The province’s tar sands cover an area larger than the United Kingdom and contain most of the world’s supply of bitumen, a particularly sticky form of petroleum that must be heated or diluted before it can be pumped. Because it’s so unwieldy, it’s only been in recent years that large-scale development of the tar sands have taken place. The steep rise in global oil prices has set off a boom in the region, with all that naturally follows (prostitutes have reported incomes as high as $15,000 a week). [TNR via BI]
Oil
Unlike some people who lack the stomachs, this fund is sticking to its oil positions. Continue reading »
Serious Question: Is Tony Hayward Even Going To Turn Around And Acknowledge The Lady Protestor Attempting To Rip Off Her Top?
By Bess Levin
Or is he just going to keep staring straight ahead and pretend there’s nothing going on behind him? (Bonus question: did the blond woman next to her go “she’s a stripper”?) Continue reading »
Our relationship with risk-taking is a schizophrenic one. Bold actions taken, even foolishly, yield bright accolades for winners, enduring damnation for losers. Qui audet adipiscitur, after all. Phrased another way: One may dare, but one must win.
On reflection, David Redmond probably shouldn’t have gone back to the office after a fateful boozy lunch last year that lasted three and a half hours.
The commodities trader arrived back at his desk at Morgan Stanley in London at 4.41pm on 6 February and through the fug proceeded to gamble $10m (£5.1m) in a frantic series of trades. It very nearly went down as the most expensive lunch in history. In the sober light of the following day, he managed to trade his way out of the position without telling anyone and avoided making any losses. But it wasn’t enough to save his neck.
The Financial Services Authority today banned Redmond from working in the City for at least two years for concealing his trading position from bosses and leaving the bank exposed to significant risk. Margaret Cole, the director of enforcement at the City watchdog, said his actions had “showed a lack of honesty and integrity”.
Who among us doubts that, had Redmond come out +20% on the positions, his name would endure in the office forever, emblazoned on brass plaque under the hermetically sealed, bulletproof-plexi case holding the actual glass he drank from that faithful afternoon?
FSA bans Morgan Stanley’s oiled trader [Guardian Online]
Here’s a thought experiment:
What would you make of the Deputy Prime Minister of a large country that insisted that, compared to the rest of the world, centralized regulation like price or production caps would be difficult to impose in his country because of the independent nature of the country’s legal system and the sanctity of property rights? Sounds reasonable, no?
Then what if I told you that the CEO of the same country’s privately-held and largest energy conglomerate was arrested on almost certainly politically motivated fraud and tax evasion charges? That he was sentenced to nine years in prison and a controlling interest in the firm was then transferred to a successor? And if that that successor was forced to flee to Israel to avoid similar charges? And if I pointed out that what followed was a mass exodus of the entire Board of Directors and most of the executive corps to foreign shores to avoid arrest and prosecution? If I then told you similar stories about the larger media and banking interests in said country, you might find our Deputy Prime Minister’s claims a bit fantastic, no? Consider:
“It would be irresponsible for Russia to join OPEC because we can’t directly regulate the activity of our companies,” he said, as nearly all are privately owned.
Yet, he supports “coordinating actions” with the cartel because of the shared interest in lifting prices. He said Moscow isn’t in a position to mandate lower production, but Russian oil companies will curb output this year as falling prices cut into their ability to produce.
He figured that if oil slides back under $40 a barrel, Russian output this year could fall twice the amount the government now forecasts, or about 300,000 barrels a day.
Oh, and apparently:
“In Post-Soviet Russia, falling price reduces demand.”
Moscow Warns on Low Oil Prices [The Wall Street Journal]
Make room on the Goldman conspiracy bandwagon. As you may or may not be aware, oil pipeline giant Semgroup Holdings took $2.4 billion in losses last summer following the oil price spike. Semgroup had been short crude and paid for it dearly. The firm went under, filing for bankruptcy protection in July. At least one voice is blaming Goldman:
But now some of the people involved in cleaning up the financial mess are suggesting that Semgroup’s collapse was more than just bad judgment and worse timing. There is evidence of a malevolent hand at work: oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup’s accounts.
“What transpired at Semgroup was no less than a $500 billion fraud on the people of the world,” says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.
We love a good conspiracy theory and this one has all the ingredients:
Target of the theory is a powerful and somewhat mysterious entity? (Check)
Claim is difficult to (dis)prove? (Check)
Well known names attach to various tentacles of the theory? (Check)
The Daniel Pipes Criteria (the perpetrator always gains power, fame, money, and sex) is satisfied? (Check)
Excellent!
Did Goldman Goose Oil? [Forbes]
The dance of crude has slapped more than a few investors to the dirt-nap lately. Three fake rallies have throttled investors like T. Boone Pickens into equity unconsciousness and several of these black gold rushers are laying on the sidelines, out cold.
Crude oil fell after a U.S. government report showed a bigger-than-forecast inventory increase in the world’s largest energy-consuming country.
Stockpiles climbed 1.94 million barrels to 353.3 million last week, the Energy Department said today. Inventories were forecast to rise by 1.5 million barrels, according to the median of analyst estimates in a Bloomberg News survey. Supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, also increased.
Fourth time is the charm?
Oil Falls After U.S. Reports Supplies Rose More Than Forecast [Bloomberg]
Mark and Andrew Madoff teamed up with their cousin Shana Madoff Swanson in early 2007 to fund Madoff Energy LLC. After hiring geologists and other employees, they began financing oil and gas projects, including well drilling in Texas.
“Oil? Gas? Sure, why not? Our fly fishing expertise will doubtless provide great geological expertise given our extensive outdoor experience. The fishing travel would dovetail nicely with the survey trips. Plus, don’t they use explosives for those surveys? Cool! Plus too, all those guys on TV you see who got wealthy from oil are like, really wealthy. Remember the Beverley Hillbillies? Those people were loaded. So loaded that everyone had to deal with their bullshit. Hell, we could even boss the Noel’s around in Mustique! I mean, have you seen the price of oil lately? Shana, you run compliance, ready. You know about like filings and stuff, right? You could do the paperwork, right? Mark and I will be the… you know… brains. The research. The analysis. We’d go visit sites near fis- er, oil and gas deposits. Hey, how much does fish oil go for nowadays?”
Madoff’s Sons, Niece Started Energy-Drilling Company [Bloomberg]
It is no secret that one of the things holding what remains of the economy together is low oil prices. That’s more than somewhat recursive, of course, since its the anticipated slack demand brought on by global recession (or fear thereof) that’s depressing oil prices. But Western salvation is Mideast disaster. As OPEC members, many already well under their petrol-augmented budget lines owing to subsidy stuffed fiscal policy, begin to panic all sorts of strange tactics emerge. Cooperation with Russia, for instance. 2 million barrel per day cuts. Earnest promises that there will be “no cheating this time” and economics lessons from oil ministers who enjoy touting phrases like “the consumer appreciates a robust market for oil.” All of this, of course, masks something approaching panic. This should concern us. What does a panicked OPEC do if this cut fails (as is probably quite likely)?
OPEC ready for deepest oil cut to rescue prices [Reuters]
Goldman Sachs wasn’t the only group surprised by the sudden bursting of the Oil BubbleTM. OPEC is going batshit, and we don’t mean that in a good way.
The problem at this point, as is usually the case with supply side controls, many of the members will be strongly incentivized to cheat on any cuts. With November NYMEX crude futures trading at just over $58 $57 $56 $55 $54, several petrol economies are looking at deficit budgets. This is extremely problematic for countries that have leveraged their in-ground deposits to feed spending binges. We aren’t naming any names, but several of the more aggressive spenders over the last five years were already having fiscal issues with oil at $65. Continuing slips would be a problem all by themselves, but production cuts on top of those will be even worse.
It is ironic that just when the cohesiveness of the cartel is most needed it is under the greatest pressure. This is one of the reasons it has been remarkable that OPEC, with so many members, has lasted even this long. Now, panicky behavior on the part of the largest extraction economies is to be expected. Figuring that this is lining up to be an outstanding show, we have several bids in on eBay for old-time theater popcorn poppers.
OPEC Plans to Meet This Month to Discuss Output Cut [Bloomberg]
Related: The OPEC Sandbox
