Some oil production problem areas….

by Jim Colburn • Wednesday, June 29, 2016

From the IEA’s “Oil Market Report” released earlier this month, but recently released for non-subscribers, here are some production profiles of some problem areas: image image image

Here is Iran:

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And, note the growth in Saudi Arabian product exports:

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Here is the IEA site:

https://www.iea.org/media/omrreports/fullissues/2016-06-14.pdf

 

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Stock levels still plentiful…

by Jim Colburn • Wednesday, June 29, 2016

From today’s “This Week in Petroleum” from the EIA stock levels of petroleum, distillates and gasoline  are still well above average levels:

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Of vol, GDP… FT Alphaville

by Jim Colburn • Tuesday, June 28, 2016

From FT Alphaville:

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Here is the link: http://ftalphaville.ft.com/2016/06/28/2167830/of-vol-gbp-and-meaningless-numbers/

 

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European Equities…

by Jim Colburn • Monday, June 27, 2016

Ben Carlson at “A Wealth of Common Sense” makes a contrarian case in favor of European equities (http://awealthofcommonsense.com/2016/06/taking-stock-of-european-equities/):

“From a historical perspective there hasn’t been a huge difference in terms of performance between European and U.S. stock market returns:

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“This divergence in performance has predictably led to a divergence in valuations as you can see from the table I (Ben, not me) put together comparing the recent metrics between U.S. and European stocks:

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His conclusion:

“Things are bad in Europe right now. This isn’t the kind of thing that’s going to get solved overnight. There’s political uncertainty, poor demographics, non-existent economic growth, negative interest rates and the list could go on and on. Maybe one of the best reasons to invest in European stocks right now is the fact that there are so few good reasons to invest in European stocks right now.”

 

 

 

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Natural gas pipelines needed…

by Jim Colburn • Monday, June 27, 2016

in New England, from Jude Clemente, Forbes:

“Currently, gas demand in New England averages 2.5-3.0 Bcf/day, and demand peaks in the winter, however, reaching around 4 Bcf/day. Gas pipeline capacity into the region is around 3.5 bcfd, with the rest available from Everett LNG imports. Rising gas demand though hasn’t meant rising pipeline capacity.

“In recent years, Quarter 1 gas prices in New England have been $8-18/Mcf above Henry Hub, and even $5-7/Mcf above those in the Mid-Atlantic, where pipeline shortages also constrain supply. From 2010-2015, the price of gas to produce electricity in Massachusetts in January averaged $10.30/Mcf, but for July it was just $4.37. During the “Polar Vortex 2014,” gas prices for power hit a staggering $22/Mcf in Massachusetts.”

And, the bottom line:

“New England’s much higher prices hurt families and businesses and are wrecking havoc on New England’s poor and the elderly. Manufacturers are shutting down or cutting operations due to higher energy prices. Excluding isolated Hawaii, New England holds the top four states with the highest energy prices (here), and none of the six states rank above 28th in “best states for business” (here).

Read the whole thing:

http://www.forbes.com/sites/judeclemente/2016/06/26/new-englands-known-need-for-more-natural-gas-pipelines/#1510bd137d6f

 

 

 

 

 

 

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by Jim Colburn • Friday, June 24, 2016

Amazing how in a low price environment, oil production in the Gulf of Mexico is going up and maybe more than expected:
“But it (oil production in the Gulf of Mexico) is also going up because companies are finding that smaller satellite fields can be tapped relatively cheaply by linking them to existing offshore oil platforms by way of underwater pipelines.

While production from many of these so-called tieback wells is reflected in forecasts from banks and analysts, the Journal analysis found that some of it appears to have been undercounted.”

 

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Here is the full story:  http://www.wsj.com/articles/u-s-oil-output-to-get-boost-from-gulf-of-mexico-1466703667

 

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Baltic Dry Index making a comeback?… The New Yorker

by Jim Colburn • Thursday, June 23, 2016

Jeffery Rothfeder makes the case in favor of the Baltic Dry Index as an economic indicator here:(http://www.newyorker.com/business/currency/the-surprising-relevance-of-the-baltic-dry-index)…

Here is some background:

“The index best showed its foresight in 2008, however, when it lost more than twenty-five per cent of its value between May and July. It turns out the dip was capturing the tightening of international credit, as financial-services firms, hampered by bad mortgage investments, struggled to maintain liquidity; in that environment, only the most well-heeled commodity buyers and shipping agents could get loans to bring in their goods. The dip in the B.D.I. presaged IndyMac’s bankruptcy, the first major bank failure of the global financial recession.

Soon after, though, the Baltic Dry Index began to lose its lustre as a predictive tool. The primary reason was a shipbuilding spree in China, intended to support the country’s position as the world’s largest consumer of commodities, most of which were needed to feed uncontrolled construction and industrial expansion. Between 2010 and 2013, China doubled its shipyard capacity, producing so many boats that the world’s fleet of cargo vessels doubled in number. With so much new supply inserted into a slow recovery from the global recession, the average charter rate for the largest cargo carriers has fallen to less than three thousand dollars per day, from around twenty-five thousand dollars a couple of years ago, and as high as two hundred and fifty thousand dollars in 2008. This has weighed directly on the B.D.I., which last hit two thousand for an extended period of time in 2010. Economists have had difficulty recalibrating the B.D.I. to reflect the vessel imbalance, because, among other things, China’s lack of transparency hinders efforts to count how many boats have been built, how many are in drydock, and how many are in so-called zombie fleets, desperately patrolling the waters for business at any price. The chain of uncertainty so puzzled B.D.I. followers that their confidence in the index’s predictive abilities waned.”

The bottom line:

“The story is this: growth in global trade is stalled, and is slipping to levels unseen since the end of the Second World War.”

 

 

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Oil shocks vs. GDP

by Jim Colburn • Thursday, June 23, 2016

Ok, Jeffery Frankel’s article in Project Syndicate is titled “Are Democrats Better for America’s Economy?” (https://www.project-syndicate.org/commentary/are-democrats-better-for-american-economy-by-jeffrey-frankel-2016-06) but my takeaway is this:

“Blinder and Watson suggest that five factors – oil shocks, productivity growth, defense spending, foreign economic growth, and consumer confidence – may together explain 56% of the growth gap. But it is impossible to know the extent to which these factors were influenced by the US president’s policies. We know even less about the factors responsible for the other 44% of the performance gap.”

And, from Blinder and Watson’s study,  (http://cdn.factcheck.org/UploadedFiles/2015/10/AER_revision.pdf) the authors suggest that oil shocks are the most important (if I read their econometric results correctly). From Blinder and Watson:

“It seems we must look instead to several variables that are less closely tied to U.S. economic policy. Specifically, Democratic presidents have experienced, on average, better oil shocks than Republicans (some of which may have been induced by foreign policy), faster growth of defense spending (if the Korean War is included), and a better record of productivity shocks (which may relate to many different policies). More tenuously, both in terms of sample size and statistical significance, Democratic presidents may have also benefited from stronger growth abroad. These factors together explain up to 56 percent of the D-R growth gap in the full sample, and as much as 69 percent over shorter (post-1963) samples.”

So, if one were stuck on a desert and could see one indicator of how the economy was doing, the top pick should be oil prices over Buffet’s rail car loadings or Greenspan’s sales of men’s underwear…

 

 

 

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Gasoline chart book…

by Jim Colburn • Thursday, June 23, 2016

From yesterday’s EIA report (http://www.eia.gov/petroleum/weekly/),  gasoline demand is robust:

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But so far, supply is adequate to meet demand.. Days of supply relate stock levels to demand:

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Here are stock levels compared with 5-year ranges:

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And, from barchart.com the gasoline crack for August has firmed a bit, but still within a range:

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US crude oil storage capacity utilization… EIA

by Jim Colburn • Wednesday, June 22, 2016

Here are some oil storage and capacity utilization charts from the always excellent EIA (http://www.eia.gov/todayinenergy/detail.cfm?id=26772):

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“Despite the large expansion in crude oil storage capacity, the net effect of capacity growth and increased inventories resulted in high storage utilization rates. Storage utilization at Cushing, Oklahoma, averaged 87% over the past four weeks, compared with 81% for the same period last year. U.S. Gulf Coast region storage utilization rates averaged 72% over the past four weeks, after never being more than 70% in the previous four years.”

 

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