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Global Oil Inventories Are Exceptionally Tight: Kemp

Global Oil Inventories Are Exceptionally Tight: Kemp

Global petroleum inventories are the tightest for years in a sign the market is overheating, as the global economy recovers rapidly from the coronavirus pandemic and major oil producers refuse to increase output faster.

Commercial inventories held in the countries of the Organisation for Economic Co-operation and Development (OECD) totalled 2.68 billion barrels at the end of December 2021, down from 3.21 billion in July 2020.

Since peaking after the first wave of coronavirus infections in 2020, inventories have fallen at the fastest rate for decades, and ended last year at the lowest seasonal level since 2013.

OECD commercial inventories ended December roughly 8% below the previous five-year seasonal average, with or without the pandemic year, based on data from the U.S. Energy Information Administration (EIA). There is no precedent for such rapid depletion of stocks in recent decades and the EIA estimates stocks have fallen further in January and February (“Short-term energy outlook”, EIA, Feb. 8).

The result has been a surge in both nearby oil futures prices and calendar spreads, reflecting concerns about the availability of sufficient oil. Front-month Brent futures prices have climbed roughly 25% in the last two months, as the latest wave of coronavirus infections has ebbed and had limited impact on global economic growth or oil consumption.

Brent’s six-month calendar spread, which is closely correlated with stock levels, has surged into a backwardation of more than $8 per barrel this week, within the 99th percentile for all trading days since 1990.

The current combination of rapidly escalating front-month futures prices and backwardation is the most bullish since at least 1993.

Overheating

Low and falling inventories are a sign of excess demand and inadequate supply, putting continuous upward pressure on prices.

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Just-in-time gives way to “buy everything you can” as U.S. supply disruptions persist

Container trucks , ships and cranes are shown at the Port of Long Beach as supply chain problem continue from Long Beach, California, U.S. November 22, 2021. REUTERS/Mike Blake

Container trucks , ships and cranes are shown at the Port of Long Beach as supply chain problem continue from Long Beach, California, U.S. November 22, 2021. REUTERS/Mike Blake

Jan 28 (Reuters) – Stephen Bullock eight months ago gave up on the idea of buying raw materials and parts only shortly before they were needed on his assembly line.

Instead, he told his purchasing manager to “just buy everything you can,” and they could store the excess, said Bullock, chief executive of Power Curbers Companies, a maker of heavy equipment used to build concrete sidewalks and other infrastructure projects.

Roughly two years into a pandemic that has snarled supply chains across the globe, U.S. companies are scrambling not just to produce enough to feed current demand – but to also refill inventory shelves. That buildup was key to the fourth quarter’s hefty 6.9% annualized growth in gross domestic product, with inventory investment contributing 4.9 percentage points, according to the U.S. Commerce Department.

Spending shifted during the pandemic from services to goods, a boom that has strained supply chains and emptied warehouses. Excluding inventories, GDP grew at a more modest 1.9% rate in the latest period.

This boom in demand, coupled with shortages, has fueled a wave of inflation that increased at a pace last year not seen in nearly 40 years. This set the stage for the Federal Reserve to now look towards raising interest rates in March.

Bullock, whose company is based in Salisbury, North Carolina, said supply chain problems have continued to grow worse in recent months – not better.

…click on the above link to read the rest of the article…

Reuters Data Scientist Fired After Nuking BLM Narrative, Exposing ‘Significant Left-Wing Bias’ In Reporting

Reuters Data Scientist Fired After Nuking BLM Narrative, Exposing ‘Significant Left-Wing Bias’ In Reporting

On Tuesday, we republished a column from a journalist who resigned from the Canadian Broadcasting Corporation because the network exhibited such extreme left-wing bias and propaganda that she couldn’t be a part of it any longer.

Today, bring you the story of Zac Kriegman, a former Reuters data scientist who was fired after performing a statistical analysis which refuted claims by Black Lives Matter, and spoke out against the company’s culture of “diversity and inclusion” which unquestioningly celebrated the BLM narrative.

As journalist Chris F. Rufo writes in City Journal: “Driven by what he called a “moral obligation” to speak out, Kriegman refused to celebrate unquestioningly the BLM narrative and his company’s “diversity and inclusion” programming; to the contrary, he argued that Reuters was exhibiting significant left-wing bias in the newsroom and that the ongoing BLM protests, riots, and calls to “defund the police” would wreak havoc on minority communities.”

Week after week, Kriegman felt increasingly disillusioned by the Thomson Reuters line. Finally, on the first Tuesday in May 2021, he posted a long, data-intensive critique of BLM’s and his company’s hypocrisy. He was sent to Human Resources and Diversity & Inclusion for the chance to reform his thoughts. –

He refused—so they fired him. -City Journal

Kriegman, who has a bachelors in economics from Michigan, a JD from Harvard, and “years of experience with high-tech startups, a white-shoe law firm, and an econometrics research consultancy,” spent six years at Thomson Reuters, where he rose through the ranks to spearhead the company’s efforts on AI, machine learning, and advanced software engineering. By the time he was fired, he was the Director of Data Science, and lead a team which was in the process of implementing deep learning throughout the corporation.

…click on the above link to read the rest of the article…

IMF, World Bank & 10 Countries Held Alarming “Simulation” Of Global Financial System Collapse

IMF, World Bank & 10 Countries Held Alarming “Simulation” Of Global Financial System Collapse

IMF, World Bank & 10 Countries Held Alarming “Simulation” Of Global Financial System Collapse

Tyler Durden's Photo

BY TYLER DURDEN
TUESDAY, DEC 21, 2021 – 11:20 PM

Earlier this month Reuters produced a report which didn’t receive nearly enough attention among the American public – its contents would be sure to alarm most people concerned with the outbreak of yet more ‘global catastrophes’. At the very least it’s curious timing: amid the recent pandemic induced disruption in global supply chains, powerful nations and banking institutions decided to get together to run a global economic collapse scenario.

The report described that Israel led a “10-country simulation of a major cyber attack on the global financial system in an attempt to increase cooperation that could help to minimize any potential damage to financial markets and banks.” It was centered on a catastrophic scenario in which “hackers were 10 steps ahead of us,” according to one official who took part.

Collapse, illustrative image via Reuters

Dubbed “Collective Strength”, the exercise was held in Jerusalem (after being moved from the original proposed location of Dubai) and included the participation also of the United States, UK, United Arab Emirates, Austria, Switzerland, Germany, Italy, the Netherlands and Thailand. Officials from the International Monetary Fund (IMF), World Bank and Bank of International Settlements were also involved.

The financial-geopolitical gaming simulation was set amid a scenario where sensitive data was leaked on the Dark Web, which combined with “fake news” reports going viral across societies, resulting in the collapse of global markets and an ensuing run on banks. Further, the simulation envisioned a series of devastating hacks targeting global foreign exchange systems, which also disrupted transactions between importers and exporters, according to Reuters.

…click on the above link to read the rest of the article…

Wheat soars to 9-year peak on supply concerns, strong demand

CHICAGO, Nov 22 (Reuters) – U.S. wheat futures rallied to their highest in nearly nine years on Monday as ill-timed rains in Australia and rising Russian wheat prices stoked concerns about tightening supplies among the world’s top exporters.

Corn and soybeans followed wheat higher, with additional support from a waning U.S. harvest and strong domestic demand from ethanol makers and soy processors.

“The demand continues to equal or outstrip the supply in the short term,” said Don Roose, president of U.S. Commodities.

“The wheat market’s leading the charge. It was hit with weather that is too wet in Australia and a little too dry in the U.S. Plains, shipping issues in southwest Canada and issues around export taxes in Russia,” Roose said.

Chicago Board of Trade March soft red winter wheat was up 23-1/4 cents at $8.57-1/2 a bushel after peaking at $8.59-1/2, the highest for a most-active contract since December 2012. All futures months hit new contract highs.

K.C. hard red winter wheat futures also posted across-the-board contract highs, with the March contract ending 28 cents higher at $8.66-1/2 a bushel.

Wheat prices in Russia rose for a fifth straight week last week on strong demand. Shipments from the world’s largest exporter are down 34% this season due to a smaller crop and rising export taxes.

Heavy rains, meanwhile stalled harvesting in Australia and threatened crop quality, while flooding in western Canada has disrupted exports when global demand for wheat has risen.

Robust domestic demand for corn and soybeans amid strong margins at ethanol plants and soy crush facilities underpinned futures prices.

CBOT December corn gained 6 cents to $5.76-3/4 a bushel, while January soybeans added 11 cents to settle at $12.74-1/4 a bushel.

 

Zambia state power firm says nation in countrywide blackout

LUSAKA, Nov 6 (Reuters) – Zambia was experiencing a nationwide power blackout on Saturday after an unidentified problem, the state utility said, adding that it was working to restore electricity supply.

“We have lost power countrywide resulting from a fault, which is yet to be determined. The company is restarting the main sources of electricity to create stability on the system,” state-owned Zesco spokesman John Kunda said.

Kunda said the power supply was likely to be restored in six to eight hours.

Copper-rich Zambia suffered another major power outage affecting most parts of the country last month after a problem at an important hydropower station. read more

Twin peaks: Whether it’s supply or demand, oil era heads for crunch time

A worker collects a crude oil sample at an oil well operated by Venezuela's state oil company PDVSA in Morichal, Venezuela, July 28, 2011.  REUTERS/Carlos Garcia Rawlins

A worker collects a crude oil sample at an oil well operated by Venezuela’s state oil company PDVSA in Morichal, Venezuela, July 28, 2011. REUTERS/Carlos Garcia Rawlins

Oct 25 (Reuters) – Energy transition and peak demand predictions have spooked investors in oil, putting the prospect of peak production sooner than anticipated accompanied by wild price spikes.

Key climate talks are set to begin at the end of this month in Glasgow, Scotland to tackle global warming under the 2015 Paris Agreement, with fossil fuel in policy-makers’ crosshairs.

But as it stands now, mobility curbs which hollowed out both spending on upstream oil projects and oil end use may already be set to permanently rein in the growth of both supply and demand.

“On current trends, global oil supply is likely to peak even earlier than demand,” the research department of bank Morgan Stanley said in a note this week.

“The planet puts boundaries on the amount of carbon that can safely be emitted. Therefore, oil consumption needs to peak. However, this is such a well-telegraphed prospect that it has solicited its own counter-response already: low investment.”

Oil demand and supply in 2030 and 2050
Oil demand and supply in 2030 and 2050
Global oil demand and declines in supply by scenario
Global oil demand and declines in supply by scenario

Still, with most oil producers and watchdogs putting the peak to the world’s thirst for oil at least several years away, demand is already veering back toward pre-pandemic levels. read more

The mismatch between demand for oil and other polluting fossil fuels roaring back to normal and output having lagged has helped contribute to an energy crunch in Europe and Asia, with crude prices soaring to multi-year highs.

…click on the above link to read the rest of the article…

Britain faces ‘massacre’ of 20 more bust energy suppliers, Scottish Power says

The sun rises behind electricity pylons near Chester, northern England October 24, 2011.  REUTERS/Phil Noble/File Photo

The sun rises behind electricity pylons near Chester, northern England October 24, 2011. REUTERS/Phil Noble/File Photo

LONDON, Oct 21 (Reuters) – Britain’s energy market faces an absolute massacre that could force at least 20 suppliers into bankruptcy in the next month alone unless the government reviews the energy price cap, Scottish Power Chief Executive Keith Anderson said on Thursday.

Natural gas prices have spiked this year as economies reopened from COVID-19 lockdowns and high demand for liquefied natural gas in Asia pushed down supplies to Europe, sending shockwaves through industries reliant on power.

Around 13 British suppliers have collapsed in recent months, forcing more than 2 million customers so far to switch providers. Before the crisis, there were more than 50 small- and mid-sized independent energy suppliers in Britain with around a 30% share of the market.

“There is a significant risk you could see the market shrink all the way back to five to six companies,” Anderson told the Financial Times.

Scottish Power, owned by Iberdrola (IBE.MC), is Britain’s fifth largest energy supplier with around 8% of the domestic gas supply market, according to data from regulator Ofgem.

“We expect, probably in the next month, at least another 20 suppliers will end up going bankrupt,” Anderson told Sky. “We are now going to start seeing some relatively well-run, good, commercially sound businesses going bankrupt because they just can’t pass the cost of the product through to customers.”

The soaring natural gas prices have strained Britain’s retail energy markets to breaking point, putting into question 30 years of energy deregulation which began in 1989 under then-Prime Minister Margaret Thatcher.

Anderson cast Britain’s energy market as facing months of tumult that could shrink the market all the way back to just five or six companies unless the price cap, set by Ofgem, was reviewed.

…click on the above link to read the rest of the article…

Oil settles up 1.5%; hits multi-year highs on surging demand

Oil prices surge, adding to global energy crunch

BENGALURU, Oct 11 (Reuters) – Oil prices jumped on Monday to the highest levels in years, fuelled by rebounding global demand that has contributed to power and gas shortages in key economies like China.

Brent crude rose $1.26, or 1.5%, to settle at $83.65 a barrel. The session high was $84.60, its highest since October 2018.

U.S. West Texas Intermediate (WTI) crude gained $1.17, or 1.5%, to settle at $80.52, after touching its highest since late 2014 at $82.18.

The pace of economic recovery from the pandemic has supercharged energy demand at a time when oil output has slowed due to cutbacks from producing nations during the pandemic, focus on dividends by oil companies and pressure on governments to transition to cleaner energy.

A U.S. administration official on Monday said the White House stands by its calls for oil-producing countries to “do more” and they are closely monitoring the cost of oil and gasoline. read more

The Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, have held back from boosting supply even as prices have risen. In July, the group agreed to boost output by 400,000 bpd to restore the 5.8 million bpd in supply curbs left from its 2020 deal to cut production in the wake of the coronavirus outbreak. read more

Pipelines run to Enbridge Inc.'s crude oil storage tanks at their tank farm in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford
Pipelines run to Enbridge Inc.’s crude oil storage tanks at their tank farm in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford

Power prices have surged to record highs in recent weeks, driven by widespread energy shortages in Asia, Europe and the United States. Soaring natural gas prices have encouraged power generators to switch to oil. read more

“Everything is very much focused on the lack of supply returning at a time when demand appears to be roaring back,” said Matt Smith, lead oil analyst at Kpler.

…click on the above link to read the rest of the article…

British industry warns of factory closures without help on fuel costs

Stainless steel tubes are stored ready to be made into exhausts at the Eminox factory, during a post-Budget visit by Britain's Chancellor of the Exchequer Philip Hammond, in Gainsborough, Britain October 30, 2018.  Christopher Furlong/Pool via REUTERS

Stainless steel tubes are stored ready to be made into exhausts at the Eminox factory, during a post-Budget visit by Britain’s Chancellor of the Exchequer Philip Hammond, in Gainsborough, Britain October 30, 2018. Christopher Furlong/Pool via REUTERS

LONDON, Oct 9 (Reuters) – Britain’s most energy intensive manufacturers, including producers of steel, glass, ceramics and paper, have warned the government that unless something is done about soaring wholesale gas prices they could be forced to shut down production.

Wholesale gas prices have increased 400% this year in Europe, partly due to low stocks and strong demand from Asia, putting particular pressure on energy intensive industries. read more

Industry bosses held talks on Friday with business minister Kwasi Kwarteng but said these ended with no immediate solutions.

“If the government doesn’t take any action then basically what we’ll see for the steel sector is more and more pauses of production in certain times of the day and those pauses will become longer,” Gareth Stace, director general of UK Steel told ITV News.

Similarly, Andrew Large, director general of the Confederation of Paper Industries, told the same broadcaster that he could not rule out factories having to suspend production due to increased energy costs.

David Dalton of the British Glass Manufacturers Association said some companies were days away from halting production.

After meeting the industry leaders on Friday, Kwarteng’s department said he was determined to secure a competitive future for Britain’s energy intensive industries.

It said he “promised to continue to work closely with companies over the coming days to further understand and help mitigate the impacts of any cost increases faced by businesses.”

…click on the above link to read the rest of the article…

Kemp: Forget Russian Intentions, Fundamentals Drove Up Europe’s Gas Price

Kemp: Forget Russian Intentions, Fundamentals Drove Up Europe’s Gas Price

European policymakers and some traders blame Russia for the low volume of gas stored across the region which has sent both gas and electricity prices surging to record highs.

Russia’s pipeline gas export monopoly Gazprom has met commitments for long-term contracts, its clients confirm. But it has not raced to book extra pipeline capacity for spot buyers, despite European calls for more supplies.

Some policymakers and traders have speculated additional gas has been deliberately withheld to make a diplomatic point and accelerate the approval of the Nord Stream 2 pipeline. Others say Russia has withheld gas to create a shortage, drive up prices and increase export revenues, similar to the way the OPEC+ producer group raises oil prices and its revenues.

The other possibility is Russia has not supplied more gas because it faces its own shortage and wants to rebuild domestic stocks after they were depleted by a cold winter in 2020/21.

There is no empirical way to determine which theory is correct or what Russia’s intentions have been. But whatever the reason, the result is the same: gas is in short supply and European energy prices have hit record levels.

Escalating energy prices are a global phenomenon. Shortages of gas, coal, electricity and to a lesser extent oil are evident across North America and Asia as well as Europe. In every case, very high and rapidly rising prices this year are a reaction to very low and rapidly falling prices last year during the coronavirus-driven recession.

Energy prices have always been strongly cyclical. In this instance, an exceptionally severe cyclical slump in 2020 has produced an equally extreme cyclical upswing in 2021.

…click on the above link to read the rest of the article…

Europe’s Gas Prices Surge To Avert Risk Of Winter Shortage

Europe’s Gas Prices Surge To Avert Risk Of Winter Shortage

Europe’s gas and electricity prices are setting record highs on a daily basis and rising at an accelerating rate as the market tries to destroy enough demand to protect depleted inventories ahead of the winter.  Gas storage sites in the European Union and United Kingdom are currently just under 76% full, compared with a ten-year seasonal average of almost 90%, according to data compiled by Gas Infrastructure Europe.

In the last decade, storage has emptied by an average of 57 percentage points over winter, but depletion is highly variable, ranging from a minimum of 38 points in 2013/14 to a maximum of 71 points in 2017/18.

If this winter sees an average drawdown, storage sites would be reduced to just 19% full by next spring, the second lowest for a decade, leaving the region with a persistent gas shortage next year.

If the winter sees a moderately strong draw, in the 75th percentile, storage would be reduced by 68 percentage points to a record low of just 8% next spring, increasing the probability supply will actually run out in some areas.

If the winter sees a maximum draw, similar to 2017/18, storage would be almost exhausted by next spring, making local shortages almost inevitable.

Futures prices are rising to avert this threat by rationing demand now to conserve inventories and reduce the risk of running out later in the winter.

Sharply rising prices are the reason wholesale markets (such as European gas) rarely run into physical shortages, unlike retail markets (U.K. gasoline and diesel) where price rises are typically more limited for commercial and political reasons.

Europe’s gas and electricity prices are likely to remain elevated until there is clear evidence that they have begun to reduce demand and conserve inventories.

Column: Hedge funds flock to oil as energy shortages worsen: Kemp

A petrol station attendant prepares to refuel a car in Rome, Italy, January 4, 2012. REUTERS/Max Rossi/File Photo

A petrol station attendant prepares to refuel a car in Rome, Italy, January 4, 2012. REUTERS/Max Rossi/File Photo

LONDON, Oct 4 (Reuters) – Rising oil prices and the spreading global shortage of coal, gas and electricity have drawn fresh buying interest from hedge funds and other money managers in oil-related derivatives contracts.

Portfolio managers purchased the equivalent of 42 million barrels in the six most important petroleum futures and options contracts in the week to Sept. 28, according to records published by regulators and exchanges.

Purchases over the last six weeks have totalled 170 million barrels, reversing more than half of the earlier sales of 268 million barrels over the previous ten weeks (https://tmsnrt.rs/2ZUULKJ).

For many fund managers, concerns about an energy crunch in coal, gas, electricity and to a lesser extent in oil have replaced earlier fears about a resurgence of coronavirus infections.

In the most recent week, the buying was led by the creation of new bullish long positions (+41 million barrels) rather than closure of previous bearish short ones (-1 million).

The total number of short positions has fallen to its lowest level since late 2019 and is in the 20th percentile for all weeks since the start of 2013, as fears about the coronavirus hitting oil demand have evaporated.

In the latest week, funds boosted positions in NYMEX and ICE WTI (+21 million barrels), Brent (+9 million), European gas oil (+11 million) and U.S. gasoline (+3 million), reducing them slightly only in U.S. diesel (-3 million).

Across all six contracts, portfolio managers have a combined net long position of 847 million barrels, which is in the 76th percentile since 2013. Long positions outnumber shorts by a ratio of 6.12:1, in the 81st percentile.

…click on the above link to read the rest of the article…

EU To Propose Exempting “Green” Bonds From Deficit And Debt Limit Calculations

EU To Propose Exempting “Green” Bonds From Deficit And Debt Limit Calculations

Yesterday, the ECB announced that in Q4, it would “modestly lower the pace of net asset purchases under the PEPP than in the previous two quarters” (even as Lagarde scrambled to convince markets not to call it tapering) with Reuters sources adding that “policymakers set a monthly target of between 60 billion and 70 billion euros” down from 80 billion currently “with flexibility to buy more or less, depending on market conditions.” Putting this non-taper taper in context, Nomura calculated that “even if net PEPP is scaled down to €60bn/month the ECB would still buy 85% of the remaining gross supply, strongly supporting EUR rates.”

Despite the shrinkage of ECB bond-buying, Lagarde made it clear that the fiscal spice must flow:

  • *LAGARDE: FISCAL SUPPORT HAS TO BE CONTINUED
  • *LAGARDE: FISCAL SUPPORT NEEDS TO BE MORE TARGETED

The most notable proposal is to exempt “green” investments from calculations of deficit and debt limits and temporarily forgetting existing rules that say debt must be cut every year, Reuters reported citing documents prepared for the ministers’ talks showed.

“The challenge in coming years will be to consolidate deficits while increasing green investments to achieve the ambitious targets of the EU to cut emissions or any other investments,” a note prepared by host Slovenia said.

In other words, the EU will use the “green” strawman of fighting climate change as a loophole to issue debt over and above the EU’s self-imposed ceilings.

…click on the above link to read the rest of the article…

Aramco On Lockdown After Houthi Missile Attack

Aramco On Lockdown After Houthi Missile Attack

Saudi Arabia had intercepted a ballistic missile attack on facilities owned by state oil major Aramco in the Eastern Region, Reuters has reported, citing the Saudi defense ministry.

Earlier reports said Aramco facilities in Dharan had gone on lockdown because of a suspected attack.

The Iran-affiliated Yemeni Houthi group claimed responsibility for the attacks on Sunday, saying it had used ballistic missiles and drones.

Ras Tanura, which is home to extensive oil infrastructure, was not the only target of the attack: the Houthis also targeted Aramco property in the southern Saudi provinces of Jizan and Najran, according to the rebel group’s spokesman who claimed responsibility for the attacks.

Aramco oil facilities are understandably a preferred target for the Houthis, which Saudi Arabia is trying to oust from Yemen after they removed the Saudi-affiliated government of the country in 2014 and has since then assumed power in most of Yemen. The Yemeni war, which has resulted in the worst humanitarian crisis in modern times, is widely seen as a proxy war between regional rivals Saudi Arabia and Iran.

The Saudis most often intercept the Houthi attacks but not always. The most notable attack that the Yemeni rebel group claimed responsibility for was the September 2019 attacks on Saudi Aramco’s oil facilities, including an oil field and a processing plant

That attack cut off 5 percent of the daily global supply for weeks, sending oil prices soaring. But Saudi Arabia and the United States said at the time that it was Iran—and not the Houthis—that was responsible for the attack, even though the Yemeni group again claimed responsibility for the strikes.

Since the start of the Yemen war, several attempts have been made at reaching a ceasefire agreement, but so far, all have failed, locking the Saudis and the Houthis in a stalemate.

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