Can It Happen Again? Emphatically, Yes

The last few weeks the financial press has been filled with articles noting the passing of the 10th anniversary of the Lehman Brothers bankruptcy. A few of the articles have been hand-wringing of the sort that if Lehman had only been rescued – like AIG – or merged with a strong commercial bank – like Merrill Lynch – the crisis would have never happened, or at least it wouldn’t have been so severe.

That’s wishful thinking. There was plenty of reckless and irresponsible behavior taking place on Wall Street to create the crisis that did develop, whether Lehman was saved or not. Like giving home mortgages to anyone who asked while creating securities backed by these often worthless loans, which only magnified the risk by a huge factor, then slapping a triple-A credit rating on them, so everyone was assured that everything was fine.

But most of the recent articles have been about whether such a crisis can happen again. And the answer is, unfortunately, absolutely. We may already be seeing the seeds being planted right before our very eyes, although I’m not sure how close we are to the next crisis. It certainly bears careful watching.

Boom-and-bust cycles are endemic to any free-market capitalist system anywhere, unfortunately, since they’re largely based on self-interest and, too often, greed. The only system where that is not the case is a planned or Communist one, where the economy is perpetually in bust mode. When the next bust will hit is anyone’s guess, but it seems with each passing day that we keep moving closer and closer to it, and not a whole lot is being done about it. Continue reading "Can It Happen Again? Emphatically, Yes"

Oil Prices Break-Out of Trading Range

Robert Boslego - INO.com Contributor - Energies


Oil futures prices have broken above the trading range where they have been since February when the market was expecting supply and demand would balance quickly as a result of the OPEC/non-OPEC deals. But those hopes were dashed because the global demand was in a seasonal decline, and inventories remained stubbornly high.

Prices managed to break higher due to a combination of circumstances:

U.S. and Global Inventories

Hurricane Harvey in the U.S. Gulf of Mexico (GOM) disrupted refinery operations, causing product stocks to draw rapidly. It was followed by Hurricane Nate, which disrupted crude oil production in the GOM.

In addition, U.S. crude exports reached record levels recently, averaging 1.744 million barrels per day (mmbd) over the past four weeks, a gain of 293 % from the same weeks a year ago. Petroleum product exports have also been strong, averaging 5.125 mmbd in the same period, up 23% v. a year ago.

Together, these trends have reduced U.S. inventories by 40 million barrels since the week ending September 8th. Global OECD stocks have dropped about 51 million barrels from May through September, though this is largely due to normal seasonal trends. Continue reading "Oil Prices Break-Out of Trading Range"

Non-OPEC Deal Delivers "Voluntary" Oil Production Cuts

Robert Boslego - INO.com Contributor - Energies


Ministers from eleven Non-OPEC oil producing countries, led by the Russian Federation, met at OPEC’s headquarters in Vienna on December 11th. It had been reported for weeks that they would agree to cut their oil production by 600,000 b/d.

What they actually agreed to was a watered-down version of that. It turned out that they did not get to 600,000, that much of the “cut” was due to a natural decline in certain countries, such as Mexico, that Russia’s 300,000 b/d cut would be gradual over the first six months of 2017, and that it was all voluntary.

The key portion of the press release reads as follows: Continue reading "Non-OPEC Deal Delivers "Voluntary" Oil Production Cuts"

What OPEC Cut Is Priced-Into The Crude Oil Market?

Robert Boslego - INO.com Contributor - Energies


As all seasoned traders know, oil futures contracts reflect the market’s probability-weighted price expectations. In addition, I believe that the market provides a risk premium to the long side which underprices oil to some extent.

One important question now is how much of a potential OPEC/Non-OPEC cut is already priced into futures contracts? The answer determines the risk-reward to being long or short, depending on the outcome of the 171st OPEC Meeting on November 30th.

Before going further, there is no definitive financial theory or procedure of telling specifically. So I have to make some informed guesses based on possible outcomes and past market reactions. Continue reading "What OPEC Cut Is Priced-Into The Crude Oil Market?"

How The Natural Gas Storage Glut Has Been Cut This Summer

Robert Boslego - INO.com Contributor - Energies


The National Oceanic and Atmospheric Administration (NOAA) reports cooling degree day (CDD) data for every seven-day period by state. From that data, they construct a populated-weighted national total.

CDDs are the difference between the daily temperature mean (high temperature plus low temperature divided by two) and 65°F. If the temperature mean is above 65°F, we subtract 65 from the mean.

Example: The high temperature for a particular day was 90°F and the low temperature was 66°F. The temperature mean for that day was: Continue reading "How The Natural Gas Storage Glut Has Been Cut This Summer"