Here’s a question that might have you pondering: Is gold a commodity?
More importantly, are we doing a disservice to the gold industry by calling gold a commodity? These may sound like silly questions, but hear me out
Last Friday we first reported on two surprising developments: one was a record accumulation of crude tankers just off the coast of Singapore in the Straits of Malacca, awaiting higher oil prices to offload their precious cargo; the second was that as a result of previously profitable contango trades now flattening and making storage no longer profitable, oil shippers are now forced to ask for bank loans to fund offshore storage costs. Over the weekend none other than Morgan Stanley noticed precisely these two developments.
The increasingly obvious trend reversal in inflation, amid softening growth, indicates the long predicted arrival of stagflation. While not unexpected, this is likely to propel the gold price higher.
One particular energy trader - a name well-known to Zero Hedge readers - Glencore, has built up a massive inventory stake in the Brent market where it now holds an unprecedented 30% position in Brent, which it is holding for offshore storage in its tankers in hopes of pushing the price of Brent, and thus the entire energy complex higher, by limiting supply.
Will Algos Push Oil Back To $60? Morgan Stanley Begs You To "Forgive The Macros, They Know Not What They Do"Submitted by Tyler Durden on 04/26/2016 11:58 -0400
“Close your eyes and buy” seems to be the mantra for now. While fundamentals don’t justify a cyclical recovery in oil yet, the market continues to move higher. The primary driving force has been macro funds, index money and CTAs. Technicals and momentum have only added to it, and there is a sense from some of investors that they need to buy for fear of missing out. Similar to 2015, we see a confirmation bias where any bullish data point is embraced outages, weekly US production, etc) and bearish data points are dismissed or spun as a buying opportunity.
This is what Pioneer Natural Resources just said in its press release: "expecting to add five to ten horizontal drilling rigs when the price of oil recovers to approximately $50 per barrel and the outlook for oil supply/demand fundamentals is positive."
"In the post-Doha world, when we're still in what is essentially a free market for oil, the Russians will pump as much oil out as the market will absorb and the Saudis have said much the same thing."
Recall all those tankers we have profiled before on anchor next to the Iran shore? They have finally started to move.
It's not just the shale drillers who are in danger as they see their liquidity evaporate. As the WSJ writes today, and as covered here since January, it is the lenders themselves whose unfunded revolver exposure may suddenly become funded and expose them to even greater risks from the energy sector should oil not rebound far more forcefully and put US oil and gas companies back in the black. How big is the exposure? Very big: $147 billion.
The stakes are rapidly rising in Doha given another supposed ‘freeze’ announcement would actually be read as outright OPEC / Russia failure without clear signals the market will see actual cuts. Doha doesn’t make for a quick kill. It merely prolongs the agony far deeper and far longer. Perhaps for some, that’s the redemptive point from US redetermination...
The companies most at risk may actually be those with that currently have some of the most highly utilized borrowing bases, ranging anywhere from 62% for Contango to 94% for Vanguard. It is these companies that will suddenly find themselves with zero incremental sources of liquidity as the banks proceed to whack anywhere from 30 to 50% of their borrowing base, leaving them scrambling to preserve liquidity and ultimately leading to bankruptcy court
Russia will export more oil to Europe in April than it has in any month since 2013 - despite Moscow's plan to sign a global agreement on freezing production in a bid to lift the price of crude. Asked what would be covered by the agreement, Russian Energy Minister Alexander Novak told reporters: "The discussion is only about freezing production. And not exports." In other words, the global supply glut is about to get even worse thanks to the likes of Russia, which is about to unleash an additional 2.4 million tonnes of ooil exports onto a world which is already drowning in excess oil.