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Oil price is as volatile as the stock markets indexes...

Oil rebounds from six-year low as investors curb rate gain bets

NEW YORK/LONDON (Aug 21): Oil rebounded from the lowest level in more than six years as investors cut bets for a US interest- rate increase in September, sending the US dollar lower.
...
http://www.theedgemarkets.com/sg/node/223923

The most important chart from the world economy this week
DateAugust 21, 2015 - 7:48PM

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John McDuling
Associate Editor, Digital
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It was another seismic week in global business. 
In possibly the only exciting bond market story ever, Apple raised money in Australia's corporate debt market. 
China's stockmarket tumbled. Vietnam's Dong got dinged. So did other emerging market currencies. Qantas actually made a profit and Ashley Madison was hacked.

But if you look at only one chart to sum up what's happened in the world economy this week, make it this one.
Oil. Black gold, Texas Tea, whatever you want to call it, has been sinking.  
At the time of writing on Friday afternoon (AEST), the oil price was hovering just above the $US40 a mark. It has fallen nearly 60 per cent over the past year, and hasn't been this low since 2009. 
Oil is such a crucial component of the global economy. 
There is plenty of good literature on the internet explaining its slide. The simplest an easiest explanation is that there is much more supply than demand.
OPEC, the cartel that dominates the global oil market, hasn't been willing to cut production for fear of losing market share to countries like Russia, Canada and the US.  Meanwhile, demand is actually waning in developed economies, which broadly speaking, are becoming more energy efficient, as well as in China, the world's largest importer of oil, whose economy just keeps looking weaker. 
What the net effect of a weak oil price is on the global economy is less clear. In theory it is good news for consumers and anyone who drives a car, but it's not good news for the oil industry, which is a big employer and a big spender on things like machinery and equipment. 
In a local context, the weak oil price has claimed at least one major scalp, with the resignation of Santos CEO David Knox on Friday at least tangentially related. 

Markets don’t like it, but oil crash is good for global economy

• THE AUSTRALIAN
  
• AUGUST 22, 2015 12:00AM
  

Alan Kohler
[Image: alan_kohler.png]
Business Editor at Large
Melbourne

[b]The drop in the oil price back to just above $US40 a barrel is an unambiguously good thing for the global economy, although you wouldn’t know it looking at the sharemarket.[/b]
The cries of pain from producers drown out the celebrations from consumers because it takes a while for the effect to hit the bowsers, and always does, and especially since Australia has so much invested in the fossil fuels.
It was also a factor in the sell-off on Wall Street on Thursday and the global correction generally, adding to anxiety about a flight from bonds as the (diminishing) prospect of a US rate hike looms. But whatever happens to markets, this country is going to have to get used to the idea that energy stored in ancient, fossilised photosynthesis, of which we have plenty, is now in global over­supply.
This was never supposed to happen, the world was supposed to be running out of oil, but it now turns out that neither of the two pillars of Australia’s resource economy — the other being iron ore — are as valuable as they were, and may never be as valuable again. In fact much of the world’s known reserves of oil, gas and coal may be in the process of becoming stranded assets.
This is not an argument about climate change, although the transition to solar and wind is probably partly responsible for the collapse in the oil price, but rather an observation that fossilised ­carbon energy is now being priced according to supply rather than demand.
A collapse in demand caused the oil price to fall in the second half of 2008 to a low of $US32.40 on December 19 that year. The return to $US100 in 2011 and then a three-year trading range between $US80 and $US110 was also a function of demand, this time rising demand, mainly from China.
But while the price collapse since July last year is partly a result of the slowing Chinese economy, it’s mostly a result of the huge increase in supply within the US as a result of new extraction technology, known as fracking and horizontal drilling. As a result the oil price can no longer be taken as a leading indicator of global or Chinese GDP growth, but rather a function of extraction and production costs and the amount of available reserves.
This is a structural, rather than cyclical, change. The new sources of supply that have been unlocked by new extraction technology cannot be locked again.
Meanwhile the rapidly falling costs of solar and wind power, added to by the development of electric vehicles and large-scale battery storage for solar energy, are, in effect, further increasing the supply of energy.
A glut of oil from better extraction methods, causing energy prices to fall to the same level as during the second deepest demand recession in a century in 2008, is one thing. We could even persuade ourselves, as many in government do, that coal and LNG will remain fundamental to the our economy for a long time to come. But the shift to using direct sunlight, instead of sunlight that’s been stored in carbon compounds for a few million years, is another matter entirely.
Future historians, surrounded by solar panels and batteries, will no doubt regard the government’s efforts to promote the Carmichael coalmine in Queensland as the last gasp of another legacy producer trying to fend off the impact of a disruptive new technology.
But the structural decline in the oil price is an unambiguous positive for consumer spending and GDP growth and a negative for inflation, which means it will probably force the Fed to put off raising interest rates next month.
The Fed has been mumbling about “lift-off” (from a zero Fed funds rate) in September but the minutes released from the July meeting made it clear that this requires inflation to be heading back towards the 2 per cent target that the US central has decided is consistent with its mandate.
In fact the July CPI, also released on Wednesday showed that the CPI rose only 0.2 per cent on a year ago (not a month ago, a year ago), which is well below what the market, and the Fed, has expected.
And that was before the oil price fell from $US60 to $US40. The latest fall in the oil price is profoundly significant: it both undermines financial markets and supports economic growth.
That makes it the best thing to have happened since China started exporting disinflation in the early 2000s.

Oct 2015 Nymex Oil prices drop to USD40.29 on last night closing. It is Oct 2015 Nymex Oil not Sept 2015, mind you!

It broke previous low of USD42.08 convincingly. Partly due to weakening of RMB also.

http://www.cmegroup.com/trading/energy/c...crude.html

• Aug 26 2015 at 2:49 PM 
   
  
  
•  Updated Aug 26 2015 at 8:34 PM 
  

New market worry: falling price for oil undermines economies around the globe

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[img=620x0]http://www.afr.com/content/dam/images/g/j/7/5/j/0/image.related.afrArticleLead.620x350.gj7zi5.png/1440585296619.png[/img]Without income from oil, many governments will struggle to meet budget expectations. supplied
by Keith Johnson
Chinese contagion that sparked "Black Monday" is especially worrisome for crude oil prices, which this summer were thought to have finally found a floor after a year of steady price declines. But that floor suddenly looks rotten: U.S. benchmark crude prices fell well below $40 a barrel on Monday, their lowest levels since the depths of the global financial crisis.
Oil prices are still at six-year lows. With question marks hanging over the world's second-largest economy, hopes for a rebound in oil prices are fading — and that's going to make for a painful reckoning everywhere from Moscow to Maracaibo.
This week's global market slide, which saw huge drops in stocks from New York to Shanghai, was fueled by worries over China's economic outlook. "Black Monday," though largely erased in the United States by market gains early Tuesday, continued in China, forcing the government to slash interest rates.
That's troubling for oil-rich countries like Russia and Venezuela, which harnessed years of breakneck Chinese growth to power their own rise — but now face the specter of a prolonged slump that could hammer already tottering economies.

"I don't want to use the phrase 'nail in the coffin,' but China is sort of piling onto the oil supply situation by adding some pretty material demand concerns," said Richard Morse, a commodities analyst at Citigroup.
HOW IT SPREADS
The oil rout is hammering Russia: The ruble on Monday hit yearly lows and is now worth half what it was last year. Coupled with Western sanctions, the Russian economy and budget are under severe pressure, which in turn creates all kinds of political headaches for President Vladimir Putin.
"Is Putin willing to hurt the interests of 45 million pensioners by trimming spending or the military-industrial complex, which is the main pillar of his support?" asked Alexander Kliment, director of Russia and emerging markets strategy at Eurasia Group, a risk consultancy.


Things are even worse in other struggling petro-states. Venezuela's disintegrating economy, coupled with plunging oil prices, has investors seriously worried about default and even societal collapse. Nigeria, already under attack from Boko Haram terrorists, will likely have to devalue its currency in a bid to cope with collapsing oil prices, which will stoke inflation and threatens even more domestic instability. Lower oil prices just aggravate already terrible political situations in places like Libya and Algeria, threatening further domestic unrest.
Even Saudi Arabia, an oil titan with hundreds of billions of dollars in its rainy day fund, faces credit downgrades, double-digit deficits, and concerns over fiscal stability. Bloomberg reported that Saudi officials are seeking to slash spending by as much as 10 percent to cope with oil's collapse.
Other oil producers all face different variations of the same headache, from Iraq's vanishing budget (which complicates the fight against the Islamic State), to slower growth in Mexico, to job losses in the U.S. oil patch. The pain is spreading far and wide: Canadian oil-sands producers can't cope with cheap oil, Norway is bracing for sluggish growth, and the United Kingdom is shedding thousands of North Sea oil jobs.
ORIGINS LIE WITH CHINA

The real irony, though, is what lies behind the current global market panic: the Chinese economic slowdown. For years, Russia and Venezuela, as well as Middle Eastern and African oil producers, watched happily as China's voracious appetite for raw materials like oil pushed crude prices up to record levels. That oil windfall fattened petro-state coffers, bolstered their confidence, and helped shape their geopolitical strategies.
Russia's pivot to Asia was predicated, in large part, on never-ending Chinese demand for energy. And Putin's economic "miracle" in the 2000s, not to mention his reelection as president, would have been a lot tougher without $100-a-barrel oil. Currently, though, some of Russia's huge energy deals with China are on hold due to low oil prices.
Venezuela's trouble making throughout its neighborhood, especially under former leader Hugo Chavez, was underwritten by hundreds of billions of dollars in oil revenue, even as the economy was propped up by huge loans from China.
Now, though, the Chinese economic roller coaster is screaming downhill, frightening traders, spooking markets, and further slashing the price of oil that ultimately underpins those economies. The biggest problem is that no one knows with certainty just what is going on in the Chinese economy.

And even some of the steps that China has taken to deal with the economic slowdown, such as devaluing the renminbi, are bad news for oil producers: A weaker currency makes imported oil more expensive, which could further dampen Chinese purchases and weigh even more on already battered oil prices.
And that's just what big oil producers don't need. Thanks to years of high oil prices, underpinned by seemingly bottomless Chinese demand, OPEC countries and Russia skewed their spending plans. Iran needs oil at about $137 a barrel to balance its budget, according to estimates provided by the commodities team at Citigroup; Saudi Arabia needs $105 a barrel; and Russia needs at least $90 oil. Countries that thrived thanks to China's boom, in other words, are now shuddering  thanks to China's bust, just as they can least afford it.
"The whole paradigm is changing. You had 15 years when massive natural resource rents made it possible for these countries to sustain political stability, and now that's all slowing down," said Kliment of Eurasia Group.
Of course, oil's slump isn't just due to the Chinese slowdown; oil producers inside and outside of OPEC have kept pumping full bore over the past year, creating a supply glut that pushed prices down from highs of about $115 a barrel last summer. And China's woes don't just hit petro-states. Australian ore and coal miners, Brazilian soybean growers, and Argentine ranchers all thrived from feeding the Chinese market for more than a decade, and now are all hunkering down.
"Absent lots of money to keep people happy, lots of countries are going to face serious problems," Kliment said.

Foreign Policy

I wonder why oil is rebounding? Do you?

Cheers
Hsq.Cap
Twitter: @hsquare_capital
https://hsquarecapblog.wordpress.com

Short covering, it was a quick drop from 60 last round

sent from my Galaxy Tab S

Oil extends gains, after soaring over 10% in biggest one-day climb in 6 years

SEOUL (Aug 28): Crude oil futures rose on Friday in Asian trading, adding to their biggest one-day rally in over six years the day before led by recovering stock markets and news of diminished crude supplies.

US crude futures are on track for their first weekly gains in 11 weeks, ending the longest losing streak since 1986. Brent crude is on track for its first weekly gain in two weeks.

Stock markets around the world rallied on Thursday, shaking off a slump related to China growth fears, as strong U.S. economic data boosted investor sentiment, and the dollar advanced for a third consecutive session.
...
http://www.theedgemarkets.com/sg/article...mb-6-years

Warren Buffett’s Berkshire Hathaway Inc. disclosed a $4.5 billion stake in Phillips 66, the Houston-based oil refiner, as the billionaire investor’s company increases its bet on the energy industry....

“Berkshire’s made a clear statement about how they view the oil business,” said Cliff Gallant, an analyst at Nomura Holdings Inc. “They seem to be taking the long view that demand for fuel is going to come back.”..

Berkshire Reports $4.5 Billion Stake in Refiner Phillips 66