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Ruble’s World-Leading Rally Set to Fizzle as Oil Rebound Falters

(Bloomberg) — The rally that’s made the ruble the best-performing major currency in the past month is coming to an end as oil slides to a six-week low. The ruble is about 10 percent overvalued after gaining 2.5 percent since Feb. 17, even as crude dropped 16 percent, according to TKB BNP Paribas Investment Partners. There’s a 61 percent chance of the Russian currency weakening by such an amount by June 30, options data compiled by Bloomberg show. With a fragile cease-fire holding in Ukraine, investor attention is back on the drop in oil, after crude’s gains underpinned a recovery in Russian assets this year. The ruble’s advance after a 46 percent tumble in 2014 has allowed policy makers to reduce interest rates twice and is stoking forecasts for more easing as it drives flows into the country’s bonds. “The ruble is overvalued considering the oil price,” Konstantin Nemnov, […]

Posted On : Published By : Tom Whipple
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Winners And Losers At The End Of The Era of The $100 Barrel

What if the world never again sees sustained prices for oil over $100 per barrel? What if—absent exogenous black-swan events like major wars—oil never sells for much more than $50 per barrel for decades into the future? Who wins? Who loses? The short answers: The winners are consumers everywhere, and American business that produce oil. The losers are nations that are oil monocultures, and businesses or policies everywhere anchored in expensive oil. Is such a scenario likely? Or is the current price collapse a kind of inverse bubble? History is often meaningfully predictive. In the roughly 150-year history of oil prices there have been just three short periods where oil sold for over $50 per barrel (measured in inflation-adjusted terms). It happened first for about 20 years after 1860 at the dawn of the oil age, followed by nearly a century with oil cycling around $20. The second price […]

Posted On : Published By : Tom Whipple
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The world’s population continues to explode!

The world’s population continues to explode! thumbnail Feeding the World Basic survival for us humans and just about everything else living; more and more investment funds are focusing on food and water production – why? What are the facts? Starting with water; estimates suggest that the world population will increase by 40 percent to 9 billion by 2050. As their purchasing power increases, developing countries like China and India are consuming more and more goods that require water for their production. Meat, for example, can take up to 10 times more water to produce than cereal crops. Several studies have concluded that demand for water is increasing at twice the rate as the world’s population. Water is one of the strategic resources of the 21st century, along with food and energy resources. Increased investment in water infrastructure and water treatment will be necessary in order to meet higher demand. […]

Posted On : Published By : Tom Whipple
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Rising energy prices will challenge western way of life

Rising energy prices will challenge western way of life thumbnail A little-known Ministry of Defence (MoD) report published earlier this year warns that converging global trends will dramatically affect UK economic prosperity through to 2040. The report says that depletion of cheap conventional “easy oil”, along with shortages of food and water due to climate change and population growth, will sustain rocketing energy prices. Long-term price spikes are likely to lead to a long recession in Western economies, fuelling internal unrest and the rise of nationalist movements. The report departs significantly from the conservative and relatively optimistic scenarios officially adopted by the British government, as exemplified in the coalition’s new Energy Security Strategy published in November last year by the Department of Energy and Climate Change (Decc). Peak “easy oil” The report predicts that “the imminent passing of the point of peak ‘easy oil’ will mean that hydrocarbon-based energy […]

Posted On : Published By : Tom Whipple
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The gold:oil ratio is speaking

As a believer in the power of diversification and inflation protection a basket of commodities can provide in a passive index framework, it is hard to grasp how much investors love oil and gold. It must be that oil is the biggest, most economically significant commodity, and gold is the shiniest, most prized metal – arguably a currency in its own right. From the largest pensions in the world to the smallest mom-and-pop retail investors, oil and gold dominate the conversation. In Taipei this week, gold and oil were louder than ever. It is an exciting time for greater China as the first commodity futures exchange-traded funds are soon to be launched. This opens the possibility for investors in this region to get access more easily to the commodities they love, but for the commodity lady that loves passive, singling out gold and oil is a difficult task. Besides […]

Posted On : Published By : Tom Whipple
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Oil Prices Fall to Six-Year Low

The benchmark U.S. oil price slumped to a six-year low on Monday on fresh signs that crude supplies are swamping the market. The selloff vindicates the many Wall Street analysts and traders who were skeptical of February’s sharp rally, which was driven by a decline in drilling activity and higher fuel demand spurred by a cold snap in the U.S. The world—and the U.S. in particular—remains awash in crude, investors and analysts say. In the near term, at least, rising inventories and a robust pace of production will continue to weigh on oil prices, which have plunged by 52% in the past six months and 59% since a peak in late June. Crude-oil futures slid 96 cents, or 2.1%, to $43.88 a barrel on the New York Mercantile Exchange, the lowest level since March 2009 and edging out the previous low from late January. The latest factor sparking the […]

Posted On : Published By : Tom Whipple
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Oil Prices May Have Further to Fall

Oil bulls got another piece of bad news today from an unlikely source: the Federal Reserve. U.S. crude production has continued to rise in spite of the collapse in oil prices. The Fed’s oil extraction index clocked in at a seasonally adjusted 179.8 in February. That’s up 0.4 percent from January and 14.4 percent from a year ago. As Morgan Stanley economist Ted Wieseman put it in a note to clients, the supply/demand imbalance in the oil market "isn’t being addressed yet by lower U.S. supplies."   The nosedive in oil prices has had an impact on oil and gas drilling. The Fed’s index for that activity fell 17.4 percent in February from the month before and was down 21.4 percent from a year ago. Oil analysts say the cutback in drilling eventually will lead to lower production as fewer new wells are developed. It’s just not happening yet, based […]

Posted On : Published By : Tom Whipple
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History Says Oil Is Hitting Its Long-Term Floor, Or Falling Through It

As Nymex oil futures have set a six-year intraday low this morning, is a new leg down underway? We may actually have to wait until Friday to be sure. Four months ago , when looking at years-long price charts to find a potential bottom for Nymex oil futures, we noted that when crude bottomed after sizable declines the past two decades, it revisited those levels within several months. Before this past week, the lowest Friday closing low was Jan. 22’s $45.59 per barrel. It then rose a combined 16% the next three weeks before seeing a slow downtrend until last week, when the front-month Nymex April contract slumped 9.6% to $44.84. With today’s further decline, it might seem we are breaking support levels which date back to 1998’s lows. But look back at the past market bottoms. At the end of 2008, West Texas Intermediate finished Christmas week at […]

Posted On : Published By : Tom Whipple
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Natural Gas Extends Losing Streak to Third Session

By Timothy Puko Natural-gas prices fell for a third-straight session as forecasts for warmer weather signaled soft demand. Natural gas for March delivery settled down 1.1 cents, or 0.4%, at $2.716 a million British thermal units on the New York Mercantile Exchange. The market has lost 3.8% since the close on March 11. Forecasts called for increasingly warm weather over the weekend, with more above-normal temperatures than previously expected to cover most of the country at the start of next week. About half of U.S. homes use natural gas for heating fuel, making winter weather a primary driver for demand. "The market has spring on its mind, but not in its step," Matt Smith, an analyst at consultant Schneider Electric SA in Louisville, Ky., said in a note. Forecasts do also show cooler-than-normal temperatures settling in later next week. That limited losses, discouraging deep short-selling, or bets against natural […]

Posted On : Published By : Tom Whipple
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The melting of Antarctica was already really bad. It just got worse.

A satellite view of Antarctica is seen in this undated NASA handout photo obtained by Reuters on Feb. 6, 2012. (NASA handout via Reuters) A hundred years from now, humans may remember 2014 as the year that we first learned  that we may have irreversibly destabilized the great ice sheet of West Antarctica, and thus set in motion more than 10 feet of sea level rise. Meanwhile, 2015 could be the year of the double whammy — when we learned the same about one gigantic glacier of East Antarctica, which could set in motion roughly the same amount all over again. Northern Hemisphere residents and Americans in particular should take note — when the bottom of the world loses vast amounts of ice, those of us living closer to its top get  more sea level rise than the rest of the planet, thanks to the law of gravity . The findings […]

Posted On : Published By : Tom Whipple