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Having been reprimanded by her boss (and President Trump) for her previous divisive remarks, ESPN's Jamele Hill called on football fans to boycott advertisers who are aligned with teams pushing back against 'kneeling'.

As a reminder, after her last outburst, here is what ESPN president John Skipper said in a memo to staffers:

"ESPN is about sports… It is not a political organization."

So much for that…

As Fox News reports, the ESPN anchor who called President Trump a “white supremacist” on Twitter last month is now calling for a boycott of advertisers aligned with "America's Team."

If you strongly reject what Jerry Jones said, the key is his advertisers. Don't place the burden squarely on the players. https://t.co/Gc48kchkuv

— Jemele Hill (@jemelehill) October 9, 2017

Jemele Hill, host of "SC6," called on fans to take indirect action against the Dallas Cowboys after owner Jerry Jones told players they would be benched if they didn't stand up during the national anthem.

Hill, an outspoken liberal, tweeted that Jones “has created a problem for his players, specifically the black ones… If they don't kneel, some will see them as sellouts.”

 

The ESPN host wrote, “By drawing a line in the sand, Jerry put his players under more scrutiny and threw them under the bus… If the rationale behind JJ's stance is keeping the fanbase happy, make him see that he is underestimated how all of his fanbase feels.”

 

She urged “paying customers” to “boycott his advertisers” if they don’t agree with Jones’ comments.

 

Hill quoted a list of Cowboys’ advertisers in one of her tweets, which included AT&T, Bank of America, Dr. Pepper Snapple Group, Ford Motors, MillerCoors and Pepsi, and sent a message to her 760,000-plus Twitter followers.

 

“Change happens when advertisers are impacted,” Hill wrote. “If you strongly reject what Jerry Jones said, the key is his advertisers.”

However, as Daily Caller’s David Hookstead wrote…

“The NFL is the biggest crutch keeping ESPN alive. If the NFL cuts ties, which would be reasonable if the network’s employees start calling for a boycott, ESPN would be in massive trouble."

 

“Not sure how happy ESPN management will be with an employee telling NFL fans to boycott NFL related sponsors, given the fact that ESPN needs the NFL to stay alive.”

Let's see John Skip[per squirm out of this one.

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On Sunday, in its most explicit warning to Donald Trump not to revise the terms of the Nuclear Deal – something the US president is expected to do over the coming days – Iran warned the United States that U.S. regional military bases “would be at risk” if further sanctions were passed. “The Americans should know that the Trump government’s stupid behavior with the nuclear deal will be used by the Islamic Republic as an opportunity to move ahead with its missile, regional and conventional defense program,” Iran Revolutionary Guards’ commander Mohammad Ali Jafari said, quoted by Reuters. He then threatened US presence in the region, warning that “if America’s new law for sanctions is passed, this country will have to move their regional bases outside the 2,000 km range of Iran’s missiles.”

Then, one day later, Iran vowed on Monday to give a “firm and crushing” response should Washington decide to also include the elite wing of its army, the Islamic Revolutionary Guard Corps (IRGC), on its list of terrorist organizations, according to the country’s foreign ministry.

“We are hopeful that the United States does not make this strategic mistake,” Iranian Foreign Ministry spokesman Bahram Qasemi stated during a news conference according to Reuters. “If they do, Iran’s reaction would be firm, decisive and crushing and the United States should bear all its consequences.”

Members of the Iranian Revolutionary Guard Corps

Late last week, the White House disclosed that Washington is preparing tougher sanctions on Tehran, including the possible designation of the Islamic Revolutionary Guard Corps (IRGC) as a terrorist group. The Trump administration aims to put more pressure on the IRGC, especially over recent missile tests and what Washington has called its “malign activities” across the Middle East. The U.S. government imposed sanctions in July on 18 entities and people for supporting the IRGC in developing drones and military equipment. In August, Congress overwhelmingly approved the “Countering America’s Adversaries Through Sanctions Act” which imposed new sanctions on Iran for its ballistic missile program, as well as sanctions on Russia and North Korea.

The Iranian counter-threats came from Qasemi one week before President Donald Trump is expected to announce his final decision on how he wants to contain the Islamic Republic. On October 15, Trump is expected to “decertify” the landmark 2015 international deal to curb Iran’s nuclear program, a step that by itself stops short of pulling out of the agreement but gives Congress 60 days to decide whether to reimpose sanctions.

New U.S. sanctions on the IRGC could affect conflicts in Iraq and Syria, where Tehran and Washington both support warring parties that oppose the Islamic State militant group (IS).

• France said on Monday it was worried that classifying the IRGC as a terrorist group could exacerbate tensions in the region.
• Germany said it was worried Trump would decide Iran is not respecting the nuclear deal, negotiated under his predecessor Barack Obama, and fears such a step will worsen insecurity in the Middle East.
• Then there was Russia: Moscow warned on Monday there would be “negative consequences” if US President Donald Trump fails to uphold the landmark Iran nuclear deal negotiated by his predecessor.
  “Obviously if one country leaves the deal, especially such a key country as the US, then that will have negative consequences,” Russian President Vladimir Putin’s spokesman said.  “We can only try to predict the nature of these consequences, which we are doing now,” Dmitry Peskov told journalists.

A U.S. pullout from the Iran deal will unravel an accord seen by supporters as vital to preventing a Middle East arms race and tamping down regional tensions, since it limits Iran’s ability to enrich uranium for nuclear fuel in exchange for the lifting of sanctions that damaged its oil-based economy. As a reminder, prior to the deal Iran and Israel were constantly at each other’s throats, resulting in a constant fear of imminent war between the two nations.

Meanwhile, the U.N. nuclear watchdog’s inspectors have repeatedly declared Iran in compliance with the terms of the nuclear deal.

That was not enough for Trump, who called Iran “a corrupt dictatorship” during his first speech to the U.N. General Assembly and said the nuclear deal was “the worst and most one-sided transactions the United States has ever entered into”. The other five world powers in the deal were Britain, France, Germany, Russia and China. The prospect of the United States reneging on the agreement has worried other partners that helped negotiate it.

British Prime Minister Theresa May, who supports the nuclear pact, and Israeli Prime Minister Benjamin Netanyahu, who opposes it, agreed in a phone call on Monday that they need to be “clear-eyed” about the threat Iran poses to the Middle East. “They agreed that … the international community should continue working together to push back against Iran’s destabilizing regional activity,” May’s spokesman said.

In an interview aired on Saturday night, Trump accused Iran of “funding North Korea” and “doing things with North Korea that are totally inappropriate”. Qasemi responded that U.S. accusations were “baseless”. He added, “Israel and some specific countries are raising these accusations to create Iranophobia.”

Finally, should Trump go ahead and designate the IRGC terrorists, University of Tehran analyst Seyed Mohammad Marandi said that Tehran will give a similar designation to the US military. Asked by RT, if he expects Trump to decertify the nuclear deal on October, 15, and what impact this could have on stability in the world, Marandi responded:

It is quite possible. Of course, Mr. Trump is a very unpredictable person, but all indications seem to show that that is what he is going to do. If he does decertify the agreement, basically it will show the international community the US is an untrustworthy country, and it is not a country you can negotiate with. It will prevent Iran from being able to carry out any negotiations in the future with the US because the Iranians will conclude that even if there is some sort of agreement over any Issue, the US may tear up that agreement later on. And I think the same is true with any country that wants or is even contemplating negotiating with the US. The US hurts itself more than anyone else. If it wishes to increase sanctions on Iran, then I think the Iranians will find the means to retaliate.

 

* * *

 

If he decertifies the nuclear deal, a lot will depend on the reaction of the EU countries. If the EU countries simply verbally oppose Trump, that is one way of moving forward. I think that would lead to the deal unfolding completely. If on the other hand, the EU countries and England decide that they will retaliate against the US, that they will sue the US or punish the US if it tries to punish their companies, that may bring about a different situation. But without a doubt, if the US wants to push for greater confrontation with Iran, the Iranians know quite well that the only way to make sure the US backs off is if the Iranians push back just as hard, if not harder. Iran will not initiate any form of confrontation, conflict or tit-for-tat, but if the US begins something, then the Iranians will definitely push back very hard.

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In another policy move that is sure to 'trigger' liberals and climate-change advocates, the New York Times is reporting that EPA Chief Scott Pruitt will on Tuesday announce that the agency is taking formal steps to repeal an Obama-era policy meant to curb greenhouse gas emissions from power plants.

Pruitt justified dismantling the policy – known as the Clean Power Plan – by arguing that his predecessors had departed from regulatory norms in crafting the plan, which was finalized in 2015 and would have pushed states to move away from coal – an industry that President Trump has championed – in favor of sources of electricity that produce fewer carbon emissions.

“The war on coal is over,” Mr. Pruitt told the Times.

 

“Tomorrow in Washington D.C., I will be signing a proposed rule to roll back the Clean Power Plan. No better place to make that announcement than Hazard, Kentucky.”

The repeal proposal will be filed in the Federal Register Tuesday, fulfilling a promise that President Trump made to dismantle his predecessors’ efforts to curb fossil fuel emmissions.

Eliminating the CPP will make it effectively impossible for the US to meet its obligations under the Paris climate agreement. President Donald Trump unilaterally withdrew from the international accord earlier this year, prompting some US states and cities to launch their own efforts to reduce carbon emissions. Trump had said that he’d be opening to renegotiating America’s obligations under the agreement, an offer that was immediately shot down by other signatories.

A leaked draft of the repeal proposal claims the US will save $33 billion after jettisoning the regulations, rejecting the purported health benefits that the Obama Administration said would result from further restrictions on fossil fuels. When the plan was unveiled in 2015, it was expected to cut emmissions by 32% by 2030 compared with 2005 levels.

However, many states are already shifting away from coal for economic reasons like lower costs associated with using natural gas.

In a development that echos decisions by federal judges to oppose the Trump administration’s first two travel ban proposals, environmental groups and several states plan to challenge the repeal proposal in federal courts, arguing against repealing the Obama-era policy on scientific and economic grounds.

Industry groups back the decision, but have said they’d be open to replacing the Clean Power Plan with more modest power plant regulations in part to help circumvent a court challenge.

The EPA is still required to regulate greenhouse-gas emissions because of a 2009 legal opinion known as the endangerment finding.

“We have always believed that there is a better way to approach geenhosue gas emmissions reductions,” Karen A Harbert, the president of the Chamber of Commerce’s Global Energy Institut, said in a statement.

 

“We welcome the opportunity for business to be at the table with the EPA and other stakeholders to develop an approach that lowers emissions, preserves America’s energy advantage, and respects the boundaries of the Clean Air Act.

How will the Trump administration roll back the Clean Power Plan? Pruitt is proposing that the CPP be repealed because it was predicated on the view that states could lower emissions at power plants by taking external actions like replacing coal plants with wind farms elsewhere. Industry groups have challenged this move by arguing that the EPA can only enforce cleanup regulations that can be undertaken by individual plants. Pruitt is essentially repurposing this argument to throw out the plan.

How will the plan impact emissions? Well, it’s unclear. One study showed that as many as 21 states – including Texas, West Virginia and Georgia – would’ve needed to accelerate coal-plant closures to comply with the new rules. But many other states are actually closing coal plants more quickly than the regulations would require.

The Times notes that, while the CPP would’ve presumably prevented a resurgence in coal use in the event that natural gas prices soar, under current market conditions, coal plants will probably continue to close amid a broader shift toward renewables and natural gas.

Pruitt’s formal proposal to repeal the CPP will now go through a public comment period before being finalized, which could take months. There’s also expected to be a lot of time-consuming litigation as Democratic-leaning states challenge Pruitt in court.

But even challenger states are moving away from coal and toward renewables.  We now wait for states’ attorneys general to announce legal challenges to Pruitt’s decision, which will probably begin after Pruitt formally proposes killing the rule on Tuesday. The decision to roll back the CPP follows an executive order President Trump signed in March ordering federal agencies to review energy industry regulations, and throw out any that are deemed overly restrictive.

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How do you know stocks are a little overextended? A good indicator is when even the most bullish sellside analyst on Wall Street, Morgan Stanley’s Michael Wilson, whose year-end price target of 2,700 is the highest of all his peers, warns that stocks may see “pullback or consolidation” and that the coming earnings season may be a “sell the news event.”

Looking at the recent surge in the S&P, Wilson writes that broad stock index had gotten ahead of itself, reaching the low end of the bank’s short term target (2550-75) for the index prior to earnings beginning (it hit 2,552 earlier this morning). He attributed this rush to buy stocks on the “too low” consensus forecast for Q3 EPS:

The consensus bottom-up forecast for 3Q S&P 500 is just 2.6% and appears too low. A strong 1H and a reluctance of corporates to raise guidance meant that mechanically 2H numbers needed to drift lower. With continued strength in economic growth and momentum in our proprietary leading earnings indicator we think companies will once again deliver versus consensus expectations. Look for continued contribution to overall earnings growth from Tech, Energy, and Financials (ex-Insurance). Accounting changes may also bring forward some earnings recognition, further supporting earnings growth. While the market will be focused on earnings over the next few weeks, bigger picture, NTM EPS estimates continue to rise, which should be a bigger driver of the market’s direction.

Looking past calendar year 2017, Wilson underscores the departure observed previously in that twelve month forward earnings have continued their upward trend, instead of being dragged sharply lower, “so the upward trend in NTM EPS is an important factor to consider when thinking about the primary direction of the market.” Indeed, 2017 and 2018 so far appear different from the past three years, which saw zero EPS growth and the only upside in the S&P was due to multiple expansion, i.e., central bank liquidity. This time may be different… unless of course there is a sharp economic decline, which would lead to – you guessed it – an earnings drop.

As a result, Wilson believes that “stocks correctly recognized this low bar a few weeks ago and rallied sharply into earnings season–a familiar pattern this year“

They also rallied a little too far, and so Wilson says the he “would expect to see a pull back or consolidation as earnings are actually reported–i.e. a sell the news event.” But don’t worry: the next move is the “next surge” in the S&P “toward the bank’s 1Q 2018 target of 2700“.

But before that, there are several downside risks stocks have to get over. First, is the potential impact of recent hurricanes on insurers (& financials), which as Goldman noted yesterday, will be a source of Y/Y Earnings decline this quarter:

 

Here’s Morgan Stanley:

Financials has been a source of strength for earnings growth all year long, but for 3Q the sector actually has a negative contribution to overall market earnings growth. Fundamentals trends did not change on a dime. Rather, cat losses for P&C insurance firms related to the hurricanes are a major drag on the sector. Ex-Insurance, Financials are contributing 40+ bps to the earnings growth rate. Growth looks strongest among the banks as cost cutting continues and the rate environment is more supportive. With Insurance, Financials takes ~140 bps off of 3Q y/y EPS growth. This story has not fully played out yet. Our P&C Insurance Analyst, Kai Pan, has noted that not all companies have yet announced loss estimates, sell side analysts may not have yet adusted numbers, and there are substantial uncertainties around any estimates embedded in numbers that have been updated. On a forward looking basis though, major cat losses tend to position insurers well to pass along rate  increases, which can be a tail wind for some in the sector assuming normalization of the forward cat losses.

Another potential concerns is what happens after Q4, when comps get harder and the bar to beat jumps substantially higher, however two things could make such comps attainable: a continued USD weakness, and passage of the Trump tax reform which would cut corporate taxes:

Expectations for 4Q and beyond start to look harder to achieve given they are all for double digit growth rates and will be lapping harder comps (Exhibit 8). For example, 4Q17, currently projected around 11%, is lapping a ~4% growth comp in 4Q16. In addition to underlying economic growth, two additional forces can help make these numbers more achievable: the USD and tax reform.

 

 

 

With respect to the USD, the currency did not really have its rapid appreciation until the last quarter of 2016. This means that 4Q17 is where we start comping against the stronger USD. The DXY is down just over 2% on a y/y base but over 8% from the end of the year. The DXY could rise a bit into year end and still be down several percent y/y. We addressed this in July noting that 1) y/y weakness in the DXY tends to correlate with revenue growth and earnings revisions breadth and 2) that our quantitative equity research colleagues estimated that every 1 percent fall y/y in the dollar equates to roughly ½ percentage point of additional forward EPS growth.

 

A lower corporate tax rate, which is still our base case, will be a boost for earnings. We have estimated that a 25% corporate tax rate would help lift 2018 earnings by about 6%. Increased investment and late cycle activity as a result of tax reform could also help lift organic growth.

 

If USD and a lower tax rate alone can help add a mid-single digit contribution to earnings growth, it is not unreasonable to think that next year’s higher targets are achievable.

Finally, Wilson writes that one additional final factor that may drag equities lower in the near-term, one which Warren Buffett suggested a week or so ago, is tax Loss Selling.

As we head into 4Q, tax loss selling becomes a possible source of technical pressure on some stocks. We screen the S&P 1500 for tax loss selling candidates, looking for stocks that may have been well-liked to start the year and that have seen substantial price declines. Our screening methodology has produced a -2.3% average and -1.6% median return in calendar 4Q over the last 15 years and appears to yield further underperformance than just a screen of stocks with similar price declines. This year, the screen produces a list of 62 stocks.

The screen of stocks most likely to see tax-loss related selling according to MS is shown below.

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After it publicized former Fox News host Bill O'Reilly’s history of harassing female colleagues earlier this year, prompting Fox to dismiss the longtime primetime host, the New York Times claimed the scalp of another powerful media titan last week when it published a bombshell story exposing Harvey Weinstein’s lurid history of sexual harassment and coercion. After the story was published, Weinstein’s career crumbled as he quickly became persona non grata in an industry that he had dominated for nearly 30 years. Lawyers and advisers denounced him. Politicians returned campaign contributions. Humanitarian awards were rescinded. And the legendary producer was fired from his own company.

But while the Times gloated over its latest triumph of holding the powerful to account, one former NYT reporter revealed that America’s paper of record had, for more than a decade, helped shield Weinstein, going so far as to kill a story about Weinstein’s history of paying off women whom he’d sexually harassed.

Sharon Waxman, the founding editor of The Wrap and formerly an entertainment industry reporter at the Times, revealed in a blog post published Sunday that she had reported out a similar story back in 2004, only for it to be quashed by top editors at the paper, who, instead of encouraging her to pursue the story, questioned its value and relevance after Weinstein had reportedly made a personal appeal demanding that it not be run.

Waxman applauded the two reporters who broke the story, saying she knows how difficult reporting on powerful industry figures like Weinstein can be. But she could only scoff at a column written by Times’ media columnist Jim Rutenberg blasting Weinstein’s “media enablers”, who had rerportedly turned a blind eye to his problematic behavior for decades. After all, she said, when it comes to keeping stories about Weinstein’s disturbing behavior from seeing the light of day, the Times was as complicit as anyone.

I applaud The New York Times and writers Jodi Kantor and Megan Twohey for getting the story in print. I’m sure it was a long and difficult road.

But I simply gagged when I read Jim Rutenberg’s sanctimonious piece on Saturday about the “media enablers” who kept this story from the public for decades.

 

“Until now,” he puffed, “no journalistic outfit had been able, or perhaps willing, to nail the details and hit publish.”

 

That’s right, Jim. No one — including The New York Times.

In an essay published on the Wrap, Waxman recounted her own efforts to expose Weinstein’s history of sexual harassment more than a decade earlier, saying she verified that at least one woman had reached a settlement with Weinstein that involved the signing of an NDA.

In 2004, I was still a fairly new reporter at The New York Times when I got the green light to look into oft-repeated allegations of sexual misconduct by Weinstein. It was believed that many occurred in Europe during festivals and other business trips there.

Her reporting took her to two foreign countries as industry insiders alerted her to the existence of Fabrizio Lombardo, the head of Miramax Italy whose only real job at the company was procuring “girls” for Harvey to see when he was in Europe.

I traveled to Rome and tracked down the man who held the plum position of running Miramax Italy. According to multiple accounts, he had no film experience and his real job was to take care of Weinstein’s women needs, among other things.

 

As head of Miramax Italy in 2003 and 2004, Fabrizio Lombardo was paid $400,000 for less than a year of employment. He was on the payroll of Miramax and thus the Walt Disney Company, which had bought the indie studio in 1993.

 

I had people on the record telling me Lombardo knew nothing about film, and others citing evenings he organized with Russian escorts.

 

At the time, he denied that he was on the payroll to help Weinstein with favors. From the story: “Reached in Italy, Mr. Lombardo declined to comment on the circumstances of his leaving Miramax or Ricucci, saying they were legal matters being handled by lawyers. ‘I am very proud of what we achieved at Miramax here in Italy,’ he said of his work for the film company. ‘It cannot be that they hired me because I’m a friend.'”

Waxman shared how she had convinced one of Weinstein’s victims to overcome her fears about violating an NDA to discuss her history with Weinstein. 

I also tracked down a woman in London who had been paid off after an unwanted sexual encounter with Weinstein. She was terrified to speak because of her non-disclosure agreement, but at least we had evidence of a pay-off.

But despite Waxman’s best efforts, the story about Weinstein that she had reported never ran; instead, allegations of sexual harassment were removed from the piece, which was eventually buried in the culture section, after Weinstein launched a wide-ranging campaign to pressure the paper’s editors and owners – a campaign that involved personalized phone calls from celebrities like Matt Damon, who vouched for Weinstein’s character.

Weinstein was even allowed to visit the Times’ newsroom to make his appeal – a shocking violation of journalistic ethics.

I was told at the time that Weinstein had visited the newsroom in person to make his displeasure known. I knew he was a major advertiser in the Times, and that he was a powerful person overall.

 

But I had the facts, and this was the Times. Right?

 

Wrong. The story was stripped of any reference to sexual favors or coercion and buried on the inside of the Culture section, an obscure story about Miramax firing an Italian executive. Who cared?

 

The Times’ then-culture editor Jon Landman, now an editor-at-large for Bloomberg, thought the story was unimportant, asking me why it mattered.

Eight years after Waxman left the times, the shifting cultural climate created the conditions for Weinstein to be deposed, as rumors circulated that his brother may have been behind the Times story.

Also, with the New Yorker reportedly researching its own Weinstein expose, the Times was effectively forced to act lest it miss out on one of the biggest entertainment industry scoops of the year.

However, the Times isn’t the only media outlet that caved to pressure Weinstein. As Page Six reported Sunday, New York Magazine fumbled its own Weinstein exposed after Weinstein reportedly had the story killed.

Even after news broke, Saturday Night Live – which has made countless cheap jokes about allegations of sexual harassment pertaining to President Donald Trump – was conspicuously mute about Weinstein.

Unsurprisingly, journalists blasted Waxman for her column, questioning why she didn’t publish the story herself after founding the Wrap in 2009. Waxman clarified that five years had passed, and many of her original sources had disappeared. Furthermore, she was preoccupied building and running her own media business – an endeavor that soaked up all of her free time, and then some.

If nothing else, Waxman’s disclosure is a valuable primer in influence peddling by powerful figures. More importantly. It’s also an important reminder that, when the collective decision was made by a cohort of powerful media interests to turn a blind eye to Weinstein’s misdeed, the Times was just as complicit as its peers.
 

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Authored by Kent Moors via OilPrice.com,

Two crucial things happened last week.

The first you may have noticed – oil prices moved back up briefly.

As for the second, most so-called “experts” seemed to have missed.

See, the environment we’re seeing in energy markets is very different from what we saw only a week ago, when oil prices were also rising.

Because last week also saw – for the first time in world history – a reigning Saudi Arabian monarch in Moscow for talks with Russia’s head of state.

Historically, Russia has been much closer to Iran – Saudi Arabia’s main regional enemy.

Now, King Salman and President Putin are expected to endorse the plan to extend the OPEC-Russia deal to cut oil production and boost prices beyond the current end date of March 2018.

But that’s not all they’re going to talk about…

Other, more far-ranging matters will also be on the agenda, including the war in Syria.

And the catalyst for this huge shift in global geopolitics is surprisingly simple.

It’s all about America’s record-breaking oil exports…

Russia and Saudi Arabia Need Each Other… for Now

Now, there’s no indication that Russia and Saudi Arabia are on the road to an alliance on anything beyond oil prices.

Even then, that accord remains only as long as it is in the subjective interest of the parties.

Nonetheless, it is disquieting to Washington that any such prospects may be on the horizon… or that U.S. oil exports may be introducing a range of foreign policy concerns.

From an energy perspective, the main issue at hand is the OPEC-Russian deal to cap oil production, which is now almost certain to continue further than the agreed-on end date of March next year.

And after some concerns had been raised over individual OPEC members exceeding the quotas the deal assigned them, evidence is now emerging that the restraint is holding.

As I’ve several times before here in Oil & Energy Investor, there’s no genuine alternative.

The major global sources of oil need to allow the worldwide market to rebalance.

That’s the only genuine basis for stability and a slow increase in prices.

Now, with some of Libya’s oil production coming back on line, it may seem like there’s less flexibility for some producers to increase their crude output and still “hide” within the overall figures set by the cap accord.

But that’s ignoring four major factors that could cut into oil supply, and send prices higher…

Massive problems are accelerating in Venezuela, Nigerian extraction levels remain under threat from domestic instability, non-OPEC producer Mexico faces a continuing shortfall, and even the news from Libya – that a major field is coming back online – belies the ongoing civil unrest there, and lack of forward production expectations.

The international balance between supply and demand will provide a rising price.

Yet that rise will remain a gradual one.

And this balance doesn’t actually mean that there will only be exactly as much oil available as is needed at any given time.

That kind of “just in time” availability, where crude is lined only to meet immediate demand, is a certain recipe for high volatility and huge spikes in price.

Even a minor problem could create chaos in the markets.

Rather, a stable balance presupposes a continuing surplus of excess market volume.

That not only cushions the pricing dynamics from wide swings in demand, but it also allows producers the luxury of being able to predict the price range.

Anybody in the business will tell you that this predictability is far more important to maintaining profit margins than are the occasional large jumps in price.

An operator’s financial survivability requires that futures sales be calculated into the estimate of the cost of producing the oil and selling it on.

These prices, called “wellhead prices,” are the real revenue a producer receives in the first arms-length transaction as oil comes out of the ground.

These prices are also well below the market price quoted throughout a trading day.

U.S. Oil Production is at Record Highs

But the primary caveat in all of this talk about an emerging balance remains U.S. production.

It’s once again increasing and now has a more immediate impact on global pricing levels than has been the case previously.

That’s because American exports have become a major factor in the global market.

For some time, oil prices have not been determined by what occurs in developed markets of North America and Western Europe.

West Texas Intermediate (WTI) and Brent, the benchmark crude rates set in New York and London, may dictate daily trade. Yet the demand fueling the market is generated in developing areas worldwide.

Until recently, the U.S. only indirectly impacted upon the international determination of price.

In the past, the only effect came from how much the American market imported from elsewhere.

For over four decades, Congress banned the export of crude oil from the country on national security grounds.

Those restrictions resulted from the Arab oil embargo boycott of the U.S. during the 1973-74 Arab-Israeli War.

Today’s situation, where America has huge domestic extractable reserves of shale and tight oil, combined with significant improvements in production efficiency, has turned those security concerns obsolete.

There’s also the simple fact that no producing country in the world (with the possible exception of Iran, for political reasons) can afford not to sell to the U.S.

As a result, as part of a budget reconciliation two years ago, Congress lifted the ban on crude exports.

American refineries by that point were already leading the world in the export of processed oil products.

What followed was a quick move of American crude oil production back into the market…

Despite the Hurricanes, Oil Exports are Breaking Records

Exports had risen to a 1.1 million barrel a day level by the time Hurricane Harvey hit the Texas coast.

The hurricane slashed exports 60 percent. Refineries were also taken off line.

That combination should have pulverized crude oil prices, at least if you listened to the so-called “experts” on TV.

But that didn’t happen.

Instead, what happened next was nothing short of astounding.

Exports swiftly returned. Record levels were reached in each of the last two weeks.

As of last Friday, the U.S. was exporting 1.98 million barrels a day. The rising level of American volume in the broader market now has an impact on global price and the saliency of the OPEC-Russian agreement limiting production.

Because remember, U.S. production is not a party to that agreement.

The rising spread between WTI and Brent has also served as an additional inducement to increasing U.S. exports. The more international Brent prices have been increasing quicker than America’s WTI.

The difference, calculated as a percentage of WTI (the more accurate way of doing this), has now averaged more than 10 percent for the past 30 consecutive daily sessions – something that has not happened in over six years. Related: OPEC Producers Unmoved By U.S. Shale Threat In Asia

The advantage to American producers is simple. Exporting oil that costs less to produce at home into markets were the oil price is higher is a direct route to improving bottom lines.

As long as this situation remains, there will be additional U.S. production coming, because it’s profitable to extract and export.

And the more U.S. oil is exported, the less immediate effect higher production here has on domestic prices.

But this is also resulting in changes to foreign expectations.

Some of these are having spillover effects in other quarters…

Including sending Saudi Arabia and Russia into each other’s arms…

At least for now.

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