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Oil markets: break-even bad

23 October 2014 - 7:38 am
 

Walking into a room to discover that the floor keeps slipping and sliding is a common problem in MC Escher drawings, supervillain deathtraps and states of exceeding inebriation. The predicament also seems to be spreading to the oil market of late.

World crude prices have paused following their collapse this month. US oil is holding at $82 a barrel and Brent at $85. How tempting to look over the cliff edge and conclude that the floor is not, in fact, too far down. One support may simply be that disruptions to supply (which have been declining lately) may rise again because of political tensions.

Perhaps $80 or $70 is the lowest price at which capital remains willing to finance expansion in US shale oilfields, the supplier of that market’s marginal barrels. Or the floor may (also) be the lowest price at which Opec producers balance public spending with revenue.

Perhaps. But neither floor might remain where it is. Take break-even budget prices first. Saudi Arabia has doubled government spending since 2008. Revenues have only risen 7 per cent in the same period, notes Bank of America. It certainly sounds like Riyadh cannot push one button for October’s volatility – cutting prices to retain its market share – much further without forcing itself into a budget deficit. But look outside the question of oil revenues, and government assets of $450bn would be enough to cover eight years of deficits if required, says Deutsche Bank. >> Read More

 

Nelson Bunker Hunt, who has died at the age of 88, was everything a Texan oil tycoon was supposed to be. Once one of the richest men in the world, he made and lost fortunes in crude, commodities, thoroughbred race horses, pizza parlours and commercial development. But he will be remembered most for trying to corner the global market in silver, an endeavour that went down in flames, eventually sending him into bankruptcy, when the bubble in the market for the metal burst in 1980.

He was the second son of HL Hunt, the prototypical wildcatter, who fathered 14 children in three families who did not know of the existence of the others.

Born on February 22 1926, in El Dorado, Texas, Bunker Hunt was by contrast monogamous, with three daughters and a son by his wife Caroline, all of whom survive him. He was very religious and a fervent anticommunist, a supporter of the likes of the John Birch Society.

He also lived modestly, a non-smoking teetotaller who drove old Cadillacs, flew economy class and preferred barbecue shacks to plush Dallas oil clubs.

Having dropped out of the University of Texas, he joined his father’s company but quit to strike out on his own in Pakistan and the Middle East. Dry wells forced him to sell half his interest in the Sarir oilfields in Libya in 1960 to BP, but a year later the partners struck oil and the money flowed. >> Read More

 

HSBC Flash China Manufacturing PMI for October:

  • expected 50.2
  • prior was 50.2-

Key points

Flash China Manufacturing PMIat 50.4 in October (50.2 in September)

  • Three-month high

Flash China Manufacturing Output Index at 50.7 in October (51.3 in September)

  • Five-month low.

Data collected 13–21 October 2014

Hongbin Qu, Chief Economist, China & CoHead of Asian Economic Research at HSBC: >> Read More

2014-ytd

 

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Saxo Bank’s Chief Economist Steen Jakobsen is predicting another ‘shock drop’ in the markets within a few weeks. With debt and low inflation continuing to create a nervous atmosphere behind most markets, Steen argues that we will hit fresh lows in mid-November. Steen takes the view that central bank policy is creating a ‘fantasy land’ for investors and he points out that the recent ‘day dive’ in markets was a closer reflection of reality. Steen outlines his suggestions for trading ahead of another dip in mid November with targets for the S&P 500 around 1810 and the Dax at 8000 – 7800. Be long fixed income as it is “a free put on the equity market.. and the economic cycle is not yet ready to adapt to a rising interest rate.”

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Moments ago CBS News reported, citing Law enforcement and U.S. Government sources, that the shooter in today’s tragic Ottawa incident was Michael Abdul Zehaf Bibeau, born in Canada in 1982. One source says he sometime dropped the name Michael and went by Abdul Zehaf Bibeau. At other times he apparently dropped the Abdul. In a report from theMuslim Issue, Zehaf-Bibeau is said to be reportedly of Algerian descent.

Zehaf-Bibeau is the alleged shooter who killed soldier at the national War Memorial before entering the Centre Block and firing off more shots. Epoch Times reporter Matthew Little says that the shooter got as far as the library before Sergeant-At-Arms shot him dead.

Earlier, a Canadian parliament official described the gunman to BBC as looking “Arabian” with “long hair and a small beard.”

According to Montreal reporter Domenic Fazioli, Bibeau was arrested five times in the city. He has three possession charges dating back to 2004 (marijuana and PCP). His two other arrests were for parole violations.

Witnesses said they saw Bibeau wearing a black coat with blue jeans, reports CBC. The same report says gun used in the attack was a double-barrel shotgun. Alberta Labor Minister Ric McIver told the Ottawa Sun that Bibeau was driving a “brown Toyota Corolla with no license plate.” He added that the car “roared up the street and screeched to a halt.” >> Read More

 

Stocks fell Wednesday, pushing the Dow Jones industrial average back into the red for the year and breaking the S&P 500′s four-day winning streak.

The market had been coming off a strong advance that had lifted the Standard & Poor’s 500 index 4.2% in four straight sessions of gains — including the market benchmark’s biggest rally in a year on Tuesday. If traders were looking for an excuse to lock in some of those profits, they got one Wednesday when news broke out of Canada about deadly gunfire in and around the country’s Parliament.

At the close, the Dow Jones industrial average was down about 153 points, or 0.9%, to 16,461, leaving it down 0.7% for 2014. The S&P fell 0.7% to 1927 and the Nasdaq composite index dropped 0.8% to 4383.

Despite the slide, the market is still in far better shape than it was exactly a week earlier, when a day of tumultuous trading briefly had the Dow down 460 points for the day and the S&P in the red for 2014 before a late-day recovery erased much of the losses. At Wednesday’s close, the S&P held 4.3% gain for 2014.

Sad Truth

22 October 2014 - 15:40 pm

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Its Depend on you

22 October 2014 - 15:35 pm

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Team ASR,
Baroda, India.