Dow Transport Dive to Take Down Crude

The Dow Transportation Index was down almost 4 percent today and if there is any silver lining in the current market turmoil is that Trannies usually lead crude down, which will drop gas prices. The chart below shows the 12.2 percent swan dive in the Dow Transports since July 7th with crude oil barely moving. We’re expecting a catch-up trade to the downside for crude oil in the next few days

What are the all-in costs of Saudi Production?

Here’s an interesting note from UBS’ Andy Lees on the background story to the oil market. You may have heard that US President Obama decided to release some of the oil from the Strategic Petroleum Reserve (SPR). This move was bearish for oil, sending it way down in trading yesterday.

The question then becomes how much of today’s oil price is based on the fundamentals and how much is based on Middle East tensions or speculation

Five Misconceptions Squashed

Niels Jensen clears up a number of common misconceptions about the macroo environment which whave great importance for investing

The Correlation between Currencies and Oil

The relationship between oil and currencies is no more stable that the relationship between the S&P 500 and currencies. As we noted yesterday in our look at the correlation between a handful of currencies and the S&P 500, it is not that there is no relationship, but rather that the relationship is far from stable. One cannot deduce the correlation from first principles, but investors should monitor the shift sands

Speculators at risk as IEA confirms demand destruction has set in

A fall in commodity prices increases the potential for financial market disruption and non-performing loan problems in China

Dollar Selling Resumes

Dollar selling resumes as equities and commodities recover after US employment report
Euro moves back near $1.44 after EU officials discussed further aid to Greece
Dollar likely to remain on back foot this week; Growth currencies likely to outperform

The Gulf of Mexico – One Year Later

A year later, the waters are still murky, but a few things are starting to become clear.

For energy investors, the most important aspect of the disaster was the moratorium on deepwater drilling in the Gulf. That ban was lifted in late February, but new safety requirements have slowed restarts on the 33 rigs that were halted, and Washington has so far issued only a handful of new permits for Gulf oil exploration. So what impact does an almost year-long stoppage in drilling have on oil production?

On the environment, scientists agree that the chemicals were effective in dispersing the oil. But the most important questions still remain unanswered: what long-term effects will the dispersant chemicals and the dispersed oil have on the Gulf of Mexico ecosystem

The Case for Human Ingenuity

There are essentially three reasons why I think oil prices will go through a rather dramatic correction over the next several years:

1. Many investors who, in recent years, have added commodities to their portfolios as a hedge will ultimately be disappointed by the lack of diversification this asset class offers;

2. Governments and regulatory authorities, both in Europe and the United States, have effectively declared war on commodity speculators, and the area will become subject to a lot more scrutiny and regulation in the years to come;

3. A number of new alternative energy forms are in much more advanced development than many investors realise and will, over the next 3-5 years, become serious alternatives to oil, particularly as far as transportation is concerned

Fracking and China’s quest for natural gas

You have probably seen the headlines on the natural gas accident in Pennsylvania. Chesapeake Energy, the largest natgas driller reported on Tuesday that one of its wells in Bradford County, Pennsylvania was uncontrollably spilling thousands of gallons of chemical-laced salt water into freshwater streams that ultimately feed into the Chesapeake Bay. Chesapeake Energy was using

Some Thoughts On The Oil Market And OPEC

By Win Thin Oil prices are lower today despite Saudi comments that it is cutting output because the market is oversupplied. Saudi Oil Minister al-Naimi said that his nation cut output to 8.29 bbl/day in March from 9.13 mln bbl/day in February, and that April output might be “a little higher” than March. Kuwaiti Oil

Has oil’s demand destruction already arrived?

What we would like to see is commodity prices falling or stagnating. And that would certainly be the case if demand destruction is already beginning as the IEA analysis suggests. Moreover, QE is ending in June. So that won’t be a factor in inflation expectations. The ‘goldilocks’ scenario would be moderating commodity prices, followed by moderating global growth, followed by an increase in growth as inflation expectations come down

A few brief comments on America’s fiscal choices

The private sector (particularly the household sector) is overly indebted. The level of debt households now carry cannot be supported by income at the present levels of consumption. The natural tendency, therefore, is toward more saving and less spending in the private sector (although asset price appreciation can attenuate this through the Wealth Effect). That