAL usage increases (CO2 capture mandatory) or else the conventional oil dries up by 2050 !
Thats the asymptote of annual extraction rates that IEA (optimistic by nature) says we cannot exceed !
Gas can be a sub but only for electric production not for transport. 50%-70% of Oil extraction is for transport depending on region.
help.....
I must confess that a discussion of asymptotes was a tad bit above my pay grade until I looked at a curve intersecting an asymptote infinitely many times. That looked very much like circling a drain. That I can fathom.
One thing I learned in the 08 collapse was that everything gets ridiculously cheap on the down slope as people shed assets in an effort to keep the lights on. We have a huge very complex interconnected system. The particulars of how it all breaks is anybody’s guess.
"We have a huge very complex interconnected system. The particulars of how it all breaks is anybody’s guess".
Not 'anybody's'. There are a few Plutocratic puppeteers who know exactly how it's going break because they are writing the script.
Am I the only one who feels a massive head-fake in oil being set up? We're still just one geopolitical event away from a price spike.
Damn those fuel efficient little prius's.
Actually what OPEC did, keep output unchanged, is to thin the herd of US frackers by squeezing the uncompetitive ones out of business at lower prices, thus indirectly trimming production. Over to you, American frackers.
OPEC and Russia have been in the business longer and are able to withstand much lower break-evens due to much lower production costs than the relatively new fracking startups. I think Rosneft has costs of something like $4 per barrel.
Does anyone actually think we've entered an era of low oil prices? LOL
If fracking takes it in the ear what happens to Uncle Warren's oil trains? What happens to the Keystone pipeline?
Boy, some of you really can't see the forest for the trees. The Saudis don't take a crap in the morning w/o the CIAs ok. One nod from the US and that corrupt bunch of ingrates in Riyadh is done with. This is being done to twist the knife in Putin and show him we can make it hurt. Side benefits - lots of people buy more iShit at Christmas because gas prices are low and highly levered shale operators get shaken out and their rights bought out by big oil. It's win-win-win for the big boys
Yup.