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Major Firms Are Saying the Stage Is Set for Another Crisis in the Bond Market

An accident could be on its way. Silver coins are melted in order to be re-used again at the Mexican Mint, or Casa de Moneda, in San Luis Potosi, Mexico, on Thursday, Feb. 5, 2015. Companies in Mexico are on pace to sell the most peso-denominated debt in 14 years as they capitalize on a tumble in benchmark borrowing costs. (Bloomberg) — The stage is set for another financial crisis to unravel years of relative calm in debt markets. At least that’s how firms from UBS Group AG to Invesco Ltd. see it. Here’s why: Prices in the world’s biggest bond market are swinging and the plunge in oil is sinking the economies of nations from Venezuela to Nigeria. To top all that off, the fundamental structure of the bond market has changed in a way that makes it difficult for regulators to gauge exactly where risks are building. […]

Posted On : Published By : Tom Whipple
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Supply Minus Demand, Explained

I recently posted a graph on supply versus demand balances.  This has drawn significant interest, as it stands in stark contrast to the forecasts of all the agencies, OPEC, and the major forecasting firms. In this post, I will discuss the underpinnings. Demand World Oil Demand (All Petroleum Liquids) Source: Respective monthly reports of the agencies The major agencies, the US Energy Information Administration (EIA) and the European International Energy Agency (IEA), as well as OPEC, expect demand to increase moderately in 2015, up 1.0 to 1.6 mbpd (million barrels per day), with an average gain of  1.2 mbpd.  This represents a middling year, better than 2014, but certainly unexceptional in recent times.  Given that oil prices have fallen by more than half, the agencies must consider price elasticity of demand to be something close to zero.  According to these views, cheap oil does not make people buy more of it. This was […]

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Saudi Aramco cancels rig contract

Sign up for our daily Energy Newsletter Saudi Aramco suspends rig contract with U.S. company Hercules Offshore. (UPI/Shutterstock/James Jones Jr.) HOUSTON, Feb. 26 (UPI) — U.S. rig company Hercules Offshore said Thursday one of its drilling contracts with the main oil company in Saudi Arabia was terminated. Saudi Aramco cancelled a contract to lease the Hercules 261 rig, effective March 27. The company said it’s been in talks with the Saudi oil company to reduce the day rates for two other rigs, Hercules 262 and Hercules 266. "The company has not received a notice of termination from Saudi Aramco with respect to these rigs," Hercules said in a statement. Hercules 261 is listed in the company’s fleet status update as having a day-rate around $135,000. Rigs 262 and 266 have a combined average day rate of around $118,000. There was no update on the status of rig contracts with […]

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Oil sector successful, Iran says

Sign up for our daily Energy Newsletter Secretary of State John Kerry testifies during a House Foreign Affairs Committee hearing on progress made with Iranian nuclear negotiations. Photo by UPI/Kevin Dietsch TEHRAN, Feb. 26 (UPI) — Most sectors of the Iranian economy are performing well, with the oil sector in particular performing as expected, the country’s deputy oil minister said. Iranian budgetary planners said they’re taking the steps necessary to reduce the leverage of oil revenue in the nation’s economy. Deputy Oil Minister Mansour Moazzami told the Oil Ministry’s official news website, Shana, "positive" developments were emerging in most sectors of the Iranian economy. "Our ministry successfully fulfilled its tasks related to increasing production capacity of oil and gas and could provide feedstock and fuel needs of large industries of the country without interruption," he said in an interview published Wednesday. Iranian President Hassan Rouhani this week claimed an […]

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Algeria: Sonatrach – Three Oil Fields Discovered Since Early 2015

Oran — Three oil fields were discovered by the national hydrocarbon group Sonatrach since the beginning of 2015, said Wednesday in Oran Chief Executive Officer of the oil company Said Sahnoun. "Sonatrach discovered for the year 2015, on its own account, three oil fields of extremely important quality," Sahnoun told APS on the sidelines of the festivities commemorating the 40th anniversary of the nationalization of hydrocarbons, hosted by the petrochemical zone of Arzew. The first oil discovery was made in the region of Touggourt while the second in Ghardaia. The third gas field was discovered in El Bayadh, said the official. These discoveries are being assessed by Sonatrach, followed by an appraisal programme that will start very shortly, added the source. Sahnoun said that the flows are "extremely encouraging ," adding that they range between 3,000 and 4,000 barrels/day.

Posted On : Published By : Tom Whipple
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TEPCO Admits Delaying Report Of Major Radiation Leak Into The Pacific Ocean For 10 Months

TEPCO Admits Delaying Report Of Major Radiation Leak Into The Pacific Ocean For 10 Months thumbnail While faith in Japanese ‘economics’ is starting to falter (borne out by the split in the BoJ and endless macro data disappointments) , trust in TEPCO and its governmental operators must be about to hit a new record low. Having promised and given up on the ice-wall strategy to stop radioactive water leaking into the ocean, Bloomberg reports TEPCO officials have admitted that it’s investigating the cause of a spike in radiation levels (23,000 becquerels/liter vs the legal limit of 90) in drainage water that it believes subsequently leaked into the Pacific ocean from the wrecked Fukushima nuclear power plant. The bigger problem, as NBC reports, TEPCO failed to report the leak for 10 months! The radioactivity increase was ‘reported’ on Sunday, the company said in an e-mail yesterday, and as Bloomberg reports […]

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Venezuela Is Running Out of Toilet Paper

Photo by Federico Parra/AFP/Getty Images An employee waits to unload valuable merchandise while people line up outside a supermarket in Caracas on Jan. 20, 2015. Cash-strapped Venezuela, which has the second-largest oil reserves in the world, after Saudi Arabia, and relies on oil for 95 percent of its export revenue, has been hit particularly hard by plummeting global prices. Still, it’s hard not to read a commodity-sharing deal proposed by nearby Trinidad and Tobago’s prime minister as anything but humiliating.  Joshua Keating Joshua Keating is a staff writer at Slate focusing on international affairs.  At a news conference Tuesday, Prime Minister Kamla Persad-Bissessar suggested that her government would “purchase goods identified by the Government of Venezuela from T&T’s manufacturers, such as tissue paper, gasoline, and parts for machinery,” and trade them for Venezuelan oil. It’s not clear if the Venezuelans are open to the deal, but they certainly need […]

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China’s Coal Consumption and Output Fell Last Year

ENLARGE Workers unload coal at a processing station in Tangxian, China. Waning demand in China is pushing down global coal prices. Photo: Associated Press BEIJING—China’s coal consumption and production fell last year for the first time in 14 years as a slowing economy and cleaner energy policies help Beijing wean the world’s largest energy consumer off coal dependence. Data released by the government Thursday show China is using more crude oil and natural gas. Coal output last year fell 2.5% to 3.87 billion metric tons compared with a year before, while coal consumption fell 2.9% in the period, according to the National Bureau of Statistics. The decrease puts China at or nearer an inflection point known as “peak coal”—the long-term decline in consumption of the mineral after decades of heavy use. The shift is already having knock-on effects with coal prices world-wide falling to six-year lows and many Chinese […]

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Offshore Driller Ensco To Shut Down Rig, Slashes Dividend

Feb 26 (Reuters) – Offshore driller Ensco Plc said it would shut down an ultra-deepwater rig as demand dwindles due to a slump in crude prices, a day after it slashed its quarterly dividend by 80 percent. The company’s shares fell nearly 8 percent to their lowest in six years. Ensco reported a fourth-quarter loss on Wednesday, compared with year-ago profit, hurt mainly by a $3 billion goodwill impairment charge. Rival Transocean Ltd also said on Wednesday it wrote down the value of its contract drilling business by $992 million in the December quarter, and has no goodwill remaining on its balance sheet. Ensco will shut down or cold stack a rig by mid 2015, Chief Executive Carl Trowell said on a conference call with analysts on Thursday. The move will cost the company about $12 million over the first and second quarters. Ensco, which is looking to sell […]

Posted On : Published By : Tom Whipple