Crude Falls Below $35 per Barrel in New York for First Time Since 2009

http://www.bloomberg.com/news/articles/2015-12-14/oil-falls-below-35-in-new-york-for-first-time-since-2009

il traded near the lowest level in more than six years as Iran reiterated its pledge to increase crude exports, bolstering speculation that rising OPEC production will deepen the global glut.
Futures fell as much as 3.1 percent to $34.53 a barrel in New York, the lowest since Feb. 18, 2009. Prices lost almost 11 percent last week, the biggest drop in a year. There’s “absolutely no chance” Iran will delay its plan to boost shipments even as prices slip, said Amir Hossein Zamaninia, the nation’s deputy oil minister for international and commerce affairs. Speculators in the U.S. have raised bearish bets to an all-time high. Diesel and gasoline futures led declines as warm U.S. weather curbed heating fuel demand.
Oil slumped last week to levels last seen during the global financial crisis, while speculators increased bets on falling U.S. crude prices to an all-time high after the Organization of Petroleum Exporting Countries this month set aside production limits. The supply glut will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency.

Market Gloom

"The OPEC decision 10 days ago just exacerbated worries about excess supply," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "There’s been no heating demand so far, which is hurting as well. Diesel and gasoline are leading the energy space lower."
WTI for January delivery fell 8 cents to $35.53 a barrel at 11:22 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 57 percent above the 100-day average. The aggregate volume of monthly WTI contracts climbed to a record of 1.596 million on the Nymex on Dec. 8. Each contract corresponds to 1,000 barrels of oil.
Brent for January settlement dropped 61 cents, or 1.6 percent, to $37.32 a barrel on the London-based ICE Futures Europe exchange. It touched $36.33, the lowest since Dec. 26, 2008. The European benchmark crude was at a $1.7 premium to WTI.
In the U.S., Senate negotiators are nearing a deal to allow unfettered crude oil exports for the first time in 40 years, though differences remain on renewable-energy tax credits that Democrats are demanding in return, according to people close to the discussions.

U.S. Exports

While any agreement could still collapse in the coming days -- the deal faces opposition in the House -- lawmakers are weighing the extension of solar and wind tax credits for as long as five years in exchange for lifting the crude-export restrictions, which were established during the energy shortages of the 1970s.
"If the ban is lifted the Brent-WTI spread will be crushed," said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. "Refinery margins in the U.S. will shrink. U.S. refiners have had the advantage of using captive crude."
Iran, which expects international sanctions over its nuclear program to be lifted by the first week of January, has already secured customers for its planned supply expansion, Zamaninia said in an interview in Tehran. The country pumped 2.8 million barrels a day last month, data compiled by Bloomberg show.

Hardened Resolve

OPEC, which set aside its output quota at a Dec. 4 meeting, is displaying hardened resolve to maintain sales, the IEA said in its monthly report Friday. While the group’s strategy has affected other producers, triggering the steepest fall in non-OPEC supply since 1992, world oil inventories will probably swell further once Iran restores exports, predicted the Paris-based energy adviser to developed economies.
Money managers’ short position on WTI futures and options rose 5.8 percent to 181,849 contracts in the week ended Dec. 8, according to CFTC data Friday. Net longs retreated to a five-year low.
"The market is oversold after falling seven days,"Phil Flynn, senior market analyst at the Price Futures Group in Chicago. "There are record short positions. You have to watch because there could be a violent snap back when they cover those shorts."
U.S. natural gas for January delivery tumbled to the lowest level since January 2002 amid forecasts that mild weather will persist through the end of the month. Futures fell as much as 6.4 percent to $1.862 per million British thermal units on the Nymex.

Oil recovery by 2017? Not likely

http://finance.yahoo.com/news/oil-recovery-2017-not-likely-174225516.html

Energy analysts are confidently predicting that oil prices will rebound by 2017, as global supply and demand come back into balance. "Buy for the long run" is once again Wall Street's over-used mantra.

Related Stories

1. Oil Prices: OPEC Stands its Ground Motley Fool
2. Yergin: Why oil prices cannot stay this low CNBC
3. Oil turns higher after dropping below $37 MarketWatch
4. Why Did Crude Oil Prices Fall after OPEC’s Meeting? Market Realist
5. Crude Oil Prices Slip Back from $42 Resistance Level Market Realist

Economists John Maynard Keynes once notably remarked, "in the long run, we are all dead."

This long-run thinking defies the logic of the oil markets. Not only has oil been among the most volatile commodities in modern economic history, it also has a tendency to spike, crash and then remain depressed for years on end.

Analysts have focused on the 18-month decline that has seen crude-oil prices drop from $107 in June 2013 to below $37 on Tuesday — a 65-percent decline. But crude oil is actually down a whopping 74 percent from its 2008 high of $147 per barrel. That decline has been in force for seven long years, since the dawn of the fracking age.

History tells us that, while price spikes tend to be sharp and somewhat short-lived, bear markets in oil, at least since the 1980s, tend to be quite long, drawn-out affairs.
When prices crashed in 1985, they went from $35 a barrel to $10 a barrel by the following year. And then they averaged just under $20 until 2003. The market flat-lined for 17 years, with an occasional bear-market rally.

With OPEC failing to rein in excess production; with U.S. frackers becoming more efficient, ringing more oil out of existing wells with fresh technology; and with other non-OPEC countries like Russia, Norway and the U.K. pumping flat out, the gap between supply and demand is yawning.

There are 3 billion barrels of excess crude sloshing around the world, according to the International Energy Agency, with crude-oil supplies outstripping demand by about 1.6 million barrels per day.
The International Energy Agency and other industry watchdogs expect supply and demand to come into greater balance next year, but that remains to be seen, with every producing nation in the world pumping as much oil as they can.
They may be losing money on lower prices, but apparently they plan to make it up on volume!

This is somewhat reminiscent of how commodity producers acted during the Great Depression in the 1930s. Despite falling commodity prices, particularly for rubber, which was in great demand during the 1920s auto boom, Asian countries, stung by the plunge in demand for new cars, continued to produce rubber at a break-neck pace, driving prices ever lower and depleting their coffers at an equally fast pace.

We are seeing that among oil producers, as well. Russia may run out of surplus cash as early as next year. Saudi Arabia has tapped global bond markets to extend their excess currency reserves, apparently hunkering down for what could be a prolonged period of depressed energy prices.

The Federal Reserve has suggested that the decline in energy prices should prove transitory. If history is any guide, oil can easily go down and stay down for many years to come.

Oil briefly fell below its 2009 low of $37.75 a barrel. Below that level, long-term support for oil prices is somewhere around $20 per barrel. That would represent a nearly 50-percent additional decline in prices!

The impact on inflation would be far more long-lasting than is currently modeled by the Fed.
These are structural, not transitory, changes that have taken place in the energy markets that may have permanently altered how fossil fuels are produced and consumed. Certainly there will be bear-market rallies, but the path of least resistance still appears lower for longer.

The impact on inflation may also be structural as well — good news for consumers, but, once again, a confounding factor for the Fed. The Fed is committed to lifting inflation while raising rates to ensure inflation does not get out of control.

That is a dual mandate that may be simply unattainable in a world awash in crude and other commodities, all of which could mean the Fed is on course for a "one and done" policy of interest rate hikes.

Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. Follow him on Twitter @rinsana.

The Coming Bubble Boom in Gold Mining Stocks - Mike Swanson (08/13/2013)

http://www.wallstreetwindow.com/node/8628

Today gold is down a bit after yesterday gain while European markets are up once again. They actually talked about Europe on CNBC around 8:00 AM today. I couldn't believe it as they almost never mention investing in Europe - but they said that the rally there could fall apart in an instant and the anchor said "he would not buy European banks" and laughed! You can't make this silliness up as Greek bank Alpha Bank is up 7% this morning!

The CNBC people were speculating that if the Fed tapers QE the dollar will rally and the Euro will go down. Whatever. I don't see how anyone can listen to this stuff and translate it into money. All they talk about is buying the US stock market after it already has gone up for four years! It's down this morning after falling yesterday.

While gold stocks screamed higher yesterday too.

We are in a key transition phase right now. European markets just broke out into new bull markets and metals and mining stocks are next. Check out the charts in this video presentation Dave Skarica and I just did. Once you do I think you will understand why we think the next few years will result in a bubble boom for mining stocks.


I got Dave to agree to a special deal for his subscription service. He is a specialist in the gold mining sector and has all kinds of new recommendations he will be making soon. Since now is the time I want to encourage you to take action on these markets so I got him to agree to a special monthly subscription as a way to get in to his service at a cheap price instead of the big annual price.
To check it out click here.

We are going to pull down this deal Wednesday night so join now by clicking here.

Swiss watchdog opens bank probe into precious metal collusion

The Swiss competition watchdog has launched an investigation into possible collusion in the precious metals market by several major banks, it said on Monday, the latest in a string of probes into gold, silver, platinum and palladium pricing. Global precious metals trading has been under regulatory scrutiny since December 2013, when German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of gold and silver benchmarks by banks.
Even though the market has moved to reform the process of deciding on its price benchmarks, accusations of manipulation have refused to go away.
Gold prices have also shed some 9 percent in the last two years as investors lose faith in its status as a store of value.
Switzerland's WEKO said its investigation, the result of a preliminary probe, was looking at whether UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui conspired to set bid/ask spreads.
"It (WEKO) has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned," WEKO said in a statement.
A WEKO spokesman said the investigation would likely conclude in either 2016 or 2017, adding that the banks were suspected of violating Swiss corporate rules.
The banks face financial penalties if WEKO finds them guilty of wrongdoing, the spokesman said, though he declined to comment on the size of any possible fine.
WEKO could add more banks to its investigation if it finds cause for suspicion, the spokesman said.
The move comes a month after press reports that the European Union's competition regulator was investigating anticompetitive behavior in precious metals spot trading, and follows news of a U.S. probe by the Department of Justice (DoJ) and the Commodity Futures Trading Commission earlier this year.
U.S. authorities are investigating at least 10 major banks for possible rigging of precious metals markets, according to reports. HSBC and Barclays said earlier this year that they were cooperating with the investigation.
Aside from regulatory probes, a number of lawsuits have also been filed in U.S. courts alleging a conspiracy to manipulate precious metals prices.
Commenting on the WEKO probe, a Julius Baer spokesman said the bank was cooperating with authorities.
In a statement, Deutsche Bank said it was cooperating with requests for information from "certain regulatory authorities" over precious metal benchmarks but declined to comment further. A Mitsui spokesman in Tokyo said the firm would cooperate with the Swiss authorities in its investigation.
Representatives for UBS, Barclays, Morgan Stanley and HSBC declined to comment.
PRESSURE RISES AFTER LIBOR
Scrutiny of precious metals pricing ramped up with the LIBOR scandal in foreign exchange markets. In May, four major banks pleaded guilty to trying to manipulate forex rates and, with two others, were fined nearly $6 billion in another settlement in a global investigation into the $5 trillion-a-day market.
A push for more transparency in precious metals saw banks last year abandon existing benchmark prices, including the century-old "gold fix", which had been set twice a day via a telephone auction, in favor of a physically settled electronic system.
The benchmarks were used by miners, refiners, traders and end-users to price gold and silver, as well as platinum and palladium, which are chiefly used in autocatalysts.
Last year Swiss financial regulator FINMA said it had found a "clear attempt" to manipulate precious metals price benchmarks during a cross-market investigation into trading at UBS.
As part of ongoing obligations imposed by FINMA, UBS is seeking to automate at least 95 percent of its global foreign exchange and precious metals trading by the end of 2016.
The UK Financial Conduct Authority (FCA) last year fined Barclays 26 million pounds ($43.8 million) for failures in internal controls that allowed a trader to manipulate how gold prices were set.
Germany's Bafin has also investigated the gold market, but said earlier this year that it had found no signs of benchmark price manipulation.
The impact of the probes on wider precious metals trading was likely to be muted, according to Brian Lucey, professor of finance at the School of Business, Trinity College Dublin.
"The question is not if individuals, or groups of individuals are collaborating to rig the game for themselves, the question is if this has any material effect," he said.
"I'm not convinced collusive behavior will have a meaningful effect micro-economically to the structure of gold trading around the world."
(Additional reporting by Kathrin Jones in Frankfurt, Steve Slater and Clara Denina in London and Yuka Obayashi in Tokyo)

Read more at Reutershttp://www.reuters.com/article/2015/09/29/us-precious-manipulation-swiss-idUSKCN0RS0DX20150929#pKm336Kox8FfxbS9.99http://www.reuters.com/article/2015/09/29/us-precious-manipulation-swiss-idUSKCN0RS0DX20150929#LxKtOdBqAwTk1Owp.97

Metals, Currency Rigging Is Worse Than Libor, Bafin Says

http://www.bloomberg.com/news/articles/2014-01-16/metals-currency-rigging-worse-than-libor-bafin-s-koenig-says

Germany’s top financial regulator said possible manipulation of currency rates and prices for precious metals is worse than the Libor-rigging scandal, which has already led to fines of about $6 billion.
The allegations about the currency and precious metals markets are “particularly serious because such reference values are based -- unlike Libor and Euribor -- typically on transactions in liquid markets and not on estimates of the banks,” Elke Koenig, the president of Bonn-based Bafin, said in a speech in Frankfurt yesterday.
Koenig is the first global finance regulator to comment publicly on the investigations as probes into the London interbank offered rate, or Libor, expand into other benchmarks. Joaquin Almunia, the European Union’s antitrust chief, said this week that its preliminary probe into possible foreign-exchange manipulation covers similar practices as in the regulator’s probe into Libor-rigging.
Investors should short Deutsche Bank AG stock because of probes into currency manipulation and as a rally in banking shares reverses, Berenberg Bank said in a report today. “The investigations by regulators into the bank’s foreign-exchange trading remain a significant risk considering Deutsche is the world’s largest foreign-exchange dealer,” Berenberg said.

Bafin Investigation

Bafin said this week it is investigating currency trading, joining regulators in the U.K., U.S. and Switzerland, who are examining whether traders at the world’s largest banks colluded to manipulate the WM/Reuters rates, used by money managers to determine the value of holdings in different currencies.
At least a dozen firms have been contacted by authorities and more than 13 traders suspended, fired or put on leave in the currency case. Regulators are examining how traders, who communicated in instant-message groups, exchanged information on client orders and agreed how to trade at the time of the fix, five people with knowledge of the probes said last month.
“That the issue is causing such a public reaction is understandable,” Koenig said. “The financial sector is dependent on the common trust that it is efficient and at the same time, honest. The central benchmark rates seemed to be beyond any doubt, and now there is the allegation they may have been manipulated.”

Deutsche Bank

Bafin interviewed Deutsche Bank employees as part of a probe of potential manipulation of gold and silver prices, a person with knowledge of the matter has said in December. The U.K. finance regulator, the Financial Conduct Authority, is also reviewing gold benchmarks as part of its wider investigation into how rates are set.
Firms including Barclays Plc and UBS AG have been fined for manipulating Libor and related rates. The European Union fined six firms, including Deutsche Bank and Societe Generale SA, a record 1.7 billion euros ($2.3 billion) in December for rate-rigging. Ten people have also been charged in parallel U.S. and U.K. criminal investigations into the matter.
A proposal by the European Commission to regulate reference values​is going “in the right direction, but not far enough,” Bafin’s Koenig said. It relies too much on self-control, she said, adding that trading on currency and precious-metals markets is “decentralized and to a large scale done bilaterally and not on exchanges or exchange-like platforms” and therefore hard to monitor.