Market crash??

[mil]

I lost half my shirt in the last big economic crunch by thinking i would be smart and buy buy buy oil.......ouch!!!
would i buy right now? not a chance...
i dont have the link in front of me, and not the time to find it , but...
i saw a interview a couple months ago with a Saudi oil reps and OPEC rep that said..
Our systems of oil extraction have been paid millions of times over , we can take oil out of the ground for $8.xx a barrel... so they can still make huge money at $50.xx a barrel.
Oil can still FALL along ways..... Don,t touch it.
Buy Bank stocks !

 

[sdw]

I lost half my shirt in the last big economic crunch by thinking i would be smart and buy buy buy oil.......ouch!!!
would i buy right now? not a chance...
i dont have the link in front of me, and not the time to find it , but...
i saw a interview a couple months ago with a Saudi oil reps and OPEC rep that said..
Our systems of oil extraction have been paid millions of times over , we can take oil out of the ground for $8.xx a barrel... so they can still make huge money at $50.xx a barrel.
Oil can still FALL along ways..... Don,t touch it.
Buy Bank stocks !

Saudi Arabia is pumping every drop for a number of reasons:
1. Iran - Saudi Arabia knew that the Western Nations (USA) would cave on sanctions. Saudi Arabia wants Iran to be too poor to fund a religious war against them.
2. Shale Oil and Gas - The USA and Canada are capable of not needing Saudi Oil, keeping the price down means that they slow down the development of Shale Oil.
3. China - China is buying Oil and Gas from nations that compete with Saudi Arabia, keeping the price down means that they slow down development of new oil fields and speed up the depletion of existing oil fields.
4. Internal Strife - the Saudi royal family has been buying off the religious fanatics for years. There was a "deal" where the fanatics could operate anywhere but inside Saudi Arabia. The Saudi royal family is expecting to have to go into exile in the next few years and they want to deplete their own oil fields as much as possible before they leave.

I think that Western Banks have lent too much money to too many people that can't pay their debts when interest rates go up. I can't agree that Bank Stocks are a good long term bet. All of the Western Nations are effectively bankrupt and are playing a ponzi scheme. It's not possible to know when people will decide that Western Nation's currency has no value, but it's something to keep in mind.

Western based Multi-national Corporations are storing over a Trillion dollars in offshore accounts. They are making a pretty big bet on Western economies not doing very well in the near future. If the Multi-nationals stockholders felt that management is wrong, there would be pressure to repatriate that money and put it too work.

 

[wetnose]

I think that Western Banks have lent too much money to too many people that can't pay their debts when interest rates go up. I can't agree that Bank Stocks are a good long term bet. All of the Western Nations are effectively bankrupt and are playing a ponzi scheme. It's not possible to know when people will decide that Western Nation's currency has no value, but it's something to keep in mind.

Was reading somewhere that the crafty banks insisted that their loans/lines of credit be converted into bonds, which they then sold. So the bag holders are the bond holders.

Oil is interesting as a commodity because as prices have fallen, production has gone up. Why? Some oil producing countries are still pumping full bore because they rely on oil as their sole source of government revenue. They have to take whatever they can get (e.g. Venezuela). Companies still produce as they have to service their debt loads - overall production in the US has only dipped by about 5% in the last year. Quite a few companies are effectively worth nothing due to their debt loads. We could see a whole bunch of takeovers in the next few months, especially as the hedges have run out.

The one piece of good news is that...production is maxed out at current prices. Saudis cannot pump substantially more. Anybody who needs to produce is doing as much as they can already. So we'll probably find a floor in the next few weeks, especially as refineries ramp production as they always do in mid December.

After that, the only way is up. 2016 demand is expected to organically increase (but not enough to substantially outstrip production) and US production is likely to fall in 2017 as the shale wells will get exhausted by that time. So $40-$50 by end 2016, and maybe $50-70 by the end of 2017.

But hey what do I know.

 

[Ray]

The one piece of good news is that...production is maxed out at current prices. Saudis cannot pump substantially more. Anybody who needs to produce is doing as much as they can already.

Nope. Iran's oil hasn't hit the market yet. As sanctions get fully lifted and foreign companies upgrade it's ports and shipping facilities, a few million barrels a day will be added to the global supply.

 

[sdw]

Was reading somewhere that the crafty banks insisted that their loans/lines of credit be converted into bonds, which they then sold. So the bag holders are the bond holders.

Oil is interesting as a commodity because as prices have fallen, production has gone up. Why? Some oil producing countries are still pumping full bore because they rely on oil as their sole source of government revenue. They have to take whatever they can get (e.g. Venezuela). Companies still produce as they have to service their debt loads - overall production in the US has only dipped by about 5% in the last year. Quite a few companies are effectively worth nothing due to their debt loads. We could see a whole bunch of takeovers in the next few months, especially as the hedges have run out.

The one piece of good news is that...production is maxed out at current prices. Saudis cannot pump substantially more. Anybody who needs to produce is doing as much as they can already. So we'll probably find a floor in the next few weeks, especially as refineries ramp production as they always do in mid December.

After that, the only way is up. 2016 demand is expected to organically increase (but not enough to substantially outstrip production) and US production is likely to fall in 2017 as the shale wells will get exhausted by that time. So $40-$50 by end 2016, and maybe $50-70 by the end of 2017.

But hey what do I know.

I know that the USA is buying 18 million barrels of Oil to top off the SPR https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(United_States) However, that isn't really that much Oil against current production.

The USA could pump Oil into depleted Oil wells if the structure is correct - it won't work on most wells. I don't think there is a known number on how much storage that would create.

There is 3.8 Billion barrels of Oil storage in addition to the SPR, however most of those tanks are already full with unsold Oil. There also Oil Tankers that are full of Oil steaming in circles. http://oilprice.com/Energy/Crude-Oi...ling-Up-As-Global-Storage-Space-Runs-Low.html That storage amounts to 100 million barrels.

When the over production of Oil slows down, there is a lot of Oil in storage - so there will not be a rapid increase in the price of Oil. As the available storage is filled, Oil will continue to drop in price.

 

[wetnose]

Nope. Iran's oil hasn't hit the market yet. As sanctions get fully lifted and foreign companies upgrade it's ports and shipping facilities, a few million barrels a day will be added to the global supply.

My bad....forgot about that lot, about 1M barrels hitting in late 2016 thereabouts...but upgrading ports/shipping facilities is a multi year project. 1M is fairly significant considering the present over supply.

 

[sdw]

The numbers of cars that Volkswagen must repair are getting massive. In the US, Volkswagen is expecting to repair 500,000 cars and buy back 115,000 cars. In Europe, Volkswagen is expecting to repair 9,500,000 cars. http://www.theglobeandmail.com/glob...ack-115000-cars-in-us-report/article28048643/

 

[sdw]

CBC has an interesting article today http://www.cbc.ca/news/business/global-canada-gdp-kondratieff-cycle-1.3470714

In an article this week titled The march of the zombies, The Economist directs a pointy finger at China, whose "huge exports of industrial goods are flooding markets everywhere, contributing to deflationary pressures and threatening producers worldwide."

Of course it is easier to blame others. The global oil market was relatively stable until U.S. domestic shale production kicked in. In China, U.S. companies from Apple to Walmart are part of the problem.

"It's classic long wave; it's overproduction," said David Knox Barker back in 2010.

"Washington is complaining about Chinese production and the goods they're dumping on our market but 60 percent of those exports out of China are owned by U.S. Fortune 500 companies, by our manufacturing facilities in China."

The fact is much of the world was thrilled when China followed the U.S. lead and began dumping money into its economy following the 2008 economic meltdown. It drove demand for iron and copper, potash and pork.