Tag: finance

Wolf Richter   http://ift.tt/NCxwUy   http://ift.tt/Wz5XCn

Washington is tangled up in spirited bouts of mudwrestling over exporting US-produced crude oil, which has been prohibited since the Arab oil embargo of 1973. Oil companies, environmentalists, consumer groups, lobbyists, lawmakers – they’re all at it.

Oil companies, faced with lackadaisical consumption and ballooning production in the US, are desperate. They have visions of dropping prices just when exploration and production costs are rocketing higher. So they want to benefit from the higher prices their US-produced oil would bring in other markets – and they want to create scarcity in the US to fire up local prices.

But environmentalists fear general mayhem if crude oil were allowed to be exported. Consumer groups are worried that it would raise the cost of gasoline, diesel, propane, and heating oil – though oil companies have sworn up and down a million times, via numerous studies they themselves directly or indirectly funded, that oil exports wouldn’t impact prices at the pump. Lobbyists of all stripes see in this conflict a mega-opportunity to fatten up their wallets. And lawmakers want to exact their pound of flesh from both sides; elections are coming, and they need to stuff their campaign coffers with money.

Meanwhile, behind the scenes, so to speak, something else has been happening: a breathtaking boom in exports, not of crude oil, which would be illegal, but of refined “petroleum products,” which is perfectly legal, even if it’s refined just enough to circumnavigate the crude-oil export ban.

BP, the British oil mastodon which is still in hot water over the Horizon oil spill in the Gulf of Mexico, figured it out too. It has inked a 10-year deal for at least 80% of the capacity of a refinery being built by Kinder Morgan Energy Partners LP in Houston, Bloomberg reported. The first phase of the 100,000 barrel-a-day refinery is expected to come online in July. It’s designed to refine crude just enough to turn it into a "petroleum product," which then can be legally exported without limits.

To heck with the crude oil export ban.

It’s not just BP. The possibility of legally exporting barely refined “petroleum products” to profit from the price differential overseas has been such an irresistible lure that it has triggered a construction boom of specialized refineries along the Gulf Coast.

An “inexpensive way around the export prohibition” is what Judith Dwarkin, chief energy economist for ITG Investment Research, called the phenomenon. She told Bloomberg, “You can lightly ruffle the hydrocarbons and they are considered ‘processed’ and then they aren’t subject to the ban.”

Specialized refineries, built at a fraction of the cost of full-fledged refineries, can distill the lightweight crude or “condensate” found in parts of the US into various “petroleum products” that often need to be refined further in the receiving country. Production of condensate has doubled since 2011, creating glut-like conditions in some areas. Hence the drive for exports. And the drive to finagle a way around the crude-oil export ban.

This chart by the Energy Information Administration shows the “petroleum product” export boom that is making such hilarious mockery of the crude-oil export ban:

Since 2007, when this boom took off, exports of petroleum products have tripled to a full-year average of 3.5 million barrels per day (bbl/d) in 2013, up 11% from 2012, according to the EIA. And they hit 4.3 million bbl/d in December, the first month ever such exports exceeded the 4 million mark.

Among these petroleum products are “distillates,” the largest category that includes diesel, kerosene, and home heating oil. US refineries increased their production of distillates to an average of 4.7 million bbl/d for the year, and set a new record in December of 5.1 million bbl/d. About 1.1 million bbl/d were exported in 2013, up 10% from prior year, half of it to Central and South America, 400,000 bbl/d to Europe.

Worried about the price of gasoline at the pump? Exports of gasoline (finished gasoline and gasoline blending components) rose 9% to an annual average of 550,000 bbl/d, with December setting a new record of 770,000 bbl/d.

Heating your home with propane? You got snookered this winter. Propane around the country prices nearly doubled since October, though they have started to wind their way back down to earth recently. Meanwhile, propane exports, supported by a new export terminal that came on line in September, soared, particularly in the last quarter, and averaged 300,000 bbl/d in 2013. A 76% jump from prior year!

Whatever the original purpose of the export ban, it wasn’t immensely helpful in keeping prices down – I mean, if I remember right, a gallon of gasoline cost a fraction of a buck at the time. Now the ballooning exports of “petroleum products” and the potential for outsized profits have nurtured along a specialized industry that is piling billions into infrastructure, plant, and equipment, with the sole goal of elegantly dodging the export ban.

What is perhaps the most gigantic loophole in the history of mankind may well obviate that spirited high-dollar mudwrestling show in Washington. Then lawmakers and lobbyists would have to go look for some other cause which they could leverage to exact their pound of flesh. And the industry will continue to use every trick in the book to light a fire under prices – and exporting “petroleum products” is just one of them.

Despite breath-taking hype on Wall Street and President Obama’s budget that assumes economic growth of 3.1%, true corporate insiders – executives and directors, not large investors that are also considered “corporate insiders” – are dumping their shares in bouts of extreme bearishness, just like they did with impeccable timing in the summer of 2007, before the last crash. Read….. True Corporate Insiders Are Freak-Out Bearish

via Zero Hedge http://ift.tt/1k0l4jd testosteronepit

Amid a Russian spokesperson “hoping” tensions do not escalate into a new cold war with the US, China has come out (perhaps unsurprisingly) on Russia’s side strongly condemning any sanctions:

“China has consistently opposed the easy use of sanctions in international relations, or using sanctions as a threat.”

The comments from China’s Foreign Ministry reflect the country’s close ties with Russia and confirm what Russia’s ambassador to Canada noted, we “can always turn to China if the West follows through on threats of tougher sanctions,” adding that “Western countries would largely be hurting themselves if they impose tougher sanctions.”

Some cryptic words this morning:

• WESTERN STATEMENTS ON UKRAINE MAKE US THINK OF TASKS, MEANS AND SACRIFICE THEY ARE WILLING TO MAKE – RUSSIAN FOREIGN MINISTRY
• *PESKOV HOPING FOR COMMON GROUND WITH WEST ON UKRAINE: RIA
• *PUTIN SPOKESMAN DOESN’T SEE NEW COLD WAR, RIA SAYS

Furthermore, as The Globe and Mail reports, it is clear the Russians have a plan…

Russia’s ambassador to Canada says he was surprised no one bothered to speak with him about the crisis in Ukraine before he received a diplomatic dressing-down last Saturday, and added his country can always turn to China if the West follows through on threats of tougher sanctions.

 

In a wide-ranging interview with The Globe and Mail, Georgiy Mamedov insisted Russia wants to see the crisis in Ukraine resolved peacefully.

 

And he said Western countries would largely be hurting themselves if they impose tougher sanctions or make good on warnings that they could boot Russia out of the G8.

via Zero Hedge http://ift.tt/1k0bPiY Tyler Durden

via Zero Hedge http://ift.tt/1k0bPiV williambanzai7

As we reported yesterday, after getting permission to cross the Bosphorus, the guided-missile destroyer USS Truxton departed the Greek port of Souda Bay on its way to the Black Sea. As of a few hours ago, it is already there. Sky News reports that the USS Truxtun passed the Dardanelles strait earlier today on its way to the Black Sea amid heightened tension over the crisis in Ukraine and reports that Russia has now 30,000 troops in Crimea.

The naval escalation is not the only arms build up in proximity to the Ukraine: the Pentagon said six US F-15 fighter jets have arrived in Lithuania to bolster air patrols over the Baltics. The fighter jets and 60 US military personnel landed at Siauliai Air Base in Lithuania, adding to the four F-15s and 150 troops already there to do the air patrol mission.

As for the pretext for the Truxton’s move, it is only 300 miles away from Sevastopol for one simple reason: naval exercises.

Joint naval exercises with Bulgarian, Romanian and US vessels are to take place in the Black Sea on March 11.

 

The naval forces of all three nations have stated no connection between the upcoming drill and the tensions on Ukraine’s Crimean Peninsula, where the Russian Black Sea Fleet is based, the Bulgarian National Radio has reported.

 

Vessels participating in the event include a Bulgarian frigate, three Romanian ships and US destroyer USS Truxtun. The US military described the joint military maneuvers as a “routine” deployment scheduled last year, long before the standoff in Ukraine.

 

Crimea, however, is some 500 km to the north-east of the location where the drill is to be carried out.

 

According to a statement by the US Navy, the Truxtun left Greece on Thursday after it was granted passage through the Black Sea Straits by Turkey, which controls their traffic.

 

The USS Truxtun will be at the Bulgarian city of Varna’s port from March 12 to March 14

And the Russian ICBM launch was just part of a “routine” drill too.

via Zero Hedge http://ift.tt/1cBwFpt Tyler Durden

European bond markets, simply put, did not blink at anything this week (and Portugal spreads actually rallied) as the insanity of that segment of the market remains. Europe’s high-yield credit market moves to near record low spreads (on rumors of an aggressive hedge fund squeeze). But all of this beggars belief as we see European stocks giving up their post-Putin gains and collapsing today on the good-news-is-bad-news from the US but much more critically the Gazprom threats (which smashed Germany’s DAX red for 2014 and down around 2% today).

European stocks have given back most of the post-Putin gains (with Germany hardest hit as it is most affected by any retaliation from sanctions)

European sovereign bonds remain totally unphased

as it’s clear the “management” in Europe cares more about the credit markets than the stock market (as opposed to the US…)

via Zero Hedge http://ift.tt/1fPMOSs Tyler Durden

Watch Phil Davis of Phil’s Stock World on the Money Talk Show at Business News Network. 

Part 1: Market Outlook: Cashy and Cautious

Phil discusses why low volume market rallies are unconvincing, the “be the house and not the gambler” approach to trading options, and his thoughts on an upcoming market correction. 

Part 2: Option Plays for 2014

Specific ideas for 2014. 

via Zero Hedge http://ift.tt/1f72J3l ilene

Following last week’s discovery that Mohamed El-Erian was “sick of cleaning up [Bill Gross’s] shit” as tensions soared at PIMCO, the “bond king” has struck back blasting to Reuters that he’s “so sick of Mohamed trying to undermine me,” claiming El-Erian wrote the damaging WSJ article. Furthermore, the somewhat paranoid-sounding Gross indicated that he had been monitoring El-Erian’s phone calls but when questioned by Reuters for evidence of El-Erian’s undermining, Gross responded “you’re on his side. Great, he’s got you, too, wrapped around his charming right finger.” As one analyst noted, “I’ve never seen Bill and Pimco scrutinized like this before… a couple of high-profile stumbles and mediocre showings, coupled with some outflows clearly has some investors on edge.”

Via Reuters,

Gross told Reuters that he had “evidence” that El-Erian “wrote” a February 24 article in the Journal, which described the worsening relationship between the two men as Pimco’s performance deteriorated last year, including a showdown in which they squared off against each other in front of more than a dozen colleagues at the firm’s Newport Beach, California headquarters.

Gross, who oversaw more than $1.91 trillion in assets as of the end of last year and who is known on Wall Street as the ‘Bond King’, said in a phone call to Reuters last Friday: “I’m so sick of Mohamed trying to undermine me.”

When asked if Reuters could see the evidence about El-Erian and the allegation he was involved in the article, Gross said: “You’re on his side. Great, he’s got you, too, wrapped around his charming right finger.”

He said he knew that El-Erian, who had been widely seen as the heir apparent to Gross but is now due to leave in mid-March, had been in contact with Reuters as well as the Wall Street Journal.

Gross indicated he had been monitoring El-Erian’s phone calls.

…

The Wall Street Journal quickly denied Gross’ claims…

When asked about Gross’s claim that El-Erian “wrote” the article, a spokeswoman for Dow Jones, the publisher of The Wall Street Journal, said: “This is an astoundingly incorrect claim about a thoroughly reported article that was in the best tradition of The Wall Street Journal.”

As we noted previously, isn’t it interesting that all these tensions occur as the Fed starts to taper and bonds , according to many strategists, end a 30 year bull market…

The latest signs of a rift between Gross and El-Erian, who once praised each other fulsomely, come as Gross is grappling with clients who are also turning their backs on the very asset class that has made him famous.

That is happening partly because the Federal Reserve continues to reduce its controversial bond buying that has provided stimulus to the U.S. and world economies.

Pimco saw its assets under management shrink by $80 billion in 2013 due to outflows and negative returns, according to Morningstar.

…

“I’ve never seen Bill and Pimco scrutinized like this before. This is the most attention I have seen on them,” said Eric Jacobson, Morningstar senior analyst who has covered Pimco for nearly two decades. “A couple of high-profile stumbles and mediocre showings, coupled with some outflows – and with no identified successor for life after Bill – clearly has some investors on edge.“

Ugly…

via Zero Hedge http://ift.tt/1lbSYld Tyler Durden

One of the critical steps in President Obama’s “off-ramp” de-escalation plan for the crisis in Ukraine was a so-called ‘observer mission’ by the Organisation for Security and Co-operation in Europe (OSCE) to ensure that all citizens were being treated fairly. That ‘plan’ has hit a wall this morning as PTI reports that pro-Kremlin gunmen blocked the obersver entry. Seems like another red line just got crossed.

Via PTI,

Pro-Kremlin gunmen kept foreign observers from entering Crimea today as Russia welcomed the prospect of the Ukrainian peninsula joining the country amid the worst East-West crisis since the Cold War.

 

A convoy of vehicles from the Organisation for Security and Co-operation in Europe (OSCE) — led by a police car and followed by two buses carrying the observers and a large number of cars waving Ukrainian flags — were stopped at a checkpoint manned by armed men as they tried to enter Crimea for a second day.

 

The observer mission is a crucial part of the so-called “off-ramp” US President Barack Obama is pushing to de-escalate a crisis in Ukraine that threatens to splinter the ex-Soviet nation of 46 million along its cultural divides.

With Gazprom threatening their gas supplies, we await President Obama’s response to this denial of his plan and the actions of his allies in Europe…

via Zero Hedge http://ift.tt/NFVu7V Tyler Durden