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’Collateralised commodity borrowing, BP edition
From BP’s fourth quarter results on Tuesday:
At 31 December 2011, $131 million of finance debt ($128 million at 30 September 2011 and $790 million at 31 December 2010) was secured by the pledging of assets,
This crude old eurozone crisis
Bank of America Merrill Lynch’s commodities analysts have picked up that Brent crude — when priced in euros — is uncomfortably close to its July 2008 peak.
And they’ve added some interesting points:
How will the world live with $100 oil?
For the long haul, that is.
So, Saudi Arabia is now effectively targeting $100/barrel crude oil, instead of the $70 – $80 price range of the past several years. This is significant because Saudi Arabia is the only country that can (in theory at least) ramp up its oil production quickly if prices spike (say,
Euro crisis, Brent oil edition
Courtesy of Olivier Jakob at Petromatrix, FT Alphaville presents the price of front-month Brent oil futures expressed in euro terms:
That would be echoes of the 2008 record oil price. This time,
Inside the mind of a gold bug
Warning: this is a very scary place to be. Rampant inflation, conspiracy, socialism, totalitarianism and Ayn Rand can be found at every turn.
Presenting the latest Thunder Road report from former resource analyst Paul Mylchreest:
Christmas cancelled for GKP investors
It’s taken more than a day and a half but Gulf Keystone Petroleum (GKP) has finally responded to speculation that Exxon Mobil was considering a £7bn, or 800p a share, cash offer.
And guess what, the Kurdish explorer is not in takeover talks but it remains committed to creating value for shareholders blah,
The curious case of ‘abnormal’ backwardation
John Kemp at Thomson Reuters is a big fan of commodity curves — backwardation, contango and all the principles that come with it.
As he often notes, one of the key theories affecting the area is the idea of a convenience yield,
The Saudi production puzzle
Last week it transpired that Saudi Arabian oil production had hit its highest level in three years.
As Bloomberg reported at the time:
Saudi Arabia, the world’s biggest crude exporter, boosted output last month to the most in more than three decades to meet customer demand.
Collateral crunch, commodity financing edition
Look at any financial market long enough and it starts to resemble the repo market.
Conventional sales and buybacks. Islamic finance. Covered bonds. Commodity contango or backwardation trades. Most of them have some form of sale and later buyback of assets,
A drachma-tic moment in Greek oil trading
European geopolitical FAIL:
LONDON, Nov 11 (Reuters) – Greece is relying on Iran for most of its oil as traders pull the plug on supplies and banks refuse to provide financing for fear that Athens will default on its debt…
Is fuel oil changing everything?
Fuel oil: a byproduct of the petroleum distillation process, usually considered either a distillate or a residue.
Or as Wikipedia explains:
The term fuel oil is also used in a stricter sense to refer only to the heaviest commercial fuel that can be obtained from crude oil,
Fundamentally speaking…
From Olivier Jakob at Petromatrix on Wednesday:
While crude oil futures continue to be supported by the Iranium premium, the products are not following and the light-end cracks are suffering further. The Naphtha and RBOB cracks to Brent are going as we expected deeper into negative territory and the pressure is now also coming to the European Distillates physical premiums.
WTI is no longer a burden to passive investors
It was quite a day on Monday for the WTI US oil benchmark. The structure of the futures curve finally flipped into a subtle backwardation, seeing the contract join Brent in a formation which sees front month futures trade more expensive to those further out.
[Explaining backwardation] The WTI-Brent anomaly
… continued.
How do you actually profit from a contango trade?
To understand the WTI-Brent deviations of the last year, understanding the formation of the industry’s contango trades is essential.
[Explaining backwardation] Are index funds the new swing producers?
FT Alphaville’s three-part series attempting to explain the current backwardation in the market…
…continued.
Index funds the new swing producers?
In many ways, Saudi Arabia’s position as the ultimate swing producer in the oil markets is key.
[Explaining backwardation] The curious case of super-backwardation
A heads up — This is a three-part series attempting to explain the current backwardation in the market. We will make three arguments: 1) That contango trades helped to create fake demand in 2009/2010 2) that index funds replaced Saudi Arabia as key swing players,
Just when it makes sense to sit in oil futures…
… many funds have stopped buying.
While at first that move might seem logical — they are obviously expressing a bearish view when it comes to future demand — it’s actually another example of how the mechanics of the market see funds damned if they do and damned if they don’t.
Goldman on who’s really wagging the oil market
If you’re wondering what Goldman Sach’s view on crude is — it can be summed up in one neat sentence from their latest research note:
The world crude oil market remains exceptionally tight.
The reasoning is pretty straightforward.
[Something for the weekend] Alliance… I’m not sure about this
– By Neil Collins –
I’m a shareholder in Alliance Trust. Its subsidiary, Alliance Trust Savings, is home to my (substantial) SIPP. The service from ATS is simple, cheap and exemplary, and I’d recommend it.
Gulf Keystone plots $200m fund raising
Earlier this week Gulf Keystone Petroleum – the next super major oil company – spelled out its plans for the future.
The highlights were a move to the main market of the London stock exchange from Aim and a plan to develop a pipeline capable of carrying 440,000 barrels a day north from its Shaikan field to the Kirkuk-Ceyhan export pipeline.
Regulatory arbitrage with Tony & Nat
Looks like ex-BP boss Tony Hayward is about to get seriously rich.
Reuters:
Tony Hayward, who stepped down as BP boss in the wake of the Gulf of Mexico oil spill, will imminently seal his return to the oil industry,
Time to get your Roxxon…
Alternative headline: “Roxxon! You don’t have to put on the red light.”
Reported by Reuters a few minutes ago:
Russia’s top crude producer, Rosneft, and U.S. ExxonMobil signed a strategic agreement on Tuesday to jointly develop oil in the Russian Arctic.
A name and shame policy from the CFTC? [Updated]
(* Please see comment at end of post.)
The Wall Street Journal is out with a very interesting commodities story on Thursday.
And it’s interesting on two fronts.
First, due to the information it carries and second,
Goldman says ‘it’s got riskier’ (but we still ♥ commodities)
For anyone wondering how commodities will do out of the USA(A+) downgrade, Goldman Sachs takes a stab at predicting the course of events in its Monday commodities research note.
In a nutshell, it’s going to get riskier out there,
Meltdown [updated -- to rollercoaster]
Nine days of stocks falling. Nasdaq — like the S&P 500 — is now negative for the year. Situation in crude also ugly and the 10-year Treasury yield is advancing down to 2.5 per cent:
Update — Nasdaq is back in positive territory at pixel time (the FTSE Eurofirst 300 closed down 2 per cent though.) WTI crude’s hugging $92.
[Paul Donovan] The 21st century is when everything changes
With government finances still dealing with the aftershocks that are rippling out of the epicentre of the financial credit crunch, the world economy could do with a period of calm in which to heal.
Unfortunately,
Quantitative greasing of another kind?
Title shamelessly stolen from Chris Cook, who’s applied the term to the IEA’s “easing” of tight oil markets by releasing reserves.
What we refer to though is the direct depression of bond yields, via the sheer weight of petrodollars (for example Saudi Arabia’s gigantic foreign assets) recycled into buying those bonds.
BarCap barks at the IEA
The IEA slaps speculators … The speculators swat right back.
The FT has kept busy reporting how the International Energy Agency’s decision last week to release 60m barrels of oil reserves has burned some energy traders.
Cholesterol, eggs, oil and other inflation-fighting ingredients
Here’s a thought after the International Energy Association’s oil price-crushing decision.
The Wall Street Journal reports that the IEA has been working on the plan for months. Suddenly all those recent speeches by Federal Reserve chairman Ben Bernanke on ‘imported’ inflation through high oil prices,