The Kingdom Offers Less Oil

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

While the media remains fixed on supply, the rest of the financial complex is prepared elsewhere. On Monday, Saudi Arabia announced what the mainstream has been waiting for (and often blatantly demanding) since the summer “rebound” faded into August liquidations. Given the mythical status of Saudi supply, this was the one country thought to be the only possible savior.

Crude prices slumped, rebounded sharply and then lost their gains all in the space of a couple of hours Monday after Saudi Arabia — the world’s largest export of petroleum — said it would cooperate with all oil producing countries to help stabilize the oil market…
Crude prices staged a sharp turnaround on Monday’s reports, with Brent trading at around $45 afterwards and light crude at just under $42. The commodities have since pared some of those gains: down 20 and 60 cents respectively. Prices had previously been down on the day and, last week, WTI crude fell below the psychologically important $40 mark for the first time since August.

Yet, now a few days later, oil is practically unchanged despite the possible alteration in oil supply. Domestic or global, the word “glut” is most often used to describe the commodity situation as if it were exhaustive when there isn’t any evidence it even applies here or elsewhere. The Saudi announcement is simply the latest stinging effect that demands proper appreciation of the real imbalance.

US fundamentals continue that demonstration, as oil production endures under reduction after peaking earlier this year. Despite that reversion in supply, oil stocks (inventories) have once more surged back to 80-year highs and leaving little doubt as to the cause of all the world’s oil problems (only where orthodox economics has so fully supplanted common sense are low oil prices to be so unwelcome). This week’s US EIA update showed yet another increase in inventory, albeit small, making it nine consecutive weekly builds and eleven of the past thirteen – dating back to the week of August 21.

ABOOK Nov 2015 Crude Stocks WTI

This is all merely the continuation of the pricing dynamics that were totally and completely obvious even when oil first started its “transitory” deviation. Both US and global production were perfectly predictable and had been for years; the US production trajectory was nearly a straight line. While production was building, oil inventory was not and oil prices thus remained corrosively elevated. Continue reading

The Plane Incident in Syria

Submitted by Pater Tenebrarum  –  The Acting Man Blog

A Strange Event

The topic of the SU-24 Russian plane shot down by Turkey over the weekend in Syria has been discussed all over the media ad nauseam by now, but we want to add a few observations and suggestions of our own. Some have perhaps not received the attention they possibly deserve.

 

Downed-Russian-Jet-1200Image of Russian jet shortly after it was hit by a Turkish missile. Luckily someone was promptly at hand to make a qualitatively acceptable video of the incident. As is well known, cameramen just waiting to film every remotely interesting activity are standing by all over Syria, which is why we get so much material about what is really happening there.

Photo credit: DPA

 

Judging from reader comments in the mainstream press, many people are uncertain as to what opinion would be the most politically correct to express at the current juncture. Both Mr. Erdogan and Mr. Putin are not exactly “model democrats” and are known for frequently defying the wishes of Western power elites. Who are we supposed to hate more right now?

Further below we will briefly discuss an interesting comment made by Germany’s vice chancellor in this context. Other than that, we are more interested in what facts are actually known and what can be inferred from them.

The entire incident is very strange. An extensive comment on this aspect is available at the German language section of Der Spiegel, but it isn’t easy to find a comparable summary elsewhere.

It seems to be true that the Russian jet has been warned about 10 times by Turkish forces via radio that it was getting close to Turkish airspace. This has been confirmed by others who are recording the radio chatter in the region. Such warnings are routinely sent over the “guard emergency frequency”, which means they can be heard by everyone listening in on this frequency and were definitely heard by the Russian pilots as well. It is however extremely odd that they are said not to have reacted to the warnings at all.

“CNN Turk” has published the following chart of the plane’s flight path – which has been provided by Turkey’s ministry of defense:

 

Flight PathThe red line shows the Russian jet’s flight path, the blue line that of the Turkish plane that allegedly intercepted it. We say “allegedly” because the Russians assert the jet was shot down by a ground-to-air missile, and no video evidence of the Turkish plane is available. Those alert cameramen either plain forgot to film it, or it remained out of sight – click to enlarge. Continue reading

Yet More Rigging By Big Banks – This Time It’s Interest Rate Swaps

Submitted by Mark O’Byrne  –  GoldCore

The abuse of power is staggering.

Time and time again over the last number of years the largest global banks have been found complicit in the manipulation of key rates, indices and markets.  Now a large and important pension fund has taken the largest of banks to task and filed a class action lawsuit alleging conspiracy to thwart competition and extract large fees and margins from the vast and critical interest rate swap market. The banks ““have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case.” the suit states.

GoldCore: Banks Collude againInterest rates swaps are used by companies and investors alike to manage interest rate risk. It is critical in smoothing returns and removing interest rate sensitivity. Providing and efficient trading market is a lucrative, but when managers of that market collude to keep margins elevated at the cost of market participants, then we all suffer.
The law suit goes on to state that banks had “ jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.” This policy had one purpose” to preserve an extraordinary profit centre,” the lawsuit said. It is alleged that the banks disguised their collusion by using code names for projects such as “Lily”, “Fusion,” and our favourite “Valkyrie,” according to the suit.

Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• China’s Desperate Commodity Sector Demands State Buy Up Surplus Metals (ZH)
• China’s New Silk Road Dream (Bloomberg)
• End of EU Border-Free System Could See Euro Fail, Warns Juncker (WSJ)
• ECB Alternatives Could Include Penalties On Banks Hoarding Cash (Reuters)
• UK Mortgage Lending Hit Seven-Year High In October (Guardian)
• Osborne Plans To Eradicate Deficit Dissolve Into Puddle Of Excuses (Bell)
• George Osborne Delays The Fiscal Pain But It Will Still Be Ferocious (AEP)
• Osborne Quietly Cuts Funding For All Of Britain’s Opposition Parties (Ind.)
• Big Banks Accused Of Interest Rate-Swap Fixing In Class Action Suit (Reuters)
• Turkish President Erdogan’s Son Major Smuggler Of Illegal ISIS Oil (Engdahl)
• How Walmart Keeps an Eye on Its Massive Workforce (Bloomberg)
• Fossil Fuel Companies Risk Wasting $2 Trillion Of Investors’ Money (Guardian)
• Germany Gives Greece Names Of 10,000 Suspected Tax Dodgers (Guardian)
• Greek Residential Property Price Slide Gains Pace In Third Quarter (Reuters)
• Dutch Court Rules Migrants’ Right To Food, Shelter Not Unconditional (Reuters)
• Good Thing Native Americans Didn’t Treat Pilgrims Like We Treat Syrians (Nevius)