Kinder Morgan ( KMI) / Shipping Sector/ Natural Gas – Why Chase Stocks Down ? – plenty of reasons to watch and wait

There was a recent video / interview of Jim Cramer saying his industry sector guru called $ 20.00 as the bottom but Cramer saw the stock in free fall and just did not know.

 

Analysts have been split on whether Kinder Morgan’s dividends are sustainable as the pipeline industry’s ability to tap equity and debt markets to finance growth dimmed. The company’s stock has slumped 27 percent this week to $17.47 as of 12:34 p.m. in New York. Moody’s Investors Service warned on Tuesday that Kinder Morgan’s bonds were on the verge of tipping into junk.

“Dividend growth is unrealistic,” Vivek Pal, a managing director at Jefferies LLC in New York, said in a note to clients before the announcement. The company needs a 50 percent dividend cut to avoid being downgraded to junk, he said.

Prior to today’s announcement, Kinder Morgan had been expected to lift its 2016 dividend to $2.14, according to Bloomberg Dividend Forecasts. Companies across the oil and gas industry have been slashing or freezing dividends to conserve cash as plunging energy prices choked off money needed to drill wells, pay debts and purchase drilling rights.

Transocean Ltd., Chesapeake Energy Corp. and Linn Energy LLC are among those whose investors have seen payouts halted amid the crunch that began 18 months ago. Kinder Morgan’s $40 billion-plus debt burden exceeds the economic output of entire nations, including Bolivia and Bahrain.

We have no oil / gas stocks in the managed accounts.Braggin ‘ Rights – out of Chesapeake at $22

We have no shipping stocks – Summary from Seeking Alpha

Dry bulk shipping unlikely to recover before 2017, consultant says
Dec 3 2015, 19:15 ET | By: Carl Surran, SA News Editor Contact this editor with comments or a news tip
Dry bulk shipping faces at least another year of pain, according to a new report from Drewry Shipping Consultants, which says companies in the industry will not return to profitability until at least 2017.Drewry says its dry bulk freight rate index fell 14.5% in September from August, and rates have fallen another 13.8% between September and November, although numbers for the full Q4 will not be available until early next year.”Demand has almost dried up,” Drewry’s lead analyst says. “China’s iron ore imports have stagnated, China’s coal imports have come down massively and India’s coal import growth has also slowed down.”Drewry forecasts demand for iron ore growing at 3%-4% over the next few years, but says demand for coal, especially in China, will not rebound any time soon.Related tickers: DRYS, SBLK, SALT, DSX, PRGN, EGLE, NM, NMM, SB, SINO, SHIP, FREE

Safe Bulkers Inc. (SB) – NYSE
$1.04-0.17(-13.64%)12:26 PM, 12/04 

Today5d1m3m1y5y10y
52wk high:4.92
52wk low:1.03
EPS:-0.39
PE (ttm):N/A
Div Rate:0.04
Yield:3.31
Market Cap:$101.02m
Volume:450,843

Good Advice  DOES COST Money -and it does SAVE Your Portfolio

Tax Haven Wealth Management : GUARANTEE of 6 % OR YOU DON’T PAY

Posted on September 10, 2015by jackbassteam

 

The key is to give yourself options. They may not love any of the scenarios, but providing choices usually leads clients to eventually embrace one.

Despite solid advice, some clients just spend too much. Others, like the married couple we’ll call Matthew and Elizabeth, diligently save but still run into retirement-planning problems.

Matthew and Elizabeth became clients of Jack A. Bass Managed Accounts a few years back, looking to manage their portfolio and put a retirement game plan in place. At 66, Matthew was considering retiring. Elizabeth could finally travel now that she was no longer the primary caregiver of her mother, who had passed the year prior. Together, we looked at their joint financial picture and analyzed the situation.

Then came some bad news: They wouldn’t be able to confidently cover living expenses if Matthew stopped working. They were shocked, because they’d done so much correctly—worked hard, lived within their means and consistently saved for retirement, putting away $2.3 million between retirement and non-qualified investments. Matthew even ran some preliminary retirement numbers online over the years to make sure they were on track.

Part of the problem was that Matthew’s planning assumptions were too rosy. He didn’t assume he’d have any variability on his portfolio returns, he didn’t assume he’d have health-care costs once Medicare kicked in, and he didn’t assume that retirement could last more than 20 years.

We projected that if Matthew retired at 66, the couple would only have about a 70 percent chance of being able to cover lifestyle expenses without having to make adjustments to spending over time; if either of them experienced a modest long-term care event that ate into their resources, they would achieve only a 65 percent success rate.

Their miscalculations aside, the other part of Matthew’s and Elizabeth’s retirement problem was that they, like many other people, put others’ needs before their own, in traditional “sandwich generation” style.

When their kids asked for help with down payments on houses, they obliged. When Elizabeth’s mom needed in-home help for a few years prior to her moving in with them, they covered it. Consequently, these unforeseen events ultimately put their retirement in jeopardy.

Working toward a solution

Matthew and Elizabeth weren’t happy to hear they weren’t on track to retire, but they appreciated having a framework from which to choose their solution.

Ultimately, Matthew chose to work 30 hours per week so that his company could continue to pick up their health-care costs (saving them about $1,000 a month in Medicare-related costs). The part-time work allowed him to take off every Friday, and that gave him the added benefit of “test driving” retirement.

He and Elizabeth also decided to downsize their home and buy long-term care coverage. The LTC insurance assured that their children wouldn’t be faced with the possibility of someday having to assist them financially.

As with all best-laid plans and good intentions, sometimes things go awry with retirement planning. However, by exploring alternative saving tactics, you can still achieve your goal.

Investment Management

Offered by Jack A. Bass Managed Accounts

We can administer your account via the internet so that you can track your returns and only you can transfer funds from that account.

Guaranteed Investment Performance

( minimum 6 % annual return)  Or You Don’t Pay

Our stock market letter :  www.amp2012.com

 

Information must proceed action and that is why we offer a no cost / no obligation inquiry service.

Email info@ jackbassteam.com or

Call Jack direct at 604-858-3202 – Pacific Time 10:00 – 4;00 Monday to Friday

( same time zone as Los Angeles)

The main intention of our website is to provide objective and independent information that will help the potential investor to make his own decisions in an informed manner. To this effect we try to explain in a simple language the different processes and the most important figures involved in offshore business and to show the different alternatives that exist, evaluating their pros and cons.

On the other hand we intend – in terms of  offshore finance, bringing these products to the average citizen.

Do something to help yourself – contact Jack A. Bass now !

A final word of advice – information without action will produce nothing in the way of improved investment returns.

Oil 5 Talking Points – All Point to Lower for Longer ?

 

Oil’s bounce back from the summer’s lows has the look of a bottoming in crude prices, but some strategists say the shakeout is not over.

“I’m pretty sure we’re going to see a new low. The probabilities are that we see a new low or two or three,” said Jack Bass. Our 2015 results for managed accounts all did well by avoiding oil and natural gas and that continues to be our bias.

The negative factors that have pounded oil prices continue to hang over the market, and the world is still facing oversupply of about 2 million barrels a day. Strategists say the chief wild card that could send oil to new lows is Iran — and uncertainty about when and how fast it can bring crude back to the market.

This past summer, West Texas Intermediate crude futures touched a low near $38 in late August before moving back to $50 per barrel on Oct. 9. Since then, oil has traded in the upper $40s, giving the impression the worst lows of the bear market in crude are over. Brent, the international benchmark, hit a low at around $42 per barrel in August and temporarily rose above $54 in October.

“There was a bout of short covering, and oil was pumped up on geopolitical fears about Russia’s foray into Syria, but the fundamentals never changed. Production is still high all around the world, and the glut is getting worse, especially for diesel fuels,” said John Kilduff of Again Capital.

1. Iran as a catalyst

Major producers continue to pump at high levels, and demand continues to lag. U.S. shale producers have more resilience than expected, and the U.S. is still producing about 9 million barrels a day.

But it’s Iran’s oil production that some analysts say the market may not be pricing correctly. They also say Iran may be making blustery assertions about its oil production that it will not be able to meet.

The U.S. and five other nations agreed in July to lift sanctions against Iran in return for curbs on its nuclear program, and this past Sunday the agreement was formalized based on Iran’s meeting its commitments to the deal.

An Iranian official this week said the country has already secured buyers from Europe and Asia for more than 500,000 barrels a day in new exports once sanctions are lifted. The final assessment by the International Atomic Energy Agency is expected to be completed by Dec. 15.

“If they put that marginal barrel onto the market, there’s going to be a price impact from it. The Saudis have taken a lot of their market share from Europe in the last couple of years,” said Michael Cohen, head of energy commodities research at Barclays. “It’s going to be a fine balance. I wouldn’t be surprised at the end of 2016 if we look back at the end of the last year and be surprised that they put only 400,000 to 500,000 barrels back on the market, not 800,000 to 900,000 barrels.”

Iran has been producing about 2.8 million barrels a day, from a high of 4.2 million barrels, according to Andrew Lipow of Lipow Oil Associates. “It would surprise me to see 500,000 a day come out onto the market within a couple of months,” he said. “The market takes what they say with a grain of salt. We do know that they are going to be exporting the first minute they can.”

It could be the start of Iran’s oil returning to market that sends oil prices back to the lows, said Citigroup’s Morse. He said the oil market could hit bottom late this year or in the first quarter, but he does not expect Tehran to be able to quickly push the volume of new oil that it is promising.

“These shut-in wells have been building pressure. They can surge production beyond what is sustainable, and if they want to show the world they are there, which is highly likely, that is possible,” he said. Morse said he expects Iran could produce 300,000 to 500,000 barrels a day more within a half year of sanctions being lifted.

Iran also has about 40 million barrels of condensates in floating storage. “I just think the market has underestimated how much oil could come back on the market immediately upon having sanctions released,” Lipow said.

2. Inventories bulging

A second thorny issue for the market is buildup of inventories. Last week U.S. government data showed a surge in crude stocks of 7.6 million barrels of oil, but it is also the buildup of refined products that analysts are watching.

Barclays, in a report, said that global refinery runs grew faster than demand by about 57 percent during the second and third quarter. That created a buildup, pushing refined products into storage in offshore tankers.

Refining capacity has been added around the globe. Saudi Arabia, for instance, shipped less crude in August but more refined oil products. According to JODI data, Saudi Arabia exported 1.3 million barrels a day of refined product, compared to 1.1 million barrels the month earlier.

The U.S. has also increased refined-product exports as well and is a net exporter of about 2 million barrels a day. Barclays expects the rate of build in refined products to slow.

“Fundamentally speaking, we remain in an oversupply situation, and refining margins are weak and likely to get weaker, especially in distillates, and the stocks remain at high levels,” said Cohen. “So any sustained price move tot he upside is going to be met by with skepticism by the market and that’s why we continue to maintain our range bound price forecast at least until the third quarter of next year.”

View gallery

Getty Images. A global oil glut has the supply-and-demand balance out of wack. Here are the main fac …

3. U.S. shale gale

A third bearish factor for oil has been, and continues to be, the resilience of the U.S. oil industry. Saudi Arabia and OPEC vowed last fall to continue producing and to allow the market to set prices in an oversupplied world, a factor they were hoping would curb non-OPEC production.

But U.S. production, despite shut-in rigs, has not fallen that much. Analysts had been expecting some companies to lose some funding in bank redeterminations this month, but it seems the industry is doing better than expected, and the impact is relatively minor.

“We think for WTI there’s downside risk for the first quarter based on the fact we think U.S. production may not roll over like people think,” said Cohen. “We need to see prices go lower as a disincentive.”

Analysts now expect the companies facing lending reviews to have a difficult time in the spring after more months of low oil prices. The U.S. industry is made up of so many companies drilling so many unconventional wells that the trigger of falling prices is not an automatic one, since producers are profitable at all different levels.

“High-yield companies are well-hedged through the first quarter, and then their hedges go off, and it’s not clear they have the cash flow to keep drilling,” said Morse.

Cohen said the pressure from a long period of low prices will pinch companies. “U.S. production is likely to be lower,” he said, adding the hit to shale producers will be worse next year after several more quarters. “It will be worse, not just for those that have their borrowing base redetermined.”

4. Biggest producers producing

Russia and Saudi Arabia are the world’s biggest oil producers, and both of them have taken a full-throttle approach to lower prices in an effort to gain or hold share.

Saudi Arabia led OPEC in its plan to use market pricing as a weapon to slow overproduction. When OPEC meets in early December, analysts see little chance of a change in policy.

In fact, rhetoric around that meeting could add downward pressure on prices.

“The Saudis have been adding more to inventories. I don’t really see them backing down from the 10 million-barrels-a-day production level. They continue to be open to a cut if other producers are willing to cut first,” said Cohen. “They’ve taken a very tit-for-tat approach. They want to see a plan and a credible plan before doing anything.”

The strain of low prices is wearing on both Russia and Saudi Arabia. “They (Saudi) can shield the blow by issuing more debt, which they have done,” Cohen said. “The amount of debt they are issuing this year is basically the equivalent of a $10 bump in oil prices.”

Morse said the producers will not be able to sustain production in a low-price environment forever. “Definitely at some point, in the winter of 2016/2017, it looks like the world moves into a net inventory drawdown, helped by U.S. shale, helped by production in Mexico, the North Sea, Oman, Russia … all showing decline rates instead of staying stable,” he said.

5. World demand

Oversupply hit the world market at the same time demand from the emerging world and China was dampened. China reported GDP of 6.9 percent for the third quarter just below last quarter’s 7 percent pace, but worries about Chinese growth and demand have pressured prices.

The World Bank this week said it expects oil prices to remain weak through next year, and it cut its expectations for crude. The World Bank’s quarterly commodity sector report pared its average oil price forecast to $52 per barrel this year from an earlier estimate of $57. It sees an average price of just $51 in 2016.

The Bank said Iran’s return to the market will dent oil prices, but it also noted weak global growth.

“All main-commodity price indices are expected to decline in 2015, mainly owing to ample supply and, in the case of industrial commodities, slowing demand in China and emerging markets,” the Bank said.

Besides overproduction, high inventories and weak demand, Morse said another factor that could weigh on prices are the speculative investors who could slam the oil price once Iran brings oil back onto the market.

He said WTI could average $40 per barrel in the fourth and first quarters, and Brent could average about $44. Barclays expects Brent to average $53 per barrel in the fourth quarter and $63 in 2016 after a recovery in prices in the second half.

 

November 2014 – How Did We Do On Our Stock Market Forecast ?

Posted on September 13, 2015by jackbassteam

JACK A. BASS MANAGED ACCOUNTS – YEAR END UPDATE AND FORECAST  As written – November 2014 – 40 % cash position You Can Judge : Our 2014 Year End Review and Forecast Gold and Precious Metals The largest gains for our … Continue reading →

Posted in Asset Protection, Best Tax Haven, Gold, Jack A. Bass Managed Accounts, Jack A.Bass, Offshore Incorporation, Offshore Investing, Portfolio Management, Tax Havens, Tax Jurisdiction, tax secrecy, Tax strategy,Trusts, Wealth Advisor, Wealth management | Tagged 2015 Stock market forecast, Jack A. Bass Manages Accounts,wealth management | Leave a comment | Edit

1. Will OPEC’s Production Slow Down and Benefit Crude Oil Prices? Market Realist
2. Russia and Saudi Arabia to Continue Pumping Oil The Wall Street Journal
3. Oil jumps $2, breaking range as supply seen ebbing Reuters
4. OPEC Sees U.S. Oil Output Dropping Next Year The Wall Street Journal
5. This Month Could Make Or Break The Oil Markets Oilprice.com

 

Ratings cut on Chesapeake Energy, other oil and gas producers :Outlooks Cut to Negative by S&P in Oil Slump

 

Exxon Mobil Corp. and Chevron Corp. were among several U.S. oil and natural gas producers that had their outlooks or ratings cut by Standard & Poor’s as the industry suffers from weak crude prices, hurting their cash flow and liquidity.

S&P cut ratings for Chesapeake Energy Corp., Denbury Resources and Whiting Petroleum Corp., while giving Exxon and Chevron “negative” outlooks, the ratings agency said Friday in a statement. Exxon “has substantially more debt than during the last cyclical commodity price trough in 2009, while upstream production and costs are at similar levels,” S&P analysts Thomas Watters and Carin Dehne-Kiley said.

Oil prices have fallen 58 percent from last year’s peak, threatening $1.5 trillion in North America energy investments, according to Wood Mackenzie Ltd.  Oil has been stuck near $45 a barrel as U.S. crude stockpiles stay about 100 million barrels above the five-year seasonal average and OPEC pumps at near-record levels.

Exxon is one of only three U.S. industrial issuers to have a triple-A bond rating, along with Johnson & Johnson and Microsoft Corp. The oil company has held that grade from S&P since at least 1985, according to data compiled by Bloomberg.

The last U.S. company to lose the triple-A designation from S&P, as well as Moody’s Investors Service, was Automatic Data Processing Inc., which was stripped of the ratings after spinning off its auto-dealer services unit in April 2014.

Chevron has been rated AA by S&P since at least July 1987, Bloomberg data show.

“Most rating actions reflect lower credit-protection measures, negative cash flow, and uncertainty about liquidity over the next 12 months,” S&P said in the statement.

Atlantic Crude Adds to Seasonal Pressure on Prices : Bloomberg -Russia Rules Out Deal With OPEC

 

• North Sea output set to reach highest level in over 3 years
• Abundant supply comes as refiners poised to start maintenance

The North Sea and Nigeria will ship the most crude in more than three years in October, adding to downward pressure on oil prices just as demand wanes from refiners shutting down for seasonal maintenance.

Output of North Sea grades will reach the highest since May 2012 next month, according to loading programs compiled by Bloomberg. Supplies from Nigeria, the biggest oil producer in Africa, are set to reach a level not seen since August of that year.

“It’s directionally bearish for crude,” Vikas Dwivedi, an analyst at Macquarie Capital Inc. said by e-mail. “The large loading programs will need buyers.”

Production in the North Sea is rising as projects come online that were sanctioned with oil prices above $100 a barrel, according to the International Energy Agency. This coincides with the end of a shutdown in Nigeria caused by a pipeline leak, allowing supplies to flow back to the market, Dwivedi said. Demand for crude will weaken as refiners shut down for seasonal maintenance, although this year’s schedule will belighter than usual as companies take advantage of high profit margins.

Shipments of Brent, Forties, Oseberg and Ekofisk and other North Sea grades, will average 2.1 million barrels a day in October, according to data compiled by Bloomberg. Nigerian supplies will total 2.2 million and Angola will ship 1.77 million, the data show.

There is an “existing overhang of the crude in the northwest of Europe, as well as in West Africa,” Abhishek Deshpande, an analyst at Natixis SA said by phone. Together with refiners going offline for seasonal maintenance, that “only tells you one story — pressure on Brent and West African prices.”

Persistent Surplus

Brent crude fell 59 cents to $49.02 a barrel on the at 12:09 p.m. on London-based ICE Futures Europe Exchange. The North Sea benchmark has fallen more than 50 percent in the past year amid a persistent global production surplus.

Refineries in Europe are expected to halt an average of 162,000 barrels a day of processing capacity from this month through to the end of the year compared with 768,000 a day in the same period of 2014, energy consultancy Wood Mackenzie said on Aug. 25. Maintenance, which usually starts in the third week of September or first week of October, may also be pushed back, Deshpande said.

The current increase in North Sea production is temporary relief for an industry facing long-term decline in output from aging fields and high production costs.

The collapse in oil prices has forced companies in the region to cut costs costs, resulting in the loss of about 5,500 jobs since late 2014, the U.K. Oil & Gas Authority, the industry regulator, said in a report Monday. The organization was set up to lay out a plan for improving the competitiveness of the North Sea.

Oil declined for a second day after another Russian official ruled out cooperation on production cuts with OPEC, adding to signs that a global oversupply will persist.

Brent lost 4 percent in London. Russia won’t join the Organization of Petroleum Exporting Countries and isn’t able to cut production in the same way, said OAO Rosneft Chief Executive Officer Igor Sechin. Russia’s Deputy Prime Minister Arkady Dvorkovich said last week there is no way the country can artificially reduce supply.

Oil has fluctuated the past three weeks as concerns over slowing demand in China fueled volatility in global markets. Prices are down more than 25 percent from this year’s closing peak in June on signs the surplus will persist. OPEC members are sustaining output and U.S. crude stockpiles remain almost 100 million barrels above the five-year seasonal average.

Russia Rules Out Deal With OPEC

“Russia’s comments on the market are having some impact on prices today,” Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB, said by phone. “There’s some positive data coming from U.S. rig counts for example, and that could be positive for oil prices this week.”

Brent for October settlement lost $1.98 to settle at $47.63 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $3.37 to West Texas Intermediate. Prices have decreased 17 percent this year.

Protect your portfolio offshore See http://www.youroffshoremoney.com

Iraq About to Flood Oil Market in New Front of OPEC Price War

(Bloomberg) — Iraq is taking OPEC’s strategy to defend its share of the global oil market to a new level.

The nation plans to boost crude exports by about 26 percent to a record 3.75 million barrels a day next month, according to shipping programs, signaling an escalation of OPEC strategy to undercut U.S. shale drillers in the current market rout. The additional Iraqi oil is equal to about 800,000 barrels a day, or more than comes from OPEC member Qatar. The rest of the Organization of Petroleum Exporting Countries is expected to rubber stamp its policy to maintain output levels at a meeting on June 5.

While shipping schedules aren’t a promise of future production, they are indicative of what may come. The following chart graphs planned tanker loadings (in red) against exports.

As in previous months, Iraq might not hit its June target – export capacity is currently capped at 3.1 million barrels a day, Deputy Oil Minister Fayyad al-Nimaa said on May 18. Still, any extra Iraqi supplies inevitably mean OPEC strays even further above its collective output target of 30 million barrels a day, Morgan Stanley says. The following chart shows OPEC increasing output in recent months against its current target.

Defying the threat from Islamic State militants, Iraq has been ramping up exports from both the Shiite south – where companies like BP Plc and Royal Dutch Shell Plc operate – and the Kurdish region in the north, which last year reached a temporary compromise with the federal government on its right to sell crude independently.

Protect your portfolio profits http://www.youroffshoremoney.com

Half of U.S. Fracking Companies Will Be Sold OR Dead This Year

Half of the 41 fracking companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies, an executive with Weatherford International Plc said.
There could be about 20 companies left that provide hydraulic fracturing services, Rob Fulks, pressure pumping marketing director at Weatherford, said in an interview Wednesday at the IHS CERAWeek conference in Houston. Demand for fracking, a production method that along with horizontal drilling spurred a boom in U.S. oil and natural gas output, has declined as customers leave wells uncompleted because of low prices.
There were 61 fracking service providers in the U.S., the world’s largest market, at the start of last year. Consolidation among bigger players began with Halliburton Co. announcing plans to buy Baker Hughes Inc. in November for $34.6 billion and C&J Energy Services Ltd. buying the pressure-pumping business of Nabors Industries Ltd.
Weatherford, which operates the fifth-largest fracking operation in the U.S., has been forced to cut costs “dramatically” in response to customer demand, Fulks said. The company has been able to negotiate price cuts from the mines that supply sand, which is used to prop open cracks in the rocks that allow hydrocarbons to flow.
Oil companies are cutting more than $100 billion in spending globally after prices fell. Frack pricing is expected to fall as much as 35 percent this year, according to PacWest, a unit of IHS Inc.
While many large private-equity firms are looking at fracking companies to buy, the spread between buyer and seller pricing is still too wide for now, Alex Robart, a principal at PacWest, said in an interview at CERAWeek.
Fulks declined to say whether Weatherford is seeking to acquire other fracking companies or their unused equipment.
“We go by and we see yards are locked up and the doors are closed he  said. “It’s not good for equipment to park anything, whether it’s an airplane, a frack pump or a car.”

Crude glut: A lesson in supply and demand : Running Out Of Storage

A LESSON IN SUPPLY AND DEMAND

Oil traders are growing increasingly nervous that a glut of crude will send prices into a tailspin.

5 ways surplus oil will affect us

Oil storage tanks in the United States have been filling rapidly as companies there contribute to produce more crude than refiners can process. As a result, the price differential between U.S. crude and international sources has widened considerably, once again providing a “North American” discount to the market.

North American motorists will like it

With rising inventories in key locations, refiners will be able to access cheaper crude and will pass at least some of those savings along to consumers. But refiners on the east and west coasts have limited access to cheaper North American crude and won’t feel the benefit as much as those who live in the mid-continent.

U.S. producers will fear it

With more crude in storage, oil companies are essentially competing with their own past production. And as space in the tanks become more scarce, producers will be forced to sell their current output at steep discounts, driving prices down further. Even as demand picks up in response to lower pump prices, the huge volume of inventories will moderate any rebound in crude prices.

American politicians will debate it

The boom in U.S. crude production has already prompted talk in Washington about lifting the 40-year-old ban on crude oil exports from the lower 48 states. As producers fill up available storage, the calls to end the prohibition (which does not include exports to Canada) will grow louder and more desperate.

Canadian producers will be sideswiped by it

Canadian crude prices are set in relation to the price of West Texas Intermediate, which is set in Cushing, OK., site of a major storage hub that is brimming with crude. Since U.S. crude is a “light” variety, Canadian oil sands producers are still seeing healthy demand for their “heavy” barrels. But their prices are being hammered down.

American environmentalists will seize on it

In the long-running debate over the Keystone XL pipeline, the Canadian government has sold the project as contributing to U.S. energy security. Opponents of the pipeline will point to the surplus production as another reason that the pipeline is unnecessary and should be turned down

Calgary’s Enbridge Inc. owns the largest oil storage facility at the continent’s most important location for such things, but it is a commercial secret as to how close its tanks are to full capacity.

In the past three years, as the U.S. oil boom took off, Enbridge expanded its tank farm in Cushing, Ok., by a third so that it can now store 20 million barrels of crude. Cushing is a strategic location: It is a hub for the web of pipelines that crosses the U.S. plains but is also the continent’s largest crude storage centre.

In recent weeks, oil traders have grown increasingly nervous that a growing glut of oil could overwhelm North America’s capacity to store it, and that we’ll soon run out of places to put it. If that occurred, prices would go into a tailspin and the industry would be forced to shut off their wells until growing demand caught up to shrinking supply.

The storage picture is opaque – clouded by companies’ commercial sensitivities and time lags in U.S. government data. Enbridge stores crude for its own account and on behalf of customers who profit by buying oil at today’s low prices and then re-selling it at a higher price on the futures market for delivery at some later date.

“Demand for commercial tank storage today is high since the future expected price of oil is higher than it is today so investors are looking to build up supplies in North America,” Enbridge spokesman Graham White said in an e-mailed statement. “Enbridge works with commercial storage clients to accommodate their requirements.”

Market fears were heightened late last week when the Paris-based International Energy Agency said that rising U.S. supply “may soon test storage capacity limits.” The warning prompted another selloff in oil markets, with North America’s key benchmark, West Texas Intermediate (WTI), falling to six-year lows Monday, down 2 per cent to $43.82 (U.S.) a barrel. That’s the lowest price for WTI since the depths of the great recession of 2008-09.

“The U.S. is a-flood with oil and other production points around the world are not letting up in their output. The question is how much more oil can we take before the storage tanks hit capacity?” said Gene McGillian, senior market analyst at Tradition Energy in Stamford, Ct.

For Canadians, the storage issue has broad ramifications.

Another round of price cuts would further cripple Alberta’s already-struggling oil industry, and blow an even larger hole in the province’s finances, as Premier Jim Prentice prepares to release his first budget since taking office in September. Federal Finance Minister Joe Oliver has delayed Ottawa’s budget until at least April in order to get a better sense of how falling oil prices will hit the Canadian economy.

For consumers, the further decline in crude prices offers more relief at the pump with prices again dropping below $1 per litre in major Ontario markets, while at the same time, undercutting the value of the Canadian dollar.

But some analysts argue the fears are overblown.

“Yes, the U.S. has seen unprecedented growth in crude stocks this year,” said Afolabe Ogunnaike, a Houston-based analyst with Wood Mackenzie, an international consulting group. “But we still think there is significant amount of storage capacity available.”

He said U.S. inventories have gown by 66.5-million barrels since the beginning of the year, but estimates there is still room to store another 200-million barrels. Meanwhile, the pace of the stock build-up should slow as refineries, which were down for seasonal maintenance, resume operations to prepare for the summer driving season. And as the industry reacts to lower prices by cutting drilling and other spending, it will soon begin to show up in lower production.

The U.S. energy department reported in February that crude storage capacity is 60 per cent full, and the figure has climbed a few percentage points since then. But the situation varies widely across the country and within Canada. The largest tank farms are close to production facilities, as in Cushing, or Hardisty, Alta. Or on the U.S. Gulf Coast, which is close to Texas producers and Gulf of Mexico producers and serves the world’s largest refining centre.

The U.S. separates the country into districts known as “PADDS – for Petroleum Administration Defence Districts, which were created during the Second World War for logistical purposes. PADD 1, for instance, is the East Coast, which has a large refining sector that relies heavily on imported crude and has little storage capacity beyond the refineries themselves. The East Coast market for petroleum products heavily influences the pump prices paid by consumers in Eastern Canada.

The key regions for storage are PADD 3, which includes the U.S. Gulf Coast, and PADD 2, which contains Cushing and the Midwest, where the vast majority of Canada’s record exports to the U.S. are headed. As of March 6, the U.S. Energy Information Administration (EIA) calculated that PADD 2 storage was 73-per-cent full, while PADD 3 was at 59 per cent. For technical reasons, many storage facilities can’t go above 80-per-cent capacity.

Oil storage tanks in Linden, N.J. are shown in this aerial file photo of Aug. 29, 2007. (The Associated Press)

The PADD 2 market is particularly important for Canadian producers, who have growing — but still limited ability — to reach the Gulf Coast. The International Energy Agency warned that should storage capacity in the Midwest reach its limits, Canadian exports would suffer.

However, refiners have invested heavily in equipment required to process the heavy-diluted bitumen that is produced in the oil sands and are keen to maintain those imports, said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers.

Analysts note that Washington is working with out-dated numbers for storage capacity. The energy administration last updated its capacity estimates in September, and will do so again in March.

“Crude oil stocks are rising everywhere in North America,” said Hillary Stevenson, manager of supply chain network for Genscape, an energy-market consulting firm. “But there’s been considerable growth in capacity, especially on U.S. Gulf Coast since September . . . so things maybe aren’t as full as people are thinking, especially on the Gulf Coast. We do have some time to absorb this growing supply glut that we’re having.”

But there is still an incentive for investors to store crude, though companies such as Enbridge are raising prices at their tank farms. The speculators are taking advantage of a condition in the futures market called contango, when prices for immediate delivery or next month are considerably below those for later months.

On the market yesterday, one could buy a barrel of crude for April delivery for $43.79 (U.S.) a barrel, and then resell it for delivery a year from now for $55.55. So if storage for the year costs less than $12 a barrel, you stand to make a profit.

Earlier this winter, traders were anticipating the same type of transaction using supertankers. In 2009, an armada of supertankers are leased, filled with crude and left at anchored for delivery at higher prices later. But this year, international crude prices have not seen the same steep differential in the futures markets, so the sea-borne market never developed.

But there is another source of “storage” that is not as accessible as the oil in tanks but still represents a future challenge for producers. In the prolific shale oil fields of Texas and North Dakota, many companies are drilling wells but not doing the final work need to bring them into production.

As above-ground storage begins to reach its limits, more firms will decide not to complete the wells they are now drilling. The glut will be buried, but not dead.

 

The Economist explains : Everything you want to know about falling oil prices

Why is the oil price falling?
Mostly because of increased supply from America—up by 4m barrels a day since 2009. Although most crude exports are still banned, American imports have plummeted, contributing to a glut on world markets. Other producers have decided not to try to curb their production and keep the price up.

Highly indebted companies are going bust, with knock-on effects on investors.

Oil Slump Extends to a Fifth Week as Global Glut Seen Expanding

Why?
The Organisation of Petroleum Exporting Countries is dominated by Gulf producers, notably Saudi Arabia. They have huge reserves to cushion the impact of low prices. They also hope that the slump will eventually shut down high-cost production, tightening the market again.

Are they right to think that?
Probably not. America’s shale production boom is based on new techniques—fracking and horizontal drilling—and unlike “big oil” involves small companies and small projects. These are flexible, meaning they will quickly respond to any price rise. And they are innovative: huge productivity gains still lie ahead.

What about the other producers?
Other producers such Nigeria and Venezuela are indeed hurting badly. But OPEC solidarity stretches only so far. Russia tried and failed to get OPEC support for a production curb—and is now ramping up its production in the hope of protecting the volume of oil revenues.

Will low prices continue?
It looks like it. Some high-cost production is closing, but once wells are drilled, it usually makes sense to keep pumping, even at a loss. It is better to make a little money rather than none. And the shale revolution is marching on.

How low can the price go?
If your correspondent could forecast that, he would be on a yacht reading The Economist rather than at a desk writing for it. But much below $40 will sharply increase bankruptcies, and the pressure on OPEC to curb production. Cheap energy also leads to higher demand.

What happens next?
The debate about lifting America’s ban on crude exports is firing up. The petrochemical and steel lobbies are fighting a rear-guard action against big oil. America’s domestic crude (light and sweet) is unsuited for the nation’s refineries (configured for sour and heavy imported oil)—but would make a lucrative export.

Who benefits from low prices?
Winners necessarily outnumber losers (imagine a world in which energy was free). Consumers have more cash in their pockets; industry enjoys lower energy costs, makes bigger profits, and pays more taxes. And it is a great time for companies with strong balance-sheets to make acquisitions.

And who suffers?
The oil industry’s immediate reaction is to squeeze costs out of its supply chain. So wages and margins are falling fast. Highly indebted companies are going bust, with knock-on effects on investors. But lower costs help the industry adapt and increase efficiency.

UPDATE March 19

 

(Bloomberg) — Oil trading near the lowest price in six years is headed for a fifth weekly drop amid signs the global supply glut is worsening.

Futures were little changed in New York after falling for the seventh time in eight days on Thursday. The Organization of Petroleum Exporting Countries needs to keep its production target unchanged to maintain market share, said Kuwait, the group’s third-largest member. Iran may increase oil exports within months of reaching a deal on its nuclear program, according to U.S. and European officials.

Oil has renewed its slump after losing almost 50 percent last year as U.S. crude stockpiles expand to the highest levels in more than three decades, even as drillers idled the number of active rigs to the fewest since 2011. OPEC maintained its quota at 30 million barrels a day in November, resisting calls to curb output amid surging supply from shale producers.

“The demand-supply imbalance is going to need to be fixed by an adjustment to supply,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone. “Traders are waking up to the harsh reality of the U.S. inventory builds and it’s getting difficult to ignore that.”

West Texas Intermediate for April delivery was at $43.92 a barrel in electronic trading on the New York Mercantile Exchange, down 4 cents, at 11:39 a.m. Sydney time. The contract, which expires on Friday, closed at $43.46 on March 17, the lowest since March 2009. The volume of all futures traded was about 81 percent below the 100-day average.

Crude Supplies

WTI’s more active May contract was 21 cents higher at $45.74 a barrel. Front-month prices have decreased 18 percent this year.

Brent for May settlement was 15 cents higher at $54.58 a barrel on the London-based ICE Futures Europe exchange. It slid $1.48 to $54.43 on Thursday. The European benchmark crude traded at a premium of $8.85 to WTI for the same month, compared with $9.83 on March 13.

OPEC, which supplies about 40 percent of the world’s crude, has no plans for an extraordinary meeting to discuss ways to shore up prices, Kuwait Oil Minister Ali Al-Omair said in Kuwait City. The 12-member group, scheduled to gather on June 5, pumped 30.6 million barrels a day in February, exceeding its quota for a ninth straight month, data compiled by Bloomberg show.

World powers have offered to suspend restrictions on Iran’s oil exports if the Islamic Republic accepts strict limits on its nuclear program for at least a decade, said U.S. and European officials who spoke on condition of anonymity.

Crude stockpiles in the U.S., the world’s biggest oil consumer, gained by 9.62 million barrels to 458.5 million through March 13, according to the Energy Information Administration. That’s the highest level in weekly records from the Energy Department’s statistical arm dating back to August 1982. Production climbed to 9.42 million a day, the fastest pace since at least January 1983.

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The U.S. Has Too Much Oil and Nowhere to Put It = another drop in prices

 

The bottom line: A record 449 million barrels of oil are being stored in the U.S. Shrinking storage capacity will lead to another drop in prices.

Seven months ago the giant tanks in Cushing, Okla., the largest crude oil storage hub in North America, were three-quarters empty. After spending the last few years brimming with light, sweet crude unlocked by the shale drilling revolution, the tanks held just less than 18 million barrels by late July, down from a high of 52 million in early 2013. New pipelines to refineries along the Gulf Coast had drained Cushing of more than 30 million barrels in less than a year.
As quickly as it emptied out, Cushing has filled back up again. Since October, the amount of oil stored there has almost tripled, to more than 51 million barrels. As oil prices have crashed, from more than $100 a barrel last summer to below $50 now, big trading companies are storing their crude in hopes of selling it for higher prices down the road. With U.S. production continuing to expand, that’s led to the fastest increase in U.S. oil inventories on record. For most of this year, the U.S. has added almost 1 million barrels a day to its stash of crude supplies. As of March 11, nationwide stocks were at 449 million barrels, by far the most ever.
Not only are the tanks at Cushing filling up, so are those across much of the U.S. Facilities in the Midwest are about 70 percent full, while the East Coast is at about 85 percent capacity. This has some analysts beginning to wonder if the U.S. has enough room to store all its oil. Ed Morse, the global head of commodities research at Citigroup, raised that concern on Feb. 23 at an oil symposium hosted by the Council on Foreign Relations in New York. “The fact of the matter is, we’re running out of storage capacity in the U.S.,” he said.

If oil supplies do overwhelm the ability to store them, the U.S. will likely cut back on imports and finally slow down the pace of its own production, since there won’t be anywhere to put excess supply. Prices could also fall, perhaps by a lot. Morse and his team of analysts at Citigroup have predicted that sometime this spring, as tanks reach their limits, oil prices will again nosedive, potentially all the way to $20 a barrel. With no place to store crude, producers and trading companies would likely have to sell their oil to refineries at discounted prices, which could finally persuade producers to stop pumping.
Oil investors appear to be coming around to the notion that a lack of storage capacity could lead to another price crash. In the futures market, hedge funds have spent the past few weeks cutting their bets that oil prices will rise. Instead, they’ve built up a record short position, increasing their wagers that prices will fall. During a March 11 interview on CNBC, Goldman Sachs President Gary Cohn said he’s concerned the U.S. is running out of storage, particularly as refineries enter their seasonal maintenance period, to prepare for the summer driving season. Around this time they usually cut the amount of crude they buy. Cohn said prices could go as low as $30 a barrel.
Oil Inventories at Highest Levels We’ve Seen
The math on this can be a bit tricky. The U.S. Department of Energy measures oil storage capacity twice a year, once in the spring and again in the fall. As of September 2014, the U.S. had 521 million barrels of working capacity, up from 500 million in 2013. That includes the space inside tank farms and on-site at refineries. It doesn’t, however, include the amount of oil that can be stored in pipelines or storage tanks near oil wells; nor does it include the amount of capacity in tankers off the coast, in transit from Alaska, or on trains. Of the 449 million barrels of total crude stocks, about 327 million are stored in tank farms or on-site at refineries.
According to data from the Energy Information Administration, the U.S. is using about 63 percent of its storage capacity, up from 48 percent a year ago. “We have more space than some people tend to believe,” says Andy Lipow, an energy consultant in Houston. The most recent estimate of storage capacity also doesn’t include tanks built since September in North Dakota, Colorado, Wyoming, and Texas, he says.
Still, the amount of space available in the tanks at Cushing is getting tight. The storage hub will run out of room by Memorial Day, says Stephen Schork, who runs energy consulting company Schork Group. As long as oil stays cheap, he says, traders have an incentive to store it. Cushing has room for roughly 71 million barrels of oil, up from about 50 million in 2010. One of the biggest owners of tanks there is Canadian energy distributor Enbridge. “We don’t have much room left, but we’re still answering the phones,” says Mike Moeller, who manages the company’s Cushing tank farm. “Not everybody who calls is going to get space.” He says monthly lease rates in the spot market have gone from dimes per barrel to more than a dollar in some cases.
“These producers have kept chugging away when they should have been shutting down”
Even with prices less than half what they were last summer and storage capacity growing scarcer, U.S. oil output has continued to rise. Through February, U.S. daily crude production reached 9.3 million barrels, about 1 million barrels more than a year ago. The massive storage buildup has provided oil companies with a phantom demand for their crude. Many hedged production before prices got too low, taking out futures contracts that guarantee a certain price. That’s allowed them to sell oil for a price higher than the going rate of $49 a barrel, keeping many profitable despite lower prices.
Running out of room inside the nation’s storage tanks might be the only way to keep companies from pumping more oil. “These producers have kept chugging away when they should have been shutting down,” says Dominick Chirichella, co-president of the Energy Management Institute, a New York-based advisory group. “At some point, the fact that supply is outstripping demand has to have its moment of truth.”

Protect your assets  read more at http://www.youroffshoremoney.com

 

Oil’s Collapse : Cost North American Investors $390-billion since June

The bear market has wiped out a total of US$393 billion since June — US$353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost US$40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index. The exception : Jack A. Bass Managed Accounts

Investors have a message for suffering U.S. oil drillers: We feel your pain- and our services are open to your potential gains.

Investors pumped more than US$1.4 trillion into the oil and gas industry the past five years as oil prices averaged more than US$91 a barrel. The cash infusion helped push U.S. crude production to the highest in more than 30 years, according to data compiled by Bloomberg.

Now that oil prices have fallen below US$45, any euphoria over cheaper energy will be tempered by losses that are starting to show up in investment funds, retirement accounts and bank balance sheets. The bear market has wiped out a total of US$393 billion since June — US$353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost US$40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index.

“The only thing people are noticing now is that gas prices are dropping,” said Sean Wheeler, the Houston-based co-chairman of the oil and gas industry team for law firm Latham & Watkins LLP. “People haven’t noticed yet that it’s also hitting their portfolios.”

The money flowing into oil and gas companies around the world in the last five years came from a variety of sources. The industry completed US$286 billion in joint ventures, investments and spinoffs, raised US$353 billion in initial public offerings and follow-on share sales, and borrowed US$786 billion in bonds and loans.

50 Cents

The crash caught investors and lenders by surprise. Eight months ago, Houston-based oil producer Energy XXI Ltd. sold US$650 million in bonds. Demand was so high that the company more than doubled the size of the offering, company records show. The debt is now trading for less than 50 cents on the dollar, and the stock has declined 88%.

Energy XXI, which has more than US$3.8 billion in debt, is one of more than 80 oil and gas companies whose bonds have fallen to distressed levels, meaning their yields are more than 10 percentage points above Treasury debt, as investors bet the obligations won’t be repaid, according to data compiled by Bloomberg.

The stocks and bonds of Energy XXI and other struggling energy firms have been bought up by pension funds, insurance companies and savings plans that are the mainstays of Americans’ retirement accounts. Institutional investors had more than US$963 billion tied up in energy stocks as of the end of September, according to Peter Laurelli, a New York-based vice president of research with eVestment, an analytics firm in Marietta, Georgia, that gathers data on about US$22 trillion of institutional strategies.

Bank Lenders

Energy XXI’s second-largest reported shareholder is a group of funds managed by Vanguard Group Inc., the biggest U.S. mutual-fund firm, according to data compiled by Bloomberg. The top reported owner of the bonds Energy XXI issued in May is Franklin Resources Inc. in San Mateo, California, also known as Franklin Templeton Investments, which manages multiple funds that bought Energy XXI’s debt, according to data compiled by Bloomberg.

Energy XXI didn’t return calls and e-mails seeking comment. The company has “plenty of liquidity,” Greg Smith, a spokesman, said in a December interview.

A reckoning may also be in store for Energy XXI’s bank lenders. The company, which drills in the Gulf of Mexico, has tapped US$974 million of a US$1.5 billion credit line extended by a group of banks including Gulfport, Mississippi-based Hancock Holding Co.’s Whitney Bank; Amegy Bank of Texas, a subsidiary of Salt Lake City-based Zions Bancorporation; and Comerica Inc. in Dallas, according to data compiled by Bloomberg. Energy XXI has also borrowed money from banks in the U.K., Australia, Canada, Spain and Japan.

Struggling Drillers

The three U.S. banks are also among the lenders to other struggling drillers. The loans are backed by oil reserves that are worth less at today’s prices than they were when banks last performed scheduled revaluations of the collateral.

Representatives of Amegy, Comerica and Hancock declined to comment on the performance of specific loans. Shares of Zions have declined 15% this month. Comerica is down 9.8%, and Hancock slid 15%.

“This is a big deal for banks in states like Texas where oil is one of the most prominent businesses,” said Brady Gailey, an Atlanta-based analyst at Stifel Financial Corp.’s KBW unit. “There are going to be loan losses and it’s going to hit multiple banks that have exposure to that credit. It will slow economic growth, it could ding real estate values, banks will lose money and their stock will get slammed.”

Regional Lender

One regional lender with energy exposure is Lafayette, Louisiana-based MidSouth Bancorp Inc., with 21% of its US$1.25 billion of lending tied to oil and gas, according to regulatory filings.

Rusty Cloutier, MidSouth’s chief executive officer, said he’s not worried about the oil decline hurting his business because the bank’s portfolio consists of experienced oil and gas companies.

“There will be some players that get hurt, but the real players in the energy market aren’t going anywhere,” Cloutier said. “Companies who are leveraged very highly and got into the business not long ago, those are the ones that are going to get hurt.”

Hundreds of smaller banks in states such as Texas, Colorado, Oklahoma and North Dakota have also plunged into energy lending during the oil boom.

‘Very Concerned’

Gil Barker, the Office of the U.S. Comptroller of the Currency’s top overseer of community banks in states including Texas and Oklahoma, said he has confidence that the smaller lenders were doing what they should, though circumstances might change.

“We’re very concerned about the banks located in these oil-producing areas,” he said. “A prolonged time of low oil prices is really going to cause banks significant problems.”

More people will be affected than realize it, said Michael Shaoul, who helps oversee about US$9 billion as CEO of Marketfield Asset Management LLC in New York. “So much of this has ended up in 401(k)s and in pension funds and in mutual funds, and that’s where the bulk of the pain is going to be felt.”

 Jack A. Bass Managed Accounts

November 2014 – 40 % cash position

Year End Review and Forecast

 

Oil/ Energy

I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.

On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plu

 

ConocoPhillips	(NYSE:COP)	$ 66.07	-6.72%
Vanguard Natural Resources, LLC	(NASDAQ:VNR)	$ 23.22	-6.86%
Seadrill Ltd.	(SDRL)	$ 14.66	-8.32%
Have you avoided this sector – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.

No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

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Telephone :  Jack direct at 604-858-3202

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