BP’s Stunning Warning: “Every Oil Storage Tank Will Be Full In A Few Months”

It was just last week when we said that Cushing may be about to overflow in the face of an acute crude oil supply glut.

“Even the highly adaptive US storage system appears to be reaching its limits,” we wrote, before plotting Cushing capacity versus inventory levels. We also took a look at the EIA’s latest take on the subject and showed you the following chart which depicts how much higher inventory levels are today versus their five-year averages.

graph of difference in inventory levels as of January 22, 2016 to previous 5-year average, as explained in the article text

Finally, we went on to present two alarm bells that offer the best evidence yet that inventories are reaching nosebleed levels: 1) some counterparties are experiencing delays in delivering crude due to unspecified “terminalling and pump” issues (basically, it’s hard to move barrels around at this point because there’s so much oil sitting in storage); 2) the cash roll is negative.

On Wednesday, BP CEO Robert Dudley – who earlier this month reported the worst annual loss in company history – is out warning that storage tanks will be completely full by the end of H1. “We are very bearish for the first half of the year,” Dudley said at the IP Week conference in London Wednesday. “In the second half, every tank and swimming pool in the world is going to fill and fundamentals are going to kick in,” he added. “The market will start balancing in the second half of this year.”

Maybe. Or maybe excess supply will simply be dumped on the market once all the “swimming pools” are full.

If that happens, don’t be surprised to see crude crash into the teens as attempts to clear and dump excess inventory spread like wildfire across the market.

Earlier this week, the IEA called any respite for crude prices “a false dawn.” Here’s why (via The Guardian): 

  • a deal between Opec and other oil producing countries to cut production is unlikely
  • with Iran increasing production in preparation for the lifting of sanctions, Opec’s production could rise as strongly this year as in 2015
  • there is little prospect falling prices encouraging a pick-up in the rate of demand for oil
  • the US dollar is likely to remain strong, limiting the scope for falls in the cost of imported oil
  • the predicted large fall in US shale production is taking a long time to materialise

So buckle up, because the collapse in the world’s most financialized of commodities has further to go, and once the entire US shale space goes bankrupt, it will emerge debtless only to start drilling and pumping anew prompting the Saudis to continue to ratchet up the pressure in an endless deflationary merry-go-round. We close with a quote from the IEA:

“We suggest that the surplus of supply over demand in the early part of 2016 is even greater than we said in last month’s oil market report. If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term. In these conditions the short-term risk to the downside has increased.” 


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Clinton Loses Young Women by More Than 60 Points in New Hampshire

One of the most notable things about the New Hampshire primary results on the Democrat side is how severely Hillary Clinton got trounced by Vermont Sen. Bernie Sanders among young people—especially young women. 

Sanders’ victory over Clinton in New Hampshire yesterday spans generations, of course, with Sanders getting 60 percent of the overall vote compared to Clinton’s 38.3 percent. And broken down into all sorts of demographic categories, Sanders still comes out on top; only the olds and the rich broke for Clinton.

According to The New York Times, Sanders “won among those with and without college degrees… among gun owners and non-gun owners… among previous primary voters and those participating for the first time… among both moderates and liberals.” Clinton and Sanders were tied among older Gen X’ers and younger boomers. Only Democratic voters 65 and older and those with a household income of more than $200,000 were resisting the Bern. 

Most interestingly, Clinton—who has long polled extremely well among women (leading by 20 points or more in Iowa and New Hampshire as recently as last fall) but less well with men—didn’t win over New Hampshire women Tuesday. Among female voters of all ages, Clinton lost by 11 percentage points. 

Among young female voters, the divide is even more stark: 82 percent of New Hampshire women under age 30 voted for Sanders, compared to just 18 percent for Clinton. Among male and female voters aged 17-29, Sanders took 84 percent of the vote. (For more on millennial love for Sanders—and Donald Trump—see “Why Donald and Bernie are Bae, Not Rand.”) 

As I noted here yesterday, the Clinton campaign has been striking a sour note with young women lately, as Hillary supporters have suggested millennial ladies only like Sanders because “the boys” do, that all attacks against Hillary are rooted in “sexism,” and that women who don’t support Clinton are probably going to hell. 

“In 2008, women helped fuel Clinton’s comeback win [in New Hampshire] against Barack Obama, backing her by double digits over her Democratic rival,” points out Carrie Dann at NBC News. It wasn’t all sunny with women and Hillary back then, either, however. In the Iowa caucuses, Obama took 35 percent of the Democratic women’s vote, while Clinton received 30 percent. “She did well only with women over 65,” The New York Times reported then. “While older women tend to vote in higher numbers than younger women, that’s still devastating news for her, since women were supposedly the backbone of her candidacy.” 

In 2008, Clinton fared worst among the youngest female voters in Iowa, losing the under-24 crowd to Obama by 40 percentage points and to John Edwards by 8 points. In national polls from around this time in the 2008 election cycle, Obama outranked voters under 30 by a margin of 56-42. The gender gap was smaller than it seems to be with Sanders, but Obama still beat Clinton among female voters under 30 by a margin of 53-45. 

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Intraday Trading Indicator Showing Shades Of 2000, 2007 Tops

Via Dana Lyons' Tumblr,

An indicator based on the first hour versus last hour of stock trading has undergone a shift similar to those seen at the prior 2 cyclical tops.

We’ve written about the intraday “Smart Money Indicator” on several occasions throughout the years, including last March. This post echoes that one from March almost word for word as the message is the same. The only difference is that our confidence in the interpretation of its present behavior is much higher now based on the evidence.

The theory goes that trading done in the stock market early in the day is indicative of the eager and emotional “dumb money” reacting to developments occurring since the prior day’s close. Conversely, trading during the final hour of the day is representative of the more deliberate and calculating “smart money” traders. While there is certainly no way to prove (or disprove) this notion, taking measure of the early and late-day trading patterns can elicit some interesting observations, present circumstances included.

One researcher that tracks such data is Jason Goepfert at Sentimentrader.com. Goepfert subtracts the day’s change in the S&P 500 after the first half hour of trading and adds the change that occurs in the final hour of trading. He then tracks the cumulative running tally of the daily readings in what he calls the “Smart Money Indicator” (SMI). The SMI is exhibiting some interesting behavior currently. After generally trending lower since the March 2009 stock market low, and in particular during the relentless rally since 2012, the SMI has begun to curl upward. This is noteworthy since we saw the same behavior near the cyclical tops in 2000 and 2007.

 

image

 

You might be thinking “shouldn’t the Smart Money Indicator trend upward during bull markets and downward during bear markets?” The main culprit here is the effect of opening gaps. Since the day’s change after the first half hour is subtracted from the SMI, gaps up to begin the day (unless completely unwound by the end of the first half-hour) would negatively impact the SMI. And big gaps up, and/or a lot of them, would contribute to a declining SMI even as the market is rallying. Conversely, persistent gaps down would contribute to a rising SMI.

Whatever the case may be regarding the mechanics of the SMI, a glance at the chart indicates that its behavior over the past 18 years is pretty straightforward. The major inflection points have occurred near significant tops and bottoms in the S&P 500. Lows in the SMI occurred at the end of 2000 and the end of 2007, just as the stock market was entering into cyclical bear markets. A potentially similar low may have occurred in August last year.

There is no guarantee that the developing shift in the Smart Money Indicator will continue higher. Indeed, we discussed potential turns in July 2014 and last March, both of which failed to follow through. This recent turn, however, is much more dramatic and convincing as the SMI is making a clear higher high above its transitional peaks of the past 20 months. If this move in the SMI does follow the course of its predecessors in 2000 and 2007, it could indicate a longer-term shift – lower – in the market’s trading behavior.

*  *  *

More from Dana Lyons, JLFMI and My401kPro.

Check out http://ift.tt/18lVhfm for more of Jason Goepfert’s unparalleled array of sentiment indicators and market insights.


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Let Us Now Praise Really Insurgent Candidates Donald Trump & Bernie Sanders

There’s something happening here. To be sure, what it is ain’t exactly clear, but still: When is the last time when the winners in the Democratic and Republican New Hampshire primaries weren’t even real members of those parties?

I’m guessing never.

Yet neither Donald Trump nor Bernie Sanders really belong to the parties for whose nominations they are vying. And yet there they stand, with two silver medals in Iowa and two yuge wins last night. Do not expect party regulars either to fully acknowledge or grasp just what a blow that is to the partisan status quo. And most folks in the media to meditate on this, either. Instead, get set for an endless procession of pieces about how Hillary Clinton is primed to win in South Carolina and will up her ground game blah blah blah. And how the real takeaway from last night for Republicans is how strong John Kasich did, how little Ted Cruz spent, etcetera, etcetera, etcetera.

A more trenchant take was written a few weeks ago by political consultant and ABC News talker Matthew Dowd:

Two independents are not just doing extremely well. They are major players creating havoc for the establishment in the nomination process. This shows the broken nature of the two political parties and the depth of the desire for change from the status quo. It is an incredible development that Mr. Sanders and Mr. Trump, men who have very little party allegiance, are creating the most energy in their respective campaigns for party leader….

Mr. Sanders and Mr. Trump have put an exclamation point on the weakness of the two incumbent parties. The evolution of the 2016 election has shown that the two major parties are going to have to deal with the disruption independents are forcing on the system. This cycle is likely to be an accelerator for the success of independents locally and at the state level-developments that can only be good for our democracy.

Dowd notes what everyone knows but is slow to fully grok: Whether Trump and Sanders secure their nominations, they are setting the agenda for this election and they are the source of energy and enthusiasm that’s leading to record turnouts and enthusiasm. 

Full Dowd here. 

That is a genuinely weird and ultimately wonderful development—and I say that as someone who is deeply troubled by the specifics of both Trump’s and Sanders’ platforms.

We may not be on the verge of the sort of cataclysmic crackup that Matt Welch and I discussed in The Declaration of Independents, in which we talked about how ostensibly impregnable duopolies fall apart seemingly overnight. Remember that between them once upon a time, Fuji and Kodak owned 100 percent of the film business around the globe, right up to the moment that the film industry was deader than the buggy-whip industry. The GOP and the Democratic Party are not going away any time soon, but long-simmering frustrations, disappointments, and anger with these two pre-Civil War entities are slowly dissolving and remaking them, whether they like it or not.

What Trump and Sanders offer up in many ways is almost a parody version of their respective brands. Trump’s xenophobia and penchant for treating government like a business is hardly unknown to Republican loyalists and Sanders’ socialism is simply the Great Society of steroids. Both drink deeply at the fountation of anti-Wall Street populism that has flavored U.S. politics since there was a Wall Street. In this sense, neither of them represent something truly new in our politics (that would take a libertarian candidate, one capable of legitimately pushing for “Free Minds and Free Markets”), but like white-hot dwarf stars that are hyper-condensed versions of right-wing and left-wing catechisms, they may just burn the whole thing down and set the stage for something truly different and better to rise from the ashes.

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Hilsenrath: Yellen’s Comments Have A “Downbeat Undertone”

With algos not exactly enthralled by their initial several million reads of the key soundbites in the Yellen speech, they – along with carbon-based traders – are looking for guidance elsewhere. One place they traditionally go to is Fed mouthpiece Jon Hilsenrath, who unfortunately appears to be out of the loop lately, and the best he could do was underscore what the market already noted.

Specifically, Hilsy highlights Yellen’s concerns that “financial conditions have become less supportive of economic growth, stresses in China and other foreign economies could weigh further on the U.S., and market expectations for inflation are sinking” and added that “without explicitly pointing to the prospect of delayed rate increases, her recitation of these risks gave her comments a downbeat undertone.“

Which brings us to the only question that matters today: is a “downbeat undertone“, aka bad news, good news for stocks once again, and will the market relapse to its old “bad news is great news” regime, or will it take advantage of today’s brief European bank euphoria to sell the rally as it has throughout all of 2016?

We will fnd out shortly.

Full note from Hilsenrath via the WSJ:

Federal Reserve Chairwoman Janet Yellen flagged risks to the economic outlook that could delay the central bank’s plans for raising short-term interest rates, in prepared remarks for her semiannual testimony to Congress on U.S. monetary policy.

 

Financial conditions have become less supportive of economic growth, stresses in China and other foreign economies could weigh further on the U.S., and market expectations for inflation are sinking, Ms. Yellen said, kicking off two days of testimony before House and Senate committees.

 

Without explicitly pointing to the prospect of delayed rate increases, her recitation of these risks gave her comments a downbeat undertone.

 

That in turn underscored the Fed’s cautiousness about following through with additional short-term interest-rate increases after pushing them up in December. Before that move, the Fed had kept rates near zero for seven years.

 

“Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar, ” Ms. Yellen said. “These developments, if they persist, could weigh on the outlook for economic activity and the labor market, although declines in longer-term interest rates and oil prices provide some offset.”

 

When the Fed pushed short-term interest rates higher in December, officials penciled in four quarter-percentage-point rate increases for 2016. Investors have been skeptical of those projections, increasingly so in recent weeks.

 

The Fed’s next policy meeting is March 15-16. Traders in futures markets see virtually no chance of a move then and just a 19% chance the Fed will move at all again this year, according to the Chicago Mercantile Exchange. The Fed’s target for its benchmark federal-funds rate is between 0.25% and 0.5%.

 

In discussing the outlook for policy, Ms. Yellen stuck to the Fed’s recent description of its plans. The Fed, she said, “anticipates that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate,” effectively leaving further rate increases as an option. The Fed leader doesn’t want to get too far ahead of colleagues in signaling an outlook for rates.

 

Still, her focus on financial conditions, foreign uncertainty and inflation expectations showed that the bar has risen for further action. Fed officials pay particular attention to market and household expectations for where inflation is going. If their expectations for future inflation sink, it could become a self-fulfilling prophecy. The Fed doesn’t want more downward pressure on consumer prices because inflation has been running below its 2% objective for more than 3½ years.


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One of the world’s last great boomtowns

[Editor’s note: Our Chief Investment Strategist Tim Staermose is filling in for Simon today from Yangon, Myanmar.]

Since so much of Asia is on holiday for the Lunar New Year, I decided to travel to Myanmar to check out how the economy is developing.

Myanmar was once the wealthiest economy in Southeast Asia. But decades of isolation and military rule have turned it into the poorest.

Myanmar is, no doubt, the Cuba of Southeast Asia.

For the last few years, however, the country has started emerging from this isolation. The military government has begun to relax its stranglehold and play nice with the rest of the world.

Just since my last trip to the country a few years ago, I can hardly believe the extraordinary progress.

A few years ago there was hardly any mobile phone coverage. All bandwidth was strictly controlled by the Army, and we pitiful civilians had no access to the network.

As late as 2013, only 7 in 100 people had a mobile phone. Now every second person in Yangon has one– usually a new Chinese-made smart phone.

A local SIM card, with 1GB of data, valid for one month can be purchased for about $6.

(That might sound cheap, but $6 is expensive in Myanmar compared to local wages. But mobile service prices are falling fast.)

Mobile technology is becoming an indispensable part of the economy.

Yesterday we stumbled upon an enterprising young lady from the Dala district, on the south side of the Yangon River from the downtown area, who offered to take us on a tour of the district.

She was able to line up rickshaws, make appointments, and keep in touch with all the people we met along our route, all from her smartphone while in the pedicab.

This was an impromptu tour, completely unplanned by us, so she had to think quickly and get things done as we travelled along.

Just three years ago, this would have been completely impossible.

ATMs and credit cards also work now.

Before, not even the few 5-star hotels in Yangon could accept credit card payment.

That was partly due to international sanctions against Myanmar (so VISA, AMEX and MasterCard were banned from doing business with the country), and partly due to lack of payments processing technology.

But, that’s all changed, too. My friends and I have been regularly withdrawing cash from foreign bank accounts at the ATMs here.

To be clear, there are still plenty of challenges for the country, as it struggles to emerge from over 50 years of isolation and disastrous economic policies.

Wandering around the derelict shells of what used to be magnificent, colonial style buildings in downtown Yangon, it serves as a clear reminder of how civilization can, and sometimes does decline.

The stench coming from the open sewers next to the pavements was a pungent reminder that the basic infrastructure of the city has not changed a great deal since the 1960s.

(On the positive side, there is a certain old world charm to Myanmar that doesn’t exist in too many other places around the world. In this respect it is very reminiscent of Havana.)

One thing above all is clear to me, though. For all its richness in oil, gas, timber, minerals, gems, soil, water, etc., Myanmar’s greatest asset is its people.

I have found people from all walks of life here to be open, honest, friendly, and, in most cases, hardworking and industrious.

Given the right tools, technology, and sufficient investment capital, this country truly does have an exceptionally bright future.

Fortunes will be made here, both by enterprising locals, as well as foreigners who have the foresight to invest wisely in one of the world’s last great boomtowns.

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“Someone” Desperately Intervened to Save Stocks Yesterday

The Central Banks are getting desperate. The interventions are so obvious now you’d have to be on drugs not so notice them.

 

On Monday afternoon, at 3PM “someone” stepped in to prop up stocks. They did it again yesterday at 10AM. These were obvious interventions.

 

How do we know this was intervention and not real buying?

 

Because no real buyer guns the markets 20+ points higher in a matter of minutes.

 

Real investors carefully try to buy stock without gunning the market higher. If the market explodes higher, you get a worse entry point.

 

Why are Central Banks desperately trying to “save” stocks?

 

Because the markets have lost faith in their abilities.

 

The Bank of Japan launched Negative Interest Rate Policy or NIRP two Fridays ago. Japanese stocks rolled over and crashed just one day later. They’ve since lost over 6%.

 

 

Consider that for a moment. The Bank of Japan, launched NIRP for the first time in history, and instead of exploding higher, stocks collapse.

Japan ALSO had to cancel a bond auction for the first time in history because investors didn’t want to buy bonds at negative rates.

The End Game has begun for Central Banks. Desperate interventions may push stocks higher temporarily, but the next Crisis has officially begun.

Smart investors are preparing now.

We just published a 21-page investment report titled Stock Market Crash Survival Guide.

 

In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.

 

We are giving away just 1,000 copies for FREE to the public.

 

To pick up yours, swing by:

http://ift.tt/1HW1LSz

 

Best Regards

 

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

 

 


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WTI Crude Plunges Back Below $28 After Yellen Disappoints

WTI Crude futures are tumbling as Yellen’s prepared remarks offered little for the doves and played down growth due to “financial strains.” Back in the red after some overnight hope from Europe, WTI is back to a $27 handle once again…

 


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Trump and Sanders Take New Hampshire, Social Justice Activist Kills Himself Outside Ohio Statehouse, FBI Can’t Unlock San Bernardino Shooters’ Phones: A.M. Links

  • Donald Trump and Sen. Bernie Sanders were the big winners in New Hampshire last night, taking 35 percent and 60 percent of the Republican and Democrat vote, respectively. Rounding out the top five GOP candidates were Ohio Gov. John Kasich with nearly 16 percent of the vote, Sen. Ted Cruz with 11.6 percent, Jeb Bush with 11.1 percent, and Sen. Marco Rubio with 10.6 percent. 
  • The Supreme Court temporarily blocked the Obama administration’s regulations on emissions from coal-fired power plants.
  • A 23-year-old Black Lives Matter and anti-hunger activist who was honored at the NAACP Image Awards in Los Angeles last week shot himself in the head on the steps of the Ohio Statehouse Monday.
  • California pregnancy-testing and counseling centers are fighting a rule that would require them to post a sign about state abortion, contraception, and prenatal care programs for low-income women.
  • A former federal judge is asking President Obama to pardon a man he sent to prison for 55 years after making three marijuana sales to a police informant.
  • The FBI has been unable to unlock the phones of the couple responsible for the December mass shooting in San Bernardino, California, because it’s encrypted—fueling government demands for a “backdoor” into encrypted phones.
  • The Ferguson City Council is asking the Justice Department for changes to a proposed consent decree meant to address local law enforcement practices. 
  • Shorter Hillary Clinton: Citizens United was a bad decision because it allows Republicans to criticize her. 
  • In San Francisco, 77 percent of security cameras on BART trains are fake or don’t work. 

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