Oil Declines As Ships Lined Up at Houston To Offload Oil : Bloomberg

After some initial excitement, November has seen crude oil prices collapse back towards cycle lows amid demand doubts (e.g. sllumping China oil imports, overflowing Chinese oil capacity, plunging China Industrial Production) and supply concerns (e.g. inventories soaring). However, an even bigger problem looms that few are talking about. As Iraq – the fastest-growing member of OPEC – has unleashed a two-mile long, 3 million metric ton barrage of 19 million barrel excess supply directly to US ports in November.

But OPEC has another trick up its sleeve to crush US Shale oil producers. As Bloomberg reports,

Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show.


Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures.



The cargoes show how competition for sales among members of the Organization of Petroleum Exporting Countries is spilling out into global markets, intensifying competition with U.S. producers whose own output has retreated since summer. For tanker owners, it means rates for their ships are headed for the best quarter in seven years, fueled partly by the surge in one of the industry’s longest trade routes.

Worst still, they are slashing prices…

Iraq, pumping the most since at least 1962 amid competition among OPEC nations to find buyers, is discounting prices to woo customers.


The Middle East country sells its crude at premiums or discounts to global benchmarks, competing for buyers with suppliers such as Saudi Arabia, the world’s biggest exporter. Iraq sold its Heavy grade at a discount of $5.85 a barrel to the appropriate benchmark for November, the biggest discount since it split the grade from Iraqi Light in May. Saudi Arabia sold at $1.25 below benchmark for November, cutting by a further 20 cents in December.


“It’s being priced much more aggressively,” said Dominic Haywood, an oil analyst at Energy Aspects Ltd. in London. “It’s being discounted so U.S. Gulf Coast refiners are more incentivized to take it.”

So when does The Obama Administration ban crude imports?

And now, we get more news from Iraq:


So taking on the Russians?

*  *  *

Finally, as we noted previously, it appears Iraq (and Russia) are more than happy to compete on price.. and have been successful – for now – at gaining significant market share…

Even as both Iran and Saudi Arabia are losing Asian market share to Russia and Iraq, Tehran is closely allied with Baghdad and Moscow while Riyadh is not. That certainly seems to suggest that in the long run, the Saudis are going to end up with the short end of the stick.

Once again, it’s the intersection of geopolitcs and energy, and you’re reminded that at the end of the day, that’s what it usually comes down to.

Asset Protection Trusts, Offshore Incorporation Advice – no cost or obligation http://www.youroffshoremoney.com

Baltic Dry Index Could Test Lows: Dry Bulk Shippers Continue To Suffer

Wall Street and Hell © Dave Granlund,Politicalcartoons.com,Wall street, hell, stock drop, stocks drop, wall st plunge, stock market, wall st losses, low stocks

I have written many times over the exit of the managed accounts from the shipping sector.

The volume of email ( deniers ) are second only to opposition to my position to sell/ avoid  Chesapeake at $22 .

I want to recommend a new article at Seeking Alpha from James Catlin

Baltic Dry Index Could Test Lows:


Following a brief rally, which provided some much needed relief to dry bulk shippers, the Baltic Dry Index again finds itself sinking amid a worsening macro-economic backdrop.


Jack A. Bass Fearless 2016 Forecast:

(Please recall that at its height the Baltic Dry Index was over 10,000 and NOW it is at 700 )

Our AVOID list includes the sector –   DRYS, DSX, GOGL, NM, NMM, SALT, SB, SBLK, SFL

Avoid Chesapeake Energy

Avoid GOLD

Avoid Natural Gas

Guaranteed Investment Performance Or You Don’t Pay
In the same way that I urge investors to use an adviser I too have a business coach. This week I complained that my performance of a 31% gain in 2013 and 18 % in 2014  was not gaining me the respect or new clients to which I thought I was entitled.

He challenged me :
a) I was not ” entitled ” to anything more than I earned by performance
b) My performance allowed me to guarantee an annual 6% return or I will forfeit the 1 % annual fee and the 20 % performance fee.

The Challenge – a guarantee for your annual investment return despite all risks to our performance and our costs .

Investors and pensions need efficient methods to screen, research, perform due diligence and monitor managers in their quest to deliver returns. They need to know the data they are using is accurate and fresh — and represents the best options available worldwide across every asset class. They must take into account their own assets and liabilities and the impact to portfolio risk while screening strategies and tracking exposures. They also need polished reports and presentations to provide evidence of a sound, inclusive selection processes for regulators and committees.

Placing these decisions in Jack A. Bass Managed Accounts removes the work from your hands to ours .

Meeting the Challenge
Jack A. Bass Managed Accounts offers a comprehensive suite of solutions for screening and monitoring, as well as risk assessment leveraging the data of the most important databases. In fact, 89% of surveyed clients agree that Jack A. Bass Managed Accounts helps them save their time during the due diligence process, while 75% of pension clients agreed .

The answer to When? – is always NOW ! – not tomorrow.
Contact Information

Information must proceed action and that is why we offer a no cost / no obligation inquiry service if you are not already a client.

Email info@jackbassteam.com

or Call Jack direct at 604-858-3202 – Pacific Time 10:00 – 4:00 Monday to Friday

Get your tax haven planning in gear for 2016 Read more athttp://www.youroffshoremoney.com


Chesapeake :Downgraded To Junk at Fitch – Further Evidence The Energy Sector Slide Continues


( FROM Seeking Alpha)
Nov 6 2015, 17:45 ET | About: Chesapeake Energy Corporation (CHK) | By: Carl Surran, SA News Editor
Chesapeake Energy’s (NYSE:CHK) debt rating is cut further below investment grade, to BB- from BB, by Fitch Ratings; shares fell 2.6% in today’s trade, in line with other energy producers as crude oil prices fell and amid the higher likelihood of a Fed rate hike.

Fitch says CHK’s cash flow, liquidity and leverage profiles will be “notably weaker” than previous expectations because of persistently low oil and gas price realizations and heightened future reliance on asset sales to fund cash flow gaps; it also cites CHK’s increasingly limited ability to invest in its highest return assets in favor of operationally committed and shorter-cycle reserves.Fitch concedes that CHK’s size and scale relative to other high-yield E&P companies provides considerable financial flexibility.

and from Forbes

This Oil Bust Will Change The Energy Industry Forever

Although demand for oil and gas will continue for decades to come, it will gradually diminish as renewable energy sources rise. A lot could happen between then and now. The International Energy Agency (IEA) and many other credible parties continue to forecast that our growing world population from 7 billion people today to 9 billion by 2050 will need much more energy – in particular as most of these people will aspire a life like we have here in North America. So it is no wonder that Abdalla El-Badri, Secretary General of OPEC has recently said that if producers don’t invest in new oil and gas supply, we could see oil prices as high as $200 a barrel. On the other hand, there is Bob Dudley, CEO of BP , who believes we won’t see $100 oil again “for a long time”.

Innovation in the oil industry, particularly the North American revolution in the hydraulic fracturing of tight oil reservoirs, has changed oil supply dramatically. With smaller, more flexible capital-light projects and shorter lead times, fracking has enabled greater adaptability to volatile market conditions. The outlook for shale oil and gas could be just as strong in many places in the world. Even if the shale boom proves tough to replicate (due to factors such as regional differences in geology, regulation and incentives to land owners), in many cases bringing new technologies to mature fields will help keep supply up and dampen the increase in oil prices.

Sluggish demand is another important factor keeping oil prices from rising. Not just from disappointing growth in China, but also in North America. Car ownership in the Western world has started to drop in the past decade, especially among young people. Based on the early success of Tesla and arrival of car sharing companies like Car2Go and Uber, and the entry of Apple AAPL +0.83% and Google GOOGL +0.13%in the autonomous-driving car game, there’s reason to foresee a future where not everyone has a personally owned internal combustion engine at their disposal. Change is slow however: a truck or bus and many gasoline fueled cars sold today will of course drive somewhere in the world for the next 30 to 40 years. Hence, some demand for hydrocarbons will continue.

The financial sector is a third factor inhibiting the rise of oil prices. While we already see many financial institutions divesting from hydrocarbon stocks to the tune of $2.6 trillionbecause of social and environmental pressure, the recent speech by Bank of England Governor Mark Carney is further going to influence the willingness of large financial institutions to continue to invest in traditional hydrocarbon projects in the future. One of the most significant risks Carney focused on in his speech is transitionary cost, the cost of write-offs for traditional hydrocarbon assets if countries are indeed getting serious about phasing out hydrocarbons. Even while the target date for a 100% carbon free society is only 2100, we expect that policies will likely start having significant implications in the next decades. The message is that “Sustainable Innovation” may become key to future energy financings and that oil and gas companies will have to innovate much more than they do today in order to survive as energy-producing Fortune 500 companies in the decades to come.


Oil 5 Talking Points – All Point to Lower for Longer ?


Oil’s bounce back from the summer’s lows has the look of a bottoming in crude prices, but some strategists say the shakeout is not over.

“I’m pretty sure we’re going to see a new low. The probabilities are that we see a new low or two or three,” said Jack Bass. Our 2015 results for managed accounts all did well by avoiding oil and natural gas and that continues to be our bias.

The negative factors that have pounded oil prices continue to hang over the market, and the world is still facing oversupply of about 2 million barrels a day. Strategists say the chief wild card that could send oil to new lows is Iran — and uncertainty about when and how fast it can bring crude back to the market.

This past summer, West Texas Intermediate crude futures touched a low near $38 in late August before moving back to $50 per barrel on Oct. 9. Since then, oil has traded in the upper $40s, giving the impression the worst lows of the bear market in crude are over. Brent, the international benchmark, hit a low at around $42 per barrel in August and temporarily rose above $54 in October.

“There was a bout of short covering, and oil was pumped up on geopolitical fears about Russia’s foray into Syria, but the fundamentals never changed. Production is still high all around the world, and the glut is getting worse, especially for diesel fuels,” said John Kilduff of Again Capital.

1. Iran as a catalyst

Major producers continue to pump at high levels, and demand continues to lag. U.S. shale producers have more resilience than expected, and the U.S. is still producing about 9 million barrels a day.

But it’s Iran’s oil production that some analysts say the market may not be pricing correctly. They also say Iran may be making blustery assertions about its oil production that it will not be able to meet.

The U.S. and five other nations agreed in July to lift sanctions against Iran in return for curbs on its nuclear program, and this past Sunday the agreement was formalized based on Iran’s meeting its commitments to the deal.

An Iranian official this week said the country has already secured buyers from Europe and Asia for more than 500,000 barrels a day in new exports once sanctions are lifted. The final assessment by the International Atomic Energy Agency is expected to be completed by Dec. 15.

“If they put that marginal barrel onto the market, there’s going to be a price impact from it. The Saudis have taken a lot of their market share from Europe in the last couple of years,” said Michael Cohen, head of energy commodities research at Barclays. “It’s going to be a fine balance. I wouldn’t be surprised at the end of 2016 if we look back at the end of the last year and be surprised that they put only 400,000 to 500,000 barrels back on the market, not 800,000 to 900,000 barrels.”

Iran has been producing about 2.8 million barrels a day, from a high of 4.2 million barrels, according to Andrew Lipow of Lipow Oil Associates. “It would surprise me to see 500,000 a day come out onto the market within a couple of months,” he said. “The market takes what they say with a grain of salt. We do know that they are going to be exporting the first minute they can.”

It could be the start of Iran’s oil returning to market that sends oil prices back to the lows, said Citigroup’s Morse. He said the oil market could hit bottom late this year or in the first quarter, but he does not expect Tehran to be able to quickly push the volume of new oil that it is promising.

“These shut-in wells have been building pressure. They can surge production beyond what is sustainable, and if they want to show the world they are there, which is highly likely, that is possible,” he said. Morse said he expects Iran could produce 300,000 to 500,000 barrels a day more within a half year of sanctions being lifted.

Iran also has about 40 million barrels of condensates in floating storage. “I just think the market has underestimated how much oil could come back on the market immediately upon having sanctions released,” Lipow said.

2. Inventories bulging

A second thorny issue for the market is buildup of inventories. Last week U.S. government data showed a surge in crude stocks of 7.6 million barrels of oil, but it is also the buildup of refined products that analysts are watching.

Barclays, in a report, said that global refinery runs grew faster than demand by about 57 percent during the second and third quarter. That created a buildup, pushing refined products into storage in offshore tankers.

Refining capacity has been added around the globe. Saudi Arabia, for instance, shipped less crude in August but more refined oil products. According to JODI data, Saudi Arabia exported 1.3 million barrels a day of refined product, compared to 1.1 million barrels the month earlier.

The U.S. has also increased refined-product exports as well and is a net exporter of about 2 million barrels a day. Barclays expects the rate of build in refined products to slow.

“Fundamentally speaking, we remain in an oversupply situation, and refining margins are weak and likely to get weaker, especially in distillates, and the stocks remain at high levels,” said Cohen. “So any sustained price move tot he upside is going to be met by with skepticism by the market and that’s why we continue to maintain our range bound price forecast at least until the third quarter of next year.”

3. U.S. shale gale

A third bearish factor for oil has been, and continues to be, the resilience of the U.S. oil industry. Saudi Arabia and OPEC vowed last fall to continue producing and to allow the market to set prices in an oversupplied world, a factor they were hoping would curb non-OPEC production.

But U.S. production, despite shut-in rigs, has not fallen that much. Analysts had been expecting some companies to lose some funding in bank redeterminations this month, but it seems the industry is doing better than expected, and the impact is relatively minor.

“We think for WTI there’s downside risk for the first quarter based on the fact we think U.S. production may not roll over like people think,” said Cohen. “We need to see prices go lower as a disincentive.”

Analysts now expect the companies facing lending reviews to have a difficult time in the spring after more months of low oil prices. The U.S. industry is made up of so many companies drilling so many unconventional wells that the trigger of falling prices is not an automatic one, since producers are profitable at all different levels.

“High-yield companies are well-hedged through the first quarter, and then their hedges go off, and it’s not clear they have the cash flow to keep drilling,” said Morse.

Cohen said the pressure from a long period of low prices will pinch companies. “U.S. production is likely to be lower,” he said, adding the hit to shale producers will be worse next year after several more quarters. “It will be worse, not just for those that have their borrowing base redetermined.”

4. Biggest producers producing

Russia and Saudi Arabia are the world’s biggest oil producers, and both of them have taken a full-throttle approach to lower prices in an effort to gain or hold share.

Saudi Arabia led OPEC in its plan to use market pricing as a weapon to slow overproduction. When OPEC meets in early December, analysts see little chance of a change in policy.

In fact, rhetoric around that meeting could add downward pressure on prices.

“The Saudis have been adding more to inventories. I don’t really see them backing down from the 10 million-barrels-a-day production level. They continue to be open to a cut if other producers are willing to cut first,” said Cohen. “They’ve taken a very tit-for-tat approach. They want to see a plan and a credible plan before doing anything.”

The strain of low prices is wearing on both Russia and Saudi Arabia. “They (Saudi) can shield the blow by issuing more debt, which they have done,” Cohen said. “The amount of debt they are issuing this year is basically the equivalent of a $10 bump in oil prices.”

Morse said the producers will not be able to sustain production in a low-price environment forever. “Definitely at some point, in the winter of 2016/2017, it looks like the world moves into a net inventory drawdown, helped by U.S. shale, helped by production in Mexico, the North Sea, Oman, Russia … all showing decline rates instead of staying stable,” he said.

5. World demand

Oversupply hit the world market at the same time demand from the emerging world and China was dampened. China reported GDP of 6.9 percent for the third quarter just below last quarter’s 7 percent pace, but worries about Chinese growth and demand have pressured prices.

The World Bank this week said it expects oil prices to remain weak through next year, and it cut its expectations for crude. The World Bank’s quarterly commodity sector report pared its average oil price forecast to $52 per barrel this year from an earlier estimate of $57. It sees an average price of just $51 in 2016.

The Bank said Iran’s return to the market will dent oil prices, but it also noted weak global growth.

“All main-commodity price indices are expected to decline in 2015, mainly owing to ample supply and, in the case of industrial commodities, slowing demand in China and emerging markets,” the Bank said.

Besides overproduction, high inventories and weak demand, Morse said another factor that could weigh on prices are the speculative investors who could slam the oil price once Iran brings oil back onto the market.

He said WTI could average $40 per barrel in the fourth and first quarters, and Brent could average about $44. Barclays expects Brent to average $53 per barrel in the fourth quarter and $63 in 2016 after a recovery in prices in the second half.


November 2014 – How Did We Do On Our Stock Market Forecast ?

JACK A. BASS MANAGED ACCOUNTS – YEAR END UPDATE AND FORECAST  As written – November 2014 – 40 % cash position You Can Judge : Our 2014 Year End Review and Forecast Gold and Precious Metals The largest gains for our … Continue reading

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Credit Suisse: Oil Has Stabilized Because Saudis Got What They Wanted


Forget wealth effect. The global equity market can’t have a smooth bull run if oil prices are tanking.

This is because commodity-related capital expenditure accounts for around 30% of total capex globally, so even though consumers may benefit from cheaper oil, companies are hit first.Credit Suisse estimates that the fall in commodities capex has taken at least 0.8% off the U.S. economic growth in the first half this year and 1% off global growth over the last year.

But the worst is over, according to analyst Andrew Garthwaite and team. They listed three reasons: 1. demand for oil has stabilized; 2. non-OPEC production has peaked; 3. Saudi Arabia has achieved its goal of deterring new entrants.

Since Saudi Arabia is the wild card, Credit Suisse analysts took pains to explain their position:

We believe that the key variable is Saudi Arabia. If it were not for Saudi Arabia, then we fear that oil would have to behave like other commodities and if there is excess supply fall to levels where a third of production is below the cash cost and, given the likely fall in commodity currencies, this in turn would lead to a much lower oil price (maybe down to $30/barrel).

This leads to the question ‘Can Saudi Arabia support the oil market?’. We think the answer is yes. They control the vast majority of spare capacityaccording to our oil team and 13% of output.

Their clear aim was to restore market share against non-OPEC and avoid being a swing producer (and thus not repeat the 1980 to 1985 experience, when their oil production fell by 70% as they sought to defend the oil price) and also limit the growth in alternative energies. The key is clearly at what point they have achieved their objective. The issue is nearly always the same – costs fall much more quickly than expected, partly because commodity currencies fall and partly because of cost deflation.

Moody’s highlight that the breakeven for median shale is around $51pb. Thus it may be the case that around the current oil price, Saudi Arabia believe they have achieved their objective of pricing out new shale projects.

Additionally the reduction in the oil price has come at a cost, with the budget deficit estimated to be 20% of GDP in 2015 (IMF Article IV – Saudi Arabia). While government debt to GDP is very low at c1%, we view the recent selling of Sama reserves and the first sovereign bond issue since 2007 as signs that there is some degree of stress.

Brent crude jumped another 2.2% to trade at $49.58 recently after a 5% rally overnight.

Oil stocks rallied. CNOOC (883.Hong Kong/CEO) advanced 12.1%, China Oilfield Services(2883.Hong Kong) gained 9.5%, PetroChina (857.Hong Kong/PTR) was up 7.8%. Sinopec(386.Hong Kong/SHI) jumped 6.8%. The Hang Seng China Enterprises Index advanced 4%. Overnight, the United States Oil Fund (USO) rose 4.9%.

Oil jumps $2, breaking range as supply seen ebbing


NEW YORK (Reuters) – Oil prices jumped more than $2 a barrel on Tuesday, breaking out of a month-long trading range on a mix of technical buying and industry talk as well as U.S. government data suggesting the global supply glut could be ebbing.

Global benchmark Brent crude (LCOc1) rallied for a third straight day and settled above $50 a barrel for the first time in a month. This convinced some dealers that there was little chance prices would slide back to the 6-1/2-year lows touched in August.

Early gains were fueled by a U.S. government forecast for tighter oil supplies next year, and indications that Russia, Saudi Arabia and other big producers might pursue further talks to support the market. The rally accelerated above $50 on chart-based buying and a weakening dollar.

Brent settled up $2.67, or 5.4 percent, at $51.92 a barrel, breaking out of the $47 to $50 band it had traded since early September. Its session peak, a penny shy of $52, was the highest since Sept. 3, and took three-day gains to more than 7 percent.

West Texas Intermediate (WTI), the U.S. crude benchmark (CLc1), settled up $2.27, or 4.9 percent, at $48.53.

“We have reduced the probability of a return to the $37 to $38 area per nearby WTI,” said Jim Ritterbusch of oil consultancy Ritterbusch & Associates in Chicago. “We will maintain a longstanding view that price declines below this support level are virtually off of the table.”

Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, concurred, saying: “Steeper U.S. production declines over the near term have created a bid for oil prices.”

Even so, analysts told a Reuters survey that U.S. crude stockpiles likely rose last week for a second straight week as more refineries went into maintenance works. [EIA/S]

The American Petroleum Institute industry group will issue at 4:30 p.m. (2030 GMT) preliminary data on U.S. crude inventories for last week, before official numbers on Wednesday from the Energy Information Administration (EIA).

Global oil demand will grow by the most in six years in 2016 while non-OPEC supply stalls, the EIA said in its monthly report on Tuesday that suggested a surplus of crude is easing more quickly than expected.

Total world supply is expected to rise to 95.98 million barrels a day in 2016, 0.1 percent less than forecast last month, the EIA said in its Short-Term Energy Outlook. Demand is expected to rise 270,000 bpd to 95.2 million barrels, up 0.3 percent from September’s forecast.

Oil executives at an industry conference in London, meanwhile, warned of a “dramatic” decline in U.S. output that could lead to a price spike if fuel demand escalates. Mark Papa, former head of U.S. shale producer EOG Resources, told the “Oil and Money” conference that U.S. production growth would tail off this month and start to decline early next year.

Russia’s energy minister said Russia and Saudi Arabia discussed the oil market in a meeting last week and would continue to consult each other.

OPEC Secretary-General Abdullah al-Badri said at a conference in London that OPEC and non-OPEC members should work together to reduce the global supply glut.

Iran’s crude sales were on track to hit seven-month lows as its main Asian customers bought less.

Ratings cut on Chesapeake Energy, other oil and gas producers :Outlooks Cut to Negative by S&P in Oil Slump


Exxon Mobil Corp. and Chevron Corp. were among several U.S. oil and natural gas producers that had their outlooks or ratings cut by Standard & Poor’s as the industry suffers from weak crude prices, hurting their cash flow and liquidity.

S&P cut ratings for Chesapeake Energy Corp., Denbury Resources and Whiting Petroleum Corp., while giving Exxon and Chevron “negative” outlooks, the ratings agency said Friday in a statement. Exxon “has substantially more debt than during the last cyclical commodity price trough in 2009, while upstream production and costs are at similar levels,” S&P analysts Thomas Watters and Carin Dehne-Kiley said.

Oil prices have fallen 58 percent from last year’s peak, threatening $1.5 trillion in North America energy investments, according to Wood Mackenzie Ltd.  Oil has been stuck near $45 a barrel as U.S. crude stockpiles stay about 100 million barrels above the five-year seasonal average and OPEC pumps at near-record levels.

Exxon is one of only three U.S. industrial issuers to have a triple-A bond rating, along with Johnson & Johnson and Microsoft Corp. The oil company has held that grade from S&P since at least 1985, according to data compiled by Bloomberg.

The last U.S. company to lose the triple-A designation from S&P, as well as Moody’s Investors Service, was Automatic Data Processing Inc., which was stripped of the ratings after spinning off its auto-dealer services unit in April 2014.

Chevron has been rated AA by S&P since at least July 1987, Bloomberg data show.

“Most rating actions reflect lower credit-protection measures, negative cash flow, and uncertainty about liquidity over the next 12 months,” S&P said in the statement.