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Oil Trades Under $42 To 6 Year Lows, Gundlach Sees "Terrifying Geopolitical Consequences" Looming
For the first time since March 2009, the front-month WTI crude futures contract has traded with a $41 handle.
As it draws ever nearer the 2009 lows, we are reminded of the ominous warnings that DoubleLine's Jeff Gundlach issued in January. - "I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying."
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As we previously discussed in January, in a recent interview with FuW, DoubleLine's Jeff Gundlach explained his concerns about the oil market not being "unequivocally good" for everyone...
Question: The crash in the oil market is already causing jitters in the financial markets around the globe. What is your take on that?
Gundlach: Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying.
Gundlach is right historically... Large and rapid rises and falls in the price of crude oil have correlated oddly strongly with major geopolitical and economic crisis across the globe. Whether driven by problems for oil exporters or oil importers, the 'difference this time' is that, thanks to central bank largesse, money flows faster than ever and everything is more tightly coupled with that flow.
So is the 50%-plus YoY drop in oil prices about to 'cause' contagion risk concerns for the world?
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Lone wolves should oil their guns.
Attack your targets directly.
ya sick of these false flag puppets supposedly knocking off cops and border agents, want to see some bankers bleed and that will send a message!
You forgot to add "I'm from the government and I'm here to help" after your post. Geez get it right if you are going to work for the man.
Know your enemy
AD
who cares what Gundlach says...just tell me what Gartman thinks, then I can get rich !!!
Santini - pot stiring after only being here for 4 days.
Know your enemy
AD
he sounds a lot like that guy who had a homoboner for bitcoin...
The junk bonds of the shale oil producers will implode. And everybody who kept money in banks and traded shares and had it in his/her portfolio will be screwed due bail-ins. Bankers? If nobody will hang them, then forget it.
When does $42 = $1.50 @ the pump?
When hell freezes over.
Santini been round longer than 4 dayz.
Fartman said the bottom was in on gold in dollar terms,3 days ago on CNBC.Scared me shitless!!
shit i missed that ! thanx for the heads-up...what's the name of that triple-inverse gold etf again ? ?
The price of a barrel of oil in 1996 peaked at $37.55
The price of a gallon of gasoline in 1996 peaked at ~$1.70
The price of a barrel of oil in 2015 bottoms at $41
The price of a gallon of gasoline in 2015 peaked at $4.00
What inflation?
and the refiners say, "bend over--and no you don't get lube"
When crude goes down, there is no correlation to stocks, but if it happens to rally tomorrow, BULLISH FOR STOCKS!!!!!!! BTFD!!!
Peak driving season coming to an end
Leave the cops and military alone.
Plenty of red meat hiding behind 10 ex-seals.
Once you go corporate, you're not military anymore.
$10 oil, here we come.
We'll be full Mad Max before $10.....
Yeah, soon oil will be free...
good luck with that!
I can say from second hand knowledge having a relative who is an oil & gas engineer in Houston; it's a Bloodbath there.
Luckily, he and his wife are frugal in the extreme since 2008 and he's prepared for the long run. But many engineers are not that prepared he said, and have huge mortgages, lead weights, tied around their ankles that will sink them.
"Despite oil slump, Houston’s housing market breaks another all-time record"
"Single-family home sales totaled 8,147 in July — up 6.7 percent from July 2014 and Houston’s highest one-month sales volume ever, the Houston Association of Realtors reported Aug. 12.
Additionally, single-family home prices also hit records for a July in Houston. The average sales price was up 6.3 percent year over year to $293,790, and the median sales price increased 8.6 percent to $220,000. Homes priced at $500,000 and above saw the largest increase in sales, up 18.3 percent, compared to roughly 12 percent for those priced from $150,000 to $499,999. '
Yeah, that Houston market is a bloodbath, a bloodbath I tell ya!
I think he was referring to the petro industry, rather than real estate. But give real estate another quarter or so and the spots will pop off that domino as well.
Houston is filled to capacity with a Condo glut, and a new single family home glut too. Houston is like New York City & the ghost towns of China with empty condos, and an oversupply on SFH. Houston is assuming that housing prices always go up, and that tax base always goes up too.
Frankly, retarded people live & work in Houston, but their days are numbered as they are all over America, in the land of the indentured into servitude, and home of the slave. Sooner or later all the bills will come due all at once, and then it's Z O M B I E A P O C A L Y P S E time for everyone including the 1%ers. Houston is an enclave of wealth that can fake it for a while. New York City & Hawaii are enclaves as well.
In CANADA we have the Toronto, Vancouver, Ottawa, Victoria, enclaves where Vancouver seems to be prime territory for private wealth from China, but that will dry up in due course very soon.
Hey take that back, sheldon is from there!
All big texas cities are getting multi family housing mega bucks for the urban agenda. Trains vs cars also. Ironic that they dont want future drivers in the home of that fuel. People are ignorant if not outright stupid.
http://www.fool.com/investing/general/2015/04/22/why-almost-every-big-te...
http://www.newsmax.com/US/texas-economy-oil-gas/2015/01/05/id/616428/
The industry used to account for 5 percent of all jobs. Now, just 2 percent.
from; http://www.houstonpublicmedia.org/news/a-1980s-style-bust-for-texas-as-o... http://en.wikipedia.org/wiki/1980s_oil_glutJapan is already on the edge and cannot respond to the devaluation of the Yuan. The Japanese bond market may blow up taking down many other bond markets with it.
The Fed will intervene to try to save Japan. Who knows if that will work.
the FED will not be helping anybody---globalization is passe- Its now fortress USA/dollar for the FED
Funny how it's "bluntly – terrifying" when it goes to $40 but it is never terrifying when it's $100.00!
My deffinition of the word terrifying must differ from his.
All we know for sure, is that Gundlach is long WTI.
better unwind that one; Neptune in Pisces (til 2026) = oil found everywhere, by everybody
It may not stop at $40 at all. Depends all on Goldman. They may run a shitload of stops as more and more people tend to think $40 is key. Watch what they do? Pound it to $35 just to be sure they fleeced everyone. Then war for more profit. Goldman is all in. Look at the project omega article. Goldman is trying to quickly control it all and September seems to be the deadline.
Then again who fucking knows!!
I agree $35 easy if not $25. The floor is $20 where ISIL (al-CIA-duh new black market OPEC cartel) is stealing Iraq oil and selling it to Zion / EU and others for $20. Until that flow stops there will be a major arb in the market and more incentive for ISIL to steal more.
wmbz - words such as "terrifying" are bandied so freely. This morning I found a terrifying fleck of green pepper in my omlett. I dont like green peppers. My old lady knows this, I should have called the cops on her as I'm sure my life will never be normal again.
Oh, but it's terrifying at 90, 100, 120 also, for the same reasons :) If you write an article about the corrupt West you are paid to panic in any situation. Buuut, DO NOT WRITE ABOUT RUSSIAN HUNDREDS OF BILLIONS DEFFICIT/LOSS DUE TO LOW OIL PRICES (11 million bpd x 60$ x 365 days). But if you talk, then make sure you blame the aggressive America for that too. To that I would say that invading and plundering other countries is not so profitable as it used to be.
"I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying."
So if it settles at $40.01 its all shiny?
Great question Knuck! I have alway wondered why pre employment pee tests for Mary Jane is set at 20 nano grams per decoliotre. Is someone with 19 going to outperform someone with 20 or 21? I dont know, but I really like fine tuning of such boundry/thresholds and appreciate when the question is so artfully applied as your example.
Are the frackers in ND etc still sitting pretty like some here were claiming when WTI went under $ 50?
the vertical spike after a dip below 40 is more interesting. the other interesting chart is the disconnect between gas prices and barrel prices. gasoline dealers are netting huge windfall.
Check out a Year-To-Date chart on Bloomberg for Crude vs. Gasoline. Huge disconnect since May - someone is doing $5k hookers and driving Lamborghinis.
"local governments are netting huge windfall." -- fixed. Many municipalities and counties are in fact broke. Many have raised their gasoline taxes. No one is paying attention.
Correct, GA. Just raised the gas taxes here!
"The geopolitical consequences could be – to put it bluntly – terrifying"
Grundlach is confusing cause and effect. Oil prices move because of geopolitical events or shifts. It's not immediately obvious to me that we're looking at cause and effect here - what if it's correlation, not causation? Would prove that first before running around and peddling "terrifying geopolotical consequences"
What are these terrifying geopolotical consequences? The economy is in the toilet pretty much everywhere -> lower oil demand -> lower prices. What's new here?
(1)Lower oil price implies lower oil demand. In other werods defaltion despite endless QE.
(2) There will be civil war in oil producing countries due to lower oil revenue. Most are ruled by strongmen and population is kept under control due to entitlements.
(3) High yield bonds will crash.
QE purchases (outright counterfeiting) ended in Oct. '14. Look at this oil chart;
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=CRUDE+OI...
(1) Lower oil demand leads to lower oil prices. Still reversing cause and effect. Lower oil prices lead to higher demand.
(2) Civil war in the mid east because their funding is running out? Sounds good to me, but are those terrifying geopolitical consequences .... Yemen, Syria, Iraq and now Turkey are already in full swing.
(3) Agreed: Hundreds of billion in high yield investments going in the toilet for the oil & gas explorers. But are those terrifying geopolitical consequences?
I agree with your 3 points, but Grundlach et al need to be more careful with this rhethoric.... terrifying geopolitical consequences ....
my repost,
the devaluation goal on cny would be 10%. to understand the china's motivation to devalue cny must know the reason behind the strong us$, which is due to the capital flow into the us or because of the weak euro and jpy. probably the later one is the fact.
the fed has to counter this move by lower interest rate and/or more qe. otherwise the us would be getting into recession or worse.
-- China's motivation to devalue is political --the party is invested in the social change toward consumerism. If the prolotariat sees the party future as a lie all bets are off--jobs and wages must be maintained at all costs--
the FED doesn't have to do anythng
It's not like we're seeing a discount passed to the consumer. CA gas is still $3.40 gal or around $3.20 cash
Of course, most of it is taxes and other BS
$2.19 in VA this morning.
You should be long tar and feathers.
Not Northern Va. still at $2.80 wtf??
$2.47 in Dallas
$3.65 in San Diego, CA
2.24 in suburban Dallas.
$2.39 in south texas...
You guys are lucky $2.39 would get you about 1.25 litres or 0.27 of a gallon here in the UK.
ya but don't forget the cost differential is TAXES and EXCHANGE RATES
$3.31 (91) here in North Dakota , $2.44 (87).
$2.22 SWVA this afternoon
gasbuddy.com
Just look at the crude monthly future to see how the 17 year uptrend has just been broken, and how easily oil can now move from $42 to $32 again (as it did 7 years ago), and then drill on down to $20:
http://www.investing.com/commodities/crude-oil-advanced-chart
I'm sure the FED will stop it at 36.66 or 26.66!
http://fm.cnbc.com/applications/cnbc.com/resources/files/2015/01/07/long...
and paul muculley formerly of PIMCO was saying yesterday how the fed "should declare victory!"
more like the fed should "tap-out"
how does it compare to historic prices adjusted for inflation?
Compare against XB1 gasoline future. THere's your $3.40 gas in CA.
Dr. Copper already had this story covered.
Uhhmmmmm Jefff, I hate to break it to you, but there is already something terribly wrong with the world, and it only gets worse from here.
I just emailed Jeff to stfu and btfd.
Its fine if you live in an ivory tower.
Life is good. There is so much cheap oil to be had, just like gold. Take all you want, we'll print more. Enjoy the never ending abundance of securitized assets.
I Am COMEX gold.
The radiation in the water tastes like BANANAS. Probably has electrolytes too.
oil industry is huge. and is related to goverment taxation, insurance, hadwares, softwares and almost everthing in economics. if the oil price below $40, everything becomes very interesting.
of course these new lows are happening when a midwest bp refinery is off line for maybe a month and gas in ohio just went up $0.80 in one day soon to be over $3.00 here-booooooooo!!!!!!!
I can envision the deflationary collapse becoming so bad that no one is producing oil, and no one wants any.
I can envision the deflationary collapse becoming so bad that no one is producing oil, and no one wants any.
When a rational man is only provided with contradictory information then he stops and attempts to make sense of a path forward while seeking to avoid the obstacles in his path. If a rational man is not able to have faith or confidence in his ability to predict his future then he merely stops until he has the clarity to continue. For instance if you see an obstacle in the road ahead, a car IN MOTION, while driving your vehicle, then you will choose to keep driving toward the obstacle, being assured and CONFIDENT that since it is in motion, that it will have cleared out of your path by the time you got there. You may adjust your speed, you may slow down a bit, in order to give the time for the clearance, in order that you avoid a collision. However if you see an obstacle in your path and you are not certain that the obstacle is in motion, or will have cleared your path, then you stop and wait until it does, or, you choose a different path....FORWARD. Of course with the mixed signals, coming out of the FED, on Interest Rates, on QE, on the health of the Financial System, the OUTRIGHT LIES ABOUT EVERYTHING, concurrent with the plethora of mixed messages, then what is a rational man to do? He stops, he waits for clarity...he plans out a different path. THus I can definitely envision the picture you painted...with confidence...as that is what will happen. The total economy will seize up, there will be a Credit Freeze, and NOBODY RATIONAL will trust what ANYBODY has to say. In fact if it is someone in Government then that is where they will be distrusted the most. Do they KNOW what they are doing? YES. How can you reset it if you do not first bring it to a stop? Everything will stop...EVERYTHING. And many will die with many more suffering as a result.No problem for those who are ready.
“Terrifying” change is already happening all around us. No need to waste ammunition on the dying (aka "Just Us" and their minions) - they have already killed themselves.
Consider just tending your livestock and crops, taking care of your family, acquiring useful skills and knowledge, and let nature take care of the filth.
thats pretty much the way it's always been don't ya think??
I agree with the sentiment but would also like to prevent a new terror rising when this one falls.
And without our own methods becoming the new boss. Tending the crops was an idea of Tolstoy and some more free-thinking German nationalists. Unfortunately it doesn't work when everyone else is lining up to rebuild the Tower of Babel.
Never with 6.6 billion souls on the planet or whatever the exact number may be actually. That alone sets the stage for unimaginable terror and death.
What do you do after the neighbors kid dies of mal nutrition or something. Oh yeah iits ok cause you got 500 oz of silver. Going to give it all up everyone of us. There's no buy the fucking dip when they just smashed in your back door and are burning you feet off to get you to talk
As the FED criminals continue to spin plates to try and keep the entire rigged casino going.....does anyone think they also buy oil contracts to keep prices from falling below $42? When it just went below $42 it shot straight back up to $42.20 in 2 minutes!!
Anyone?
FED buying long oil contracts and rigging this as well?
The oil hedge counterpartys have been doing it for months.
Why do you thinkthe price is dropping now as the hedges expire ?
Yep, can even hear that nervous music they play for the plate spinners (Forgot the title).
Flight of the Bumblebee
http://www.youtube.com/watch?v=6QV1RGMLUKE
or
Ride Of The Valkyrieshttp://www.youtube.com/watch?v=GGU1P6lBW6Q
oil plunge protection team, engage.
Holy crackers... the only thing I take off that last chart is that after oil has cratered 40+%, it has always rebounded with a vengeance. Thanks Zero... All-In it is!
It's all fun and games until global war breaks oud 2 billion people die and 2 billion more are thrown into abject poverty.
Well, $42 is the bottom. Load up the truck. Feck Gundlach GS and the rest. The "Oil God" told me it is only going up from here. Oh wait.
You might say that in 2001 America's move was much like the beginning push of all of the chips into the centre of the board.
History occurs in slow motion, so time slowed adjusting to this big play. If the above is true, then the currency war is the stares back and forth deciding whether to call or not.
America's got lots of red chips, but do they have the most chips overall?
Alaska oil producing state and gas is $3.50+ at pumps here in Kodiak
Diesel is a dollar more
That seems way too cheap considering that AK is BFE to the refiners.
seal oil is free
if you can catch them ...
I remember hearing that oil price was tied into a lot of derivatives contracts.
It still feels too early to start buying. Wait until a few oil companies go bankrupt. People will be afraid that ALL oil companies are going bankrupt, so the price of the really good companies will have sympathy crashes. I'm guessing Exxon will still exist in 20 years, so we'll get a good buying opportunity at some point when fear is at its highest.