Look Out Below :Oil prices hit 11-year low as global supply balloons ( Reuters plus Bloomberg charts) )

LONDON (Reuters) – Brent crude oil prices hit their lowest in more than 11 years on Monday, driven down by a relentless rise in global supply that looks set to outpace demand again next year.

Oil production is running close to record highs and, with more barrels poised to enter the market from nations such as Iran, the United States and Libya, the price of crude is set for its largest monthly percentage decline in seven years.

Brent futures (LCOc1) fell by as much as 2 percent to a low of $36.05 a barrel on Monday, their weakest since July 2004, and were down 49 cents at $36.39 by 1332 GMT.

While consumers have enjoyed lower fuel prices, the world’s richest oil exporters have been forced to revalue their currencies, sell off assets and even issue debt for the first time in years as they struggle to repair their finances.

OPEC, led by Saudi Arabia, will stick with its year-old policy of compensating for lower prices with higher production, and shows no signs of wavering, even though lower prices are painful to its poorer members.

The price of oil has halved over the past year, dealing a blow to economies of oil producers such as Nigeria, which faces its worst crisis in years, and Venezuela, which has been plunged into deep recession.

Even wealthy Gulf Arab states have been hit. Last week Saudi Arabia, Kuwait and Bahrain raised interest rates as they scrambled to protect their currencies.

NO LIGHT AT THE END OF THE TUNNEL

“With OPEC not in any mood to cut production … it does mean you are not going to get any rebalancing any time soon,” Energy Aspects chief oil analyst Amrita Sen said.

“Having said that, long term of course, the lower prices are today, the rebalancing will become even stronger and steeper, because of the capex (oil groups’ capital expenditure) cutbacks … but you’re not going to see that until end-2016.”

Reflecting the determination among the biggest producers to woo buyers at any cost, Russia now pumps oil at a post-Soviet high of more than 10 million barrels per day (bpd), while OPEC output is close to record levels above 31.5 million bpd.

Oil market liquidity usually evaporates ahead of the holiday period, meaning that intra-day price moves can become exaggerated.

On average, in the last 15 years, December is the month with least trading volume, which tends to be just 85 percent of that in May, the month which sees most volume change hands.

Brent crude prices have dropped by nearly 19 percent this month, their steepest fall since the collapse of failed U.S. bank Lehman Brothers in October 2008.

U.S. crude futures (CLc1) were down 26 cents at $34.47 a barrel, their lowest since 2009.

“Really, I wouldn’t like to be in the shoes of an oil exporter getting into 2016. It’s not exactly looking as if there is light at the end of the tunnel any time soon,” Saxo Bank senior manager Ole Hansen said.

Investment bank Goldman Sachs (GS.N) believes it could take a drop to as little as $20 a barrel for supply to adjust to demand.

Thanks to the shale revolution, the U.S. has been pumping a lot of oil on the cheap, helping to drive down prices to six-year lows and to fill up storage tanks. Indeed, we’re running out of places to put it.

LOOK OUT BELOW

The U.S. has 490 million barrels of oil in storage, enough to keep the country running smoothly for nearly a month, without any added oil production or imports. That inventory doesn’t include the government’s own Strategic Petroleum Reserve, to be used in the now highly unlikely event of an oil shortage. Nor does it include oil waiting at sea for higher prices. The lower 48 states also boast about 4 trillion cubic feet of natural gas in storage — a far bigger cushion than Americans have needed so far during a very warm winter.

For their part, OECD countries (including the U.S.) have nearly 3 billion barrels of oil in storage — or enough to keep factories lit and houses heated in those countries for two months, cumulatively, without added production or imports.

The glut is going to continue worldwide unless some major producers stop pumping. OPEC announced recently that it was abandoning output limits.

So what happens when there’s too much oil to store? Producers will try to rid themselves of it by cutting prices. In that scenario, the price would plummet so far that some producers would shutter their wells altogether — which is, perhaps, the only way that the oil glut will ease.

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GET YOUR PORTFOLIO THE HELL OUT OF ENERGY : PRAYER ISN’T AN INVESTMENT STRATEGY

Natural Gas Price Dips on Low Demand for Heating

 

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 34 billion cubic feet for the week ending December 11. Analysts were expecting a storage withdrawal of around 68 billion cubic feet. The five-year average for the week is a withdrawal of around 79 billion cubic feet, and last year’s withdrawal for the week totaled 76 billion cubic feet.

Natural gas futures for January delivery traded up about 2% in advance of the EIA’s report, at around $1.83 per million BTUs, and traded around $1.79 after the data release, the same as Wednesday’s closing price. Last Thursday, natural gas closed at $2.02 per million BTUs, and over the past five trading days that was the posted high for natural gas futures. A new 52-week low of $1.78 was set Wednesday. The 52-week range for natural gas is $1.78 to $3.95. One year ago the price for a million BTUs was around $3.91.

Warmer than normal temperatures are expected to prevail for the rest of this week, but a cold snap is expected in the eastern part of the United States through the weekend. Beginning next week, temperatures in the east are expected to warm up while the west and the northern tier are touted to be cooler than normal. Overall, natural gas demand should be higher through the middle of next week.

Stockpiles are about 16% above their levels of a year ago and about 9.1% above the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.846 trillion cubic feet, around 322 billion cubic feet above the five-year average of 3.524 trillion cubic feet and 541 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 3.305 trillion cubic feet for the same period a year ago.

 Here’s how share prices of the largest U.S. natural gas producers reacting to this latest report:

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded down less than 0.1%, at $79.11 in a 52-week range of $66.55 to $95.18.

Chesapeake Energy Corp. (NYSE: CHK) traded down about 2.7% to $3.80. The stock’s 52-week range is $3.57 to $21.49.

EOG Resources Inc. (NYSE: EOG) traded down about 2.3% to $74.07. The 52-week range is $68.15 to $101.36.

In addition, the United States Natural Gas ETF (NYSEMKT: UNG) traded down about 2.0%, at $7.02 in a 52-week range of $6.95 to $19.38.

Chicago, IL – December 16, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Chevron Corp. (CVX), Royal Dutch Shell plc(RDS.A), Kinder Morgan Inc. (KMI),ConocoPhillips (COP) and Encana Corp. ( ECA).

Today, Zacks is promoting its ”Buy” stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

Oil & Gas Stock Roundup

It was a week where oil prices dropped to levels not seen since Feb 2009 and natural gas futures settled below the $2 level for the first time in over 3 years.

On the news front, Chevron Corp. (CVX) set its investment budget for 2016 at $26.6 billion, down 24% from this year.

Overall, it was a pretty bad week for the sector. West Texas Intermediate (WTI) crude futures dived 10.9% to close at $35.62 per barrel, while natural gas prices plunged 9% to $1.990 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Devon Bets on Crude Even as OPEC Inaction Sinks the Commodity .)

Oil prices encountered the year’s largest weekly drop in reaction to bearish comments from International Energy Agency (IEA) that sees global oil glut to worsen next year in the face of slowing demand growth. Oil was also undone by OPEC’s latest monthly report that showed the oil cartel’s November production rising to a 3-year high.

Related Quotes

Natural gas also fared badly despite a bullish inventory report that showed a larger-than-expected withdrawal. The heating fuel was weighed down by predictions of tepid early-December demand for the heating fuel due to mild weather spurred by the El Niño phenomenon.

Recap of the Week’s Most Important Stories

1. U.S. energy behemoth Chevron Corp. offered a glimpse of its 2016 capital spending plans. The integrated major has pegged its next year’s capital budget at $26.6 billion, down 24% from the $35 billion it expects to invest by the end of 2015. Of the total, roughly 90% will go toward oil and gas exploration projects worldwide, and 8% for downstream businesses.

In a separate press release, Chevron announced the commencement of production from the Moho Bilondo Phase 1b project, located off Republic of Congo’s coast at a water depth of 2,400 to 4,000 feet. Total production from the prospect – in which Chevron holds a 31.5% working interest – will likely be 40,000 barrels of oil every day.

2. Europe’s largest oil company Royal Dutch Shell plc (RDS.A) has received the unconditional clearance from China to proceed with its $70 billion acquisition of BG Group plc − a leading upstream energy player in the UK. The permission clears the final regulatory obstacle that was in the path of Shell’s BG buyout.

Following the green signal from China, the only thing that is left is the approval of shareholders after which the deal will likely be closed by early 2016. However, after getting the Chinese authorization, Shell added its intention to reduce global headcount by 2,800 from the merged entity.

3. The plunge in crude price – from over $100 per barrel in June last year to the recent $35 per barrel mark – has led several firms in the oil industry to take drastic measures to remain afloat. Treading on the same lines, energy infrastructure company Kinder Morgan Inc. ( KMI) announced a cut in its dividend payout beginning with the fourth quarter of 2015. The Houston, TX-based firm plans to lower its quarterly dividend to 12.5 cents, a 75% nosedive from the earlier payout of 51 cents.

Kinder Morgan plans to utilize the funds from the cutback in dividend to fund the equity portion of its expansion capital requirements. This would eliminate the need to tap into external sources for funds to a large extent. Management expects the cut to also translate into a sustained solid investment grade credit rating. The company expects to continue this practice of funding its capital expenditure plans through internal sources in 2017–18 also. (See More: Kinder Morgan Slashes Dividend by 75%, Hits 52-Week Low .)

4. Houston-based energy major ConocoPhillips (COP) released its capital spending budget and operating plan for 2016. The company’s 2016 capital budget of $7.7 billion is 25% below the expected 2015 capital spending and 55% lower than that of 2014. Of the total budget, about $1.2 billion or 16% is apportioned for base maintenance and corporate expenditures, $3.0 billion or 39% has been allocated for development drilling programs, $2.1 billion or 27% has been set aside for major projects. The remaining $1.4 billion or 18% is to be used for exploration and appraisal.

The majority of capital will be used for the development of U.S. oil fields, mainly shale formations in Texas and North Dakota, as well as for the Gulf of Mexico and Alaska. ConocoPhillips also intends to allot drilling capital to Malaysia, China, the North Sea and Canada. (See More: ConocoPhillips Updates 2016 Capex and Operational Plans .)

5. Encana Corp. (ECA) has decided to slash its 2016 capital spending budget by 25% from this year. The Calgary, Alberta-based oil and gas explorer also announced plans to lower its 2016 annual dividend by more than 78%. The announcements were not unforeseen as the company has been hit hard by the persistent weakness in oil price. Following the announcement, Encana fell more than 8% on the NYSE.

The company’s projected 2016 capital budget is in the range of $1.5 billion and $1.7 billion. Most importantly, the majority of the amount will be allocated toward four key oil and natural gas properties that comprise the Montney and Duvernay shale fields in Canada and the Eagle Ford and Permian shale resources in the U.S.

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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.

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Chesapeake :Downgraded To Junk at Fitch – Further Evidence The Energy Sector Slide Continues

 

( FROM Seeking Alpha)
Nov 6 2015, 17:45 ET | About: Chesapeake Energy Corporation (CHK) | By: Carl Surran, SA News Editor
Chesapeake Energy’s (NYSE:CHK) debt rating is cut further below investment grade, to BB- from BB, by Fitch Ratings; shares fell 2.6% in today’s trade, in line with other energy producers as crude oil prices fell and amid the higher likelihood of a Fed rate hike.

Fitch says CHK’s cash flow, liquidity and leverage profiles will be “notably weaker” than previous expectations because of persistently low oil and gas price realizations and heightened future reliance on asset sales to fund cash flow gaps; it also cites CHK’s increasingly limited ability to invest in its highest return assets in favor of operationally committed and shorter-cycle reserves.Fitch concedes that CHK’s size and scale relative to other high-yield E&P companies provides considerable financial flexibility.

and from Forbes

This Oil Bust Will Change The Energy Industry Forever

Although demand for oil and gas will continue for decades to come, it will gradually diminish as renewable energy sources rise. A lot could happen between then and now. The International Energy Agency (IEA) and many other credible parties continue to forecast that our growing world population from 7 billion people today to 9 billion by 2050 will need much more energy – in particular as most of these people will aspire a life like we have here in North America. So it is no wonder that Abdalla El-Badri, Secretary General of OPEC has recently said that if producers don’t invest in new oil and gas supply, we could see oil prices as high as $200 a barrel. On the other hand, there is Bob Dudley, CEO of BP , who believes we won’t see $100 oil again “for a long time”.

Innovation in the oil industry, particularly the North American revolution in the hydraulic fracturing of tight oil reservoirs, has changed oil supply dramatically. With smaller, more flexible capital-light projects and shorter lead times, fracking has enabled greater adaptability to volatile market conditions. The outlook for shale oil and gas could be just as strong in many places in the world. Even if the shale boom proves tough to replicate (due to factors such as regional differences in geology, regulation and incentives to land owners), in many cases bringing new technologies to mature fields will help keep supply up and dampen the increase in oil prices.

Sluggish demand is another important factor keeping oil prices from rising. Not just from disappointing growth in China, but also in North America. Car ownership in the Western world has started to drop in the past decade, especially among young people. Based on the early success of Tesla and arrival of car sharing companies like Car2Go and Uber, and the entry of Apple AAPL +0.83% and Google GOOGL +0.13%in the autonomous-driving car game, there’s reason to foresee a future where not everyone has a personally owned internal combustion engine at their disposal. Change is slow however: a truck or bus and many gasoline fueled cars sold today will of course drive somewhere in the world for the next 30 to 40 years. Hence, some demand for hydrocarbons will continue.

The financial sector is a third factor inhibiting the rise of oil prices. While we already see many financial institutions divesting from hydrocarbon stocks to the tune of $2.6 trillionbecause of social and environmental pressure, the recent speech by Bank of England Governor Mark Carney is further going to influence the willingness of large financial institutions to continue to invest in traditional hydrocarbon projects in the future. One of the most significant risks Carney focused on in his speech is transitionary cost, the cost of write-offs for traditional hydrocarbon assets if countries are indeed getting serious about phasing out hydrocarbons. Even while the target date for a 100% carbon free society is only 2100, we expect that policies will likely start having significant implications in the next decades. The message is that “Sustainable Innovation” may become key to future energy financings and that oil and gas companies will have to innovate much more than they do today in order to survive as energy-producing Fortune 500 companies in the decades to come.

 

Forbes Predicts Chesapeake Running Out Of Options

The Dim Outlook For Chesapeake Energy

The highly leveraged shale gas champion is burning cash, selling assets and running out of options. 

Chesapeake Energy CHK +1.8% is in pretty bad shape. Shares are down 67% in the past 12 months, to $8.70 today. The last time Chesapeake traded at such a low range was in 2003. Its equity market cap is less than $6 billion. Think this looks like a bargain? Only if you’re really bullish on oil and gas prices. On the contrary, if oil and gas stays low for a couple more years it is hard to see how Chesapeake’s equity is worth anything at all.

Chesapeake’s earnings report last week provided no comfort. The company started 2015 with $4.1 billion in cash. It ended the first half with $2 billion. That’s half its cash evaporated in six months. During that time Chesapeake did not buy or sell any assets. It reduced its capex levels by about 40% over last year. So that cash burn rate pretty well represents the sorry state of its underlying business.

This highly leveraged company is becoming even more leveraged. In the first half, total debt net of unrestricted cash increased from $7.4 billion to $9.5 billion. As profitability has collapsed, net debt has risen to more than 6 times annualized Ebitda. In normal conditions 4x is considered rich. This is worrisome for a company that will need to refinance $5 billion in debt over the next five years.

Part of the problem is a huge glut of gas and liquids in the Utica and Marcellus, where there’s not enough pipeline capacity to evacuate it all out to market. Chesapeake has curtailed production in both regions. But that won’t solve the bigger problem. According to analyst Kevin Kaiser at Hedgeye, Chesapeake is caught in a “midstream stranglehold.” It is contractually obligated to pay fees to pipeline giant Williams Companies for its dedicated capacity. Most of Williams’ contracts with Chesapeake are on a “cost of service” mechanism, which guarantees Williams a return on its investment in building out pipelines. Chesapeake has to pay a certain amount whether it uses all the pipeline capacity or not. The less it uses, the higher Chesapeake ends up paying per unit of volume.

It’s a set-up that would work in a world of higher commodity prices and ever increasing volumes. According to Chesapeake’s February 2012 investor presentation, when the company entered into these pipeline contracts it was anticipating that in 2015 it would be enjoying $6 per mcf natural gas and $100 oil and annual ebitda of more than $10 billion. Instead, this year’s ebitda will be more like $2 billion.

According to Kaiser’s analysis, Chesapeake’s midstream pipeline expenses, at about $1.70 per mcf (or the oil equivalent) are the highest in the entire industry. In the Midcon region Chesapeake was paying 64 cents per mcf to move gas in 2012. But because gas prices have gone so low, it stopped drilling there. Now it’s paying an estimated $1.20 per mcf to move gas there. All told, Chesapeake’s payments to Williams amount to about $1.9 billion a year, according to its quarterly report. “It will take multiple years to play out, but we believe that CHK equity is ultimately a zero,” wrote Kaiser in his June report.

Chesapeake would love to renegotiate contracts with Williams, but the pipeline giant has very little incentive to play ball. Williams paid more than $8 billion to acquire its control of Access, the pipeline division that Chesapeake spun off in exchange for more than $4 billion in emergency cash back in 2012. Many of Chesapeake’s contracts with Williams carry terms of more than a decade.

Alan Armstrong, CEO of Williams, said on his quarterly conference call that he’s open to “win-win” solutions with Chesapeake. “In terms of restructuring, certainly, they take the lead on that and we try to provide support and find win-win ways where they can add volumes that help offset some of those obligations.”
Chesapeake could gain some traction by selling off assets where it’s stuck in tough contracts with Williams, or making joint ventures with other operators that can add their volumes to fill out Williams’ pipes.

Chesapeake has already tightened its belt a lot. CEO Doug Lawler has cut costs, slashed capex and improved drilling efficiency. Last month he announced that Chesapeake would suspend its dividend, saving $240 million a year.

Lawler will have to keep trying to sell off whatever acreage is attractive to buyers. In October 2014 Chesapeake sold acreage in the Marcellus and Utica to Southwestern Energy SWN +5.92% for $5.4 billion. At the beginning of the third quarter Chesapeake sold assets in Oklahoma to private equity backed FourPoint Energy for $1 billion. Lawler will need to orchestrate a lot more asset sales to make ends meet. The company says it has ample liquidity thanks to an untapped $4 billion revolving line of credit. That line may well shrink when banks do their fall borrowing base redeterminations.

Why not try to sell the whole thing? Please. Chesapeake’s big equity holders, Southeastern Asset Management and Carl Icahn (each with about 10% stakes), would like to convince the market that’s possible, but who would want to buy a business with such poor underlying performance and lots of overhead when they can just cherrypick off the decent pieces? If you’re a deep pocketed oil and gas major you’d be better off acquiring any number of healthier operators. Cowen & Company analyst Charles Robertson, Jr. notes that Cimarex Energy XEC +2.5%, with its low leverage and world-class position in the Permian Basin is “one of the easiest acquisition targets” for the majors.

Further complicating Chesapeake’s outlook is the ongoing legal trouble related to alleged underpayment of royalties. In the first half Chesapeake agreed to pay a $119 million settlement in a class action brought by Oklahoma landowners who said the company bilked them on royalty payments. Chesapeake says that litigation over similar allegations continues in Texas, Louisiana, Ohio, Pennsylvania and Arkansas and that the Dept. of Justice has subpoenaed information relating to Chesapeake’s royalty payments. The company says “losses are reasonably possible” but that “we are currently unable to estimate an amount or range of loss.” What potential acquirer would want to take on that open-ended liability?

This is a company that hasn’t been able to live within its cashflow at any time in the past decade, even when oil prices were above $100. It has generated more than $16 billion in cash from asset sales since 2012, but is more highly leveraged than ever. Unless oil and gas prices recover significantly in the months ahead Chesapeake will continue to sell assets and shrink smaller and smaller until it eventually runs out of cash and runs out of options.

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Stocks To Avoid : Chesapeake Our Top Avoid In Natural Gas,

occupy wall street cartoon

 

These are this Thursday’s top analyst upgrades, downgrades and initiations.

Check out Seeking Alpha for the unending series of article seeking  to pick the bottom – in natural gas, shipping , drilling and compare that to our consistent  AVOID ratings:

Chesapeake Energy Corp. (NYSE: CHK) was downgraded to Perform from Outperform at Oppenheimer. That means that the firm now has no target to speak of, and the $13.06 closing price compares to a consensus price target of $15.67 and a 52-week range of $12.89 to $29.92. The downgrade was based on growing losses and a cash flow deficit.

Rite Aid Corp. (NYSE: RAD) was started as Outperform with a $10 price target (versus a $8.64 close) at Credit Suisse. The firm believes Rite Aid is one of the more compelling risk-reward profiles in the space and that it has a compelling M&A potential.

Toll Brothers Inc. (NYSE: TOL) was raised to Outperform from Neutral and the target price was raised to $42 from $40 (versus a $36.81 close) at Credit Suisse. The firm believes that investors underappreciate its earnings potential, and the firm raised estimates to reflect the updated City Living pipeline.

Transocean Ltd. (NYSE: RIG) was started as Underweight with a price target of $14 (versus a $19.08 close) at Barclays. Transocean’s consensus price target is $14.17, and the 52-week range is $13.28 to $46.12.

Harley-Davidson Inc. (NYSE: HOG) was downgraded to Neutral from Outperform with a price target cut to $57.00 from $74.00 (versus a $54.69 close) at Wedbush. Harley-Davidson has a consensus price target of $66.00 and a 52-week range of $53.04 to $72.37.

 

Natural Gas Investors In Denial

Natural Gas Declines After Stockpiles Drop Less Than Forecast

” Investors have to face this ” new normal”, Jack A.Bass

The Energy Information Administration said stockpiles dropped 26 billion cubic feet in the week ended Dec. 26 to 3.22 trillion. Analysts estimated a decline of 34 billion while a survey of Bloomberg users predicted a withdrawal of 30 billion.

“It’s another bearish withdrawal in a series of bearish withdrawals,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. “The last nine months we have been oversupplied. The bearish fundamentals already had a head start and they are supercharged by mild weather.”

Natural gas for February delivery slid 8.1 cents, or 2.6 percent, to $3.013 per million British thermal units at 12:04 p.m. on the New York Mercantile Exchange. Gas traded at $3.041 before the storage number was released at noon. Volume was 50 percent below the 100-day average. Prices are down 29 percent this year, heading for the first annual drop since 2011.

The EIA released the supply report a day early because of the New Year’s holiday.

The storage withdrawal was the smallest for the last week of the year since 2005. Supplies fell 108 billion the same week last year while the five-year average decline is 114 billion.

A deficit to the five-year norm narrowed to 2.5 percent from 4.9 percent the previous week. Supplies were 7.8 percent above year-earlier inventories, up from a surplus of 4.8 percent in last week’s report.

“The market keeps coming under pressure without the seasonal demand support,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

Heating Season

Stockpiles may end the heating season in March, when storage levels bottom out as the peak-demand period ends, at 1.6 trillion cubic feet, double year-earlier levels, McGillian said.

This December is about 8.3 percent warmer than a year earlier based on natural-gas weighted heating degree days, Matt Rogers, president of Commodity Weather Group LLC, said in an e-mail. The number of heating degree days next month may drop to 975, down 6.7 percent from January 2014, he said.

Weather models indicate a stronger cold front pushing across the Midwest and Northeast next week before giving way to more seasonal readings on Jan. 10 through Jan. 14, a Commodity Weather report today showed. The rest of the U.S. will see mostly average or higher readings during the period.

New York

Manhattan’s low on Jan. 9 will drop to 19 degrees Fahrenheit (minus 7 Celsius), 8 below normal, before rising three days later to 35, according to AccuWeather Inc. in State College,Pennsylvania. About 49 percent of U.S. households use gas for heating.

Marketed gas production will expand in 2015 for the 10th consecutive year as new wells come online at shale deposits such as the Marcellus and the Utica in the East, the EIA said in its Dec. 9 Short-Term Energy Outlook. Output will rise 3.1 percent to 76.68 billion cubic feet a day, a record for the fifth straight year.

Speculators cut net-long positions in four benchmark gas contracts by 23,613, or 87 percent, to 3,648 in the week ended Dec. 23, the least since the market was net short in January 2012, a U.S. Commodity Futures Trading Commission report yesterday showed.

Long-only positions fell 4.2 percent to the least since November 2011, while shorts rose 3 percent.

“Right now we have more to go in this selloff; that is what the record amount of gas is doing to the U.S.” said McGillian.

 

 

Get Out Of Natural Gas and Oil Stocks – worse to come – Updated Dec.25

In this Dec. 17, 2014 photo, workers tend to oil pump jacks behind a natural gas flare near Watford City, N.D. Natural gas, the nation's most prevalent heating fuel, is getting cheaper just as winter is arriving because of mild temperatures and plentiful supplies. (AP Photo/Eric Gay)

Natural gas, the nation’s most prevalent heating fuel, is getting cheaper just as winter is arriving because of mild temperatures and plentiful supplies.

The price of natural gas has dropped 29 percent in a month, to $3.17 per 1,000 cubic feet on Tuesday from nearly $4.50 in late November. That’s a steep drop even for a fuel notorious for volatile price swings.

The lower prices are expected to linger and could reduce electricity prices and heating bills in the coming months. Natural gas is used by half of the nation’s households for heating and to generate 26 percent of the nation’s electricity.

Natural gas often rises as winter weather approaches, and a frigid November sent the price higher. But December warmed up, and temperatures for the rest of the winter are expected to be close to normal.

.

Oil falls, near $60 on supply glut, strong dollar

A customer waits as an employee of state-owned Pertamina refuels his car at its petrol station in Jakarta

In 2013 and 2014 a theme of my speeches to investors has been the problems facing exploration and production companies in natural gas . Then I projected that companies unprofitable at $4.00 would be in difficulty – today it is a crisis – expect bankruptcies and mergers to be the story in 2015..

Natural gas futures slid in New York  Thursday Dec.24 -to the lowest level since September 2012 after a government report showed U.S. inventories fell last week by less than forecast.

The Energy Information Administration said stockpiles dropped 49 billion cubic feet in the week ended Dec. 19 to 3.246 trillion. Analysts estimated a decline of 63 billion while a survey of Bloomberg users predicted a withdrawal of 59 billion.

“It’s so small because it was warm,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. “We expected some power generators to switch more to natural gas because of lower prices, but we didn’t see that. Meanwhile, the market continues to be flooded by production.”

Brent oil fell on Wednesday ( Dec .23), trading around $60 per barrel weighed down by strong supply in the United States and a rising dollar.

Brent for February delivery was down $1.50 to $60.19 at 1327 GMT after gaining $1.58 on Tuesday. It hit a low of $59.93 earlier in the session.

U.S. crude was down $1.17 to $55.95 a barrel, after closing $1.86 higher in the previous session.

Trade was thin as many in the European and U.S. market were off for the Christmas break.

Data from the American Petroleum Institute (API), an industry group, showed U.S. crude stocks rose by 5.4 million barrels in the week ended Dec. 19. Analysts had expected a drop of 2.3 million barrels.

In Europe, gasoline stocks reached their highest in five months in the Amsterdam-Rotterdam-Antwerp oil hub, data from PJK International showed.

A supply glut in the United States and elsewhere has helped push oil down some 46 percent since it reached this year’s peak above $115 per barrel in June.

“There was a large build in the API data and there are high stocks for now, although strong U.S. GDP growth should help demand,” said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.

The dollar index stayed close to its highest since April 2006 after a revised third-quarter U.S. gross domestic product report surprised with the fastest growth in 11 years.

A strong dollar makes commodities priced in the greenback more expensive for holders of other currencies.

Now investors face more volatile markets and securities that no longer move in lock-step. At the same time, investors must cope withslower growth in China, minuscule growth in the euro area and negative growth in Japan.

Such widespread sluggish demand — along with ample supplies of oil and most everything else — is the reason commodity prices are falling. They have been since early 2011, but many people failed to notice until recently, when crude oil prices nosedived.

Normally, less demand and a supply glut would lead the Organization of Petroleum Exporting Countries, beginning with Saudi Arabia, to cut production. As the de facto cartel leader, the Saudis would often reduce output to prevent supply increases from driving down prices.

Of course, this also cost the Saudis market share and encouraged cheating by OPEC members. Saudi leaders must grind their teeth over the last decade’s unchanged demand for OPEC oil, while all the global growth has been among non-OPEC suppliers, principally in North America.

The Fools In Chesapeake ( CHK)

Yesterday Chesapeake announced it would spend a billion dollars on stock buy backs – this is foolishness bordering on gross mismanagement – like the captain of the Titanic rearranging the deck chairs. Companies must husband their funds – the best will survive and cherry pick assets from corpses – to mix as many metaphors as I can.

No Glory for Prophets

My best call in 2014 was to reverse on Quicksilver ( KWK) and sell out at $ 2.50 – it is now down a further 90 % to pennies.Many more companies will follow – don’t hold on for a recovery. That sell call earned me the most email – all negative- for the year and no thanks from investors.

The millions of dollars – per well – now at work -have to complete their drilling and this will bring on additional natural gas supplies in the U.S. that in turn will pressure oil prices well into 2015. LNG exports from the U.S. ( starting in about 12 months by Cheniere at the gulf coast in the U.S. ( and projects in Australia) will pressure international prices and also depress oil.

Planned Australian LNG projects threatened by energy price crash

Woodside's Pluto LNG Loading jetty, Pluto LNG onshore gas plant.

Handout/ WoodsideWoodside’s Pluto LNG Loading jetty, Pluto LNG onshore gas plant.

Planned Australian liquefied natural gas (LNG) export projects, including the costly Scarborough floating vessel, are at risk as sinking energy prices make investments unviable, analysts said.

A nearly 50% slump in Asian LNG prices this year has pressured any project without a Final Investment Decision (FID). Just last week, Woodside Petroleum Ltd  delayed the FID for its US$40-billion Browse floating project with Royal Dutch Shell and BP.

The next cab off that rank could be ExxonMobil and BHP Billiton’s  US$10-billion Scarborough project.

Scarborough will be “commercially challenging” to justify given a raft of competing LNG projects, said Noel Tomnay, global gas and LNG research head at Wood Mackenzie.

“China’s growing pains as well as slugs of LNG coming into the market: that’s a fairly wicked combination. It would take a very brave soul to ignore the prevailing market.”
BHP and ExxonMobil were not available for comment.

The future for other Australian LNG projects without FID is also uncertain.

GDF Suez and Santos are seeking alternatives for their Bonaparte floating project, Woodside has indefinitely delayed its Sunrise project, while Shell has yet to commit to its Arrow project where it has cut hundreds of positions.

Coal Will Continue To Contract

Coal is going to be used for the next 50 years – but high sulphur mines will close and electrical generation will rely on cheap natural gas . Stay away from trying to pick the bottom in the sector.

You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
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% plunge…

Have you avoided these sectors – 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.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

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)

Email

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Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

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