Oil Hits Two-Week High on Dollar-Fueled Rally – Yemen:Shipping Chokepoint

Oil storage in tanks on the edge of town in Cushing, Okla.

 

Trader cites added impact of Middle Eastern conflicts on pricing
Updated March 25, 2015 4:06 p.m. ET

Oil prices surged to their longest winning-streak in more than a month as the weakening dollar continues to fire up a rally despite a historic glut of oil.

U.S. oil pushed to the verge of $50 a barrel for the first time since March 9. Four straight sessions of gains matched a winning streak from late January and early February. The market hasn’t had a five-session winning streak since June, when Islamic State militants were threatening the Iraqi capital.

Middle Eastern conflicts could have played a role Wednesday as news spread of Saudi Arabia building up forces near Yemen, said trader Tariq Zahir. But the dollar was likely the main factor behind the rally, Mr. Zahir and others said.

Oil has been rallying for most of the past week, since the Federal Reserve ratcheted back expectations for a rate increase. That news started the dollar’s retreat from a historic high, which has since fueled an inverse price move in oil.

Oil prices moved in tandem with the dollar, especially in the past four months, analysts said. Dollar-priced commodities like oil become more affordable for holders of other currencies as the dollar depreciates.

Some traders have been buying on expectation of the tandem move. Others have been buying oil simply because they are looking for other trades now that the dollar’s long rally may be over, traders and brokers said.

“It’s the hope of U.S. dollar going down and production going down in the U.S.—without [the traders] fully thinking about it,” said Mr. Zahir, who is bearish on oil prices.

Light, sweet crude for May delivery settled up $1.70, or 3.6%, to $49.21 a barrel on the New York Mercantile Exchange. That is its highest settlement since March 9.

Brent, the global benchmark, gained $1.37, or 2.5%, to $56.48 a barrel on ICE Futures Europe, its highest settlement since March 12.

It could be a panic move and a mistake, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc., comparing the rise to the last winning streak when traders bought into oil as rig counts started to fall precipitously. With rigs out of work, hopes grew that production would soon decline. Instead, production has kept growing.

“They think they have this newfound gem of an information point, and then they realize” the fundamentals rule, Mr. Yawger said.

 

I
The market briefly lost ground on news that U.S. producers added to a historic glut, but rebounded within about 90 minutes and kept rallying for the rest of the afternoon.

U.S. oil inventories rose by 8.2 million barrels in the week ended March 20 to 466.7 million barrels, the U.S. Energy Information Administration said, outdoing a 5.6-million-barrel increase expected in a Wall Street Journal survey of traders and analysts.

Stockpiles are at a high in weekly data going back to 1982. In monthly data, which don’t exactly line up with weekly data, inventories haven’t been this high since 1930.

Stockpiles in Cushing, Okla., a key storage hub and the delivery point for the Nymex contract, rose by 1.9 million barrels to 56.3 million barrels, adding to its highest level on record in data going back to April 2004. The EIA said in September that Cushing’s working storage capacity was 70.8 million barrels.
Domestic crude production also slightly edged out the weekly record it set last week of 9.4 million barrels.

“Bottom line, we’re filling up those stockpiles and as long as refinery operations are subdued, we’re going to see these” additions, said Mark Waggoner, president of brokerage Excel Futures. “This is about the time we ought to sell.”

Gasoline stockpiles fell by 2 million barrels, more than the 1.7 million-barrel drop expected by analysts surveyed by the Journal.

Front-month gasoline futures settled up 2% at $1.8365 a gallon.

Distillate stocks, including heating oil and diesel fuel, fell by 34,000 barrels, less than the 500,000-barrel drop that analysts had expected.

Diesel futures settled up 1.3% at $1.7283 a gallon.

Bloomberg) — While Yemen contributes less than 0.2 percent of global oil output, its location puts it near the center of world energy trade.

The nation shares a border with Saudi Arabia, the world’s biggest crude exporter, and sits on one side of a shipping chokepoint used by crude tankers heading West from the Persian Gulf. Global oil prices jumped more than 5 percent on Thursday after regional powers began bombing rebel targets in the country that produced less than Denmark in 2013.

Yemen’s government has collapsed in the face of an offensive by rebels known as Houthis, prompting airstrikes led by Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries. The Gulf’s main Sunni Muslim power says the Houthis are tools of its Shiite rival Iran, another OPEC member, and has vowed to do what’s necessary to halt them.

“While thousands of barrels of oil from Yemen will not be noticed, millions from Saudi Arabia will matter,” said John Vautrain, who has more than 30 years’ experience in the energy industry and is the head of Vautrain & Co., a consultant in Singapore. “Saudi Arabia has been concerned about unrest spreading from Yemen.”

Yemen produced about 133,000 barrels a day of oil in 2013, making it the 39th biggest producer, according to the U.S. Energy Information Administration. Output peaked at more than 440,000 barrels a day in 2001, the Energy Department’s statistical arm said on its website.

Shipping Chokepoint

Brent, the benchmark grade for more than half the world’s crude, gained as much as $3.23, or 5.7 percent, to $59.71 a barrel in electronic trading on the London-based ICE Futures Europe exchange on Thursday. West Texas Intermediate futures, the U.S. marker, jumped 5.6 percent to $51.98 on the New York Mercantile Exchange.

“Yemen is not an oil producer of great significance but it is located geographically and politically in a very important part of the Middle East,” said Ric Spooner, a chief strategist at CMC Markets in Sydney.

 

The U.S. Has Too Much Oil and Nowhere to Put It = another drop in prices

 

The bottom line: A record 449 million barrels of oil are being stored in the U.S. Shrinking storage capacity will lead to another drop in prices.

Seven months ago the giant tanks in Cushing, Okla., the largest crude oil storage hub in North America, were three-quarters empty. After spending the last few years brimming with light, sweet crude unlocked by the shale drilling revolution, the tanks held just less than 18 million barrels by late July, down from a high of 52 million in early 2013. New pipelines to refineries along the Gulf Coast had drained Cushing of more than 30 million barrels in less than a year.
As quickly as it emptied out, Cushing has filled back up again. Since October, the amount of oil stored there has almost tripled, to more than 51 million barrels. As oil prices have crashed, from more than $100 a barrel last summer to below $50 now, big trading companies are storing their crude in hopes of selling it for higher prices down the road. With U.S. production continuing to expand, that’s led to the fastest increase in U.S. oil inventories on record. For most of this year, the U.S. has added almost 1 million barrels a day to its stash of crude supplies. As of March 11, nationwide stocks were at 449 million barrels, by far the most ever.
Not only are the tanks at Cushing filling up, so are those across much of the U.S. Facilities in the Midwest are about 70 percent full, while the East Coast is at about 85 percent capacity. This has some analysts beginning to wonder if the U.S. has enough room to store all its oil. Ed Morse, the global head of commodities research at Citigroup, raised that concern on Feb. 23 at an oil symposium hosted by the Council on Foreign Relations in New York. “The fact of the matter is, we’re running out of storage capacity in the U.S.,” he said.

If oil supplies do overwhelm the ability to store them, the U.S. will likely cut back on imports and finally slow down the pace of its own production, since there won’t be anywhere to put excess supply. Prices could also fall, perhaps by a lot. Morse and his team of analysts at Citigroup have predicted that sometime this spring, as tanks reach their limits, oil prices will again nosedive, potentially all the way to $20 a barrel. With no place to store crude, producers and trading companies would likely have to sell their oil to refineries at discounted prices, which could finally persuade producers to stop pumping.
Oil investors appear to be coming around to the notion that a lack of storage capacity could lead to another price crash. In the futures market, hedge funds have spent the past few weeks cutting their bets that oil prices will rise. Instead, they’ve built up a record short position, increasing their wagers that prices will fall. During a March 11 interview on CNBC, Goldman Sachs President Gary Cohn said he’s concerned the U.S. is running out of storage, particularly as refineries enter their seasonal maintenance period, to prepare for the summer driving season. Around this time they usually cut the amount of crude they buy. Cohn said prices could go as low as $30 a barrel.
Oil Inventories at Highest Levels We’ve Seen
The math on this can be a bit tricky. The U.S. Department of Energy measures oil storage capacity twice a year, once in the spring and again in the fall. As of September 2014, the U.S. had 521 million barrels of working capacity, up from 500 million in 2013. That includes the space inside tank farms and on-site at refineries. It doesn’t, however, include the amount of oil that can be stored in pipelines or storage tanks near oil wells; nor does it include the amount of capacity in tankers off the coast, in transit from Alaska, or on trains. Of the 449 million barrels of total crude stocks, about 327 million are stored in tank farms or on-site at refineries.
According to data from the Energy Information Administration, the U.S. is using about 63 percent of its storage capacity, up from 48 percent a year ago. “We have more space than some people tend to believe,” says Andy Lipow, an energy consultant in Houston. The most recent estimate of storage capacity also doesn’t include tanks built since September in North Dakota, Colorado, Wyoming, and Texas, he says.
Still, the amount of space available in the tanks at Cushing is getting tight. The storage hub will run out of room by Memorial Day, says Stephen Schork, who runs energy consulting company Schork Group. As long as oil stays cheap, he says, traders have an incentive to store it. Cushing has room for roughly 71 million barrels of oil, up from about 50 million in 2010. One of the biggest owners of tanks there is Canadian energy distributor Enbridge. “We don’t have much room left, but we’re still answering the phones,” says Mike Moeller, who manages the company’s Cushing tank farm. “Not everybody who calls is going to get space.” He says monthly lease rates in the spot market have gone from dimes per barrel to more than a dollar in some cases.
“These producers have kept chugging away when they should have been shutting down”
Even with prices less than half what they were last summer and storage capacity growing scarcer, U.S. oil output has continued to rise. Through February, U.S. daily crude production reached 9.3 million barrels, about 1 million barrels more than a year ago. The massive storage buildup has provided oil companies with a phantom demand for their crude. Many hedged production before prices got too low, taking out futures contracts that guarantee a certain price. That’s allowed them to sell oil for a price higher than the going rate of $49 a barrel, keeping many profitable despite lower prices.
Running out of room inside the nation’s storage tanks might be the only way to keep companies from pumping more oil. “These producers have kept chugging away when they should have been shutting down,” says Dominick Chirichella, co-president of the Energy Management Institute, a New York-based advisory group. “At some point, the fact that supply is outstripping demand has to have its moment of truth.”

Protect your assets  read more at http://www.youroffshoremoney.com

 

Tankers – The Bright Sector in Oil and Shipping Sector Collapse

Oil Traders Seen Storing Millions of Barrels at Sea on Slump

Oil companies are seeking supertankers to store 20 million barrels of crude as a collapse in the price of the commodity creates a trading opportunity last seen during the 2008-09 recession, a Greek shipping company said.

Companies inquired about booking 10 very large crude carriers for storage in the past several days, Odysseus Valatsas, the chartering manager for Dynacom Tankers Management Ltd. near Athens, said by e-mail today. A “handful” have already been hired for the trade, he said, citing discussions with shipbrokers and others working in the shipping market. Dynacom’s fleet can carry about 65 million barrels of oil.

Oil collapsed 48 percent in 2014 and prices for later this year are now so far above current costs that traders can make money from buying cargoes and storing them on ships, according to JBC Energy GmbH. As many as 60 million barrels could be held offshore within the next several months, the Vienna-based consultant predicted on Jan. 6. Traders stored 100 million barrels at sea in 2009, Frontline Ltd., a tanker owner, said at the time.

“It looks more and more likely that you’ll see more floating storage and it’s going to be good” for ship owners, Eirik Haavaldsen, a shipping analyst at Pareto Securities SA in Oslo, said by phone. “The re-emergence of floating storage is what could move the crude tanker market this year from being rather good to possibly very very good.”

Frontline Surge

Shares of Frontline rose as much as 14 percent in Oslo today to the highest in almost a year. They closed up 9.5 percent at 28.70 krone ($3.74).

Shipping costs gained today, with day rates for supertanker shipments to Japan from Saudi Arabiaclimbing 1 percent to $82,216 a day, the most for the time of year since at least 2009, according to data from the Baltic Exchange in London.

Brent crude for August traded at $55.87 a barrel as of 4:20 p.m. in London, a premium of $6.75 compared with February. That gap needs to be about $6.50 to cover hiring a ship and other costs associated with storing crude, according to E.A. Gibson Shipbrokers Ltd. in London.

JBC estimates that 30 million to 60 million barrels will be stored offshore in the next several months. The higher end of that forecast is about the same as Denmark’s annual consumption.

Oil Companies and Investors In Denial : Portfolio Profits At Risk

My rant – the  curse of Cassandra :

Cassandra, daughter of the king and queen, in the temple of Apollo, exhausted from practising, is said to have fallen asleep – when Apollo wished to embrace her, she did not afford the opportunity of her body. On account of which thing :

when she prophesied true things, she was not believed.

I have written :

Managed Accounts Year End Review and Forecast

Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ Energy I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors  ?– you  ( your portfolio) would have been better off today

and now you have to decide for 2015.

No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Two examples drawn from a recent sector review on Seeking Alpha – note that company management and you as an investor are not able to face present prices, trends and the facts of supply and demand . What are the these people thinking – why would you invest here ?

Cabot Oil and Gas (NYSE: COG)

Standing behind its production growth expectations of 20-30% in 2015, Cabot is budgeting $1.53-1.6 billion of capital expenditure for 2015, of which drilling and well completion capital will consist roughly 80%. However, the company is budgeting for $88/bbl oil, which at this point seems rather optimistic. Note that this is an increase from 2013’s $1.19 billion capital expenditure program.

Concho Resources (NYSE: CXO)

Concho is one rare company that is seeking to execute large increases in production in 2015, budgeting $3 billion for capex in 2015 as of their 3Q results release. To this end they have hedged roughly 42,000 barrels per day for 2015 at an average price of $87.22 per their derivatives information column on this page, or about a quarter of their target output.

Encana Energy (NYSE: ECA)

Encana is banking on higher realized oil prices in 2015 as their projected budget has actually increased this year to $2.7-2.9 billion, up from a previously announced $2.5-2.6 billion. Aftersuccessfully acquiring Athlon Energy (the transaction closing in November), Encana is making a bullish push to grow business in spite of ominous sector-wide headwinds.

The impending writedowns represent the latest blow to an industry rocked by a combination of faltering demand growth and booming supplies from North American shale fields. The downturn threatens to wipe out more than $1.6 trillion in earnings for producing companies and nations this year. Oil explorers already are canceling drilling plans and laying off crews to conserve cash needed to cover dividend checks to investors and pay back debts.

The mid-cap and small-cap operators are going to be hardest hit because this is all driven by their cost to produce,” said Gianna Bern, founder of Brookshire Advisory and Research Inc., who also teaches international finance at the University of Notre Dame.

An index of 43 U.S. oil and gas companies lost about one-fourth of its value since crude began its descent from last year’s intraday high of $107.73 a barrel on June 20.

Have you avoided these sectors  ?– you would have been better off  and now you have to decide for 2015.

No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Jack A. Bass Managed Accounts

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds at the rate of 1 % monthly if you require an income stream.

OR

Looking for Income ?  – Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management , tax reduction,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Telephone  Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax Free Portfolio  Growth website  Http://www.youroffshoremoney.com

Miners Sector 2015 Forecast :Dumping Assets At Fire-sale Prices

Senior mining companies are still holding many unnecessary and troubled assets on their books. So it would not be a surprise to see a few more dirt-cheap deals in 2015.

Scott Douglas/Riversdale Mining Ltd.Senior mining companies are still holding many unnecessary and troubled assets .

The junior mining sector is in such brutal shape right now that most companies are unwilling to even pay for booths at conferences that are geared to them.

 

Mr. Dethlefsen’s firm, Corsa Coal Corp., was approached this year about buying coal assets in Pennsylvania from Russian steel giant OAO Severstal, which was bailing out of the United States.

Severstal had bought these operations for $900 million in 2008, when steelmaking coal prices were hitting all-time highs. Mr. Dethlefsen would not pay anything close to that in today’s awful coal market, but he didn’t have to. Corsa bought the operations for a grand total of US$60 million, or less than 8% of what Severstal paid.

“It’s a tough market. We have our work cut out for us with this business and it’s not going to be easy,” said Mr. Dethlefsen, Corsa’s chief executive.

“But we’d rather start by paying US$60 million than US$500 million.”

Indeed. It used to be that when mining companies put assets up for auction, they wouldn’t actually sell them unless they got a very full price. That could be because their commodity price assumptions were too optimistic, or they were just too attached to them and convinced they could extract more value. Dozens of interesting projects were put up for auction in recent years and never changed hands because sellers demanded too much money.

We have our work cut out for us with this business and it’s not going to be easy

That changed in 2014, especially at the low end. This will go down as the year when miners were happy to dump their troubled assets. They just wanted to get them off the books and make them someone else’s problem.

The Corsa-Severstal deal was one such example. Rio Tinto Ltd., another, sold coal assets in Mozambique for US$50 million, just three years after paying US$3.7 billion for them. Kinross Gold Corp. dumped Fruta del Norte, possibly the world’s richest undeveloped gold project, for US$240 million, or less than a quarter of what it paid six years ago.

A Billion Dollar Loss – and more of these stories to be written in 2015

And then there was the unfortunate tale of Alberta coal miner Grande Cache Coal Corp. A pair of Asian commodity traders (Marubeni Corp. and Winsway Enterprises Holdings) paid $1 billion for the company in 2011. But coal prices turned dramatically against them. So in October, they agreed to sell their Grand Cache stakes for a buck. Each.

These fire-sale prices generated some laughs across the industry. Yet the deals have an undeniable logic in the current volatile market conditions.

Handout/Grande Cache Coal

Handout/Grande Cache CoalA pair of Asian commodity traders (Marubeni Corp. and Winsway Enterprises Holdings) paid $1 billion for Grande Cache Coal in 2011. But coal prices turned dramatically against them. So in October, they agreed to sell their Grand Cache stakes for a buck. Each.

During the mining bull market (roughly 2002 to 2011), the industry was undergoing massive consolidation as miners rode the wave of rising metal prices. Senior mining companies like Rio Tinto and Vale SA snapped up almost everything in sight, piling up a lot of debt and unnecessary assets in the process. As long as commodity prices were high, who cared? They were just happy to get bigger.

It took a steep drop in prices — and an embarrassing wave of writedowns — to force them to reconsider their strategy. They realized too much management time was being wasted on non-core assets that deliver minimal or no return. They also recognized that low commodity prices may last for a while and that they needed to shed these assets to get as lean as possible.

It has helped that almost every major mining company replaced its CEO over the last couple of years. These guys have no emotional attachment to the assets their predecessors overpaid for, and are happy to do whatever it takes to get value out of them.

“Everyone is looking at rationalizing their portfolios to their best core assets,” said Melanie Shishler, a partner and mining specialist at Davies Ward Phillips & Vineberg LLP. “In furtherance of that, I think people are being quite unrelenting in what they’re prepared to do to reach that goal.”

And there was nothing CEOs wanted to divest more than their problem assets. These assets were unloaded for bargain-basement prices after they backfired in spectacular ways.

For Severstal, it was a combination of a deteriorating coal market and Vladimir Putin. When Severstal bought the U.S. assets in 2008, coking coal prices were soaring above US$300 a tonne. Supply was so tight that steelmakers were terrified they would not be able to source product, so they started snapping up coal mining operations.

Today, that strategy seems absurd. Benchmark prices have plunged to US$117 a tonne, due to soaring supply and uncertain Chinese demand. Steelmakers no longer see any need to be vertically integrated.

Advertisement

Kinross – Poster Child For Mining Sector Errors

For Toronto-based Kinross, the central issue was also politics. The problem with the Fruta del Norte (FDN) project is that it is in Ecuador, a country with no history of large-scale gold mining. Kinross paid $1.2 billion for FDN in 2008 even though Ecuador did not have a firm mining law at the time. It was a reckless gamble, and it backfired after the government demanded outrageous windfall profits taxes. (Kinross owns equity in FDN’s new owner, so it could still benefit if the mine is built.)

Rio Tinto fell victim to a lack of good due diligence. It paid billions for the Mozambique coal assets without having a firm transportation plan in place. The transportation constraints were far bigger than anticipated, making the coal assets almost worthless in Rio’s eyes.

Handout/Kinross

Handout/KinrossKinross paid $1.2 billion for the Fruta del Norte mine in 2008 even though Ecuador did not have a firm mining law at the time. It was a reckless gamble, and it backfired after the government demanded outrageous windfall profits taxes.

 

In the two-dollar Grande Cache deal, the Asian sellers decided the assets definitely worthless to them at these prices. Experts said the sellers were facing potential cash outflows in the short term, something they clearly wanted to avoid.

Senior mining companies are still holding many unnecessary and troubled assets on their books. So it would not be a surprise to see a few more dirt-cheap deals in 2015.

One notable thing about these transactions is they usually involved a large company selling to a very small one. Sometimes it takes a small company to give a problem asset the attention it needs to create value. If they can’t get the assets turned around, then these deals are not such a great bargain.

“I’ve always said one company’s non-core asset is the cornerstone asset of another one,” said Jack A. Bass, managing partner at Jack A. Bass and Associates.

That is certainly the case with Corsa, which transformed into a serious player overnight with the Severstal deal. But now that the excitement has worn off, the company has to prove it can generate actual value out of these operations in a miserable coal market. If Corsa pulls that off and prices rebound, it could turn out to be one of the best mining deals in decades.

“We took the opportunity to come in and buy at what we think is the trough,” Mr. Dethlefsen said.

“To do that, you’ve got to have a pretty strong stomach. Over the next 12 months, it’s going to be a knife fight.”

You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ Energy I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

Energy Forecast 2015 : Oil Prices Won’t Be Bouncing Back

The surge in production comes as growth in global demand hit a five-year low in 2014, due to "a sharp slowdown in Chinese oil demand growth and steep contractions in Europe and Japan," the IEA said in its December report.

The surge in production comes as growth in global demand hit a five-year low in 2014, due to “a sharp slowdown in Chinese oil demand growth and steep contractions in Europe and Japan,” the IEA said in its December report.
  • ANALYSIS

The world’s major producers continue to pump oil at record levels, dimming hopes of a price rebound in the near future.


Jack A. Bass tax planning and investing guru says the prolonged stretch of low oil prices to come will bring on economic and geopolitical changes that not so long ago were unthinkable

U.S. crude has lost half its value since the summer, as eight of the world’s Top 10 producers cranked up production at or near record levels, with no one willing to rein in output.

On Tuesday, the global benchmark Brent settled up 2¢ at US$57.90. U.S. crude settled up 51¢ at US$54.12 a barrel. Both measures hit 5-1/2-year lows Monday before rebounding slightly.

International Energy Agency data shows U.S. oil production has risen by 4.7 million barrels per day during the past five years, while Canada’s production is up one million bpd and Saudi Arabia has climbed by 1.7 million bpd.

The surge in production comes as growth in global demand hit a five-year low in 2014, due to “a sharp slowdown in Chinese oil demand growth and steep contractions in Europe and Japan,” the IEA said in its December report.

The global oil market appears heavily oversupplied during the first-half of 2015

At the same time, Saudi, Canadian, American, Iraqi, Kuwaiti, Russian and UAE production were at or near their highest-ever levels.

“The global oil market appears heavily oversupplied during the first-half of 2015, with global stock builds becoming more manageable during the second-half of next year,” said RBC Capital Markets in a Dec. 18 report. “On an annual basis, we estimate the global oil market is approximately 1 million bpd oversupplied in 2015, but should tighten in 2016 as non-OPEC supply growth decelerate.”

There are few upside risks for oil at the moment. Markets barely registered news of a rocket attack last week on an oil terminal in Libya that saw up to 1.8 million bpd of oil wiped out from the market.

Related

CLICK TO ENLARGE

CLICK TO ENLARGE

Indeed, a deal between Iraq’s central government and the autonomous region of Kurdistan could see up to 300,000-bpd of oil entering the market by the first quarter. On Tuesday, the U.S. administration released more details on what kind of petroleum is allowed to be shipped under the 40-year ban on crude exports, that could further encourage production.

“I think we are in an era of low oil prices for some time to come,” said Phil Flynn, a Chicago-based analyst at The Price Futures Group Inc. “We ended the year in the U.S. with record inventories, we have OPEC basically on track to produce two million barrels per day more than the demand for their oil; and then we have other non-OPEC countries not showing any signs of cutting back in production — the glut is going to go on.”

Oil companies have started to take some action with rig counts at an eighth-month low in the U.S., but it will take a while for the process to filter through the supply chain.

In a sign of the lag, RBC expects non-OPEC supply growth to rise by 1.8 million bpd (compared to its previous estimate of 1.7 million bpd) in 2014, 1.1 million bpd (versus 1.3 million bpd) in 2015, and finally taper to 300,000  to 400,000  bpd in 2016 (compared to its previous estimate of 900,000 bpd).

While smaller, leveraged companies are expected to bear the brunt of the oil price plunge, the bigger, well-capitalized players will likely benefit from the purge of marginal barrels.

“The well-integrated oil companies are loving this,” Mr. Flynn says. “They are going to be able to ride it out and pounce on opportunities when others are going to be tight for cash.”

Few analysts expect an oil price recovery within the next few months, but some  believe markets are underestimating supply threats hovering over the horizon.

“We believe oil prices will rebound for three reasons,” said Leslie Palti-Guzman
, senior analyst, global energy and natural resources at Eurasia Group.

“Markets are underestimating the Libyan crisis, the U.S. Congress will impose more sanctions on Iran, curtailing its production, and Saudi Arabia and its Gulf allies will take some action.

 

You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position

Oil/ Energy I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffs

Get Out Of The Oil Patch New Paradigm Update

It is human nature to look for bargains - and destroy your portfolio as you gather losers into what used to be a ” nest” egg.

Look at Seeking Alpha and count the ” analysts” saying Dryships ( DRYS) is going to turn – how none forecast the  dollar level it now enjoys.

“We could definitely see $55 next week,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We are probably going to see some violent trading.”

The Saudis are not messing around.

“Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
WWW.BUSINESSINSIDER.COM

‘Drifting Down’

Skip York, a Houston-based vice president of energy research at Wood Mackenzie Ltd., said the next price target is $45.

“The market hasn’t seen the response they’re looking for on the supply side yet,” York said. “We’re now in this environment where I think prices are going to keep drifting down until the market is convinced, until the signal that production growth needs to slow has been received and acted on by operators.”

Are you still a client of a portfolio manager urging you to ” stay the course” – or worse, telling you to add to losing positions and losing sectors?

small- and mid-capitalization stocks, both E&P and Oil Service, are trading ~60% below their recent peaks, on average.

  • A growing number of stocks are priced at less than one-quarter of their peak prices achieved less than six months ago.

This is what is happening to oil TODAY ( Dec 22)

Crude Extends Fourth Weekly Decline Amid Supply Glut

Standard & Poor’s Ratings Services revised its outlook to negative for Royal Dutch Shell Plc (RDSA), Total SA (FP) and BP Plc (BP/)as the oil-market rout driven by weakening demand and a flood of supply from American shale fields threatens cash flow into 2016.

The credit-rating company also cast a dim eye on Houston-based ConocoPhillips, saying it’s facing similar cash flow pressure, and said it may cut the ratings on Eni SpA (ENI) and BG Group Plc’s BG Energy Holdings. S&P cited “the dramatic deterioration in the oil price outlook” and the 50 percent increase in debt loads and dividend commitments for the biggest European oil producers since the end of 2008.

Saudi Oil Minister Ali Al-Naimi said OPEC’s biggest producer will seek to maintain market share and that global demand growth this year was slower than expected. Iraq plans to boost its production next year, Oil Minister Adel Abdul Mahdi said. Trading volatility stayed at the highest level in more than three years.

Saudi Arabia is not willing to give up market share,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “With the U.S. production trajectory intact certainly in the next few months, it’s going to be a fight. It certainly looks like oil is heading toward $50.”

Oil has slumped about 21 percent since OPEC decided against cutting its production target last month, prompting a plunge in the value of currencies from the Russian ruble to the Norwegian krone. Surging production and slower-than-expected demand growth have also contributed to this year’s rout. Output in the U.S. is the highest in three decades.

Brent for February settlement dropped $1.10, or 1.8 percent, to $60.28 a barrel at 1:05 p.m. New York time on the London-based ICE Futures Europe exchange. The volume of all futures was 16 percent below the 100-day average. The European benchmark crude traded at a premium of $4.82 to West Texas Intermediate. Prices have fallen about 45 percent this year, set for the largest drop since 2008.

WTI for February delivery fell $1.73, or 3 percent, to $55.40 on the New York Mercantile Exchange with volume 12 percent below the 100-day average. The U.S. benchmark is down about 43 percent this year.

Implied Volatility

Implied volatility for at-the-money options in the front-month Brent contract, a measure of expected futures movements and a key gauge of options value, rose to 49.7 percent, the highest level since August 2011, according to data compiled by Bloomberg. WTI volatility is also at the highest since 2011.

“Nothing fundamentally has changed,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “The Saudis have been saying that they are not going to cut production. We are going to see some violent trading with very high volatility.”

The market is oversupplied by 2 million barrels a day, according to Mohammed Al Sada, Qatar’s energy minister. The International Energy Agency cut projections on Dec. 12 for the amount of crude OPEC will need to provide next year by 300,000 barrels a day to 28.9 million.

Wrong Information

Lack of cooperation from non-OPEC producers and wrong information in the market hit prices, Al-Naimi said at a conference in Abu Dhabi yesterday. Saudi Arabia’s oil policy doesn’t target other countries, and if non-OPEC producers were to offer cuts, OPEC probably wouldn’t follow suit, he said.

“Whether it goes down to $20/b, $40/b, $50/b, $60/b, it is irrelevant,” Al-Naimi told the Middle East Economic Survey when asked what price would prompt OPEC to cut output.

Iraq, OPEC’s number two producer, will have output of 4 million barrels a day and export 3.3 million barrels a day next year, Abdul Mahdi said in an interview in Abu Dhabi. Its production accounted for 10 percent of OPEC’s output in November at 3.35 million barrels a day, according to data compiled by Bloomberg.

OPEC pumped 30.56 million barrels a day in November, exceeding its collective target of 30 million for a sixth straight month, a Bloomberg survey of companies, producers and analysts shows.

Output in the U.S., the world’s biggest oil consumer, expanded to 9.14 million barrels a day in the week ended Dec. 12, according to the Energy Information Administration. That’s the highest level in weekly data that started in January 1983.

Shale Boom

The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota. The three shale plays supplied record amounts in November, said the industry-funded American Petroleum Institute.

The slump in oil is spurring the most bullish bets by hedge funds in four months. Speculators expanded their net-long position in WTI by 14 percent in the week ended Dec. 16 to 217,723 futures and options, U.S. Commodity Futures Trading Commission data show.

and today Dec. 22 Natural Gas Tumbles ( again)

Natural gas futures tumbled to a two-year low in New York as mild weather and record production threatened to expand a stockpile surplus.

Futures slumped 9 percent to the lowest settlement since Jan. 9, 2013, making the fuel the worst performer among 22 materials in the Bloomberg Commodity Index. Gas stockpiles totaled 3.295 trillion cubic feet as of Dec. 12, 47 billion more than a year earlier and above the year-ago level for the first time since 2012, government data showed. The surplus will “balloon to just shy of 200 billion cubic feet” by the start of 2015, according to JPMorgan Chase & Co.

Temperatures may be above normal in most of the lower 48 states through Dec. 26 and on the East Coast through Dec. 31, according to Commodity Weather Group LLC in Bethesda, Maryland.

“The hope of cold weather boosting inventory withdrawals is receding, and that’s opened up a floor in gas prices,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “The weather models are generally less supportive for the persistence of cold.”

Natural gas for January delivery fell 32 cents to settle at $3.144 per million British thermal units on theNew York Mercantile Exchange. Volume for all futures traded was 59 percent above the 100-day average at 2:41 p.m. Prices have dropped 26 percent this year, heading for the biggest annual loss since 2011.

‘Downside Risk’

U.S. gas production may climb 5.5 percent this year to a record 74.26 billion cubic feet a day, Energy Information Administration data show.

“Supply growth and mild weather returned working gas storage to a year-on-year surplus for the first time since December 2012,” Morgan Stanley analysts including New York-based Adam Longson said in a report e-mailed today. That “adds to near-term downside risk.”

Gas production from the Marcellus shale formation in the Northeast may climb to 16.3 billion cubic feet a day in January, up 19 percent from a year earlier, the EIA said Dec. 8 in its monthly Drilling Productivity Report. The agency is the Energy Department’s statistical arm.

The low in New York on Dec. 27 may be 36 degrees Fahrenheit (2 Celsius), 7 higher than average, data from AccuWeather Inc. in State College, Pennsylvania, show. Boston temperatures may drop to 35 degrees, 10 above normal.

You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ EnergyI am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

 

Get Out of The Oil Patch Part 3 :Goldman Sachs : How Oil Projects Are Stranded

Photographer: Mark Ralston/AFP via Getty Images

Please see our first Get Out of The Oil Patch dated Nov.30 for our 2015 forecast – here is a portion of that article:

– quote  Oil/ Energy I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL – unquote

Kostin, for his part, is recommending that it’s time to load up on energy companies if you’re a patient (there’s that word again) investor with a 12-month time horizon. He and the elves at Goldman have identified 27 energy stocks in the Russell 1000 Index whose prices have declined more than their 2015 earnings estimates and trade at below-average forward-looking valuations.

With capital expenditures in the capex-heavy energy industry sure to take a hit and oil prices likely to remain volatile, oil-service companies probably aren’t the way to go, according to Kostin. Rather, the Goldman team recommends refiners such as Marathon Petroleum Corp. (MPC) and Phillips 66 (PSX) as well as midstream companies that are less sensitive to oil prices and offer the potential for dividend growth. They include EQT Midstream Partners LP (EQM), Kinder Morgan Inc. (KMI)and Cheniere Energy Inc. (LNG)

If you can’t keep your paws off the service stocks, Goldman recommends what it considers the more high-quality and defensive names such as Atwood Oceanics Inc., Schlumberger Ltd. (SLB) andOceaneering International Inc. (OII)

Our advice beat several Wall Street Gurus: 

Oil’s drop has punished Icahn, Paulson • 10:37 AM

Carl Surran, SA News Editor
  • Even some of Wall Street’s big boys are taking a beating in the oil sector: Carl Icahn’s holdings of Talisman Energy (NYSE:TLM) have tumbled $230M since late August, and John Paulson’s firm had one of its largest losses of the year on a bet that big oil companies would buy smaller ones.
  • Before TLM agreed to be bought by Repsol, which boosted TLM shares, Icahn’s losses stood at more than $540M as recently as Dec. 11, and he still will have lost ~$290M at the deal price; Icahn also holds stakes in hard-hit Chesapeake Energy (NYSE:CHK) and Transocean (NYSE:RIG).
  • Paulson was the biggest shareholder in Whiting Petroleum (NYSE:WLL) and Oasis Petroleum (NYSE:OAS) at the end of Q3, but his strategy could yet pay off, as many analysts expect consolidation in the energy sector as lower oil prices pressure smaller firms.
  • Also caught flat-footed by the oil price pullback was Prosperity Capital’s Mattias Westman, a longtime investor in Russia whose firm has lost more than $1B this year, in part on stakes in Russian energy companies Gazprom (OTCPK:OGZPY) and Lukoil (OTCPK:LUKOY, OTC:LUKOF)

There are zombies in the oil fields.

After crude prices dropped 49 percent in six months, oil projects planned for next year are the undead — still standing upright, but with little hope of a productive future. These zombie projects proliferate in expensive Arctic oil, deepwater-drilling regions and tar sands from Canada to Venezuela.

In a stunning analysis this week, Goldman Sachs found almost $1 trillion in investments in future oil projects at risk. They looked at 400 of the world’s largest new oil and gas fields — excluding U.S. shale — and found projects representing $930 billion of future investment that are no longer profitable with Brent crude at $70. In the U.S., the shale-oil party isn’t over yet, but zombies are beginning to crash it.

The chart below shows the break-even points for the top 400 new fields and how much future oil production they represent. Less than a third of projects are still profitable with oil at $70. If the unprofitable projects were scuttled, it would mean a loss of 7.5 million barrels per day of production in 2025, equivalent to 8 percent of current global demand.

How Profitable Is $70 Oil?

Source: Goldman Sachs Global Investment Research. Annotated by Tom Randall/Bloomberg

Source: Goldman Sachs Global Investment Research. Annotated by Tom Randall/Bloomberg

Making matters worse, Brent prices this week dipped further, below $60 a barrel for the first time in more than five years. Why? The U.S. shale-oil boom has flooded the market with new supply, global demand led by China has softened, and the Saudis have so far refused to curb production to prop up prices.

It’s not clear yet how far OPEC is willing to let prices slide. The U.A.E.’s energy minister said on Dec. 14 that OPEC wouldn’t trim production even if prices fall to $40 a barrel. An all-out price war could take up to 18 months to play out, said Kevin Book, managing director at ClearView Energy Partners LLC, a financial research group in Washington.

If cheap oil continues, it could be a major setback for the U.S. oil boom. In the chart below, ClearView shows projected oil production at four major U.S. shale formations: Bakken, Eagle Ford, Permian and Niobrara. The dark blue line shows where oil production levels were headed before the price drop. The light blue line shows a new reality, with production growth dropping 40 percent.

Even $75 Oil Crashes the Shale-Oil Party

Source: ClearView Energy Partners LLC

Source: ClearView Energy Partners LLC

The Goldman tally takes the long view of project finance as it plays out over the next decade or more. But the initial impact of low prices may be swift. Next year alone, oil and gas companies will make final investment decisions on 800 projects worth $500 billion, said Lars Eirik Nicolaisen, a partner at Oslo-based Rystad Energy. If the price of oil averages $70 in 2015, he wrote in an email, $150 billion will be pulled from oil and gas exploration around the world.

An oil price of $65 dollars a barrel next year would trigger the biggest drop in project finance in decades, according to a Sanford C. Bernstein analysis last week.

A pause in exploration and development may sound like good news for investors concerned about climate change. A vocal minority have been warning for years that potentially trillions of dollars of untapped assets may become stranded due to climate policies and improved energy efficiency. The challenges faced by oil developers today may provide a small sense of what’s to come.

However, these glut-driven prices can’t stay low forever. Oil production hasn’t slowed yet, but as zombie projects go unfunded, it will. This is how the boom-bust-boom of the oil market goes: prices fall, then production follows, pushing prices higher again. The longer this standoff goes, the more zombies will languish and the sharper the rebounding price spike may be.

How are you going to reduce your taxes in 2015

Tax website http://www.youroffshoremoney.com for 2015 tax planning

Economic Updates : 2015 Forecast / Deflation

Two New Articles

1) Outlook for U.S. and global economies next year is cautiously optimistic

Gold Downside Risk Seen As : ‘Significant’

 The author of The Gold Investors Handbook says the worst isn’t over yet for gold after prices erased  this year’s gain.

“Risks are significantly skewed to the downside,” said Bass, who told investors to sell last year before gold’s biggest collapse since 1980. “Much of the support was coming from political uncertainty in Ukraine and what was going on in Middle East,” and those concerns have faded, he said in a telephone interview yesterday.

After bullion’s rally in the first half of the year beat gains for commodities, equities and Treasuries, the metal is heading for a quarterly decline to end out 2014. Demand for precious metals as a protection of wealth has been eroded by the outlook for a strengthening U.S. economy, which helped spark a rally in the dollar .

Gold fell to an eight-month low this week after the Federal Reserve  raised its outlook for interest rates, crimping demand for an inflation hedge. Money managers cut bullish holdings for five weeks, while holdings through global exchange-traded funds slumped to the lowest since 2009.

“Gold is more responsive to the near-term growth momentum in the U.S., rather than long-term inflation concerns,” Damien Courvalin, a Goldman analyst, said . “Interest is lower in gold than it was say 18 months ago.”

Dollar Rally

. The Bloomberg Commodity Index of 22 raw materials slid 5.2 percent in 2014, while the MSCI All-Country World Index of equities rose 3.7 percent. The Bloomberg Dollar Spot Index climbed 4.3 percent.

Bass isn’t alone in predicting the end to this year’s rebound that drove the best first-half performance for gold since 2010. Societe Generale SA’s Michael Haigh, who also correctly forecast 2013’s slump, said in a report this month that he expects the metal will drop more than 5 percent by 2015’s third quarter. Investors, who in June and July were adding to bullish wagers, may be starting to agree with analysts, taking their short holdings on the metal to the highest in three months.

Muted Inflation

After 12 straight years of gains, gold tumbled 28 percent in 2013 as an equity rally and muted inflation prompted some investors to lose their faith in the metal.

Bass on April 10, 2013, issued a sell recommendation, before a two-day 13 percent plunge that ended April 15, 2013, and left prices in a bear market. The slump wasn’t foreseen by most money mangers, who had increased their bullish bets by 11 percent the prior month. The investors cut holdings to a six-year low by December.

Now, Currie expects bullion to drop to $1,050 by the end of 2015, maintaining a forecast from the start of the year. SocGen’s Haigh sees prices at $1,150 in the third quarter next year, he said in a report e-mailed Sept. 12. The metal reached this year’s peak of $1,392.60 in March amid violence in Ukraine.

Citigroup Inc.  lowered its forecast for next year amid expectations of U.S. rate increases, while the “risk-related source of support has been diminished.” The bank cut its outlook to $1,225 from $1,365. UBS AG reduced it three-month outlook yesterday by 7.7 percent to $1,200.

Target Price

“Turbulence is still there, but is not escalating any further, which we believe will help gold decline to our target,” Courvalin said.

“Our inflation forecasts are pretty subdued,” Bass said.

Inflation expectations, measured by the five-year Treasury break-even rate, this week reached the lowest since June 2013.

 

“Ultimately, what drives fair value for gold prices is the U.S. real interest-rate environment,” Courvalin said.

 

It is human nature to look for bargains - and destroy your portfolio as you gather losers into what used to be a ” nest” egg.

Look at Seeking Alpha and count the ” analysts” saying Dryships ( DRYS) is going to turn – how none forecast the sub dollar level it now enjoys.

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ EnergyI am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

 

Lor Loewen's photo.

Get Out Of The Oil Patch, Get Out of Dry Bulk Shipping – New Paradigm Update

It is human nature to look for bargains - and destroy your portfolio as you gather losers into what used to be a ” nest” egg.

Look at Seeking Alpha and count the ” analysts” saying Dryships ( DRYS) is going to turn – how none forecast the sub dollar level it now enjoys.

“We could definitely see $55 next week,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We are probably going to see some violent trading.”

‘Drifting Down’

Skip York, a Houston-based vice president of energy research at Wood Mackenzie Ltd., said the next price target is $45.

“The market hasn’t seen the response they’re looking for on the supply side yet,” York said. “We’re now in this environment where I think prices are going to keep drifting down until the market is convinced, until the signal that production growth needs to slow has been received and acted on by operators.”

Are you still a client of a portfolio manager urging you to ” stay the course” – or worse, telling you to add to losing positions and losing sectors?

small- and mid-capitalization stocks, both E&P and Oil Service, are trading ~60% below their recent peaks, on average.

  • A growing number of stocks are priced at less than one-quarter of their peak prices achieved less than six months ago.

This is what is happening to oil TODAY ( Friday Dec. 12)

U.S. oil drillers, facing prices that have fallen below $60 a barrel and escalating competition from suppliers abroad, idled the most rigs in almost two years.

Rigs targeting oil dropped by 29 this week to 1,546, the lowest level since June and the biggest decline since December 2012, Baker Hughes Inc. (BHI) said on its website today. Those drilling for natural gas increased by two to 346, the Houston-based field services company said. The total count fell 27 to 1,893, the fewest since August.

As OPEC resists calls to cut output, U.S. producers from ConocoPhillips (COP) to Oasis Petroleum Inc. (OAS) have curbed spending. Chevron Corp. (CVX) put its annual capital spending plan on hold until next year. The number of rigs targeting U.S. oil is sliding from a record 1,609 following a $50-a-barrel drop in global prices, threatening to slow the shale-drilling boom that’s propelled domestic production to the highest level in three decades.

“It’s starting,” Robert Mackenzie, oil-field services analyst at Iberia Capital Partners LLC, said by telephone from New Orleans today. “We knew this day was going to come. It was only a matter of time before the rig count was going to respond. The holiday is upon us and oil prices are falling through the floor.”

ConocoPhillips said Dec. 8 that the Houston-based company would cut its spending next year by about 20 percent, deferring investment in North American plays including the Permian Basin of Texasand New Mexico and the Niobrara formation in Colorado. Oasis, an independent exploration and production company based in Houston, said Dec. 10 that it’s cutting 2015 spending 44 percent to focus on its core area in North Dakota.

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter at http://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ EnergyI am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

 

Lor Loewen's photo.
Like · ·
Follow

Get every new post delivered to your Inbox.

Join 2,287 other followers