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Page added on August 14, 2019

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Oil Markets Face Nightmare Scenario

Consumption

Oil prices rose sharply on Tuesday after President Trump decided to delay tariffs, recognizing the negative impact tariffs would have on the U.S. economy. But by Wednesday, oil prices crashed again, as financial markets see the risk of economic recession rising in spite of the tariff delay.

The closely-watched spread between two-year and 10-year treasury yields finally flipped, the first time that has occurred since 2007. Yields on two-year notes are trading higher than 10-year treasuries, a phenomenon that has reliably preceded past economic recessions. Financial markets took note, and sold off stocks and commodities of all types.

This problem has been brewing for a while, with the early signs of an inverted yield curve showing up last year. Economists and analysts have been watching this for months, but the spread received a jolt after the recent announcement from President Trump regarding a new round of tariffs. He now seems to have regretted that decision, but market traders are not assuaged. The tariff delay “doesn’t really change the outlook on the trade tensions,” Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong, told Bloomberg. “We expect further policy easing in the coming months to help stabilize growth amid the above headwinds.”

The negative sentiment might be here to stay because reams of other data point to an economic slowdown.

For instance, China’s latest industrial data for July was the weakest since 2002. Germany’s economy contracted in the second quarter and is nearing recession. The same is true of the UK, which also saw GDP fall in the second quarter.

Car sales in China have declined for 13 of the last 14 months. Car sales in India and Germany also fell sharply in July. Global manufacturing activity and trade volumes are down.

The ECB is expected to cut interest rates again, and the U.S. Federal Reserve might be compelled to do so again, after only recently cutting rates for the first time in a decade.

Some economists think bond yields could go to zero or even into negative territory if recession hits. “This is the ultimate indicator that something is fundamentally wrong with the world economy,” Adam Posen, president of the Peterson Institute for International Economics, told the Washington Post. “The escalation of the trade war is making it worse.”

Notably, yields on 30-year treasuries plunged in recent days as well, a sign that capital is flowing into safe haven assets as fears of recession take hold.

After routinely boasting that the trade war was hurting China more than the U.S., and that China was forced to pay billions of dollars to the U.S. government because of tariffs, President Trump essentially admitted that U.S. consumers were bearing the brunt of the impact when he called off some of his proposed tariffs on Tuesday.

On the one hand, stepping back from the brink could put both sides on the path to a negotiated settlement – Chinese and American negotiators are scheduled for face-to-face talks in September – but it could also signal vulnerability.

Viewed from the perspective of Beijing, the flip-flopping from the U.S. is an admission from Trump that he can’t survive politically if the U.S. economy slows down too much. For Xi Jingping, there is little incentive to offer concessions of any significance. If that is the lesson then the trade war could drag on indefinitely.

Notably, the delay of U.S. tariffs saw oil prices soar on Tuesday as it seemed to take away a major economic headwind. But the bump was temporary, with prices falling back just as sharply on Wednesday after the raft of poor economic data and the inverted yield curve pointed to an oncoming economic recession.

Some analysts don’t say any major pitfalls to oil prices. “Oil demand in China and the US is unlikely to weaken noticeably as a result of the trade conflict, though if this were to happen Saudi Arabia would further reduce its output,” Commerzbank said in a note. “Thanks to the OPEC+ production cuts, the oil market will be undersupplied in any case in the second half of the year.”

Perhaps. But on the current trajectory, a supply glut is looming in 2020. On that much, most agree. But the problem is that recent price downturns were largely the result of U.S. shale growing faster than demand. This time around, the danger is much larger. A global economic recession would bring the expected supply glut forward, and make it much worse.

By Nick Cunningham of Oilprice.com



24 Comments on "Oil Markets Face Nightmare Scenario"

  1. Robert Inget on Wed, 14th Aug 2019 8:48 pm 

    Conversation

    Giovanni Staunovo
    @staunovo
    #India: July oil demand +3.3% Y/Y to 17.6mt

    Gasoline +8.8% y/y
    Diesel +3.3%
    LPG +9.0%
    Naptha -5.3%
    Petcoke -12%

    May consumption revised from 18.3mt to 19mt

    PPAC #OOTT

  2. Twocats on Wed, 14th Aug 2019 10:12 pm 

    Not everyone is predicting yet another round of glut. Hmm it’s almost like someone was predicting for years (cough Short) that prices would fall even as oil became scarce and expensive. Who woulda thought?

  3. Robert Inget on Thu, 15th Aug 2019 9:21 am 

    Trump: Israel shouldn’t let Omar, Tlaib visit country

    President Trump on Thursday said Israel should not allow two U.S. congresswomen with whom he has feuded to enter the country for an upcoming trip to Israel and the Palestinian Territories.

    Trump tweeted that it would show “great weakness” on Israel’s part if it allowed Reps. Ilhan Omar (D-Minn.) and Rashida Tlaib (D-Mich.), the first two Muslim women elected to Congress, to cross its border.

  4. joe on Thu, 15th Aug 2019 9:36 am 

    This guy is playing the outrage game to a tee. He’s gonna sit back and laugh while all the insanocrats go red in the face with fake outrage on behalf of those who made the suicide bomb into an artform. Think Trump gives a Sh1t what Taliban and mullah Omar think…..

  5. joe on Thu, 15th Aug 2019 9:39 am 

    Btw, if ur gay or a jew in Omar’s true America, watch out. Be care lefties it’s hard to choose which side to take when both ur outrage groups fight each other, in Birmingham here the muslims are attacking equality education in Muslim area state schools…..

  6. Robert Inget on Thu, 15th Aug 2019 9:57 am 

    Hit Job Updates;

    MORE ON:
    JEFFREY EPSTEIN
    Haunting photos show Jeffrey Epstein’s ‘Pedophile Island’ in the Caribbean
    Jeffrey Epstein’s bodyguard: ‘Somebody helped him’ kill himself
    American flags lowered to half-staff on Jeffrey Epstein’s private islands
    Ex-Miami mayor says he doesn’t know how Epstein got his number
    Jeffrey Epstein’s autopsy determined the convicted pedophile suffered multiple broken neck bones, according to a report.

    One of the breaks was to Epstein’s hyoid bone, an injury that experts told the Washington Post is more common in homicide victims.

    The discoveries were disclosed to the paper by two people familiar with the findings of the autopsy, which was completed on Sunday, but warranted more information by the Medical Examiner’s Office before it makes a final cause-of-death ruling.

    “Today, a medical examiner performed the autopsy of Jeffrey Epstein,” said Chief Medical Examiner Dr. Barbara Sampson in a statement Sunday night.

    “The ME’s determination is pending further information at this time. At the request of those representing the decedent, and with the awareness of the federal prosecutor, I allowed a private pathologist (Dr. Michael Baden) to observe the autopsy examination. This is routine practice.”

    Sampson’s office didn’t answer a request for comment from the Washington Post about the injuries.

  7. Robert Inget on Thu, 15th Aug 2019 10:09 am 

    Israel bars Omar and Tlaib entry after Trump’s urging
    Israel on Thursday announced that it would block Reps. Ilhan Omar (D-Minn.) and Rashida Tlaib (D-Mich.) entry to the territory during an upcoming overseas trip, according to multiple reports.

    The decision was announced moments after President Trump tweeted that it would show “great weakness” for Israel to allow the two congresswomen into the country. The president has been an outspoken critic of both Omar and Tlaib, who last year became the first two Muslim women elected to Congress.

    OK. American Jews.
    Are you going to just keep quiet?
    Or, are you going to let Fascists win?
    I’m guessing you will and ‘they’ win.

  8. JuanP on Thu, 15th Aug 2019 10:18 am 

    “MORE ON:
    JEFFREY EPSTEIN”

    Clintons got him. They are the untouchables and have the liberal democratic party in their sack of tricks.

  9. JuanP on Thu, 15th Aug 2019 10:20 am 

    “OK. American Jews.
    Are you going to just keep quiet?
    Or, are you going to let Fascists win?
    I’m guessing you will and ‘they’ win.”

    Come on Robert The squad are the fascist. WTF, Trump is a moron but the squad are worse.

  10. Robert Inget on Thu, 15th Aug 2019 11:14 am 

    Jews Against Plastic Straws:
    Read all about it.

    Miami Beach is among several Florida cities that have now banned plastic straws. Major corporations — such as McDonald’s, Royal Caribbean and Starbucks — have now committed to switching to paper straws.

    But while the world is moving away from single-use plastics, the Trump campaign is now selling 9-inch-long plastic Trump straws on its website. A pack of 10 costs $15, and in the three weeks they’ve been out, the campaign said it’s sold over a half-million dollars’ worth. (30)

    (plastic straws have zero to do with climate change) No matter. It sounds anti Trump being against single use plastic.

    Air Born Plastic Particles
    The lead scientist, Dr Melanie Bergmann, told BBC News: “We expected to find some contamination but to find this many microplastics was a real shock.”

    She said: “It’s readily apparent that the majority of the microplastic in the snow comes from the air.”

    Microplastics are defined as those particles below 5mm in size.

    https://www.bbc.com/news/science-environment-49295051

    I would argue micro-plastics are really quite democratic, effecting every air breather.

  11. JuanP on Thu, 15th Aug 2019 12:12 pm 

    “But while the world is moving away from single-use plastics, the Trump campaign is now selling 9-inch-long plastic Trump straws on its website. A pack of 10 costs $15, and in the three weeks they’ve been out, the campaign said it’s sold over a half-million dollars’ worth. (30)”

    Come on Robert like a ban on straws will matter. The problem is with rich people like you and me who consume too much to begin with. You can’t make that green even with your stupid solar panels and EV car.

  12. Outcast_Searcher on Thu, 15th Aug 2019 3:07 pm 

    Over time, global oil use increases with the global economy. As it will, until and unless oil is replaced as the world’s primary transport fuel, which will take multiple decades, best case.

    Over time, global petrochemical demand will almost certainly increase as global population and living standards rise.

    Worrying about what will happen to oil prices in a month or two years is inconsequential. It’s what will happen in decades which matters for investors (vs. speculators).

  13. Cloggie on Sat, 17th Aug 2019 6:09 am 

    US-Neocons get nervous, thought they had Europe in their pocket, turns out not to be the case:

    https://www.nationalreview.com/corner/friends-of-putin/

    ‘Friends of Putin’

    Indeed, Putin is the Che of many in Europe and elsewhere. This morning, President Trump retweeted Katie Hopkins, a British commentator and former Apprentice contestant. She hailed Salvini, Orbán, et al., for bringing “strength in depth.” She added, “The fightback by proud nations is on.”

    I say, be careful with whom you are entangled. Putin is no friend to things that conservatives, certainly in the United States, have long prized — freedom being paramount among them.

    Worldview US neocons have on offer: accept darkie invaders in unlimited numbers otherwise we are going to call you a raysist. Oh, and we have “freedom” (whatever that may mean), by the bucket-load.

    Worldview Putin-Russia has on offer: be careful not to throw away your unique biosphere and European culture (of which we btw are a part).

    Now, who do you think is the most attractive partner for Europe? Well?

    Tic-toc-tic-toc

    https://documents1940.wordpress.com/2019/08/13/salvini-my-only-purpose-is-to-save-europe/

    https://documents1940.wordpress.com/2018/05/10/boreas-rising-paris-berlin-moscow/

    Paris-Berlin-Moscow minus UK, that’s 640 million whites.

    USofA, that’s 197 million whites.

    Oopsie.

    And I’ll bet that, on second thoughts, after a deep look in the mirror, quite a few cowboys will all of a sudden recognize the European in themselves and prefer PBM over Washington, even if Carl Bernstein’s (((these jewish neocons))) do not approve.

    https://www.youtube.com/watch?v=ZRlatDWqh0o

    #Walkover

  14. Davy on Sat, 17th Aug 2019 6:39 am 

    “Is it the beginning of the end for drive-thrus?”
    https://tinyurl.com/yyefhz7h top gear

    “Bad news for lazy people who like their fast food on the go (and influencers looking for a clickbait title for their supercar video) as the days of drive-thrus are numbered. At least in Minneapolis, anyway. The city has banned the building of drive-thru windows in order to reduce emissions, noise and pedestrian accidents.”

    Here in America we have this scourge. It is a fine example of the car culture gone bad. The amount of idle time at these windows is huge. This needs to stop. In fact, fast food needs to go.

  15. Davy on Sat, 17th Aug 2019 6:40 am 

    “Will this object make it easier to breathe in our cities?”
    https://tinyurl.com/y6ktes7h bbc

    “An alternative to urban trees known as “bio-curtains” is being developed by a team of architects and scientists in London. The curtains use the power of algae to absorb carbon dioxide from the air. The architects EcoLogicStudio created the technology in collaboration with University College London and University of Innsbruck.”

    I think these are a great idea if they could be implemented ascetically and utilize recycled plastic or in the case of this study bio degradable plastic.

  16. Davy on Sat, 17th Aug 2019 6:40 am 

    “We moved to the forest to fight climate change”
    https://tinyurl.com/y2vjgw2j bbc

    “Janne Utriainen, his wife and four daughters are tackling climate change in their own way: they’ve moved to a remote location in northern Lapland where they live off the land: they fish, hunt, pick berries, keep sheep and chickens and grow some vegetables. Janne believes that climate change is caused by overconsumption – so in order to save the planet, he believes we should all consume less and waste less.”

    This Guy and his family are REAL Green. They are not TRUE Green but they are nearer to it. I recommend watching this clip. He makes a great point that renewables are not going to solve the problem of environmental destruction. It is the behavior of doing and consuming less. Move away from the city and focus on your local. You will naturally consume less. Get close to nature and it will enhance your life away from consumerism.

  17. Davy on Sat, 17th Aug 2019 6:41 am 

    “How Much Range Is Lost On A Parked Tesla Model 3 In 63 Days?”
    https://tinyurl.com/y2sxb46 clean technica

    “My search led me to a few options to mitigate the risk: Park at the airport and keep it plugged in. It is an interesting solution but would I find a charging spot? How soon would I have to reserve the spot? Would the airport facilities let me stay plugged in for that long? Ask a friend to drop me off and leave my car plugged in at home. Only one problem, and a big one: I live in an apartment with no place to plug in (I usually charge at the mini Supercharger in Plano). Keep the car at home and take an Uber or Lyft to the airport. This scenario has the same issue as above. Then it struck me. What if I find a storage location that people normally use to store boxes or furniture and keep my car there. I started calling storage places and, to my surprise, there is not a storage place where you can plug in your car. Finally, here is the plan I came up with that would work: I left my car parked in my friend’s garage and didn’t plug it in. He was also on vacation for two months, so it was no issue for him either. I had another friend who was willing to come by to plug the car in, if needed. I gave him my key card and the “Pin to Drive” just in case he felt like taking it for a spin. To my astonishment, the car is a beast and barely sips electrons when sitting idly. I parked my car in my friend’s garage with a range of 299 miles on June 3rd. When I returned, I picked up my car and found that it still had 199 miles of range remaining. It used only 100 miles worth of battery in 63 days.”

    This is a EV issue I had not considered in the past.

  18. Davy on Sat, 17th Aug 2019 6:41 am 

    “Local Socialism and Civil Society”
    https://tinyurl.com/y6ca6qo5 resiliance

    “I am not suggesting some grand communitarian-traditionalist-socialist alliance here, at least not without a great deal of careful theoretical exploration and clear limitations (some of which I’ve attempted in the past, under the title “left conservatism”). However, I am insisting that advocates of democratic socialism hurt themselves in the realm of political debate, and misunderstand themselves in the realm of ideas, when they present socialism as too universal, and too rational, to ever be republican in the classic sense: that is, attentive to the res publica, to people where they live.”

  19. Davy on Sat, 17th Aug 2019 6:42 am 

    It is my opinion that REAL Green applications ultimately can reach the level of small local communities. I am doing REAL Green individually. I do reach out locally but I almost never explain what I am doing in detail. Most of my neighbors would not understand this way of thinking. For them much of what I do is natural for where I live. Animals, wood, hay, and a well running farm is normal. The environmental activity well that is for the hunting effort. So, I am somewhat camouflaged to my true motivations which are REAL Green Deep Adaptation for a coming decline by embracing less and living locally. This is done relatively with the understanding the status quo must be leveraged to achieve your goals.

    Ultimately it will take a community to realize strong REAL Green results. What I am doing is not economic in the status quo. Electricity is cheaper than wood if looked at from strictly a cost approach with labor and material. Hay is cheaper done by big operators and purchased. Animals cannot be raised with small stocking rates and expected to provide you a living. My REAL Green approach to life must have an income source. Many can do this by having one or more members of the family working a status quo job. I am retired living off my investments from when I was “status quo”. If you want to live a life with modern benefits you have to remain attached to the status quo.

    Where this might be improved upon is a community based effort that would embrace “communitarian-traditionalist-socialist alliance”. People of like mind in locals can come together socialistically and realize a REAL Green life. The reality of the situation is if you are going to go low carbon and low ecological footprint efficiently it has to be local and community based. It has to have a socialistic tendencies to operate efficiently. What this means is a ordering of activity without the extreme profit motive and the hyper capitalistic approach of private property. There has to be shared efforts, gift economy, and barter involved. There must also be a social order with shared leadership that has a hint of authoritarianism. We can look to the Amish to see how they have managed to maintain their lifestyles.

    If you are going to lower your footprint there are consequences. Some can go as individuals into a TRUE Green way of life. The consequences are a very meager life that only works in certain settings for example a very rural life that allows one to live off the land. For most this is not practical. I could have chosen this way of life but I would not be able to take my family with me. It would have been a solitary living alone. That was not practical for me. Some might be able to manage this and I salute them because they are closer to TRUE Green. An alternative for those who have been awakened to planetary decline and see through FAKE Green of the rich liberal establishment the alternative is a REAL Green community embracing socialism at the grass roots level not at the top where socialism is basically just another wealth transfer Ponzi scheme.

  20. Davy on Sat, 17th Aug 2019 6:42 am 

    “Chemists make first-ever ring of pure carbon”
    https://tinyurl.com/y5uetcal nature

    “Long after most chemists had given up trying, a team of researchers has synthesized the first ring-shaped molecule of pure carbon — a circle of 18 atoms. The chemists started with a triangular molecule of carbon and oxygen, which they manipulated with electric currents to create the carbon-18 ring. Initial studies of the properties of the molecule, called a cyclocarbon, suggest that it acts as a semiconductor, which could make similar straight carbon chains useful as molecular-scale electronic components. Pure carbon comes in several different forms, including diamond, graphite and ‘nanotubes’. Atoms of the element can form chemical bonds with themselves in various configurations: for example, each atom can bind to four neighbours in a pyramid-shaped pattern, as in diamond; or to three, as in the hexagonal patterns that make up the single-atom-thick sheets of graphene. (Such a three-bond pattern is also found in bulk graphite as well as in carbon nanotubes and in the globular molecules called fullerenes.) But carbon can also form bonds with just two nearby atoms. Nobel-prizewinning chemist Roald Hoffmann at Cornell University in Ithaca, New York, and others have long theorized that this would lead to pure chains of carbon atoms. Each atom might form either a double bond on each side — meaning the adjacent atoms share two electrons — or a triple bond on one side and a single bond on the other. Various teams have attempted to synthesize rings or chains based on this pattern.”

  21. Davy on Sat, 17th Aug 2019 7:26 am 

    For anyone that cares. I imagine my REAL Green Adaptation idea to be something akin to techno-utopia lite.

  22. Davy on Sat, 17th Aug 2019 7:34 am 

    FYI, the above comment is juanpee. I will comment again at lunch so any Davy comments between then is just juanpee trolling

  23. Davy on Sat, 17th Aug 2019 7:47 am 

    Now back on topic.

    “Some economists think bond yields could go to zero or even into negative territory if recession hits. “This is the ultimate indicator that something is fundamentally wrong with the world economy,” Adam Posen, president of the Peterson Institute for International Economics, told the Washington Post.”

    The ultimate indicator?

    LMFAO!

  24. Cloggie on Sat, 5th Oct 2019 5:58 am 

    Jews Against Plastic Straws

    ROFL.

    Sorry Robert Inget, I know how important Jews are to you (one wonders why that is, asking the question is answering it), but if you really want to get a job done, bring in the Dutch:

    https://deepresource.wordpress.com/2019/10/05/ocean-cleanup-reports-initial-success/

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