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I hear there is going to be a big announcement made by BIG SCREEN regarding a major Chinese production!!
Time is running out for you guys, the most likely outcome I can see is that FNDM will soon be delisted from trading on the grey market for not filing, and the shareholders will end up getting nothing. If there in fact has been any shorting of the stock those that have will end up having the last laugh.
Yes you are right, their plans were to build a Nuclear Power Plant, I believe it was in Utah. I know someone who was a strong believer of the Alternative Energy Corp. AEHI and felt it would it be a big part of his retirement funds.
It became a part of my retirement funds because all I did was trade and made money while he lost his.
I have bought and sold FNDM shares because of the court case, I currently do not have any shares in the company. I have had experiences in two other companies that after a very lengthy period of time worked out to my benefit.
I may buy back into FNDM but what bothers me is the over promotion of the company on this board. To me that is a red flag, for example statements that FNDM is being shorted. I go long and short stocks, this is not a stock you would or could do legally, there is no money to be made in doing so. There are a lot better stocks to short then FNDM.
There was a free site that I used a lot when I was trading a stock with the ticker symbol AEHI. Once it became non-compliant a warning was issued on it and they stopped showing trades tell further notice. I tried to find the site again but was unable to. This is the best I could do which also has issued a warning on FNDM.
http://www.otcmarkets.com/stock/FNDM/quote
The Energy Report for 06/15/2015
Greek Side Show
Oil prices are still being held hostage to a large degree by the Greek default sideshow as Deutsche Bundesbank President Jens Weidmann said time is running out for Greece. Despite the fact that oil demand continues to blow away expectations and U.S. rig Counts continue to fall the market still is worried about Greece. Greek and the European Commission talks fell apart over the weekend as Greek negotiators walked out after only 45 minutes. This comes after IMF officials walked out of debt negotiations last week. It seems that while Greece is still saying that their only plan is to reach a deal with creditors but they seem to have a funny way of executing such a plan.
Friday Baker Hughes reported that the U.S. oil rig count fell 7 to only 635 rigs. That is a record 27 weeks of declines. Total rigs fell by 9 to 859 and that means that there are now about 60% fewer rigs working since a peak of 1,609 in October.
Geopolitical risk is still high. Over the weekend the U.S authorized airstrikes in Libya to try to subdue Al-Qaeda militants that have sized some oil ports. Yet at the same time Libya News Agency reported, that Libya oil production hit 500,000 barrels per day. That would add to the glut assuming the whole country does not fall apart.
Saudi Arabia opened up its stock market to foreign investors Reuters Report that "Saudi Arabia's bourse rose on Sunday ahead of its opening to direct foreign investment, though it remained unclear if any foreign funds would be able to buy local shares when the new regulations take effect on Monday. The main Saudi stock index climbed 1.3 percent, buoyed by blue chips which are seen as most likely to be targeted by foreign investors, and have been included in a provisional benchmark by index compiler MSCI. Turnover was modest." The Wall Street Journal reported that Saudi Arabia's $590 billion stock market opened to foreigners on Monday, nearly a year after the kingdom unveiled plans to give international investors direct access to the Middle East's biggest economy. The kingdom posted solid economic growth in the past decade funded mostly by hundreds of billions of dollars in oil-sales income. But a sharp drop in crude prices since mid-2014 has crimped its ability to maintain a massive local spending plan, forcing it to burn billions in foreign reserves this year."
Gas Prices are still on the rise according to Trilby Lundberg of the Lundberg survey, she says that the average price of regular rose by 3 cents a gallon in the past two weeks to $2.87 a gallon. Lundberg says it's the smallest hike in nine weeks. The average is 82 cents a gallon lower than a year ago. The average national price for midgrade gas was $3.07, with premium going for $3.24.
Major forecasters continue to raise their oil price forecasts while touting bullish fundamentals. Go figure. It looks like there is too much focus on supply but not enough about demand. That is why oil should really get a lift if a deal with Greece is reached because it will lower the odds of an EU recession.
Discoveries of new oil and gas reserves drop to 20-year low!
Submitted by Mikael Höök
Discoveries of new oil and gas reserves dropped to their lowest level in at least two decades last year, pointing to tighter world supplies as energy demand increases in the future. Preliminary figures suggest the volume of oil and gas found last year, excluding shale and other reserves onshore in North America, was the lowest since at least 1995, according to previously unpublished data from IHS, the research company. Depending on later revisions, 2014 may turn out to have been the worst year for finding oil and gas since 1952...
Why we are at Peak Oil Right Now
http://peakoilbarrel.com/peak-oil-right-now/
Reported Death of Peak Oil Has Been Greatly Exaggerated
by Ron Patterson Posted on 12/06/2015
http://peakoilbarrel.co
Shale Boom, Shale Bust: The Myth of Saudi America
One of the most respected traders in the oil sector – Dan Dicker. Dan has recently released his second book Shale Boom, Shale Bust: The Myth of Saudi America”, and I thought readers would find the below excerpt of interest. The book is now available for preorder on Amazon.
"...I knew that the conventional wisdom on the drop in oil prices after the OPEC meeting in November, 2014 was going to be ascribed solely to the Saudis, a conclusion that was far too simple to explain the massive collapse. No, something else, something even more important was going on -
The Saudi reticence to cut production was just a catalyst. The bigger theme was an already overdue bust that was happening in U.S. shale oil.
This oil bonanza had been built on a house of cards, ready at any moment to topple over. The list of fragile flaws in the system was long. Each state had its own set of regulations and oversights on leases and operations, with no consistent framework for oil shale fracking. Despite (or because of) the complete freedom in oversight, fracking for oil from shale had grown at a frightening and undisciplined pace. As prices declined, it became clear that much of this breakneck activity had been financed by very risky and highly leveraged capital investments that mirrored some of the worst pyramiding schemes I had ever seen. But because prices had been high, many of the shortcomings had been conveniently overlooked: oil was being taken out of the ground as quickly as it could be drilled.
The months following the OPEC announcement showed me just how rickety the entire structure for retrieving shale oil had become. Oil companies that had been the darlings of Wall Street not one year earlier were now losing 70-80% of their share value, as their corporate bonds, which were already poorly rated, risked complete default. Virtually every company involved in shale production was forced to slash development budgets, hoping to ride out what they prayed was a temporary dip in the price of oil. Yet projected production numbers from all of these players continued to rise, almost insuring that prices would stay cheap. What had been a universally optimistic industry not 6 months prior had changed overnight into a frightened group playing a collective game of chicken, as oil producers hunkered down with reduced budgets and hoped like mad that the “other guy” would go broke first.
That shale oil had folded like a cheap suitcase so quickly and completely was incredible to witness and, I thought, incredibly important: it was undeniable proof that as a nation, we had completely bolloxed this once-in-a-lifetime opportunity.
To me, this was more than a story of another boom/bust cycle in the oil patch. God knows that the oil business had seen enough of those already and knew what they were about. But I saw shale oil not as just another in a long line of boom/bust cycles in U.S. oil production, but as the last boom we were likely to have. I didn't see shale oil as just another technological advance in a long line of advances yet to come; I saw it as the last best chance to put the U.S. on a firm footing towards a cogent national energy policy and as a conduit towards a real and necessary renewable energy future. And we were blowing it.
But I didn't see these mistakes as irreversible. Instead, I saw the bust in shale oil as a chance to get it right. I truly believe that shale can deliver on many, if not all, of the promises it has already pledged.
Simple economic laws would say that this period of low prices can't really last very long, no matter what I believe the industry needs. As costs for exploration continue to rise, so does the global appetite for oil—two simple facts that ensure that prices must substantially rise again.
But my hope is that in this brief window of low prices, we might find some clarity. The “bust” cycle in shale since late 2014 spotlights the deficits in how we're managing shale oil in a way that the “boom” cycle between 2010 and 2014 as oil averaged above $90 a barrel cannot: with oil prices high, focus centers on quick growth, quick profits, and soaring share prices. But with oil prices low and energy companies reeling, there is a brief window for reflection—to try and understand what is happening and why it is happening and to chart a more responsible and less purely opportunistic way to a smarter, more sustainable energy future.
My 30-year perspective as a trader, analyst, and columnist gives, I think, a unique view into these questions—totally without ulterior motive for financial gain, yet with an inside understanding of the oil business and the financial markets that guide that industry. I hope to help you understand shale oil's boom and current bust and why the hopes and hypes of shale need to be re-imagined and restructured…before oil prices recover and the markets again give a green light to energy companies to resume their natural instinct—of pissing it all away."
The Coming Energy "Debt Bubble"
Following some nice recent gains and despite a dip on Tuesday, the market currently remains at just below $60 a barrel for West Texas Intermediate (WTI) crude oil futures in New York.
The recent rise in prices would seem to be just what the smaller operators in the United States need to avoid a sector meltdown.
A few months back, when prices were pushing lows of $40 a barrel, there was widespread talk of a wave of bankruptcies coming in the oil patch. The picture is now better, given a recovery in crude prices.
But there is another shoe about to fall in the ongoing fight by smaller companies to survive.
Here's my take on the disaster that's brewing – and the opportunities it may bring…
Some Companies Won't Survive This
A major energy debt bubble is rapidly forming. Moving forward, it will put significant pressure on the sector.
Make no mistake: There will be fewer oil producers in the United States at the end of the year than there were at the beginning – even if the overall pricing trajectory remains pointed up.
Now, that is not necessarily a bad thing from our investment standpoint. Well-positioned and well-managed producers will acquire choice drilling assets and leases at discount. That will raise both their bottom lines and our profitability.
But the terrain is changing.
This week, a bout with rising bond yields has once again put pressure on the Achilles' heel of most small operators. Most American exportation and production (E&P) companies have been cash poor over the past decade, regardless of the price of oil.
Essentially, this means it has cost them more to fund ongoing operations than they have realized in revenues. When prices for oil have been $75 or higher, this spread has made little difference. In such an environment, it is usually better to fund the bulk of forward operations by rolling over debt than by tapping cash.
Especially if the company is publicly traded. In a higher (and stable) oil pricing situation, cash proceeds translated into a higher offered dividend constitute a better return for the company's share value than a rapid retirement of debt.
Producers Are Still Making Less
Yet this remains all about the price commanded for the commodity.
Remember, the price flashing in the corner of your TV screen is a futures contract. The company taking the oil out of the ground makes a lower price.
The first pricing stage is at the wellhead. This comprises the transfer of oil coming out of the ground to a distributor. That is what the operator realizes as revenue, but it is hardly the final price. Rather, the price is then adjusted upward as it transits to a refinery (the primary end user of the raw material crude) and then onto retail consumers as finished oil products.
Depending on the grade of oil produced (based on factors such as weight, sulfur content, and impurities), the producing company is making a lot less. At $60 a barrel, the average U.S. producer is making somewhere around $50.
And that means even with overall prices improving they are not rising fast enough to avoid an oncoming squeeze.
Energy debt is found at the upper end of the high-yield debt curve. That is often referred to as "junk bond territory" – issuances below investment grade. Since this debt has a higher risk of default, it provides a lower face value and a higher interest rate.
That is simply a risk premium – the issuing company realizes lower funding and has to pay more to receive it. To stay afloat, leveraged oil companies need to be able to roll existing debt over and access debt markets for additional funding.
Unfortunately, as oil prices retreated some 60% between August 2014 and February 2015, the yield curve exploded. As junk bond yield rates increased, energy yields expanded even quicker.
The current recovery in oil prices has helped a little, but the pricing floor it is not rising quickly enough for the most vulnerable companies.
Currently, there is almost $1 trillion in such oil company junk bonds outstanding. And the interest commanded on new issuances is accelerating. As of last week, oil company annualized interest rates stood between 12% and 15%. As bond interest rates in general were rising this week, energy bond rates were deteriorating even more.
High-Risk Interest Rates Throw Safety out the Window
How bad is this deterioration? Aggregate figures are not always indicative of what is really happening in the debt market, except in this case. Bond interest rate changes are quoted on basis points. Each 1% revision is divided into 100 basis points. That allows us to calculate a convenient yardstick of how one particular component of the market is faring against a broader spectrum of debt.
My estimates as of close of trade on Tuesday are indicating a significant bubble forming in indebted oil companies' abilities to weather the debt storm. Each 1-basis-point rise in investment grade debt yield has translated into a (quite generalized) rise of almost 2 basis points in junk bonds.
But the rise is almost twice that for energy junk bonds.
The conclusion is direct: High-risk interest rates are almost doubling over safer bonds, while the energy portion of the junk market is experiencing a rise approaching four times safer debt.
Of course, much of this is a function of a massive re-pricing in global debt, with at least some of it due to the market deciding (not always for the best of reasons) to do the Fed's job for them. The continuing acceleration in debt yields, therefore, is not likely to continue at such a pace for much longer.
But it has already done some significant damage to the most exposed oil producers.
The Companies That Survive Can Make You Rich
To survive during periods of low prices, companies need to hedge. That means they will take out futures contracts on their own forward production. But actual market prices for the product at contract expiration need to match the hedge (and the combined series of options companies will take on that contract).
And for that to happen, the breakeven for the cost of operations versus the market price of the oil produced must be at a level allowing for the debt load to remain manageable.
That is becoming more difficult. My current projections put the breakeven at about $74 a barrel by July for the bulk of shale and tight oil production in the United States. This is the primary contributor to the new production surpluses experienced.
My expected market (not wellhead) price by the end of July is only $65 to $68 a barrel. Most companies will still be able to hedge forward for another eight to twelve months. However, unless we have a rapid rise in oil prices during the second half of this year, the cost of hedging will become prohibitive and the range unpredictable.
By the end of December, I calculate that the breakeven price for shale/tight oil production will be about $76 a barrel, while the WTI market price will be between $73 and $78. That will allow the resumption of more normal hedging and more workable bond yields.
Unfortunately, there will be casualties well before we reach December. Expect a rising bankruptcy rate and a robust mergers and acquisitions (M&A) cycle to kick in by summer.
The M&A will provide us with some nice opportunities to make profits from the energy debt bubble.
I have never know Goldman Sachs to have been right on any of it's price predictions for the price of oil, so why should their prediction for $45 oil by November be any different. I saw a guy on TV say it was done to shake up the market so that they could cover their oil shorts.
I do not have any shares in PetroRio at the moment, but the shares do look appealing at current prices.
I cannot sell something I do not own. Nor would I short an illiquid penny stock like FNDM.
Who would be foolish enough to pay .25 for FNDM shares.
FUND.COM INC (FNDM:OTC PINK)
0.6499USD Increase 0.0399 (6.54%) Volume: Above Average
Volume 2,049
I am posting this as a favour to you investors in FNDM
That means nothing because the stock did not trade at that price. It last traded in Canada at .96CAD up .09 on Monday. Where the stock does have liquidity. Although the company is on my watch list I do not currently have shares in it.
You are known to being a long term holder, hopefully in the case of FNDM it will turn out to be a profitable one.
It doesn't seem that AdvisorsShares Investments Inc. are very worried about the outcome of the court case otherwise they would have been on the bid buying FNDM shares. With only 875,000 shares O/S the cost could not be that great a lot less then what some on this board feel a court decision or settlement would be, especially if they started at the 52 week low of 11.
Interesting situation and potential for Fund.com. Should I seem more confirmation of the upward trend this morning. I will look to starting a position in the stock.
Rzbern:
Shareholders already know that so you don't have to rub it in. It is just another example of your negative posts which seem designed to drive the stock down further. So that you will either be able to buy the shares at a lower price or you have such a hate for the company you want to do all you can to destroy it's share price regardless of the effect it will have on it's shareholders.
Rzbern how can you possibly look at yourself in the mirror.
Rzbern:
As I have stated before I also have sold all of my shares in HRT and have moved onto other stocks. Since then I have posted occasionally on this board anything I have found positive relating to oil.
I never post negative comments about companies I short or am long in. I feel it is unethical to bash a company I am short in. and down right stupid to bash a company I am long in. I did let my feelings known about the R/S, that is not the same as bashing.
Even though I do not have shares in HRT, I really want to see the company succeed for the sake of it's shareholders. I take no joy in seeing others lose money in the stock market.
Rzbern it sickens me to read your posts on IH and especially on SH, as a none shareholder in HRT it is very clear to me your intent is to discourage me and other potential shareholders from buying shares in HRT.
You and robnhood who also stated he does not have any shares in HRT are quite a couple. WHY are you two so obsessed with a company that you no longer have shares in that keeps you both so intent on posting on HRT discussion boards on IH and SH?
rzbern:
Do you still own shares in HRT?
I live in Vancouver B.C. Canada, right now there are a lot of oil tankers anchored in our harbour that have been rented to store oil by traders to be sold at a later date because of the contango that is now in the oil market. Contango means you can sell oil in the future for a higher price then it is currently selling for.
HRT is making a wise move to store their production in the company's FPSO vessel. This a much better thing to do then to stop production. If they did that they would have to let go all of their production workers, but still have to have maintenance personnel, therefore not eliminating all of their costs in the Polvo field. Also when the price of oil rises to a more normal level, they could be faced with problems finding production workers.
In the past when traders have leased oil tankers during times of weak oil prices for the purpose of storing oil that has been a bullish sign for oil.
HRT is fortunate to have such a vessel that can store 1 million barrels, putting it to very good use, enabling it to sell the stored oil at a higher price in the future. Oil companies are suffering greatly from the current low oil price and would love to have such a storage capacity.
Bankers See $1 Trillion of Zombie Investments Stranded in the Oil Fields
By Tom Randall Dec 17, 2014 9:52 PM PT
Photographer: Mark Ralston/AFP via Getty Images
A disused mining machine is displayed in front of an oil sands extraction facility near the town of Fort McMurray, Alberta, Canada.
There are zombies in the oil fields.
After crude prices dropped 49 percent in six months, oil projects planned for next year are the undead -- still standing upright, but with little hope of a productive future. These zombie projects proliferate in expensive Arctic oil, deepwater-drilling regions and tar sands from Canada to Venezuela.
In a stunning analysis this week, Goldman Sachs found almost $1 trillion in investments in future oil projects at risk. They looked at 400 of the world’s largest new oil and gas fields -- excluding U.S. shale -- and found projects representing $930 billion of future investment that are no longer profitable with Brent crude at $70. In the U.S., the shale-oil party isn’t over yet, but zombies are beginning to crash it.
The chart below shows the break-even points for the top 400 new fields and how much future oil production they represent. Less than a third of projects are still profitable with oil at $70. If the unprofitable projects were scuttled, it would mean a loss of 7.5 million barrels per day of production in 2025, equivalent to 8 percent of current global demand.
How Profitable Is $70 Oil?
Making matters worse, Brent prices this week dipped further, below $60 a barrel for the first time in more than five years. Why? The U.S. shale-oil boom has flooded the market with new supply, global demand led by China has softened, and the Saudis have so far refused to curb production to prop up prices.
It’s not clear yet how far OPEC is willing to let prices slide. The U.A.E.’s energy minister said on Dec. 14 that OPEC wouldn’t trim production even if prices fall to $40 a barrel. An all-out price war could take up to 18 months to play out, said Kevin Book, managing director at ClearView Energy Partners LLC, a financial research group in Washington.
If cheap oil continues, it could be a major setback for the U.S. oil boom. In the chart below, ClearView shows projected oil production at four major U.S. shale formations: Bakken, Eagle Ford, Permian and Niobrara. The dark blue line shows where oil production levels were headed before the price drop. The light blue line shows a new reality, with production growth dropping 40 percent.
Even $75 Oil Crashes the Shale-Oil Party
The Goldman tally takes the long view of project finance as it plays out over the next decade or more. But the initial impact of low prices may be swift. Next year alone, oil and gas companies will make final investment decisions on 800 projects worth $500 billion, said Lars Eirik Nicolaisen, a partner at Oslo-based Rystad Energy. If the price of oil averages $70 in 2015, he wrote in an email, $150 billion will be pulled from oil and gas exploration around the world.
An oil price of $65 dollars a barrel next year would trigger the biggest drop in project finance in decades, according to a Sanford C. Bernstein analysis last week.
A pause in exploration and development may sound like good news for investors concerned about climate change. A vocal minority have been warning for years that potentially trillions of dollars of untapped assets may become stranded due to climate policies and improved energy efficiency. The challenges faced by oil developers today may provide a small sense of what's to come.
However, these glut-driven prices can’t stay low forever. Oil production hasn’t slowed yet, but as zombie projects go unfunded, it will. This is how the boom-bust-boom of the oil market goes: prices fall, then production follows, pushing prices higher again. The longer this standoff goes, the more zombies will languish and the sharper the rebounding price spike may be.
Where the Big Global Oil Players are Putting Their Money Now
by Dr. Kent Moors | published December 10th, 2014
Marina and I are headed back to sunny Florida. It will be a welcome change from the brisk weather in London.
Not that I had much time to take in the scenery…
While my better half sampled the shops in Kensington High Street, I was in high level meetings in a place known as “The City.”
More oil and gas deals are funded in this small section of London’s financial district than anywhere else in the world.
Much of the conversation centered on OPEC’s latest moves, the fall in oil prices, and the massive short positions in oil futures that have combined to create the biggest pressures on the energy sector in a decade.
And that, in turn, has prompted some interesting moves among the major global money players…
Low Oil Prices: Setting the Stage for the Next Big Move
These are the folks who will decide what the energy market looks like over the next 12 to 18 months. They are also the reason I’ve been sitting in an 18th floor conference room overlooking what remains of the “The Wall.”
It was built by the Romans to protect Londinium, the empire’s port and bastion. For over 1,500 years, “The Wall” limited the city’s expansion and continued to delimit its geography. These days, there’s not much left of it.
But symbolically, it does have has some relevance to what transpired in over two days of meetings.
Because, as the very substance of the energy sector changes, so, too, will the manner in which it is all financed. And that requires some defensive walls among the bankers with whom I’ve been meeting.
In these circles, I am usually called upon to provide geopolitical and time-sensitive risk advisories. However, this time around the conversation is moving quickly to another subject entirely.
While public attention remains fixed on OPEC, crude pricing, and the impact on American unconventional (tight and shale) oil production, the discussion in London is already moving to the next stage.
The one where the guys with the big bucks make the even bigger bucks.
As several around the table called it, it’s the “next financing sequence,” and it will unfold based on three interlocking developments.
One of them has already begun. It’s the fall in oil prices resulting in a new equilibrium of about $70 per barrel in New York (the West Texas Intermediate, or WTI, benchmark crude rate) and $75 here in London (the Brent rate).
This first element is already nearing a close, with crude pricing rates likely to move up marginally from where they are at the moment. The consensus is forming that, apart from a major crisis or “geopolitical event” (apparently, the current politically acceptable way of mentioning ISIS, or a Russian military stroll in the neighborhood, the collapse of nuclear discussions with Iran, rising Kashmir tensions… you get the idea), lower oil prices are going to be around for a while.
In the aftermath, there has been a downward pressure in energy almost across the board, whether there is any direct connection to oil or not. This has been painting with a very broad brush. The result has been unjustified, creating oversold conditions in several market sectors.
Moving into a Massive Money Cycle
That leads to the second factor. Sustained prices at these levels will put renewed pressure on companies with higher cost production projects or – and this is the key here – heavy debt encumbrances.
For those who saw my Bloomberg World interview on Monday, I gave you a preview. It included a discussion about how credit matters have become a barometer with which to gauge likely takeover targets.
The key point is this: We are moving into a major cycle of M&A.
The aim among these big money guys is to marshal considerable funds and direct them toward specific targets. Other companies will fall by the wayside or be bought out for peanuts.
But the prized objectives will provide considerable upside. Unlike the mantra driving other “experts,” shorting either the raw materials or the companies is not the best way make the largest returns.
In fact, everyone I’ve been talking to here is unwinding short positions.
Sector consolidation is approaching fast, and this is where the majority of the money will be made. To accomplish this, a dual strategy is being employed utilizing both direct acquisition of assets and leverage, and the introduction of new derivative instruments to maximize the access.
Much of this is beyond the average investor. That leads to the third and most important element as it relates to retail investors.
Among oil and gas operators, the consolidation crunch will be initially centered on a designated list of smaller companies having efficient field operations with known and extractable reserves, good oversight, limited additional demand for working capital, and a manageable debt load. Their problem, as with all small producers, is having enough funding to bridge the gap.
Some of these are going to be acquired outright, while others will continue to operate under current corporate structures. Once the sector stabilizes and prices begin moving up again, I expect these to become the foundation for some interesting M&A action that will jump across energy barriers from one segment to another.
In short, the holdings will look different, as will the expectations.
A Billionaire Insider Just Made a Bold Bet on Crude
by Dr. Kent Moors |
There was a very dramatic development in the oil market last week. It involved a well-known insider and a bullish bet on crude.
Harold Hamm, the CEO of Continental Resources Inc. (NYSE:CLR), announced that his company – a major producer in the Bakken and other U.S. unconventional oil basins – had unwound its hedge positions.
So why is that so important?
Hedges like the ones unwound by Hamm are used to compensate for the possibility of future oil price declines. In a single bold move Hamm had made one of the biggest bets ever on rising oil prices.
So while the TV pundits are still wringing their hands over the decline in crude oil prices, a deep market insider was preparing for crude to go in the opposite direction…
Here’s why I think Hamm and Continental have it right…
What’s Really Drives Oil Prices
First, a number of analysts have been pointing out something over the last few days that I have been saying for weeks now. The decline in oil prices does not reflect the overall rise in demand.
You see, despite our penchant to view oil only through the lenses of the trading benchmarks in New York (West Texas Intermediate, or WTI) and London (Brent) the demand that drives today’s prices is not American or European.
The real drive is coming from developing countries. And this is not simply the known giants such as China or India. Rather, it involves the greater (and exploding) Asian market, along with the resurgence developing in Latin America and Africa.
It is true that the emergence of shale and tight oil in the U.S. has prompted revisions in demand expansion by both OPEC and the International Energy Agency (IEA).
But the results still point to:
(1) An overall demand increase by at least 1.2% year-on-year;
(2) and a sustained Brent price of about $95 a barrel and a WTI peg of closer to $88.
Recall as well that the net impact of American shale oil on global pricing is tempered by the current (and over four-decade long) prohibition against exporting U.S. production.
This impact is limited to reducing imports into the U.S. – a situation that has been in place for some time now, and is hardly a justification for the curious read of declining demand internationally.
So, let’s look elsewhere to explain this disconnect.
A second possibility might be indications that Gross Domestic Product (GDP) is declining, translating into an expected forward concern over sluggish or recessionary market projections.
But that’s just simply not the reality either. GDPs are still climbing - not falling.
Yes, there have been some concerns expressed over Chinese growth prospects. But those have dissipated considerably as the performance in China continues to go higher. Of course, India has its own set of problems, but even there the prognosis is up.
In the absence of marked downward signals, the BRICS (Brazil, Russia, India, China, South Africa) – the five developing countries now driving primary global interest – are just not giving us any reason to suspect that a cut in the global economic forecast is warranted.
Expansion may come below some lofty (and unrealistic) predictions, but the aggregate picture hardly justifies the view that a GDP contraction is on the horizon.
A Short Story About Falling Oil Prices
That leaves us with a third reason driving this disconnect. And it turns out to be the 800-pound gorilla in the room.
For some time now, significant money has gone into “riding” the price of oil futures down. This is, in short, a story about shorts period.
Now shorting a stock or a commodity is hardly new. Investors do it all the time if the prospects look promising that the price will be moving south. Of course, heavy short positions may upon occasion dictate such movement, at least in the near term.
That’s especially true if the guys moving the heavy short positions are the same “experts” predicting the fall. In this way, it becomes a self-fulfilling prophecy.
Ultimately, the market will eventually correct for this overemphasis on the down side. When that correction occurs, shorts need to be covered and that always sends the price up even more than the underlying market indicators would seem to warrant.
After all, a recipe for disaster for the shorts is to go into the market to buy the contracts needed to cover rising prices. Even though this would seem to be handing these guys just what they deserve.
This would seem to be the primary reason why both WTI and Brent are priced at levels some $8-$10 per barrel below where they would trade in a normal market.
It only requires a trading environment in which the commodity rather than the artificial moves orchestrated by the “flash boys” determine the price.
That day is coming in short order. For those taking a position beyond the end of their own nose, Hamm and Continental have gotten it right.
A Billionaire Insider Just Made a Bold Bet on Crude
by Dr. Kent Moors |
There was a very dramatic development in the oil market last week. It involved a well-known insider and a bullish bet on crude.
Harold Hamm, the CEO of Continental Resources Inc. (NYSE:CLR), announced that his company – a major producer in the Bakken and other U.S. unconventional oil basins – had unwound its hedge positions.
So why is that so important?
Hedges like the ones unwound by Hamm are used to compensate for the possibility of future oil price declines. In a single bold move Hamm had made one of the biggest bets ever on rising oil prices.
So while the TV pundits are still wringing their hands over the decline in crude oil prices, a deep market insider was preparing for crude to go in the opposite direction…
Here’s why I think Hamm and Continental have it right…
What’s Really Drives Oil Prices
First, a number of analysts have been pointing out something over the last few days that I have been saying for weeks now. The decline in oil prices does not reflect the overall rise in demand.
You see, despite our penchant to view oil only through the lenses of the trading benchmarks in New York (West Texas Intermediate, or WTI) and London (Brent) the demand that drives today’s prices is not American or European.
The real drive is coming from developing countries. And this is not simply the known giants such as China or India. Rather, it involves the greater (and exploding) Asian market, along with the resurgence developing in Latin America and Africa.
It is true that the emergence of shale and tight oil in the U.S. has prompted revisions in demand expansion by both OPEC and the International Energy Agency (IEA).
But the results still point to:
(1) An overall demand increase by at least 1.2% year-on-year;
(2) and a sustained Brent price of about $95 a barrel and a WTI peg of closer to $88.
Recall as well that the net impact of American shale oil on global pricing is tempered by the current (and over four-decade long) prohibition against exporting U.S. production.
This impact is limited to reducing imports into the U.S. – a situation that has been in place for some time now, and is hardly a justification for the curious read of declining demand internationally.
So, let’s look elsewhere to explain this disconnect.
A second possibility might be indications that Gross Domestic Product (GDP) is declining, translating into an expected forward concern over sluggish or recessionary market projections.
But that’s just simply not the reality either. GDPs are still climbing - not falling.
Yes, there have been some concerns expressed over Chinese growth prospects. But those have dissipated considerably as the performance in China continues to go higher. Of course, India has its own set of problems, but even there the prognosis is up.
In the absence of marked downward signals, the BRICS (Brazil, Russia, India, China, South Africa) – the five developing countries now driving primary global interest – are just not giving us any reason to suspect that a cut in the global economic forecast is warranted.
Expansion may come below some lofty (and unrealistic) predictions, but the aggregate picture hardly justifies the view that a GDP contraction is on the horizon.
A Short Story About Falling Oil Prices
That leaves us with a third reason driving this disconnect. And it turns out to be the 800-pound gorilla in the room.
For some time now, significant money has gone into “riding” the price of oil futures down. This is, in short, a story about shorts period.
Now shorting a stock or a commodity is hardly new. Investors do it all the time if the prospects look promising that the price will be moving south. Of course, heavy short positions may upon occasion dictate such movement, at least in the near term.
That’s especially true if the guys moving the heavy short positions are the same “experts” predicting the fall. In this way, it becomes a self-fulfilling prophecy.
Ultimately, the market will eventually correct for this overemphasis on the down side. When that correction occurs, shorts need to be covered and that always sends the price up even more than the underlying market indicators would seem to warrant.
After all, a recipe for disaster for the shorts is to go into the market to buy the contracts needed to cover rising prices. Even though this would seem to be handing these guys just what they deserve.
This would seem to be the primary reason why both WTI and Brent are priced at levels some $8-$10 per barrel below where they would trade in a normal market.
It only requires a trading environment in which the commodity rather than the artificial moves orchestrated by the “flash boys” determine the price.
That day is coming in short order. For those taking a position beyond the end of their own nose, Hamm and Continental have gotten it right.
Peter D. Scott Senior Vice President & CFO of LTS (LSTMF)
New York Conference
December 3, 2014 at 9:30 AM (ET)
Web Cast
http://www.veracast.com/webcasts/baml/levfin2014/id59207203869.cfm
Oil, oil analysts and why the bottom is in. Editor's Pick article this morning from SA:
http://seekingalpha.com/article/2730125-oil-markets-sentiment-and-lame-thinking-are-currently-in-the-drivers-seat
Why black gold’s low prices won’t last long
http://www.telegraph.co.uk/finance/oilprices/11262690/Why-black-golds-low-prices-wont-last-long.html
Why black gold’s low prices won’t last long
http://www.telegraph.co.uk/finance/oilprices/11262690/Why-black-golds-low-prices-wont-last-long.html
Even though I currently do not have shares in HRT I will still post relevant positive news about oil.
Nothing could make me happier then to see HRT go up for you people holding it's shares. Even if it means I would have to pay more for HRT should I decide to buyback into it.
Some off shore oil rigs shutting down
According to to CNBC Europe some offshore drilling rigs are shutting off oil production inorder to save on costs. That will mean a futher drop in oil production along with productions cuts that will be made be others due to low oil prices.
What is wrong with [almost] everyone?
OPEC -- cut or not to cut? Why is this even in question? Here's the facts:
1) since OPEC's been in play in the mid-70's, there have been 17 "oversupply" situations that have run crude prices down. All 17 times, OPEC cut, somtimes significantly.
2) the original meeting was scheduled for Nov 21, but Venezuala needed more time to fine tune their "incentive", hence, the meeting was moved back to the 27th. Do you think that a "status quo" decision by the Saudi's would have required an extension to the meeting date?
3) yesterday, the Saudi Oil Minister, arriving in Vienna was asked, "Are you nervous about the upcoming meeting?", to which he replied, "nervous? about what, there have been oversupply situations in the past, and there will be more in the future".
4) at least half of the OPEC members are begging for a cut to run up prices; Russia is begging for a cut and have indicated their willingness to contribute 300K bbl/day to the program.
5) Finally the conspiracy theory that the US and Saudi have conspired to run down oil prices to punish Russia: are you kidding? Throw the US shale industry, every OPEC nation's margin of profiability (and more), not to mention Saudi's imperial attitude of total world oil domination . . . all under the bus . . . just to "punish" Putin.
-------------------------------------------
By this weekend, there will be over 1m bbl/day cuts by OPEC, plus a couple hundred thousand thrown in by Russia . . . oil will be well over $80/bbl, and by the end of next week, probably closer to $90/bbl.
Anyone not seeing this as a clear-cut, no questions asked, buying opp on oil stocks . . . . well, are just reading too much "doom and gloom" editorializing.
For what it is worth that is my opinion.
What is wrong with [almost] everyone?
OPEC -- cut or not to cut? Why is this even in question? Here's the facts:
1) since OPEC's been in play in the mid-70's, there have been 17 "oversupply" situations that have run crude prices down. All 17 times, OPEC cut, somtimes significantly.
2) the original meeting was scheduled for Nov 21, but Venezuala needed more time to fine tune their "incentive", hence, the meeting was moved back to the 27th. Do you think that a "status quo" decision by the Saudi's would have required an extension to the meeting date?
3) yesterday, the Saudi Oil Minister, arriving in Vienna was asked, "Are you nervous about the upcoming meeting?", to which he replied, "nervous? about what, there have been oversupply situations in the past, and there will be more in the future".
4) at least half of the OPEC members are begging for a cut to run up prices; Russia is begging for a cut and have indicated their willingness to contribute 300K bbl/day to the program.
5) Finally the conspiracy theory that the US and Saudi have conspired to run down oil prices to punish Russia: are you kidding? Throw the US shale industry, every OPEC nation's margin of profiability (and more), not to mention Saudi's imperial attitude of total world oil domination . . . all under the bus . . . just to "punish" Putin.
-------------------------------------------
By this weekend, there will be over 1m bbl/day cuts by OPEC, plus a couple hundred thousand thrown in by Russia . . . oil will be well over $80/bbl, and by the end of next week, probably closer to $90/bbl.
Anyone not seeing this as a clear-cut, no questions asked, buying opp on oil stocks . . . . well, are just reading too much "doom and gloom" editorializing.
For what it is worth that is my opinion.
Russia may suggest oil output cut of 15 mln T in 2015 - newspaper
MOSCOW Mon Nov 24, 2014 2:41am EST
Nov 24 (Reuters) - Russia may suggest cutting its oil production by around 15 million tonnes a year (300,000 barrels per day) and expects OPEC to limit its output as well, Kommersant daily newspaper said, citing sources.
Before OPEC meets later this week in Vienna, Russia has spoken to members Venezuela and Saudi Arabia about the need to support the oil market and hopes to press its message on the need for higher prices in Vienna on Nov.25.
Russian Energy Minister Alexander Novak said last week Moscow was looking at the option of cutting its oil production, the world's largest, but said the measure had yet to be agreed.
Quoting sources close to the government, Kommersant said that Russia may offer a cut of 15 million tonnes next year. At the same time, Russia and Venezuela may suggest that OPEC should limit its output by another 70 million tonnes.
Russia's Energy Ministry declined to comment.
A source familiar with the matter told Reuters that the idea in Kommersant was one possible option and that there were other ways of shoring up prices.
Russia has a limited scope to cut production and has no storage to take off large volumes from export markets, analysts and industry sources say.
Some analysts predict that Russia, the biggest oil producer outside OPEC, may lose some 350,000 barrels per day of output as soon as next year due to weak drilling and low prices, which may slightly support prices. (Reporting by Katya Golubkova, editing by Elizabeth Piper)
Iran to push for cut in Saudi oil production at OPEC meeting
Iran will try to persuade Saudi Arabia to cut oil production when the oil ministers from the two OPEC members meet this week in Vienna, Iran’s semi-official Mehr news agency reported on Sunday, citing a television interview with the country’s oil minister. The Organization of the Petroleum Exporting Countries meets on Thursday to set its output policy and some of its members have called for output cuts to shore up oil prices. Brent crude oil has lost about 30% of its value since June to around US$80 a barrel because of abundant supplies and weakening demand. “Iran’s oil minister will meet his Saudi counterpart in Vienna to persuade the oil giant for cuts in oil production and supply,” Mehr reported. But an agreement on an OPEC output cut at this week’s meeting is uncertain. Saudi Arabia, the world’s biggest oil exporter, has yet to say whether it supports one. Iran has said the steep fall in oil prices this year is the result of deliberate moves by some exporters that have kept production high to undermine Tehran’s sanctions-hit economy. Reuters
Iran to push for cut in Saudi oil production at OPEC meeting
Iran will try to persuade Saudi Arabia to cut oil production when the oil ministers from the two OPEC members meet this week in Vienna, Iran’s semi-official Mehr news agency reported on Sunday, citing a television interview with the country’s oil minister. The Organization of the Petroleum Exporting Countries meets on Thursday to set its output policy and some of its members have called for output cuts to shore up oil prices. Brent crude oil has lost about 30% of its value since June to around US$80 a barrel because of abundant supplies and weakening demand. “Iran’s oil minister will meet his Saudi counterpart in Vienna to persuade the oil giant for cuts in oil production and supply,” Mehr reported. But an agreement on an OPEC output cut at this week’s meeting is uncertain. Saudi Arabia, the world’s biggest oil exporter, has yet to say whether it supports one. Iran has said the steep fall in oil prices this year is the result of deliberate moves by some exporters that have kept production high to undermine Tehran’s sanctions-hit economy. Reuters
Russia may suggest oil output cut of 15 mln T in 2015 - newspaper
MOSCOW Mon Nov 24, 2014 2:41am EST
Nov 24 (Reuters) - Russia may suggest cutting its oil production by around 15 million tonnes a year (300,000 barrels per day) and expects OPEC to limit its output as well, Kommersant daily newspaper said, citing sources.
Before OPEC meets later this week in Vienna, Russia has spoken to members Venezuela and Saudi Arabia about the need to support the oil market and hopes to press its message on the need for higher prices in Vienna on Nov.25.
Russian Energy Minister Alexander Novak said last week Moscow was looking at the option of cutting its oil production, the world's largest, but said the measure had yet to be agreed.
Quoting sources close to the government, Kommersant said that Russia may offer a cut of 15 million tonnes next year. At the same time, Russia and Venezuela may suggest that OPEC should limit its output by another 70 million tonnes.
Russia's Energy Ministry declined to comment.
A source familiar with the matter told Reuters that the idea in Kommersant was one possible option and that there were other ways of shoring up prices.
Russia has a limited scope to cut production and has no storage to take off large volumes from export markets, analysts and industry sources say.
Some analysts predict that Russia, the biggest oil producer outside OPEC, may lose some 350,000 barrels per day of output as soon as next year due to weak drilling and low prices, which may slightly support prices. (Reporting by Katya Golubkova, editing by Elizabeth Piper)
Russia may suggest oil output cut of 15 mln T in 2015 - newspaper
MOSCOW Mon Nov 24, 2014 2:41am EST
Nov 24 (Reuters) - Russia may suggest cutting its oil production by around 15 million tonnes a year (300,000 barrels per day) and expects OPEC to limit its output as well, Kommersant daily newspaper said, citing sources.
Before OPEC meets later this week in Vienna, Russia has spoken to members Venezuela and Saudi Arabia about the need to support the oil market and hopes to press its message on the need for higher prices in Vienna on Nov.25.
Russian Energy Minister Alexander Novak said last week Moscow was looking at the option of cutting its oil production, the world's largest, but said the measure had yet to be agreed.
Quoting sources close to the government, Kommersant said that Russia may offer a cut of 15 million tonnes next year. At the same time, Russia and Venezuela may suggest that OPEC should limit its output by another 70 million tonnes.
Russia's Energy Ministry declined to comment.
A source familiar with the matter told Reuters that the idea in Kommersant was one possible option and that there were other ways of shoring up prices.
Russia has a limited scope to cut production and has no storage to take off large volumes from export markets, analysts and industry sources say.
Some analysts predict that Russia, the biggest oil producer outside OPEC, may lose some 350,000 barrels per day of output as soon as next year due to weak drilling and low prices, which may slightly support prices. (Reporting by Katya Golubkova, editing by Elizabeth Piper)
Crude oil’s ‘Class A’ divergence suggests a bullish trend reversal
http://www.marketwatch.com/story/crude-oils-class-a-divergence-suggests-a-bullish-trend-reversal-2014-11-24