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The Connection Between Oil Prices, Debt Levels, and Interest Rates

If oil is “just another commodity,” then there shouldn’t be any connection between oil prices, debt levels, interest rates, and total rates of return. But there clearly is a connection. On one hand,  spikes in oil prices are connected with recessions . According to economist James Hamilton,  ten out of eleven post-World War II recessions have been associated with spikes in oil prices . There also is a logical reason for oil price spikes to be associated with recession: oil is used in making and transporting food, and in commuting to work. These are necessities for most people. If these costs rise, there is a need to cut back on non-essential goods, leading to layoffs in discretionary sectors, and thus recession. On the other hand, the manipulation of interest rates and the addition of governmental debt (by spending more than is collected in tax dollars) are the primary ways […]

Posted On : Published By : Tom Whipple
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WTI Oil Falls From One-Month High on U.S. Data

West Texas Intermediate crude dropped from a one-month high as more Americans than projected filed applications for unemployment benefits last week. Brent slid. WTI fell 0.3 percent after the Labor Department reported jobless claims increased to 326,000 in the week ended May 17, more than the 310,000 median forecast by economists surveyed by Bloomberg. It advanced $1.63 yesterday on a government report that U.S. supplies tumbled as imports dropped. Brent decreased less than WTI on stronger Chinese manufacturing. “The rally is looking a little overextended, and unless we continue to see good economic data, the market is going to meet greater and greater resistance,” Gene McGillian , an analyst and broker at Tradition Energy in Stamford , Connecticut , said by phone. “Does the market have enough momentum to go up without another week of sizable drawdowns? I am not convinced.” WTI for July delivery slid 33 cents to […]

Posted On : Published By : Tom Whipple
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Oil Futures Dip, Gasoline Climbs Ahead of Holiday Weekend

Oil futures slipped Thursday as traders who had bet on higher prices locked in profits after Wednesday’s rally, while gasoline futures hit a three-week high on expectations of rising demand. Light, sweet crude for July delivery settled down 33 cents, or 0.3%, at $103.74 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange fell 19 cents, or 0.2%, to $110.36 a barrel. Oil prices rose to a one-month high Wednesday after weekly government data showed that U.S. oil supplies unexpectedly fell by 7.2 million barrels last week. The decline was largely due to a drop in imports to the lowest weekly level since 1997. However, domestic oil supplies are just 2% below the record high reached April 25. "We had a pretty incredible run this week," said Phil Flynn, analyst at Price Futures Group in Chicago. "We’re really catching […]

Posted On : Published By : Tom Whipple
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Natural-Gas Futures Near a 7-Week Low

Natural-gas futures sank to near a seven-week low Thursday on news of the year’s largest stockpile addition. Natural gas for June delivery lost 11.4 cents, or 2.6%, to close at $4.359 a million British thermal units on the New York Mercantile Exchange. Two days of losses have pushed down futures to within 0.1 cent of the seven-week low closing price they hit May 13. Prices have been falling as surplus natural gas has steadily increased from an 11-year low, a trend that is still strengthening, federal analysts said Thursday. Producers added 106 billion cubic feet of gas to storage for the week ended May 16, the U.S. Energy Information Administration said. That is 3 bcf more than what 21 traders, brokers and analysts forecasted in a Wall Street Journal survey. It was also about 16 bcf more than what usually gets added to storage at […]

Posted On : Published By : Tom Whipple
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Despite Bloody Conflict, Iraq's Leader Looks Likely To Keep Power

Iraq’s election didn’t make a huge splash in the U.S., but the results of the April 30 vote were released this week, and the outcome has important ramifications for Iraq and the wider region. Prime Minister Nouri al-Maliki’s party came out way ahead. Iraq has faded from the American radar, but it saw nearly a decade of U.S. military operations. And it’s sandwiched between Syria, where a civil war is raging, and Iran, where nuclear negotiations are at a critical juncture. The international community has repeatedly warned that if Iraq can’t reconcile its ethnic and sectarian differences, the country could fracture and exacerbate these regional tensions. Maliki, who continues to have U.S. support, seems poised to hold onto the job he’s had for the past eight years, even though there are many who doubt that he can bring about reconciliation. He is a Shiite Islamist politician, and in recent […]

Posted On : Published By : Tom Whipple
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Despite Bloody Conflict, Iraq’s Leader Looks Likely To Keep Power

Iraq’s election didn’t make a huge splash in the U.S., but the results of the April 30 vote were released this week, and the outcome has important ramifications for Iraq and the wider region. Prime Minister Nouri al-Maliki’s party came out way ahead. Iraq has faded from the American radar, but it saw nearly a decade of U.S. military operations. And it’s sandwiched between Syria, where a civil war is raging, and Iran, where nuclear negotiations are at a critical juncture. The international community has repeatedly warned that if Iraq can’t reconcile its ethnic and sectarian differences, the country could fracture and exacerbate these regional tensions. Maliki, who continues to have U.S. support, seems poised to hold onto the job he’s had for the past eight years, even though there are many who doubt that he can bring about reconciliation. He is a Shiite Islamist politician, and in recent […]

Posted On : Published By : Tom Whipple
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Iraqi Kurdistan defies Baghdad to load first pipeline oil sale

Iraqi Kurdistan startedloading oil from its new pipeline for shipment from a Turkishport on Thursday, defying the Baghdad government, which claimssole authority over Iraqi crude and declares any independentlysold oil as ‘smuggled’. The cargo of 1 million barrels of crude oil was being loadedon a tanker in the Mediterranean port of Ceyhan, Turkish EnergyMinister Taner Yildiz told Reuters on Thursday. "Loading will be completed today," Yildiz said, declining toname the buyer. The sale is likely to infuriate Baghdad, which has been atloggerheads with the autonomous Kurdish region over the sharingof oil revenues, and denounced Turkey’s courtship of the Kurds,warning that steps towards Kurdish economic independence […]

Posted On : Published By : Tom Whipple
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Sinopec Advances Iran Oil-Field Plans Despite Canceled China Deal

Sinopec, is pushing to start a new phase in an Iranian oil-field development, a plan Iran says it is likely to approve, according to people familiar with the project. The push is part of a broader attempt by China and Iran to mend fences after the cancellation of a separate project. Chinese state-owned company Sinopec is taking steps to start development activities in the second phase of the Yadavaran oil field, which is set to start next year. Delegates from Sinopec are due to travel to Tehran next month to discuss the plans, according to two people familiar with the company’s Iran operations. The topics will include ordering equipment such as pipes. Sinopec didn’t return a request for comment. In late April, Iran with state-owned China National Petroleum Corp. following repeated delays at a giant oil-field project. The cancellation triggered speculation among Iran oil experts […]

Posted On : Published By : Tom Whipple
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Deadly attacks strike Shia religious pilgrims in Baghdad

Blasts are the latest in a surge of nationwide bloodshed that has left more than 3,600 people dead this year in Iraq Three separate attacks targeting Shia Muslim pilgrims in Baghdad on Thursday left at least 31 people dead and 61 others injured ahead of a major religious holiday, police sources told Al Jazeera.  The attackers defied a shutdown of major roadways for Shia religious faithful, who were heading to the Imam Kadhim shrine in Kadimiyah in western Baghdad to commemorate the death of the Shia saint in 799 AD. The two-day rituals are due to climax on Saturday and Sunday. Among the attacks, police said a suicide bomber targeted Shia pilgrims at a bus stop as they gathered to head toward a religious shrine in the Kadimiyah neighborhood. In the Mansour area, a parked car exploded as pilgrims stopped to rest before making their way on a highway […]

Posted On : Published By : Tom Whipple
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Iraqi Oil Sector Dependent On Negotiations With Kurds, Turkey; Al-Maliki Electorial Win Not As Critical To Energy Sector

Iraqi Prime Minister Nouri al-Maliki’s apparent success in gaining a third term in office is a move that could escalate tensions with Sunni militant groups in the country but will have little effect on the country’s massive oil sector — provided al-Maliki handles Iraq’s Kurdish leaders carefully. The Iraqi electoral commission announced Monday that al-Maliki’s State of Law bloc had won the most seats in the April 30 parliamentary elections, falling short of a majority. This week Iraqi officials have struggled to confront how the country will move forward politically. While the country braces for what is expected to be a tumultuous future in forming a new government, experts say the country will most likely not suffer from investment shortfalls in the oil sector — its main source of revenue. Rather, it is the sector’s internal ability to increase capacity and technical expertise that will determine its fate, experts say. […]

Posted On : Published By : Tom Whipple