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Betting On The 'Other' Oil Black Swan
With oil prices plunging to 5-year lows, perhaps it is time to consider the cheapness of betting on the other oil black swan...
Via BofA's Jake Greenberg,
In my base case, I remain structurally bearish oil. The world is making huge productivity and efficiency gains (lighter vehicles, new technology, etc.), and we are starting to see real substitution (e.g. to LNG and CNG). On the supply side, oil is not resource constrained (i.e. at the right price, you get more shale coming to market + Libya + KRG + North Sea’s Buzzard + Arctic, etc) and OPEC is a dysfunctional oligopoly. Francisco Blanch thinks we could see Brent drop below $60/bbl in the next six months.
Interestingly, lower oil prices may not incentive increased demand as both China and India are taking advantage of the drop to raise taxes on fuel consumption. Lower crude prices are not being passed on to the end consumers in the markets that matter most for demand growth. See the WSJ here: India raises taxes on fuels. And the Australian here: China lifts fuel tax
Oil’s black swan...
That said, if oil prices go “too low”, there are some very powerful State actors who could become incentivized to precipitate a geopolitical crisis in order to get oil prices back up. E.g. a Saudi Arabian spring, or an attack on a major pipeline? The ISIS-sponsored attack in November in Saudi Arabia’s oil-rich Al Ahsa region did not get a lot of air time, but this is definitely an article worth reading...again from the WSJ: ISIS urging attacks on Saudi
Given this tail risk, I would want to own some long-dated, out of the money call options on Brent within my portfolio.
You can buy the DEC 16 $100/bbl call options (COZ6) for ~$2.50, ~21.5vol.
That doesn’t seem expensive for two years of insurance against a supply side shock. Plus, assuming we see a curtailment of investment, oil could just rise naturally to this price level over the next two years...
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out of the mouths of babes
Ad hominem is Amerikan Patriot's long suit, tho in many a chat room he claims his willy is.
Ad hominem is Amerikan Patriot's long suit, tho in many a chat room he claims his willy is.
Um, you know, like isn't that an example of an ad hominem attack coming from someone accusing someone else of launching ad hominem attacks?
I'm getting confused.
I'm surprised you are like confused, um, you know?
'do as i say. don't do as i do'
In 'god we trust' beat that out for america's motto.
Iran has had everything but nuclear war thrown at it for almost 40 years. No one would argue that Iran is weaker now than it was 40 years ago. So much for sanctions as a decisive weapon of war! Do not plan on Russia succumbing to Anglo-American Zionists anymore than Iran has.
True, there are a significant number of Russians who are addicted to the hedonism, corruption, and crony capitalism which was introduced to Russia during the Yeltsin years. These Russians will squeal and complain. But the greater number of Russians will hold them in as much contempt as they hold the Americans who sponsor them.
Iran was a modern, cosmopolitan country until Carter sided with the Mullahs instead of the Shah. Their people are literate, they just need a kick in the ass to throw off their 7th century head chopping overlords.
Dimitry Orlov,
Is that you?
The ultimate schill for Putin has come out of the closet??
Actually, you were never in the closet when it comes to Putin,
were you?
"True, there are a significant number of Russians who are addicted to the hedonism, corruption, and crony capitalism which was introduced to Russia during the Yeltsin years."
That is the essential card the US is playing,
"These Russians will squeal and complain. But the greater number of Russians will hold them in as much contempt as they hold the Americans who sponsor them."
Oligarchs don't have to be popular to win. But "the greater number of Russians" can be a powerful tool in Putin's kit if he plays his hand right.
His greatest danger - and the oligarchs' greatest strength - is corruption.
Quote: True, there are a significant number of Russians who are addicted to the hedonism, corruption, and crony capitalism which was introduced to Russia during the Yeltsin years.
AKA --THE GOVERNMENT.
and it is to laugh at the idea of the former Soviet nomenklatura being a group of idealistic, wealth-and-power eschewing monks.
yawn. go somewhere else loser.
The good thing about your short stupid posts is that they deter people from reading your long stupid posts.
Who's manning Vlad's suicide watch tonight?
When financial problems occur in the energy sector it is often accompanied by political instability and sometimes her ugly sister war. As a rule the economy loves stability, bottom-line dropping oil prices means more risk for an already shaky world economy. All this is being complicated by the recently strong dollar. The dollars strength and the rising American stock market could also be taken as a sign of an unstable global economy.
When a strong shift in currencies occurs someone usually gets hurt and this can lead to bankruptcy, default, or contagion. A great deal of the shadow banking world overlaps and falls into the grey world of derivatives. The total derivatives market has grown to a massive size. It includes hundreds of trillions of dollars in over-the-counter non-reported agreements and private contracts and is estimated to be over 20 times larger than the global economy. Everyone paying attention knows that even a slight problem in a market this size could collapse the whole economic system. The article below delves deeper into the problems caused by falling oil prices.
http://brucewilds.blogspot.com/2014/11/dropping-oil-prices-increase-risk-to.html
Don't push Vlad too hard or you folks are gonna be sorry!
He'll let out a nasty fart and maybe drop one of his compliant, docile men to the mat.
Exposing just a little bit more of his inner self than he realizes, Amerikan Parrot* said:
It's doubtful that anyone would smell it, given your eager propensity to insufflate any flatus sourced from the Russian President.
*Thanx and a tip o' the hat to the ZH commenter that coined this term. Parrot is an exquisitely appropriate moniker.
No potato for you, Polly.
paid by the post?
Nope.
Sexual favors. Same as always
Well, damn, then I wanna play on his team too.
They're lookin' for a switch hitter.
But don't quote me.
ISIS treasury comes from Opium/ Heroin smuggling (?note: Burma HUGE!?!) and other drugs from China, Iran and Afghanistan via the ancient silk-routes into Europe and the rest of the world. It traverses along the trade routes [friendly or be dead villages] extending across the Asian continent and connected to the Mediterranean Sea. The most well worn paths of transit has been through eastern Turkey (Turk-Kurd's'/ all Kurd's?/ Syrian, Iranian and Iraqi)). Turkey is to the 'New World Order', "The Pole to Which the World Turns"... it is the the city of Constantinople that straddles two continents and the Bosphorus is what divides it-- with its sea's that opens and closes two world's? Note: Western Tukey is either coastal lowland or rolling-hills covered with farms and orchards... whereas, its Central Provinces are rugged and barren. The Black Sea region is cool, verdant and Alpine perfect weather for the Wealthy, but the eastern portion has overwhelmingly tall and jagged peaks and troughs , where precipices soar far above gorges and lakes. It is quite nice in warm weather, but when fall/winter arrive it is a frozen HELL!, [but] my-oh-my, is it ideal terrain for guerrilla warfare, and with the Kurd's submitting to ISIS this summer they havn't lost much as the MSM would have us believe. Especially villages that will side with them,[and that is many] and will help their cause untill the Kurd's learnt to late that 'Religion Matters'! Now its just survival?
Erdogan's deal with Russia regarding the South-Stream Pipeline reroute is a fantasic decision to outwit the West and move closer to the Russian/ Chinese Axis. And, with Russia just agreeing to build Nukes in Turkey while also signing contracts in Iran.
Oil can go to $40bbl and the Saudi's are making money fist-over-fist betting against the market. Imagine getting $90bbl, $80bbl, $70bbl, $60bbl knowing it's gonna hit below $40bbl. Sure (ISIS or whatever they call themsevles will exist untill their usefullness has expired) they'll sabotage and cause havoc on the Saudi's or whomever?!? But the 'BLUEGold' will flow, and flow and flow!
The world is fast moving away from 20th century relics for transportation. The youth of the world now coming into their own see no future for themselves with the new millenium starting out using two-century old fuel. The future is Fuel-Cells or EV (Battery Technology), period with no need for gasoline mucking-up the atmosphere. The ME is scared shitless. Russia, Iran control well over 60% of the world's BlueGold ([Natural Gas= ~85%-75% Methane ][1 atom {C} carbon & 4 atoms hydrogen-- the most abundant chemical {H} element in the universe]) and it's not that difficult to separate as some would have you believe.
EV's are almost there with battery's and an infrastructure much moar doable economically than Hydrogen's, but Hydrogen will get you ~ 325m/p/fill-up, vs. ~ 125m/p/charge EV... and both are cheap fuels!
Problem to ubiquity: PEM's 'Proton Exchange Membrane Fuel Cell & Platium v. Polymer cost?
Hydrogen cost via infrastructure {not of hosehold fueling station/ plugin}, but like all technologies we have years to decide which is best, but certainly the future is now for our generation and 'nuttins' gonna hold-em-backwards!!! Remember that methane is the princilple component of 'Natural Gas' and the world's got at least 300years minimum supply even with population demographics factored into the equation.
So in summary the Saudi's are fucked, because this tyme is truly different... [?]
jmo
When Vlad beggars ordinary Russians and prostrates the Russian state because he's isolated himself from the rest of the world, which third world country will the Russian people exile him to?
And then you woke up because the bed was wet.
"Mommy."
Pindostan?
Perish the thought!
It's a good thing President Putin has the approval of his nation.
Is it? Germany also had faith in its dictator right up to the point where the Americans and Russians were shaking hands on the banks of the Elbe.
If an American President were so busily wrapping himself in the flag, we would hear tons of "last refuge of a scoundrel" type quotes. But its okay as long as its Grandmaster Putin tightening his grip on the Grand Duchy of Evil.
Neither of our opinions actually matter, however. Events are playing out and they will determine the outcome. My money is on Russia losing once again.
As they did in the Crimean War.
As they did in the Russo-Japanese War of 1904-5.
As they did in the crushed revolution of 1905.
As they did in WWI by surrendering to Germany even though they were on the winning side.
As they did by ousting Kerensky and falling into the clammy embrace of Leninism.
And then into the clutches of Stalin.
Oh, and they lost WWII as well. Everyone else was liberated from their cruel dictators except for Fascist Spain and Communist Russia. Can't really chalk that one up as a win except maybe in comparison to the rest of the dismal record of disaster and defeat. Or else if you think that Soviet Communism was actually a wonderful thing that ought to be restored to its rightful place in the pantheon of great ideas.
They didn't actually lose the Cold War. More like they just lost heart and gave up.
Russia did eventually kick Finland's ass, stab a prostrate atomized Japan already whimpering at MacArthur's feet in the back, and is currently thumb-wrestling with Obama (and losing).
The real question is if he would change his course of action even if he didn't have the approval of his nation. We both know the answer to that one, just as we both know how much he respects the concept of term limits.
Dictators mold public opinion, they do not serve it.
Every now and then a person emerges who so galvanizes popular opinion that he becomes the most idolized and admired person in the country. Naturally when this happens, the "people" call upon him to be their leader. The mythological Moses was such a person. So was George Washington (the people wanted him to be president for life). So was Hitler. So is Putin. Each -to a vast majority of his countrymen- is/was simply the best person to do the job.
The Russian Czar was the most revered and popular person in Russia. But the war was going badly, no victory was in sight, and economic hardships were increasing. Less than 100,000 men were involved in the overthrow of the czar out of a country of 160 million. Based upon figures amassed by Lenin himself after he took control of Moscow and St.Petersberg, the Communist party numbered about 100,000. 80,000 of these were Jews. 98% of the Politburo were Jews. But, because they had the money to make things happen, the power and will to terrorize the Christians, and the organization to keep everyone in line and in a state of fear, the Communists won the ensuing Civil War.
Forces are at work within Russia intending to disrupt the economy and sew discontent among the population. They have set out to mold public opinion, not serve it.
They will never be able to tear the "people" away from Putin; but they are counting on making such a mess of the economy that -like Morsi in Egypt- Putin can be seen as incompetent and stubbornly wrong-headed. Before that happens, I hope that they will be exposed, rooted out and imprisoned for their treasonous activities. The "west" will see this as a "pogrom", regardless of the facts or the situation.
The Zionists are at war with Putin as much as they were at war with Hitler, long before open warfare started in 1939. Whatever the costs entailed and howver long it takes, they are confident that they will prevail this time as well.
A couple of thoughts on this:
1) You can't have it both ways. If Moses was mythological, then he wasn't chosen by the people at all. Regardless, the existing record, such as it is, is that he was chosen by God and the people were not really down with him-- Golden Calf, broken set of Commandments and all that.
2) Lenin never took control of St. Petersburg. He took control of Petrograd.
3) So far as I know, the Bolsheviks were hardly millionaires. Un-Jewish Stalin, for example, was a bank robber while un-Jewish Lenin was an exile who was exploited by the German General Staff for its own brilliantly sinister purposes. Don't know about whether Trotsky was Jewish or otherwise but he was hunted down and murdered by the Bolsheviks. Molotov was not Jewish and got his job for that reason-- in order to grease negotioations with Hitler in re stealing half of Eastern Europe.
4) The Washington versus Hitler/Putin axis comparison is a little skewed. Washington had no thirst for power and studiously set an example of rejecting it even if he could have become king or President for life. Hitler and Putin both fail this test outright and it is wrong to soil Washington's memory by associating his noble self with their vile lust, accumulation, and retention of power. Term limits: invented by Washington. Term limits: cynically flouted by Putin. No comparison at all. Washington did have one significant admirer, however-- Napoleon Bonaparte, who died lamenting that he was not as good a man as the virtuous Virginian.
5) You seem to indicate that Grandmaster Putin makes no effort to mold and control public opinion himself. Only the forces of EEEE-vile arrayed against him stoop to such low tactics. No honest observer of politics in any country would believe that he is not neck-deep in the propaganda game himself.
Correction: Which OTHER third world country will the Russian people exile him to?
I'm surprised it took this long for someone to start talking about ISIS inside Saudi Arabia.
What's it been this year? ISIS, Ebola and oil prices.
Can we top the year off with all three combining inside Saudi Arabia.
You probably have no interest in knowing this, but I will be entering my black swan in the
As the long shot, natch.
Global oil production is about 85 million barrels a day or about 31 billion barrels a year. In 20 years (2034) 620 billion barrels of oil will have been pumped to the surface of our planet to fuel the phenomenal parade of wealth and ingenuity also known as the planet Earth's economy, uncle Sam 'Merkun, prop.
That is, if everything goes smoothly. And no untoward swans of the negroid feather phylum come home to roost.
For example, the black swan I entered in the Grand Prix. A two year old maiden, Obamette.
Briefly, the folks that have lied their tits off to us about the quality of the recovery, the burgeoning (and burgering) work force, and who have printed enough currency to thrust stock markets around the world into LEO, are the same folks who have sworn on their Boy Scout honor that the proven reserves of Earthly oil runneth over.
I don't think so. And we shall see, shant we?
I prolly won't be around in 2034 to collect the trophy, and therefore I nominate Radical Marijuana to accept the award and make some brief remarks on my behalf.
Good point! If/when the world's petroleum reserves are ever exhausted, it won't happen overnight. Rationing will extend the reserves for several years, perhaps a decade or more, once the reality that "the end is nigh" finally dawns on us.
The technology already exists to use alternate fuels and electric motors. But at the current price of petroleum, these remain "on the back burner". As far as energy consumption is concerned, mankind will adjust. Just exactly mankind will be doing in 2030 is quite another matter.
Absolutely
And the US military will decide when America can no longer afford to divert crude oil away from the military into its economy. There must be priorities.
There's also the matter of today's $18 trillion National Debt. Can you say what it will be in 20 years?
Speaking of dollars, will foreign producers of crude oil be willing to sell percentages of their production for dollars considerably weakened by the printing of them by the Federal Reserve? There is willingness now, but the world is still in shock from our evanescent recovery.
Finally, when the recovery shows up, where will it aim? At the pre-dotcom bubble of 1995? The pre-Iraq War bubble of 2002? Or the pre-subprime housing bubble of 2004?
So many bubbles. So little time.
I recently re-watched the documentary "Who killed the electric car?" and it still gave me goosebumps. Ok, so GM and Commodore Smith were forced to kill it, so the idea goes. Ok, so they smoked a billion dollars of GM money up the chimney. What I can't figure is why hybrid or all electric cars have not sold better than they do now, especially in oil zero countries like Japan? Are consumers completely hypnotized into reacting negatively to electric? It makes no rational sense, but therein might be the answer. Rational responses to problems. Electric cars have been around since the late 1800's, early 1900's and we know who suppressed them.
I will return to a point that I made in posts some time ago, which is that the US Navy has announced (at least twice) that they have found a technology that can turn sea water into a hydrocarbon fuel that their engines can use. All right on board their ships. I read somewhere that the US Navy is the single largest customer of crude oil products in the world. So, if within, say, 5 years the Navy has it all sorted out and they can make their ships fuel independant, will this too not have a huge impact on crude oil prices? I mean, if this is true, then every major navy in the world will want exactly the same technology, immediately. I also recently saw a report of a car that will run on salt water; this was a European report.
So, there are alternatives and maybe this unwinding of crude is a signal that the masters of the universe have understood this and are repositioning?
dunno
If the US Navy -- or anybody, for that matter -- was that close to turning lead into gold converting salt water into 91 octane Supreme, the propaganda wheels would be spinning 24/7. No?
You're probably too young to remember 'desktop fusion'.
Most Americans have seen the difference between an electric leaf blower or chain saw and the mighty gas powered ones.
It is in the American Gene to want the most powerful device that can be charged on MasterCard. And no one, bb, wants to be dragging an extension cord around with them forever.
These stories about turning compost into chocolate ice cream make the sheeple feel better, but you best stick to Haagen Daz.
Dennis Gartman says to stay short oil, so we can say a bottom is in.
"Interestingly, lower oil prices may not incentive increased demand as both China and India are taking advantage of the drop to raise taxes on fuel consumption."
Incentive is not a verb. And incentivize is just for people who think it sounds smart and are too lazy to say "provide(s) incentive".
It's no fucking wonder the global economy is going straight down the shitter. The people running and supposedly analyzing it don't know how to speak properly. It only follows their ability to think is impaired as well.
Its a word if I say it is a word: General Stormin' Norman.
.
..
Is it time for a "Global Spring"?
just wondering....