WTI Tumbles To $47 Handle; Energy Stocks Don't Care At All

Tyler Durden's picture

Presented with no comment...

One of these things is not like the other...

 

Not good... apart from... for stocks?

 

Charts: Bloomberg

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Oracle 911's picture

It's hilarious, both this article and your post.

Bill of Rights's picture

I bet your mommy said the same thing at birth..." This is hilarious looking "

44_shooter's picture

Thats the best you could come up with??????

Pareto's picture

Denmark looking for a bailout?

blowing winter's picture
blowing winter (not verified) Bill of Rights Mar 30, 2015 11:43 PM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com

venturen's picture

Bubbles don't need no stinking profits!

KnuckleDragger-X's picture

There are bonds to be sold, bubbles to be blown and sheep to be shorn and it's not just oil, the market is flying on rumor. It's almost time for some good old fashioned panic.....

Ruffmuff's picture

It is just home on the range.

The Chief's picture

Actually, no one should care. If you dont have a plan already, youre pretty well fucked.

venturen's picture

what is funny...all the stocks move in lock step....it is almost like individual performance is now completely irrelevant. 

disabledvet's picture

All assets can in fact move higher.  Absolutely together as well.  And, yes... to infinity as well.

 

That's why shorting is such a dangerous business.  The entire market can move against you.

 

Since being short means you are at an informational disadvantage don't expect the regulators to be on your side either.

Kreditanstalt's picture

Why is this a surprise?  In a time in which yield has been eliminated by central planners there are no "investments"...there are only gambling chips left and everyone is a trend-following herd member, buying whatever is going up and selling whatever is going down.

Fundamentals?  Profits? Don't matter, when everything is a casino counter and risk has been concealed.

More and more zombie companies on the way.   (And the mainstream thinks "interest rates" will rise...hahahahaha!)

Handful of Dust's picture

One executive in the fabricated metal manufacturing sector said: "Our oil and gas customers have just stopped producing. This is not an unusual event for our oil and gas customers, but what feels different about this time is no one knows when production will restart. Typically, we have to ride out 60-90 days, and this one looks like six months or more."

 

http://finance.yahoo.com/news/comes-dallas-fed-142110714.html

adr's picture

That is because pricing is so screwed up thanks to the algo manipulation that nobody can set prices. If they know oil is going to be around $42 for a few months, the producers can plan on that. When oil jumps up and down 10-15% in a week, you can't set pricing. It takes much longer than a few days to refine a barrel of oil and get in in the distribution channel. You make the wrong move and the 8% profit you built in is gone. This headline scanning garbage and laser beam targeting based on weekly inventory builds needs to stop.

The entire economy has ground to a halt because nobody knows what anything is going to cost a few days from now. How in the hell is a manufacturer going to quote a per unit price when by the time he places his order for materials the price is up or down 15-20%?

That is why gasoline is stubbornly high. By keeping the price high refiners can absorb the idiocy of the futures market even though the price per barrel should put gas way under $2 a gallon.

The goal of every free person left should be to burn down every stock exchange and computerized trading firm in the world. If we don't every day is going to get worse until the collapse that sends us to the stone age.

FreeShitter's picture

It was almost 40, wake me up when its there....

LawsofPhysics's picture

Some people will have the consumable calories to actually survive as well as do and make shit...

...most will not.

Same as it ever was...

forwardho's picture

Many thing can be lied about.

Actual calories used to create goods of value is not one of them.

Dropping demand for calories mirrors the drop in production of goods.

You're right though, most will not.

The reaping...

joe_npb's picture

Maybe the stocks correcting something like up to 80% in some cases already reflects the worse case scenario?  Maybe folks realize that with nearly half of the rigs being cut the drop off in production is not far off the horizon and now is a time to buy?  

Oh wait!  Eureka!  Maybe, just maybe the overcapacity of 1.3 million barrels per day is about to be rectified -- on a world that consumes 93 million barrels per day!

Or maybe, the geopolitical risk is a factor once again, nah, that would be too logical!

Maybe we will be driving autmobiles next year too!

So if a stock that has dropped 70%-80% now goes up 20%, it is still down 64% - 76% from the peak.  Down a whole lot but up from the lows!  

GREED takes over.  Same story, different day.

 

madcows's picture

who cares, stocks are up 1.5%.  To the moon, alice.

nmewn's picture

Fundamental transformation.

Its a Yellen stawk market murikel I tell ya!!!

Quinvarius's picture

Fed and Treasury getting sucked into some more mission creep.

Magooo's picture

Let me explain these graphs:

 

- conventional oil peaked in 2005 and the only new production that was available (shale, tar sands, deep sea) was extremely expensive to produce 

 

Aging giant fields produce more than half of global oil supply and are already declining as group, Cobb writes. Research suggests that their annual production decline rates are likely to accelerate. http://www.csmonitor.com/Environment/Energy-Voices/2013/0412/The-decline...

 

- QE and ZIRP were deployed to support the production of these types of oils (essentially a bubble was purposely created using these policies coupled with a PR campaign telling us we had a 100 years of new oil due to shale)

 

- QE ZIRP was also deployed to offset the massive drag that $100+ oil puts on the economy --- essentially it was a desperate attempt to stop a deflationary death spiral --- we've of course seen all the toxic side effects

 

-  the central banks know that shale is a short lived gig so the mandate was to drill baby drill --- sink as many mother fucking holes into those fields and start sucking like a crack whore who's reward is a gram bag for a job well done

 

- the race was on ---  get those holes in while the ponzi scheme of shale has legs --- because once the sunk costs are sunk --- doesn't matter what happens to the price of oil --- that oil comes out of the ground

 

- I also suspect that the central banks knew that they could only offset 100 buck oil for so long without blowing up the machine so this factored into their decision to get as much oil out as fast as possible and get those sunk costs in place

 

- the central banks cannot allow energy companies to go broke (for obvious reasons) so they are either a) directly purchasing energy stocks and/or b) shoveling newly minted cash to energy companies who are buying back their own stocks

 

CONCLUSION:  We are going to see a peak in overall global oil production when shale oil flat lines --- we will bump along for some time (a year - maybe two?) on the top of that plateau ---  central banks will do absolutely anything to fight off deflation (as they saying goes 'you ain't seen nothing yet') --- but at some point this is going to blow up spectacularly and civilization --- which is built on cheaply extractable oil --- is going to end --- permanently.

 

Unfortunately, there is no disputing the findings in this report.   We can fight it with QE ZIRP and other stimulus policies... but make no mistake, there is NO WAY OUT of this situation.

 

THE PERFECT STORM (see p. 59 onwards)

The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel. http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf

 

 

 

Bear's picture

Hey MaGooo, thanks for all the good news ... you make The Bear sound like Pollyana

emersonreturn's picture

@magoo, thank you for the link and for posting.  

Magooo's picture

And let's examine why this collapse is an EXTINCTION event:  

 

Try keeping thousands of spent fuel ponds under control when the world collapses.  Sheet zeke – we can barely keep Fukushima from going to pieces and that’s with BAU fully functional!!!

The Consequence of Cesium-137 Release  http://belfercenter.ksg.harvard.edu/publication/364/radiological_terrorism.html   

A typical 1 GWe PWR core contains about 80 t fuels. Each year about one third of the core fuel is discharged into the pool. A pool with 15 year storage capacity will hold about 400 t spent fuel. To estimate the Cs-137 inventory in the pool, for example, we assume the Cs137 inventory at shutdown is about 0.1 MCi/tU with a burn-up of 50,000 MWt-day/tU, thus the pool with 400 t of ten year old SNF would hold about 33 MCi Cs-137. [7] Assuming a 50-100% Cs137 release during a spent fuel fire, [8] the consequence of the Cs-137 exceed those of the Chernobyl accident 8-17 times (2MCi release from Chernobyl). Based on the wedge model, the contaminated land areas can be estimated. [9] For example, for a scenario of a 50% Cs-137 release from a 400 t SNF pool, about 95,000 km² (as far as 1,350 km) would be contaminated above 15 Ci/km² (as compared to 10,000 km² contaminated area above 15 Ci/km² at Chernobyl). Thus, it is necessary to take security measures to prevent such an event from happening.

 

 

Heck, life was always temporary so a few positives:

 

 This is like having a terminal disease but you feel great --- so you get to enjoy the limited time you have left

You get to witness the end of civilization (of course you won’t get to tell your grand kids about that…

 Think of the schadenfreude of all those despised elites who get wiped out!

 

 

 

 

Magooo's picture

Still pissed off at Bernanke?

 

Remember what he said when he stepped down:

 

"I know you all hate me for what I have done --- but when you realize the reasons I did these things --- you will thank me"

 

When you are starving and eating grass and bark --- or roasting a baby over a fire fueled by plastic shopping bags (because all the trees have been cut down)  --- remember what Ben said.

 

He bought you 6 more years of life.   And Yellen it trying to buy you more. 

 

Ya they bought it with printed money -- and the rich got richer --- but so what?  

 

I'll take the 6 years and cheer for more.  

 

I used to moan and bitch about Ben but then I smartened up - realized what the real deal was -- and have been riping through a bucket list for 5+ years now. 

forwardho's picture

It is refered to as "Bonus Time"

Thanks are given for each "normal" day by those who are awake.

Living within a mass illusion.

 

 

Magooo's picture

More on this:

 

OIL BECOMING TOO EXPENSIVE TO EXTRACT

It emerged this week that the drilling of wells in the North Sea has crashed by around 50% this year, compared to the year-ago period. The reason for this is simple: the cost of extracting oil in North Sea has quintupled over the last decade, discouraging companies from investing within the region.  http://www.fool.co.uk/investing/2014/07/18/surging-north-sea-project-costs-are-putting-the-regions-future-at-risk-tullow-oil-plc-premier-oil-plc-xcite-energy-limited/

 

The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth.  http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

 

Sanford C. Bernstein, the Wall Street research company, calls the rapid increase in production costs “the dark side of the golden age of shale”. In a recent analysis, it estimates that non-Opec marginal cost of production rose last year to $104.5 a barrel, up more than 13 per cent from $92.3 a barrel in 2011.   http://www.ft.com/intl/cms/s/0/ec3bb622-c794-11e2-9c52-00144feab7de.html#axzz3T4sTXDB5

 

Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html

 

Magooo's picture

And I would be remiss if I were not to metion that renewable energy is not going to save the day:

 

Renewable energy 'simply won't work': Top Google engineers

http://www.theregister.co.uk/2014/11/21/renewable_energy_simply_wont_work_google_renewables_engineers/

http://techcrunch.com/2011/11/23/google-gives-up-on-green-tech-investment-initiative-rec/

Two highly qualified Google engineers who have spent years studying and trying to improve renewable energy technology have stated quite bluntly that whatever the future holds, it is not a renewables-powered civilisation: such a thing is impossible.

Both men are Stanford PhDs, Ross Koningstein having trained in aerospace engineering and David Fork in applied physics. These aren't guys who fiddle about with websites or data analytics or "technology" of that sort: they are real engineers who understand difficult maths and physics, and top-bracket even among that distinguished company. The duo were employed at Google on the RE<C project, which sought to enhance renewable technology to the point where it could produce energy more cheaply than coal.

Even if one were to electrify all of transport, industry, heating and so on, so much renewable generation and balancing/storage equipment would be needed to power it that astronomical new requirements for steel, concrete, copper, glass, carbon fibre, neodymium, shipping and haulage etc etc would appear.

All these things are made using mammoth amounts of energy: far from achieving massive energy savings, which most plans for a renewables future rely on implicitly, we would wind up needing far more energy, which would mean even more vast renewables farms – and even more materials and energy to make and maintain them and so on. The scale of the building would be like nothing ever attempted by the human race.

In reality, well before any such stage was reached, energy would become horrifyingly expensive – which means that everything would become horrifyingly expensive (even the present well-under-one-per-cent renewables level in the UK has pushed up utility bills very considerably).

 

 

As is plainly obvious --- we are right fucked.  

 

cbilds's picture

Magoo-

Very interesting posts/insights.  I would like to discuss a few things/get your take about the O&G market with you - offline.  My email address is creighton.bildstein@gmail.com, if you'd care to proceed.  Thank you.

thecrud's picture
thecrud (not verified) Mar 30, 2015 8:32 PM

You just described my visits to the grocery store I never know wtf something is going to cost from day today.

thecrud's picture
thecrud (not verified) Mar 31, 2015 5:58 AM

46 now and well on way to 45. by the by mygas is 1.99 again If that tells you anything.