Oil Extends Drop : Worsening Glut – With Oil Companies and Investors In Denial

Oil extended losses to trade below $45 a barrel amid speculation that U.S. crude stockpiles will increase, exacerbating a global supply glut that’s driven prices to the lowest in more than 5 1/2 years.

Futures fell as much as 2.6 percent in New York, declining for a third day. Crude inventories probably gained by 1.75 million barrels last week, a Bloomberg News survey shows before government data tomorrow. The United Arab Emirates, a member of the Organization of Petroleum Exporting Countries, will stand by its plan to expand output capacity even with “unstable oil prices,” according to Energy Minister Suhail Al Mazrouei.

Oil slumped almost 50 percent last year, the most since the 2008 financial crisis, as the U.S. pumped at the fastest rate in more than three decades and OPEC resisted calls to cut production. Goldman Sachs Group Inc. said crude needs to drop to $40 a barrel to “re-balance” the market, while Societe Generale SA also reduced its price forecasts.

“There’s adequate supply,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone today. “It’s really going to take someone from the supply side to step up and cut, and the only organization capable of doing something substantial is OPEC. I can’t see the U.S. reducing output.”

West Texas Intermediate for February delivery decreased as much as $1.19 to $44.88 a barrel in electronic trading on the New York Mercantile Exchange and was at $44.94 at 2:26 p.m. Singapore time. The contract lost $2.29 to $46.07 yesterday, the lowest close since April 2009. The volume of all futures traded was about 51 percent above the 100-day average.

U.S. Supplies

Brent for February settlement slid as much as $1.31, or 2.8 percent, to $46.12 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $1.24 to WTI. The spread was $1.36 yesterday, the narrowest based on closing prices since July 2013.

U.S. crude stockpiles probably rose to 384.1 million barrels in the week ended Jan. 9, according to the median estimate in the Bloomberg survey of six analysts before the Energy Information Administration’s report. Supplies have climbed to almost 8 percent above the five-year average level for this time of year, data from the Energy Department’s statistical arm show.

Production accelerated to 9.14 million barrels a day through Dec. 12, the most in weekly EIA records that started in January 1983. The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, or fracking, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

OPEC Output

The U.A.E. will continue plans to boost its production capacity to 3.5 million barrels a day in 2017, Al Mazrouei said in a presentation in Abu Dhabi yesterday. The country currently has a capacity of 3 million and pumped 2.7 million a day last month, according to data compiled by Bloomberg.

OPEC, whose 12 members supply about 40 percent of the world’s oil, agreed to maintain their collective output target at 30 million barrels a day at a Nov. 27 meeting in Vienna. Qatar estimates the global surplus at 2 million a day.

In China, the world’s biggest oil consumer after the U.S., crude imports surged to a new high in December, capping a record for last year. Overseas purchases rose 19.5 percent from the previous month to 30.4 million metric tons, according to preliminary data from the General Administration of Customs in Beijing today. For 2014, imports climbed 9.5 percent to 310 million tons, or about 6.2 million barrels a day.

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

Oil Declines / Impact On Major Players and Suppliers : Glut to Linger ( as we forecast)

Crude has dropped by more than half since June as U.S. output surged and the Organization of Petroleum Exporting Countries decided to maintain its production ceiling. Saudi Arabia won’t cut its output, though producers outside the group are welcome to do so, Ali Al-Naimi, that country’s oil minister, said at a conference in Abu Dhabi last month. Today’s decline accelerated as the dollar strengthened.

“The Saudis are providing no support for the market,” Helima Croft, chief commodities strategist at RBC Capital in New York, said by phone. “It looks like they will let prices continue to fall, taking as much non-OPEC production offline as possible.”

U.S. Cut Rigs Loose

Yesterday, Helmerich & Payne Inc. (HP), the biggest rig operator in the U.S., said it had received early termination notices for four contracts. Today, a second contract driller, Pioneer Energy Services Corp. (PES), said four rigs had been canceled early. Producers may cut short another 50 to 60 agreements, according to Bloomberg Intelligence analyst Andrew Cosgrove.

Terminations aside, less than half of land drillers’ rigs are on term contracts through 2015, data compiled by Bloomberg Intelligence show. Pioneer may be the most exposed, with 75 percent of its fleet up for renewal in the next three quarters, according to the data.

Ensign Energy Services Inc. (ESI) may lay off as many as 700 workers across Kern County and Long Beach, California, after an “early and unexpected termination” of drilling contracts, the company said in a Dec. 18 letter to the state’s Employment Development Department. The Calgary-based field services company was forced to halt production on a number of drilling rigs in California, according to the letter.

Oil Prices

Oil’s collapse has been so rapid and so driven by sentiment that forecasters from Bank of America Corp. to UBS AG say there are no clear signs of when the rout will end. The U.S. is pumping the most crude in more than three decades as horizontal drilling and hydraulic fracturing unlock shale reserves, adding to a global supply glut that Qatar estimates at 2 million barrels a day.

Brent for February settlement decreased $1, or 2 percent, to $50.15 a barrel at 2:06 p.m. New York time on the London-based ICE Futures Europe exchange, heading for the lowest settlement since April 2009.

West Texas Intermediate for February delivery slid 70 cents, or 1.4 percent, to $47.95 a barrel on theNew York Mercantile Exchange. The volume of all futures traded was 14 percent above the 100-day average for the time of day. Brent traded at a $2.17 premium to WTI on the ICE, the smallest since October

Crude Output

U.S. output expanded to 9.14 million barrels a day through Dec. 12, the highest level in weekly data from the Energy Information Administration that started in January 1983.

Credit Suisse Group AG cut its forecast for this year’s increase in U.S. crude output by 500,000 barrels a day, David Hewitt, the co-head of the bank’s global oil and gas equity research, said at an investor conference in Singapore today. Growth may slow by 800,000 barrels a day in 2016 compared with its previous estimate, he said.

Crude Exports

Credit Suisse had previously expected U.S. production to accelerate by 1.3 million barrels a day in 2015, and 1.4 million next year, he said. Brent crude will average $75 a barrel this year and $80 in 2016, according to Hewitt.

U.S. crude exports climbed 34 percent to 502,000 barrels a day in November, the most in records dating back to 1920, data from the Census Bureau and the EIA show. Some lawmakers inWashington are seeking to end a 40-year-old law that restricts crude sales to just a few overseas markets.

The Bloomberg Dollar Spot Index increased to 1,147.71. A stronger dollar reduces oil’s investment appeal.

“The dollar put downward pressure on oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The fundamentals of oil are still very bearish.”

Gasoline futures slipped 1.1 percent to $1.3236 a gallon. Ultra low sulfur diesel declined 0.7 percent to $1.6889.

Regular gasoline at U.S. pumps fell to the lowest level since May 2009. The average retail priceslipped 0.9 cent to $2.182 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group. Pump prices were around $2.05 a gallon when oil was last below $50 a barrel.

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

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  ( your portfolio) 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.

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 ?

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

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 website  Http://www.youroffshoremoney.com

Gas Price Drop Pressures Aging Coal and Nuclear Power

A 37 percent drop in natural gas prices since June has lowered what U.S. nuclear and coal plants can charge for electricity, potentially speeding the demise of generators teetering on the brink of closing.

While power plants that burn gas get a break on the cost side, allowing them to charge less for their product, coal and nuclear operators are seeing thinning profits. The gas squeeze comes as companies are upgrading plants to meet new environmental rules and demand weakens as a result of competition from solar and wind energy.

FirstEnergy Corp. (FE), NRG Energy Inc. (NRG), and the generation unit that will be spun off fromPPL Corp. (PPL), are among companies most at risk from depressed energy prices, according to a Dec. 31 note published by UBS AG energy analysts. Exelon Corp. (EXC), the biggest U.S. owner of nuclear reactors, said it needs to almost double power prices to keep a New York plant running.

“Natural gas prices have been falling and that’s generally not a good thing for coal and nuclear power producers who sell in competitive wholesale markets,” said Paul Patterson, a New York-based analyst for Glenrock Associates LLC.

Public Service Enterprise Group Inc. (PEG) could also face reduced revenues, UBS said. Plant closings threaten the reliability of power supplies in some regions. Mild weather has disappointed hopes for a surge in summer cooling and winter heating demand for gas.

Changing Fuels

“The latest slide in natural gas prices raises the specter of big coal-to-gas switching in 2015,” said Julien Dumoulin-Smith, a New York-based analyst for UBS.

Expectations for a repeat of last year’s polar vortex, when frigid temperatures spurred record demand and soaring prices for gas and electricity, are dwindling due to milder-than-expected winter weather.

“As you get further along in the winter, the risk of extreme weather begins to go down,” Patterson said.

Gas settled yesterday in New York at $2.938 per million British thermal units after hitting a two-year low this week. Gas last month hit historic lows in some parts of the Mid-Atlantic.

Power prices for delivery during the peak hours of the day for winter has fallen 21 percent to $54 a megawatt-hour since mid-December in PJM Interconnection LLC, the nation’s largest U.S. electricity grid. PJM serves more than 61 million people from Washington, D.C. to Chicago.

Stocks Suffer

Shares of some of the nation’s largest power generators have also suffered. NRG, the largest U.S. independent generation owner, has fallen 22 percent since hitting a recent high on Nov. 7. Dynegy Inc., another large independent operator, is down 15 percent over the same period.

Owners of utilities, which are allowed to charge rates that provide a profit, are exiting the competitive power business that leaves them vulnerable to market swings. American Electric Power Co. (AEP), the biggest U.S. coal burner, said yesterday it had hired Goldman Sachs Group Inc. to advise on a potential sale of seven power plants as the utility owner struggles to compete amid falling prices.

Utilities including FirstEnergy, which owns about 10,000 megawatts of coal capacity, and Exelon are lobbying regulators and grid operators to boost what they can charge customers at their financially pinched units. They say closing the plants will risk blackouts and raise customer bills even higher.

After recording losses that exceeded $100 million from 2011 to 2013, Exelon said it needs to charge about 83 percent more than wholesale prices to earn a profit at its Rochester-area Ginna plant. Last month, Entergy Corp. shut Vermont’s only operating reactor citing low power prices.

EPA Rule

The U.S. Environmental Protection Agency said today it will delay the release of carbon-emission rules for all power plants until the middle of the summer. Industry groups and Republican lawmakers said the proposed rules would effectively ban new coal facilities.

The companies say gas shortages last winter showed the value of coal and nuclear plants that were needed to keep the lights on. PJM, the grid operator, is asking federal regulators to allow for increasing payments to plant owners to ensure at least 2,000 megawatts of aging generation is kept in operation through next winter, according to a filing with the Federal Energy Regulatory Commission.

That won’t provide any relief in the short term as milder weather and lower gas prices could reduce FirstEnergy’s earnings per share by 20 cents in 2015, according to UBS. The company is among “the most exposed” to declining use of coal-fired power units, UBS said.

Hedging Help

NRG could see a $30 million reduction in earnings before interest, taxes, depreciation and amortization in 2015, UBS said.

To protect themselves from volatile price swings, power companies are using hedging contracts to lock in future prices for power and gas.

FirstEnergy is taking “aggressive actions” to reduce its exposure to the market and has increased its hedged contracts since November, said Tricia Ingraham a spokeswoman for FirstEnergy. Exelon reduces its exposure to power price movements with a three-year forward hedging strategy, spokesman Paul Adams said. NRG, PPL and Public Service declined to comment on the UBS report. Dynegy didn’t immediately respond to a request for comment.

This year, coal-fired power production in PJM could be close to the lowest level since 2008, according to UBS.

How $50 Oil Changes Almost Everything

 Investors are in denial but bankers see the problem:

  • Lenders are already doling out tough love to companies,  with some lenders wanting to see producer plans for handling further price drops while others are urging asset sales.
  • The 10 highest ratios of net debt/EBITDA from the last 12 months, according to S&P Capital IQ, belong to KWK, AR, WRES, GDP, REN, HK,XCO, REXX, MPO, EPE.

Photographer: Andrew Burton/Getty Images

U.S. shale oil production.

The plummeting price of oil means no more trout ice cream.

Coromoto, a parlor in Merida, Venezuela, famous for its 900 flavors,closed during its busiest season in November because of a milk shortage caused by the country’s 64 percent inflation rate, the world’s fastest.

That’s the plight of an oil-producing nation. At the same time, consuming countries like the U.S. are taking advantage. Trucks, which burn more gasoline, outsold cars in December by the most since 2005, according to data from Ward’s Automotive Group.

The biggest collapse in energy prices since the 2008 global recession is shifting wealth and power from autocratic petro-states to industrialized consumers, which could make the world safer, according to a Berenberg Bank AG report. Surging U.S. shale supply, weakening Asian and European demand and a stronger dollar are pushing oil past threshold after threshold to a five-and-half-year low, with a dip below $40 a barrel “not out of the question,” said Rob Haworth, a Seattle-based senior investment strategist at U.S. Bank Wealth Management, which oversees about $120 billion.

Oil prices are the big story for 2015,” said Kenneth Rogoff, a Harvard University economics professor. “They are a once-in-a-generation shock and will have huge reverberations.”

Photographer: Daniel Acker/Bloomberg

Travis Simmons, a driver for Yo-Mac Transport, stores a filling hose after delivering..

Weak Prices

Brent crude, the international benchmark, fell as low as $49.66 a barrel today, dropping below $50 for first time since 2009. Prices dropped 48 percent in 2014 after three years of the highest average prices in history. West Texas Intermediate, the U.S. benchmark, plunged to as low as $46.83 today, about a 56 percent decline from its June high.

“We see prices remaining weak for the whole of the first half” of 2015, said Gareth Lewis-Davies, an analyst at BNP Paribas in London.

If the price falls past $39 a barrel, we could see it go as low as $30 a barrel, said Walter Zimmerman, chief technical strategist for United-ICAP in Jersey City, New Jersey, who projected the 2014 drop.

“Where prices bottom will be based on an emotional decision,” Zimmerman said. “It won’t be based on the supply-demand fundamentals, so it’s guaranteed to be overdone to the downside.”

The biggest winner would be the Philippines, whose economic growth would accelerate to 7.6 percent on average over the next two years if oil fell to $40, while Russia would contract 2.5 percent over the same period, according to an Oxford Economics Ltd.’s December analysis of 45 national economies.

Inflation Outlook

Among advanced economies, Hong Kong is the biggest winner, while Saudi Arabia, Russia and the United Arab Emirates fare the worst, according to Oxford Economics.

One concern of central bankers is the effect of falling oil prices on inflation. If crude remains below $60 per barrel this quarter, global inflation will reach levels not seen since the worldwide recession ended in 2009, according to JP Morgan Securities LLC economists led by Bruce Kasman in New York.

Kasman and his team are already predicting global inflation to reach 1.5 percent in the first half of this year, while sustained weakness in oil suggest a decline to 1 percent, they said.

Negative Inflation

The euro area would probably witness negative inflation, while rates in the U.S., U.K. and Japan also would weaken to about 0.5 percent. For what it calls price stability, the Federal Reserve’s inflationtarget is 2 percent. Emerging-market inflation would also fade although lower currencies and policies aimed at slowing the effects on retail prices may limit the fall.

As for growth, a long-lasting price of $60 would add 0.5 percentage point to global gross domestic product, they estimate.

Even as cheaper fuel stimulates the global economy, it could aggravate political tension by squeezing government revenue and social benefits, Citigroup Inc. analysts said in a Jan. 5 report.

Either way, previously unthinkable events now look more likely. Byron Wien, a Blackstone Group LP vice chairman, predicting that Russian President Vladimir Putin will resign in 2015 and Iran will agree to stop its nuclear program.

Iran Losses

Iran is already missing tens of billions of dollars in oil revenue due to Western sanctions and years of economic mismanagement under former President Mahmoud Ahmadinejad.

President Hassan Rouhani, elected on a pledge of prosperity to be achieved by ending Iran’s global isolation, is facing a falling stock market and weakening currency. Iranian officials are warning of spending and investment cuts in next year’s budget, which will be based on $72-a-barrel crude. Even that forecast is proving too optimistic.

“Iran will stumble along with less growth and development,” said Djavad Salehi-Isfahani, a professor of economics at Virginia Tech in Blacksburg, Virginia, who specializes in Iran’s economy. “The oil price fall is not reason enough for Iran to compromise.”

The Russian economy may shrink 4.7 percent this year if oil averages $60 a barrel under a “stress scenario,” the central bank said in December. The plunge in crude prices prompted a selloff in the ruble with the Russian currency falling to a record low against the dollar last month and tumbling 46 percent last year, its worst performance since 1998, when Russia defaulted on local debt.

Russian Production

“The risk is that, as a badly-wounded and cornered bear, Russia may turn more aggressive in its increasing desperation, threatening global peace and the European economic outlook,” said Holger Schmieding, Berenberg Bank’s London-based chief economist. However, “the massive blow to Russia’s economic capabilities should –- over time –- make it less likely that Russia will wage another war.”

Russian oil production rose to a post-Soviet record last month, showing how pumping of the nation’s biggest source of revenue has so far been unaffected by U.S. and European sanctions or a price collapse. The nation increased output to 10.667 million barrels a day, according to preliminary data from the Energy Ministry on Jan. 2. That compares with global consumption of 93.3 million barrels a day, based on the International Energy Agency’s estimate for 2015.

Venezuela, which relies on oil for 95 percent of its export revenue, risks insolvency, Jefferies LLC said in a Jan. 6 note. The cost of insuring the country’s five-year debt has tripled since July, Citigroup said. President Nicolas Maduro is visiting China to discuss financing and expects to travel to other OPEC nations to work out a pricing strategy.

Confounding Investors

The U.S., still a net oil importer, would accelerate economic growth to 3.8 percent in the next two years with oil at $40 a barrel, compared with 3 percent at $84, the Oxford Economics study found. The boost to consumers could be offset by oil companies’ scaling back investments, according to Kate Moore, chief investment strategist at JPMorgan Private Bank. Producers are cutting spending by 20 percent to 40 percent, according to Fadel Gheit, an analyst at Oppenheimer & Co.

The mixed picture is confounding investors. The Standard & Poor’s 500 Index of U.S. equities fell 1.9 percent on Jan. 5, the biggest decline since October, as oil brought down energy shares and stoked concerns that global growth is slowing.

While cheaper oil helps consumers, business spending has a bigger effect on equities, and oil companies are set to cut investments. Oil at $50 a barrel could trim $6 a share off earnings in theS&P 500 Index this year, according to Savita Subramanian and Dan Suzuki, New York-based strategists at Bank of America Corp.

Bets on high energy prices have mashed share prices of companies such as Ford Motor Co., Tesla Motors Inc. and Boeing Co.

Redistributes Income

Fifth Third Bancorp (FITB), one of the regional lenders that tried to chase the fracking boom, is down 12 percent since June 20.

Caterpillar Inc., Joy Global Inc., Allegheny Technologies Inc., Dover Corp., Jacobs Engineering Group and Quanta Services Inc. are all down more than 20 percent since oil peaked at almost $108.

Despite those losses, Morgan Stanley last month concluded cheaper fuel is a net benefit for the U.S. economy.

“Any massive redistribution of income can raise political tensions,” Schmieding of Berenberg Bank said in the Jan. 6 report. “But, net/net, strengthening the U.S., Europe, Japan, China and India, while weakening Russia, Iran, Saudi Arabia and Venezuela, is likely to make the world a safer place in the end.”

Houston, We Have An Oil Investor Problem : Survival

Photographer: Dmitry Beliakov/Bloomberg

Hedge Funds Cut Oil Bets After Worst Drop Since 2008

 

 

 

(And it will get worse -

Oil Companies and Investors In Denial : Portfolio Profits At Risk - Jack A. Bass)

Oil’s dramatic fall in price will have serious effects on revenues and spending in the sector, according to some industry analysts, with one investment firm predicting a sector-wide “recession” that will last for several years.

Both U.S. crude and Brent futures fell to fresh 5½-year lows on Tuesday, with the former slipping below $48 at one stage. Weak global demand and booming U.S. oil production are seen as the key reasonsbehind the price plunge, as well as OPEC’s (Organization of the Petroleum Exporting Countries) reluctance to cut its output.

This sector slump will lead to a fight to the death for oil firms, according to analysts at Bernstein Research. The research firm likened the current environment to the Hollywood movie “The Hunger Games”, which portrays a dystopian post-apocalyptic future where the main protagonists battle each other to survive.

“Our research convinces us an oil services recession is largely unavoidable at even $80 a barrel…The Hunger Games have begun,” Nicholas Green, a senior analyst at the company, said in a note on Tuesday morning.

Bernstein’s Green believes that offshore activity will also face a “structural recession.” He predicts that there will be only half of the new work available in 2015, compared to last year, and forecasts no material recovery before 2017.Hedge funds reduced bets on rising oil prices for a second week as futures extended their worst plunge since 2008.

Speculators pared their net-long positionin West Texas Intermediate crude by 3.6 percent in the week ended Dec. 30, U.S. Commodity Futures Trading Commission data show. Short wagers jumped 12 percent, the first gain in six weeks.

The U.S. benchmark price sank 46 percent last year as domestic oil output reached a three-decade high and OPEC produced more than its target for a seventh month. The International Energy Agency has cut its estimate for global demand as economies outside the U.S. are expected to grow more slowly, adding to a supply glut.

Oil Prices

“You had the combination of weak fundamentals and a shift in market psychology,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said yesterday. “People realized that there’s no imminent market tightness, and this caused big selloffs.”

WTI fell $3, or 5.3 percent, to $54.12 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. Futures declined $1.16, or 2.3 percent, to $48.88 a barrel at 8:46 a.m. after sliding to $48.47, the lowest since April 2009.

U.S. crude production was 9.12 million barrels a day in the seven days ended Dec. 26 after reaching 9.14 million two weeks earlier, the highest in weekly government data since 1983.

Global Production

Crude stockpiles in the U.S. were 385.5 million barrels as of Dec. 26, while gasoline suppliesincreased to 229 million, the highest seasonal levels in weekly Energy Information Administration data.

Russian oil production rose 0.3 percent in December to a post-Soviet record of 10.667 million barrels a day, according to preliminary data e-mailed by CDU-TEK, part of the Energy Ministry. Iraq exported 2.94 million barrels a day in December, the most since the 1980s, Oil Ministry spokesman Asim Jihad said.

“The consistent production around the world is overwhelming demand,” Michael Hiley, head of energy OTC at LPS Partners Inc. in New York, said yesterday. “It looks like prices will keep making new lows.”

The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which have unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

Saudi Prices

“Everybody is producing as much oil as they can,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “With the shale revolution flooding the market with oil and OPEC not cutting at all, the market is fundamentally weak.”

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, produced 30.24 million barrels a day in December, according to a Bloomberg survey. The group decided to maintain its output quota at 30 million barrels a day at a Nov. 27 meeting in Vienna.

Saudi Arabia, the world’s biggest oil exporter, raised its price yesterday for February deliveries of Arab Light to Asia from the biggest discount in at least 14 years. The price cut last month was followed by Iraq, Kuwait and Iran, prompting speculation that Middle East producers were protecting market share.

“The Saudis refuse to cut and lose market share, to prop up prices for the rest of the world,” Hiley said. “As the price goes down, it doesn’t mean production goes away.”

Natural Gas

Net-long positions for WTI dropped by 7,551 to 199,388 contracts of futures and options in the week ended Dec. 30, according to the CFTC. Long positions fell 0.4 percent to 259,613 and short bets climbed to 60,225.

In other markets, bearish wagers on U.S. ultra low sulfur diesel increased 11 percent to 27,087 contracts as the fuel sank 6.1 percent to $1.8688 a gallon.

Wagers on U.S. natural gas swung to net short position of 12,130 contracts in the week ended Dec. 30 from net long of 3,648 in the previous week. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Nymex natural gas dropped 2.4 percent to $3.094 per million British thermal units.

Bullish bets on gasoline tumbled 10 percent to 44,226. Futures slumped 7.4 percent to $1.4537 a gallon on Nymex in the reporting period.

Regular retail gasoline dropped 0.5 cent to an average of $2.194 yesterday, the cheapest since May 2009, according to Heathrow, Florida-based AAA, the country’s largest motoring group. U.S. drivers may save as much as $75 billion at gasoline pumps in 2015, AAA said on Dec. 31.

“People realized how bearish the fundamentals are,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s probably the worst of times for hedge funds. For drivers, it’s probably the best of times.”

 

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.

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 website  Http://www.youroffshoremoney.com

 

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

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  ( your portfolio) 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.

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. After successfully 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 website  Http://www.youroffshoremoney.com

OIL Declines – (as we forecast) – Expect ” more of the same “

Oil Falls to 5 1/2-Year Low as Russia, Iraq Boost Output

Oil dropped to the lowest since May 2009 amid growing supply from Russia and Iraq and signs of manufacturing weakness in Europe and China.

Futures headed for a sixth weekly loss in New York and London. Oil output in Russia and Iraq surged to the highest level in decades in December, according to data from both countries’ governments. Euro-area factory output expanded less than initially estimated in December. A manufacturing gauge in China, the world’s second-largest oil consumer, fell to the weakest level in 18 months, government data showed yesterday.

Prices slumped 46 percent in New York in 2014, the steepest drop in six years and second-worst since trading began in 1983, as U.S. producers and the Organization of Petroleum Exporting Countries ceded no ground in their battle for market share. OPEC pumped above its quota for a seventh month in December even as U.S. output expanded to the highest in more than three decades, according to data compiled by Bloomberg.

Oil Prices

“We’re seeing more of the same,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The Chinese and European PMI figures signal weaker demand, while there’s ever-increasing supply. Nobody is cutting back on output and now the Russians are posting post-Soviet production highs.”

Brent for February settlement fell 53 cents, or 0.9 percent, to $56.80 a barrel on the London-based ICE Futures Europe exchange at 11:31 a.m. It declined to $55.48, the lowest since May 7, 2009. Volume for all futures traded was 30 percent below the 100-day average. The European benchmark slumped 48 percent last year, the second-biggest annual loss on record behind a 51 percent tumble in the 2008 financial crisis. Brent traded at of $3.24 premium to WTI.

West Texas Intermediate for February delivery rose 32 cents, or 0.6 percent, to $53.59 a barrel on the New York Mercantile Exchange after dropping to $52.03, the least since May 1, 2009. Volume for all futures traded was 34 percent below the 100-day average. Prices are down 3.2 percent this week.

The surge in oil supplies in Iraq and Russia signaled no respite in early 2015 from the glut that’s pushed crude prices lower. The two countries provided 15 percent of world oil supply in November, according to the International Energy Agency.

Russian oil output rose 0.3 percent in December to a post-Soviet record of 10.667 million barrels a day, according to preliminary data e-mailed today by CDU-TEK, part of the Energy Ministry. Iraq exported 2.94 million barrels a day in December, the most since the 1980s, Oil Ministry spokesmanAsim Jihad said.

The final two burning crude-storage tanks were extinguished at Es Sider, Libya’s biggest oil port, National Oil Corp. spokesman Mohammed Elharari said by phone from Tripoli. The fires started Dec. 25, when Islamist militants shot rockets at the port in a second attempt to capture it.

OPEC Production

OPEC’s production slid by 122,000 barrels a day from November to 30.24 million last month, led by losses in Saudi Arabia, Libya and the United Arab Emirates, a Bloomberg survey of companies, producers and analysts shows. The 12-member group has a collective target of 30 million a day.

U.S. oil production averaged 9.12 million barrels a day in the week ended Dec. 26, according to the Energy Information Administration. Output increased to 9.14 million a day through Dec. 12, the most in weekly data that started in January 1983.

Inventories of gasoline surged in the week ended Dec. 26 as production climbed to a record, EIA data showed.

Gasoline futures declined 3.14 cents, or 2.1 percent, to $1.4407 a gallon in New York. Diesel decreased 3.18 cents, or 1.7 percent, to $1.8018.

Regular gasoline at U.S. pumps fell to the lowest level since May 2010. The average retail price slipped 0.9 cent to $2.231 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.

Sector will respond to the lower commodity price but their share price will decline – example;

NEW YORK (MarketWatch) — Linn Energy LLC LINE, +15.20% said Friday it has approved a 2015 budget that cuts oil and natural gas capital spending to $730 million from about $1.55 billion in 2014, the latest company to respond to the recent slide in crude oil prices. “After careful consideration, LINN’s senior management proposed and the Board of Directors approved a 2015 budget that contemplates a significantly lower current crude oil price than in 2014,” Chief Executive Mark Ellis said in a statement. The budget assumes an unhedged NYMEX price of $60 a barrel. The company is cutting its annual dividend to $1.25 a share from $2.90, he said. Linn Energy has signed a non-binding letter of intent with GSO Capital Partners LP, the credit arm of The Blackstone Group LP BX, +0.56% to fund oil and gas development. GSO has agreed to commit up to $500 million to fund drilling programs. Shares were down 6.2% in premarket trade.

Three weeks after Chairman Steve Schwarzman said it’s going to be the best time in years to invest in energy, Blackstone Group LP (BX) is putting money to work.

Blackstone’s $70 billion credit arm, GSO Capital Partners, committed as much as $500 million to fund oil and natural gas development for Linn Energy LLC (LINE), according to a statement today. The Houston-based energy producer rose as much as 18 percent after the announcement, after losing almost 70 percent of its value in six months as crude prices plummeted.

Private equity firms, while taking steps to shore up energy companies in their portfolios, are hunting for investments in oil and gas producers after Brent tumbled more than 50 percent since June. Energy presents the best opportunity for Blackstone in many years, especially for the New York-based firm’s credit unit, Schwarzman said at a Dec. 11 conference.

“There are a lot of people who borrowed a lot of money based on higher price levels, and they’re going to need more capital,” he said at the conference in New York. “There are going to be restructurings to do. There’s going to be a fallout. It’s going to be one of the best opportunities we’ve had in many, many years.”

Photographer: Patrick T. Fallon/Bloomberg

Steve Schwarzman, co-founder, chairman and chief executive officer of Blackstone Group

Under the five-year agreement with Linn, Blackstone would fund drilling programs at locations selected by Linn for an 85 percent working interest in the wells, according to the statement. If the projects produce a 15 percent annualized return for Blackstone, its stake will drop to 5 percent.

Oil ‘Crisis’

The plunge in oil may usher in a new era for investing in distressed debt, according to Howard Marks, the billionaire co-founder of Oaktree Capital Group LLC. In a letter to clients last month, Marks said his Los Angeles-based firm is becoming more aggressive as companies that borrowed heavily in the low-interest rate environment now come under pressure.

“We knew great buying opportunities wouldn’t arrive until a negative ‘igniter’ caused the tide to go out, exposing the debt’s weaknesses,” Marks wrote. “The current oil crisis is an example of something with the potential to grow into that role.”

Linn, a master-limited partnership, is the latest producer to cut spending on expectations of lower oil and gas prices. The company said today it expects oil to average $60 a barrel in 2015, although it has hedged about 70 percent of its expected output at higher prices. Brent fell 1.9 percent to $56.23 a barrel at 2:38 p.m. in New York.

Active Developer

The agreement with Blackstone, which is non-binding, is “designed to allow Linn to be an active developer of assets with growth capital,” Mark Ellis, Linn’s chief executive officer, said in the statement. “This agreement creates a dynamic alliance.”

The company’s shares rose 13 percent to $11.44 at 2:47 p.m. in New York.

Please see our recent articles published this week on  2015 Energy Sector Forecasts ( archived) 

 

Natural Gas Investors In Denial

Natural Gas Declines After Stockpiles Drop Less Than Forecast

” Investors have to face this ” new normal”, Jack A.Bass

The Energy Information Administration said stockpiles dropped 26 billion cubic feet in the week ended Dec. 26 to 3.22 trillion. Analysts estimated a decline of 34 billion while a survey of Bloomberg users predicted a withdrawal of 30 billion.

“It’s another bearish withdrawal in a series of bearish withdrawals,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. “The last nine months we have been oversupplied. The bearish fundamentals already had a head start and they are supercharged by mild weather.”

Natural gas for February delivery slid 8.1 cents, or 2.6 percent, to $3.013 per million British thermal units at 12:04 p.m. on the New York Mercantile Exchange. Gas traded at $3.041 before the storage number was released at noon. Volume was 50 percent below the 100-day average. Prices are down 29 percent this year, heading for the first annual drop since 2011.

The EIA released the supply report a day early because of the New Year’s holiday.

The storage withdrawal was the smallest for the last week of the year since 2005. Supplies fell 108 billion the same week last year while the five-year average decline is 114 billion.

A deficit to the five-year norm narrowed to 2.5 percent from 4.9 percent the previous week. Supplies were 7.8 percent above year-earlier inventories, up from a surplus of 4.8 percent in last week’s report.

“The market keeps coming under pressure without the seasonal demand support,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

Heating Season

Stockpiles may end the heating season in March, when storage levels bottom out as the peak-demand period ends, at 1.6 trillion cubic feet, double year-earlier levels, McGillian said.

This December is about 8.3 percent warmer than a year earlier based on natural-gas weighted heating degree days, Matt Rogers, president of Commodity Weather Group LLC, said in an e-mail. The number of heating degree days next month may drop to 975, down 6.7 percent from January 2014, he said.

Weather models indicate a stronger cold front pushing across the Midwest and Northeast next week before giving way to more seasonal readings on Jan. 10 through Jan. 14, a Commodity Weather report today showed. The rest of the U.S. will see mostly average or higher readings during the period.

New York

Manhattan’s low on Jan. 9 will drop to 19 degrees Fahrenheit (minus 7 Celsius), 8 below normal, before rising three days later to 35, according to AccuWeather Inc. in State College,Pennsylvania. About 49 percent of U.S. households use gas for heating.

Marketed gas production will expand in 2015 for the 10th consecutive year as new wells come online at shale deposits such as the Marcellus and the Utica in the East, the EIA said in its Dec. 9 Short-Term Energy Outlook. Output will rise 3.1 percent to 76.68 billion cubic feet a day, a record for the fifth straight year.

Speculators cut net-long positions in four benchmark gas contracts by 23,613, or 87 percent, to 3,648 in the week ended Dec. 23, the least since the market was net short in January 2012, a U.S. Commodity Futures Trading Commission report yesterday showed.

Long-only positions fell 4.2 percent to the least since November 2011, while shorts rose 3 percent.

“Right now we have more to go in this selloff; that is what the record amount of gas is doing to the U.S.” said McGillian.

 

 

Get Out Of Natural Gas and Oil Stocks – worse to come – Updated Dec.25

In this Dec. 17, 2014 photo, workers tend to oil pump jacks behind a natural gas flare near Watford City, N.D. Natural gas, the nation's most prevalent heating fuel, is getting cheaper just as winter is arriving because of mild temperatures and plentiful supplies. (AP Photo/Eric Gay)

Natural gas, the nation’s most prevalent heating fuel, is getting cheaper just as winter is arriving because of mild temperatures and plentiful supplies.

The price of natural gas has dropped 29 percent in a month, to $3.17 per 1,000 cubic feet on Tuesday from nearly $4.50 in late November. That’s a steep drop even for a fuel notorious for volatile price swings.

The lower prices are expected to linger and could reduce electricity prices and heating bills in the coming months. Natural gas is used by half of the nation’s households for heating and to generate 26 percent of the nation’s electricity.

Natural gas often rises as winter weather approaches, and a frigid November sent the price higher. But December warmed up, and temperatures for the rest of the winter are expected to be close to normal.

.

Oil falls, near $60 on supply glut, strong dollar

A customer waits as an employee of state-owned Pertamina refuels his car at its petrol station in Jakarta

In 2013 and 2014 a theme of my speeches to investors has been the problems facing exploration and production companies in natural gas . Then I projected that companies unprofitable at $4.00 would be in difficulty – today it is a crisis – expect bankruptcies and mergers to be the story in 2015..

Natural gas futures slid in New York  Thursday Dec.24 -to the lowest level since September 2012 after a government report showed U.S. inventories fell last week by less than forecast.

The Energy Information Administration said stockpiles dropped 49 billion cubic feet in the week ended Dec. 19 to 3.246 trillion. Analysts estimated a decline of 63 billion while a survey of Bloomberg users predicted a withdrawal of 59 billion.

“It’s so small because it was warm,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. “We expected some power generators to switch more to natural gas because of lower prices, but we didn’t see that. Meanwhile, the market continues to be flooded by production.”

Brent oil fell on Wednesday ( Dec .23), trading around $60 per barrel weighed down by strong supply in the United States and a rising dollar.

Brent for February delivery was down $1.50 to $60.19 at 1327 GMT after gaining $1.58 on Tuesday. It hit a low of $59.93 earlier in the session.

U.S. crude was down $1.17 to $55.95 a barrel, after closing $1.86 higher in the previous session.

Trade was thin as many in the European and U.S. market were off for the Christmas break.

Data from the American Petroleum Institute (API), an industry group, showed U.S. crude stocks rose by 5.4 million barrels in the week ended Dec. 19. Analysts had expected a drop of 2.3 million barrels.

In Europe, gasoline stocks reached their highest in five months in the Amsterdam-Rotterdam-Antwerp oil hub, data from PJK International showed.

A supply glut in the United States and elsewhere has helped push oil down some 46 percent since it reached this year’s peak above $115 per barrel in June.

“There was a large build in the API data and there are high stocks for now, although strong U.S. GDP growth should help demand,” said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.

The dollar index stayed close to its highest since April 2006 after a revised third-quarter U.S. gross domestic product report surprised with the fastest growth in 11 years.

A strong dollar makes commodities priced in the greenback more expensive for holders of other currencies.

Now investors face more volatile markets and securities that no longer move in lock-step. At the same time, investors must cope withslower growth in China, minuscule growth in the euro area and negative growth in Japan.

Such widespread sluggish demand — along with ample supplies of oil and most everything else — is the reason commodity prices are falling. They have been since early 2011, but many people failed to notice until recently, when crude oil prices nosedived.

Normally, less demand and a supply glut would lead the Organization of Petroleum Exporting Countries, beginning with Saudi Arabia, to cut production. As the de facto cartel leader, the Saudis would often reduce output to prevent supply increases from driving down prices.

Of course, this also cost the Saudis market share and encouraged cheating by OPEC members. Saudi leaders must grind their teeth over the last decade’s unchanged demand for OPEC oil, while all the global growth has been among non-OPEC suppliers, principally in North America.

The Fools In Chesapeake ( CHK)

Yesterday Chesapeake announced it would spend a billion dollars on stock buy backs – this is foolishness bordering on gross mismanagement – like the captain of the Titanic rearranging the deck chairs. Companies must husband their funds – the best will survive and cherry pick assets from corpses – to mix as many metaphors as I can.

No Glory for Prophets

My best call in 2014 was to reverse on Quicksilver ( KWK) and sell out at $ 2.50 – it is now down a further 90 % to pennies.Many more companies will follow – don’t hold on for a recovery. That sell call earned me the most email – all negative- for the year and no thanks from investors.

The millions of dollars – per well – now at work -have to complete their drilling and this will bring on additional natural gas supplies in the U.S. that in turn will pressure oil prices well into 2015. LNG exports from the U.S. ( starting in about 12 months by Cheniere at the gulf coast in the U.S. ( and projects in Australia) will pressure international prices and also depress oil.

Planned Australian LNG projects threatened by energy price crash

Woodside's Pluto LNG Loading jetty, Pluto LNG onshore gas plant.

Handout/ WoodsideWoodside’s Pluto LNG Loading jetty, Pluto LNG onshore gas plant.

Planned Australian liquefied natural gas (LNG) export projects, including the costly Scarborough floating vessel, are at risk as sinking energy prices make investments unviable, analysts said.

A nearly 50% slump in Asian LNG prices this year has pressured any project without a Final Investment Decision (FID). Just last week, Woodside Petroleum Ltd  delayed the FID for its US$40-billion Browse floating project with Royal Dutch Shell and BP.

The next cab off that rank could be ExxonMobil and BHP Billiton’s  US$10-billion Scarborough project.

Scarborough will be “commercially challenging” to justify given a raft of competing LNG projects, said Noel Tomnay, global gas and LNG research head at Wood Mackenzie.

“China’s growing pains as well as slugs of LNG coming into the market: that’s a fairly wicked combination. It would take a very brave soul to ignore the prevailing market.”
BHP and ExxonMobil were not available for comment.

The future for other Australian LNG projects without FID is also uncertain.

GDF Suez and Santos are seeking alternatives for their Bonaparte floating project, Woodside has indefinitely delayed its Sunrise project, while Shell has yet to commit to its Arrow project where it has cut hundreds of positions.

Coal Will Continue To Contract

Coal is going to be used for the next 50 years – but high sulphur mines will close and electrical generation will rely on cheap natural gas . Stay away from trying to pick the bottom in the sector.

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

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.

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