That propaganda video was so crude is was a joke, a HS kid in the US could make a better one; and the companies that produce games wouldn’t be caught dead anywhere near that junk.
Tag Archives: Illuminati
How OPEC Lost The War Against Shale, In One Chart
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 21, 2017 11:32 AM
At the start of March we showed a fascinating chart from Rystad Energy, demonstrating how dramatic the impact of technological efficiency on collapsing US shale production costs has been: in just the past 3 years, the wellhead breakeven price for key shale plays has collapsed from an average of $80 to the mid-$30s…
… resulting in drastically lower all-in breakevens for most US shale regions.
Today, in a note released by Goldman titled “OPEC: To cut or not to cut, that is the question”, the firm presents a chart which shows just as graphically how exactly OPEC lost the war against US shale: in one word: the cost curve has massively flattened and extended as a result of “shale productivity” driving oil breakeven in the US from $80 to $50-$55, in the process sweeping Saudi Arabia away from the post of global oil price setter to merely inventory manager.
This is how Goldman explains it:
Shale’s short time to market and ongoing productivity improvements have provided an efficient answer to the industry’s decade-long search for incremental hydrocarbon resources in technically challenging, high cost areas and has kicked off a competition amongst oil producing countries to offer attractive enough contracts and tax terms to attract incremental capital. This is instigating a structural deflationary change in the oil cost curve, as shown in Exhibit 2. This shift has driven low cost OPEC producers to respond by focusing on market share, ramping up production where possible, using their own domestic resources or incentivizing higher activity from the international oil companies through more attractive contract structures and tax regimes. In the rest of the world, projects and countries have to compete for capital, trying to drive costs down to become competitive through deflation, FX and potentially lower tax rates.
The implications of this curve shift are major, all of which are very adverse to the Saudis, who have been relegated from the post of long-term price setter to inventory manager, and thus the loss of leverage. Here are some further thoughts from Goldman:
- OPEC role: from price setter to inventory manager In the New Oil Order, we believe OPEC’s role has structurally changed from long-term price setter to inventory manager. In the past, large-scale developments required seven years+ from FID to peak production, giving OPEC long-term control over oil prices. US shale oil currently offers large-scale development opportunities with 6-9 months to peak production. This short-cycle opportunity has structurally changed the cost dynamics, eliminating the need for high cost frontier developments and instigating a competition for capital amongst oil producing countries that is lowering and flattening the cost curve through improved contract terms and taxes.
- OPEC’s November decision had unintended consequences: OPEC’s decision to cut production was rational and fit into the inventory management role. Inventory builds led to an extreme contango in the Brent forward curve, with 2-year fwd Brent trading at a US$5.5/bl (11%) premium to spot. As OPEC countries sell spot, but US E&Ps sell 30%+ of their production forward, this was giving the E&Ps a competitive advantage. Within one month of the OPEC announcement, the contango declined to US$1.1/bl (2%), achieving the cartel’s purpose. However, the unintended consequence was to underwrite shale activity through the credit market.
- Stability and credit fuel overconfidence and strong activity: A period of stability (1% Brent Coefficient of Variation ytd vs. 6% 3-year average) has allowed E&Ps to hedge (35% of 2017 oil production vs. 21% in November) and access the credit market, with high yield reopen after a 10- month closure (largest issuance in 4Q16 since 3Q14). Successful cost repositioning and abundant funding are boosting a short-cycle revival, with c.85% of oil companies under our coverage increasing capex in 2017.
That said, the new equilibrium only works as long as credit is cheap and plentiful. If and when the Fed’s inevitable rate hikes tighten credit access for shale firms, prompting the need for higher margins and profits, the old status quo will revert. As a reminder, this is how over a year ago Citi explained the dynamic of cheap credit leading to deflation and lower prices:
Easy access to capital was the essential “fuel” of the shale revolution. But too much capital led to too much oil production, and prices crashed. The shale sector is now being financially stress-tested, exposing shale’s dirty secret: many shale producers depend on capital market injections to fund ongoing activity because they have thus far greatly outspent cash flow.
This is the key ingredient of what Goldman calls the shift to a new “structural deflationary change in the oil cost curve” as shown in chart above. As such, there is the danger that tighter conditions will finally remove the structural pressure for lower prices. However, judging by recent rhetoric by FOMC members, this is hardly an imminent issue, which means Saudi Arabia has only bad options: either cut production, prompting higher prices and even greater shale incursion and market share loss for the Kingdom, or restore the old status quo, sending prices far lower, and in the process collapsing Saudi government revenues potentially unleashing another budget c
Liquidity Suddenly Collapses As Stocks Tumble
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 21, 2017 11:27 AM
This is the biggest drop for Bank stocks since Brexit, as investor concerns over Trump’s reform agenda grow…
And, as Nanex points out, S&P 500 futures liquidity is collapsing today.
ADVERTISING
Why? Because whereas the BTFDers have been willing to jump in and, well, BTFD, on days where there is a sharp move lower, both the HFTs and the carbon-based traders step aside and pull their bids, unsure if this is “the start” of the selloff. Maybe this time they are right, as the bank bloodbath continues:
- 28,485
- 57
Why The 2017 French Election Could Trigger A Major Market Drop
by Tyler Durden
In 1981, the French stock market dipped in fears over François Mitterrand’s presidency win and the same could happen again, says Saxo Bank’s head of macro analysis Christopher Dembik.
In the 30 days following the first round in the 1981 election, the French stock market dropped by over 20% as a result of concerns about the economic policies of Mitterrand, who eventually became president from 1981 to 1995.
Dembik says that if Marie Le Pen – who has an anti-Eurozone stance – wins, the same steep dive could happen to the CAC 40 by 20% after the election. The first round of voting is on April 23 and the second round is on May 7.
Bank Bloodbath Batters Stocks; Bonds, Bullion Bounce As Trumpcare Vote Doubts Rise
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 21, 2017 10:36 AM
Does this look like policy ‘success’ or ‘failure‘?
VIX is jumping as stocks sink…
And Bank stocks are collapsing…
With the Financials ETF breaking below a key technical level…Bank stocks have now gone nowhere since Dec 8th.
Lots of chatter about selling due to doubts on TrumpCare passing on Thursday – which will delay the tax reform foundation that the market is settled on (and any banking system reform).
- 17,251
- 45
NORTH KOREA’S LITTLE STICK
Reuters Tries Scheduling Hit Job on T-Rex For Not Attending NATO Meeting, Skips Their Own Reporting Days Earlier…
GLOBAL WAR APPROACHES: NORTH KOREA WARNS: “IF A SINGLE BULLET IS FIRED WE WILL NUKE THE UNITED STATES”
We had better take them out before they can actually do it!
Brexit begins: Date Article 50 will be triggered to start process of UK leaving EU now confirmed
The beginning of the end for the EU.
EU Taxpayers Brace As Deepening Banking Crisis Means Euro-TARP Looms
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 20, 2017 5:00 AM
Authored by Don Quijones via WolfStreet.com,
If the ECB scales back stimulus, banks face even greater risk of collapse. But now there’s a new solution
Events are moving so fast in Europe these days, it’s almost impossible to keep up. While much of the attention is being hogged by political developments, including the election in the Netherlands, Reuters published a report warning that the European banking sector may face even higher bad loan risks if the ECB begins to scale back its monetary stimulus programs, something it has already begun, albeit extremely tentatively.
The total stock of non-performing loans (NPL) in the EU is estimated at over €1 trillion, or 5.4% of total loans, a ratio three times higher than in other major regions of the world.
On a country-by-country basis, things look even scarier. Currently 10 (out of 28) EU countries have an NPL ratio above 10% (orders of magnitude higher than what is generally considered safe). And among Eurozone countries, where the ECB’s monetary policies have direct impact, there are these NPL stalwarts:
- Ireland: 15.8%
- Italy: 16.6%
- Portugal: 19.2%
- Slovenia: 19.7%
- Greece: 46.6%
- Cyprus: 49%
That bears repeating: in Greece and Cyprus, two of the Eurozone’s most bailed out economies, virtually half of all the bank loans are toxic.
Then there’s Italy, whose €350 billion of NPLs account for roughly a third of Europe’s entire bad debt stock. Italy’s government and financial sector have spent the last year and a half failing spectacularly to come up with a solution to the problem. The two “bad bank” funds they created to help clean up the banks’ toxic balance sheets, Atlante I and Atlante II, are the financial equivalent of bringing a butter knife to a machete fight. So underfunded are they, they even strugggled to hold aloft smaller, regional Italian banks like Veneto Banca and Popolare di Vicenza, which are now pleading for a bailout from Rome, which in turn is pleading for clemency from Brussels.
What little funds Atlante I and Atlante II have left are hemorrhaging value as the “assets” they’ve been used to buy up, invariably at prices that were way too high (often at over 40 cents on the euro), continue to deteriorate. The recent decision of Italy’s two biggest banks, Unicredit and Intesa Sao Paolo, to significantly write down their investment in Atlante is almost certain to discourage the private sector from pumping fresh funds into bailing out weaker banks.
Which means someone else must step in, and soon. And that someone is almost certain to be the European taxpayer.
In February ECB Vice President Vitor Constancio called for the creation of a whole new class of government-backed “bad banks” to help buy some of the €1 trillion of bad loans putrefying on bank balance sheets. Constancio’s idea bore a striking resemblance to a formal proposal put forward by the European Banking Authority (EBA) for the creation of a massive EU-wide bad bank that, in the words of EBA president Andrea Enria, would “make it much easier to achieve critical mass and to create a well functioning market for (impaired) assets.”
Here’s how it would work, according to Enria (emphasis added):
The banks would sell their non-performing loans to the asset management company at a price reflecting the real economic value of the loans, which is likely to be below the book value, but above the market price currently prevailing in illiquid markets. So the banks will likely have to take additional losses.
The asset manager would then have three years to sell those assets to private investors. There would be a guarantee from the member state of each bank transferring assets to the asset management company, underpinned by warrants on each bank’s equity. This would protect the asset management company from future losses if the final sale price is below the initial transfer price.
One of the biggest advantages of launching an EU-wide bad bank is that it would avoid the sort of public “resistance” that would occur if it was done at a national level, says Enria. Italian lenders would presumably be able to continuing pricing bad loans at or around 40 cents on the euro on average, even though their real value — i.e. the current value priced by the market — is often much lower. The difference between the market price, if any, and the price the banks end up receiving for their bad debt will be covered by Europe’s taxpayers.
If given the green light, the scheme would pave the way to the biggest one-off bail out of European banks in history. It would be Euro-TARP on angel dust, with even fewer checks and balances and much less likelihood of ever recovering taxpayer funds. According to a banker source cited by Reuters, while Germany has not yet endorsed the EBA plan, the EU documents describe the development of a secondary market for NPLs as a priority. According to Enria, the EBA hopes to finalize matters “at the European level” in the Spring.
The documents also include proposals for a wider “restructuring of banking sectors” as states address the NPLs problem. This “could lead to mergers among EU banks after they offload their bad loans,” a banking industry official said.
In other words, EU taxpayers would have to spend potentially hundreds of billions of euros saving yet more banks from the consequences of their own acts and bail out their bondholders and potentially their stockholders too, with funds desperately needed in other areas. Those banks, once saved and their balance sheets cleansed, would then be handed on a platter to much bigger banks. In return, taxpayers would end up with an even more concentrated, consolidated, interconnected financial system that is even more prone to abuse, corruption, and excess.
The ECB’s policy isn’t about creating inflation but about keeping a financial system and a currency union from collapsing upon each other. Read… ECB Trapped in its Own “Doom Loop” as Inflation Surges
Centinel2012 