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March 30, 2020

Trump, Putin Will Discuss The End Of U.S. Shale Oil

Three weeks ago, when the Russian and Saudi war on U.S. shale oil started, we wrote:

In the first week of January crude oil reached $69/bl but it has since dropped to $45/bl as the coronavirus crisis destroyed the global demand. The Saudis tried to make a deal with Russia, the second largest exporter after Saudi Arabia, to together cut oil production to keep the price up. But Russia rejected a new OPEC cut. It wants to keep its production up and it will use the crisis to further undermine U.S. oil fracking production. As the whole fracking boom in the U.S. is build on fraud the move might well be successful.

Russia does not have a budget deficit and is well positioned to survive lower crude oil prices without much damage. Saudi Arabia is not.

Only a week later oil was already at $30/barrel and we predicted that it would go down to $20/bl.

On Monday the U.S. WTI oil price index reached that mark. Oil prices in other places are falling even further:

Canadian heavy crude has become so cheap that the cost of shipping it to refineries exceeds the value of the oil itself, a situation that may result in even more oil-sands producers shutting operations.

Western Canadian Select crude in Alberta dropped to a record-low close of $5.06 a barrel on Friday, according to Bloomberg data going back to 2008 ...

The corona virus crisis has led to drop in global demand by some 20%. The world production and consumption in normal times was at about 100 million barrel per day. Consumption is now below 80 million bl/d. But after the OPEC+ agreement failed Saudi and Russia both started to pump as much as they could to regain market shares. Together they are increasing their production by some 3-4 million barrels per day. All that oil has to go somewhere.

Trump announced that he would use the cheap prices to fill the U.S. strategic oil reserve. But the spare room in the reserve storage at that time was only some 150 million barrels. As it can only be filled at a rate of 2 million barrels per day the topping off of the reserve is insignificant in the current market.

The oil producers at first pumped their oil into storage tanks to be sold later. When those filled up they rented supertankers to store the oil at sea. But empty supertankers are now also getting rare and the price for them is increasing:

The CEO of the world’s largest tanker owner, Frontline Ltd., said on Friday that he’d never known such demand to hire ships for long-term storage. Traders could book ships to put 100 million barrels at sea this week alone, he estimated, but even that could accounts for less than a week’s oversupply.

The only solution will be a shut down of the more expensive oil fields. Canada and Brazil are already doing it. U.S. shale producers who are bleeding cash will now have to follow.

That is clearly what Russia wants:

As soon as U.S. shale leaves the market, prices will rebound and could reach $60 a barrel, Rosneft’s Igor Sechin said recently. As fate would have it, in what many would have until recently considered an impossible scenario, a lot of U.S. shale might do just that.

Breakeven prices for U.S. shale basins range between $39 and $48 a barrel, according to data compiled by Reuters. Meanwhile, West Texas Intermediate (WTI) is trading below $25 a barrel and has been for over a week now.

The Trump administration has asked the Saudis to produce less oil but as the Saudi tourist industry is currently also dead the Saudi clown prince needs every dollar he can get. The Saudis will continue to pump and they will sell their oil at any price.

The White House is now concerned that it will completely lose its beloved shale oil industry and all the jobs connected to it.

Russia of cause knows this and a few days ago it made an interesting offer:

A new OPEC+ deal to balance oil markets might be possible if other countries join in, Kirill Dmitriev, head of Russia’s sovereign wealth fund said, adding that countries should also cooperate to cushion the economic fallout from coronavirus.
...
“Joint actions by countries are needed to restore the(global) economy... They (joint actions) are also possible in OPEC+ deal’s framework,” Dmitriev, head of the Russian Direct Investment Fund (RDIF), told Reuters in a phone interview.
...
“We are in contact with Saudi Arabia and a number of other countries. Based on these contacts we see that if the number of OPEC+ members will increase and other countries will join there is a possibility of a joint agreement to balance oil markets.”

Dmitriev declined to say who the new deal’s members should or could be. U.S. President Donald Trump said last week he would get involved in the oil price war between Saudi Arabia and Russia at the appropriate time.

A logical new member of an expanded crude oil cartel would be one of the biggest global producer that so far was not a member of that club - the U.S. of A.

We now learn that Trump is ready to talk about that or other concepts:

As Ria reports (in Russian) the topics of upcoming phone call [between Putin and Trump] will be Covid-19, trade (???) and, you guessed it, oil prices.

Trump, who sanctioned the Russian-German Nord-Stream II pipeline while telling Germany to buy U.S. shale gas, is now in a quite bad negotiation position. Russia does not need a new OPEC deal right now. It has many financial reserves and can live with low oil prices for much longer than the Saudis and other oil producing countries. Trump would have to make a strategic offer that Russia could not resist to get some cooperation on oil prices.

But what strategic offer could Trump make that would move Putin to agree to some new deal?

Ukraine? Russia is not interested in that unrulable, bankrupt and fascist infested entity.

Syria? The Zionist billionaires would stop their donations to Trump if he were to give up on destroying it.

Joining an OPEC++ deal and limit U.S. oil production? That would be an anti-American intervention in free markets and Congress would never agree to it.

And what reason has Russia to believe that Trump or his successor would stick to any deal? As the U.S. is non-agreement-capable it has none.

The outcome of the phone call will therefore likely be nothing.

The carnage in the oil markets will continue and will ravage those producer countries that need every penny while the corona virus is ravaging their people. Meanwhile the U.S. shale market will go bust.

Posted by b at 17:25 UTC | Comments (121)

March 29, 2020

The MoA Week In Review - Open Thread 2020-25

Last week's posts at Moon of Alabama:

  • Mar 25 - Netanyahoo's Corona Coup
    Related:
    Opposition leader Gantz sold out to Netanyahoo presumably in exchange for a promise that Netanyahoo would leave in 18 month. No one believes that he will keep that promise. Gantz' move has blown up his Blue and White coalition. His excuse is the corona crisis which, he says, requires unity. Israel will have quite a problem with the disease. The ultra-orthodox Haredi do not follow the stay at home orders. The Zionist do not care about Palestinians and forget that the disease will not differentiate. The Health Ministry is held by a corrupt Haredi who lacks the relevant qualifications.

Use as open thread ...

Posted by b at 14:37 UTC | Comments (296)

March 28, 2020

It Is A Time Of Crisis And U.S. Foreign Policy Is Becoming Unhinged

The Trump administration is reacting to the pandemic stress by lashing out at perceived internal and external enemies. Secretary of State Mike Pompeo is leading the external onslaught.

UN Secretary General Antonio Guterres has called for an "immediate global ceasefire" to focus on fighting Covid-19. He has appealed for the "waiving of sanctions that can undermine countries' capacity to respond to the pandemic."

But Washington is not listening.

Requests from Venezuela and Iran for emergency IMF loans to buy medical supplies were blocked by U.S. interventions.

Just a month ago Pompeo announced an increase of sanctions against Iran. The sanctions block money transfers. They make it impossible for Iran to import the medical equipment it urgently needs to counter the epidemic.

While the U.S. renewed the sanction waiver which allows Iraq to import electricity and gas from Iran the waiver is now limited to only 30 days. One third of Iraq's electricity depends on those imports from Iran and, if the waiver is not renewed, its hospitals will go dark just when the epidemic will reach its zenith.

Parts of the Trump administration are even pressing for a wider war against alleged Iranian proxy forces in Iraq:

Cont. reading: It Is A Time Of Crisis And U.S. Foreign Policy Is Becoming Unhinged

Posted by b at 15:13 UTC | Comments (211)

March 27, 2020

Open Thread 2020-24

The post I worked on today didn't pan out.

Please use yesterday's thread for further discussion of the pandemic.

Other stuff can go here ...

Posted by b at 18:16 UTC | Comments (214)

March 26, 2020

More Bits On The Corona Crisis

Donald Trump's MAGA is successful.

The U.S. is providing the world with another example of its great exceptionalism. In a few days it will have the greatest number of Covid-19 cases and the greatest number of casualties of the disease. It will also have spent the greatest amount of money on the crisis with the smallest part of it going to the people who need it.

It is not a nice picture and it makes me sad.

The more than two trillion dollar the lobbyists told Congress to put into their 800+ pages relief bill will mostly go to very rich people. It is  corporate socialism - a bail out for investors and managers.

Contrast that with the Russian president Vladimir Putin who, in an address to the Russian people, allocated most of the money for the unemployed, the retired and for families:

Then, with special flourish, Mr. Putin used the impending crisis to fix several unpopular tax loopholes favoring the very rich, so that the proceeds of the new taxes may be used to offset some of the costs of the social protection measures now being introduced for the great majority of the working population, for families, etc.

To name one such abuse, he is calling for all remittances of dividends and the like by physical persons to offshore ‘tax havens’ where they go untaxed, now to be subjected to a 15% income tax in Russia. The double taxation treaties with those tax haven countries allowing this abuse will be amended accordingly.

The U.S. as well as other countries is still not doing enough to slow down or even stop the outbreak.

The Wall Street Journal today reports (paywalled but quoted here) what we emphasized in our earlier pieces. The lockdown in Wuhan on January 23 was not enough to end the growth of the number of cases.

It was only after February 2, when Wuhan introduced the isolation of suspected cases and of people who had close contact with confirmed cases, that it gained a grip on the crisis:

Cont. reading: More Bits On The Corona Crisis

Posted by b at 18:20 UTC | Comments (478)

March 25, 2020

Netanyahoo's Corona Coup

Israel's prime minister Benjamin Netanyahoo has used the corona crisis to launch a coup.

Netanyahoo has served as caretaker prime minister since December 2018. Three parliament elections have since ended in stalemate. The first two, in April and September 2019, left him and his top opponent, the former army chief Benny Gantz, without sufficient parliamentary support to establish a government. Israels parliament, the Knesset has 120 seats. Gantz' Blue and White has won fewer seats than Netanyahoo's Likud (33-36).

But following the third round, early this month, Gantz assembled a narrow majority of parliamentary supporters and on March 16 President Reuven Rivlin tasked Gantz with forming Israel’s next government.

Netanyahoo is accused of bribery, fraud and breach of trust and the trial against him was scheduled to open on March 19.

On Sunday March 15 at 1:50 am Netanyahoo announced that the courts would be closed for public health reasons. His trial has been moved to late May. He also ordered the internal security service to secretly track the cellphone data of those suspected of possible infections. His Health Ministry prohibited any gathering of more than 10 people and instructed the parliament to also follow that rule.

On March 16 the newly elected Knesset members were sworn in three at a time by Knesset Speaker Yuli Edelstein. But two days later the speaker, a member of Netanyahoo's Likud party, refused to convene the house quoting the new health guidelines.

Without a house session no new speaker can be elected and the parliament would be out of business until some unknown time in the future. Meanwhile Netanyahoo is using emergency regulations to run the country.

Unable to use his majority Gantz asked the Israeli high court to intervene. This Monday, March 23, the court ruled without dissent that the speaker must convene the house for a plenum vote today. But that did not happen. Speaker Edelstein refused to follow the high court order, publicly resigned and said he had no intention for calling for a vote in the next 48 hours during which he is still the formal speaker.

Cont. reading: Netanyahoo's Corona Coup

Posted by b at 16:47 UTC | Comments (115)

March 24, 2020

Open Thread 2020-23

News & views ...

Posted by b at 15:13 UTC | Comments (399)

March 23, 2020

Coronavirus - How To Lift Lockdowns And Why We Should All Wear Masks

While the U.S. president continues to blame China there are more signs that the outbreak started elsewhere:

Some question why Italy was caught off guard when the virus outbreak was revealed on Feb. 21.

Remuzzi says he is now hearing information about it from general practitioners. "They remember having seen very strange pneumonia, very severe, particularly in old people in December and even November," he says. "This means that the virus was circulating, at least in [the northern region of] Lombardy and before we were aware of this outbreak occurring in China."

The sudden appearance of a new type of coronavirus against which no one had any immunity led to a sudden rise of cases with severe respiratory difficulties. These require up to three weeks of ventilator support and intensive care.

Our healthcare systems are not capable of working under such an onslaught. If they get overwhelmed other cases which require intensive care will fall by the wayside. The number of unnecessary deaths will then start to explode.

The only possible way to avoid such an outcome is to minimize contacts between humans to stop the mass infection wave.

When the first wave exploded in Wuhan city the authorities ordered a complete lockdown of the city and of Hubei province. That happened on January 23. Twelve days later, on February 4, the number of new cases in Wuhan started to decline. The Lombardy region in Italy ordered a lockdown on March 9. Twelve days later Italy reported its first decline of new cases.

While the hospitals in Wuhan as well as in Lombardy were for a while overwhelmed the further outbreak has been slowed if not stopped.

(Wuhan is notorious for air pollution but Lombardy is not. The theory that air pollution has contributed to the high number of severe cases in both regions is thus not confirmed.)

Lockdowns have been ordered in several European nations and in several U.S. states. Boeing and other companies have shut down their production facilities in Washington state. Many people are now unemployed. The situations in various states look dire.

Cont. reading: Coronavirus - How To Lift Lockdowns And Why We Should All Wear Masks

Posted by b at 18:00 UTC | Comments (371)

March 22, 2020

The MoA Week In Review - Open Thread 2020-22

Last week's posts at Moon of Alabama:

> Go hard right now. Order heavy social distancing. Get this thing under control.
Then, release the measures, so that people can gradually get back their freedoms and something approaching normal social and economic life can resume. <
Harry Moroz @hrmoroz - 15:35 UTC · Mar 20, 2020
For the average American the best way to tell if you have covid-19 is to cough in a rich person’s face and wait for their test results
> Overall, we rate Moon of Alabama Left Biased based on story selection and word choices that consistently favor progressives and Mixed factually due to anonymity associated with who runs the site. Otherwise, Moon of Alabama is well sourced to credible/factual information. <

---
Other issues:

Ukraine:

Six years and $20 billion in Russian investment later, Crimeans are happy with Russian annexation - Washington Post!
Ukraine’s Zelensky wants to end a war in the east. His problem: No one agrees how to do it. - Washington Post

Use as open thread ...

Posted by b at 14:21 UTC | Comments (354)

March 21, 2020

Coronavirus - On Western Government Failures And Possible Therapies

The U.S. intelligence services fear to come under questioning for not raising enough warning about the novel coronavirus pandemic. To prevent any criticism they asked their favored stenographers to write an exculpating piece.

Thus the Washington Post headlines:

U.S. intelligence reports from January and February warned about a likely pandemic

U.S. intelligence agencies were issuing ominous, classified warnings in January and February about the global danger posed by the coronavirus while President Trump and lawmakers played down the threat and failed to take action that might have slowed the spread of the pathogen, according to U.S. officials familiar with spy agency reporting.

The intelligence reports didn’t predict when the virus might land on U.S. shores or recommend particular steps that public health officials should take, issues outside the purview of the intelligence agencies. But they did track the spread of the virus in China, and later in other countries, and warned that Chinese officials appeared to be minimizing the severity of the outbreak.

If the spy services were really concerned about the issue why did they not warn the public? Instead of leaking new idiotic fairytales they could have leaked a warning about the pandemic. Instead we were given this:

If the intelligence services had taken the pandemic seriously they could have warned the public via their countless stenographers in the media. Instead they kept the media filled with false anti-Russian stories and told Trump that the Chinese are lying which they were in fact not. And now they blame Trump for not listening to them.

Trump of course would have not have believed the intelligence reports anyway. Why would he? The FBI and CIA have for three years tried to get him impeached. They created Russiagate based on a fake dossier. They lied to get FISA warrants to spy on his campaign. When Russiagate finally fell apart the CIA sent a fake 'whistleblower' to launch Ukrainegate. In Trump's place there is no reason to believe a word of whatever any of the 'intelligence officials' say.

The intelligence services failed to issue effective warnings. But they were not the only ones. All institution in 'western' countries and their leaders have lacked in their preparation for a larger outbreak.

Cont. reading: Coronavirus - On Western Government Failures And Possible Therapies

Posted by b at 19:17 UTC | Comments (241)