Race to the Bottom: Russian Oil Production Hits New Highs

Iraq produced over a billion barrels of oil in 2015. Saudi Arabia is pumping as fast as their devilish hearts permit. Russia is churning it like vodka in Siberia. Hell, the only people who don’t seem to be having a shit load of fun, digging for oil, is us.

The country’s crude and gas condensate production increased to 10.825 million barrels a day last month, beating the previous record set in November by 0.4 percent, Bloomberg calculations based on the data show. Output for the year increased 1.4 percent compared with 2014, exceeding 534 million metric tons, or almost 10.726 million barrels a day, according to the preliminary information e-mailed from Energy Ministry’s CDU-TEK unit.

Russian crude producers have been setting post-Soviet records even amid plunging prices and U.S. and European Union sanctions that cut access to foreign financing and technology. The companies have managed to squeeze more crude out of some aging fields in West Siberia and brought a few mid-sized new projects on line.

This is starting to get the stench of desperation, as the price of oil plunges, these lunatics produce more oil. They’ve built national spending budgets around the idea that crude would sustain $100 for years to come. Now comes the panic.

How is it possible for oil to bottom amidst this chicanery? Imagine the price of the iPhone dropping because no one wanted them. Stores had warehouses filled with them, running out of room to store the damn things and all the while Apple kept producing record amounts of iPhones. Well, that’s exactly what’s going on in the oil markets.

As an aside, look at the graphic below, that I swiped from the morons at Bloomberg. Apparently, the B team is writing for them this weekend, who don’t know the difference between “losing” and “loosing.”

An embarrassment to the internets, they are (extra Yoda).

Banned in Nazi Germany after infuriating the Fuhrer, The Great Dictator is one of many masterpieces by Charlie Chaplin. You could see why Hitler hated this movie, as it made fun of him from beginning to end. What’s especially surreal about this movie is the time in which it was made, 1940, at the height of German power. You could imagine how pissed Hitler was, as he watched it from his palatial digs overseeing the Eiffel Tower.

It was slapstick comedy all the way through, until the end, when Chaplin gave an emotional sermon, indicative of the dark days of 1940.

It appears the Fed is firmly in control of maintaining short term rates, so far, something skeptics questioned could be accomplished. Bankers are like pigs in a field of slop right now.

The Federal Reserve’s most important tool for setting interest rates absorbed a record $475bn of money from financial institutions in its last monetary operation of 2015, in another sign that one of the central bank’s main methods of draining liquidity from the financial system is working.

The New York Fed said that the US central bank had awarded $474.59bn in one-day fixed-rate reverse repurchase agreements to 109 counterparties in an auction on Thursday, more than a third higher than the previous record set at the end of the second quarter in 2014.

“With two weeks having passed since the lift-off announcement, it does not appear that the Fed is having any trouble keeping the effective fed funds rate between 25 and 50 basis points.”

The $475bn awarded on Thursday matures on January 4, when markets reopen following the new year holiday, and compares to $277bn taken at an auction on Wednesday.

As of right now, the market is kind of leaning towards a March rate increase.  However, one more good employment number and those crazy devils might give it a go in January.

According to the Stock Trader’s Almanac, the direction of January’s trading predicts the course for the year 75 percent of the time.
Stocks could get a boost next week from the so-called “January effect,” when stocks that were sold off in December for year-end tax harvesting rally back in the next month as investors scoop them back up at lower prices.
Of the S&P 500 components, 301 were down 10 percent or more from their 52-week highs and 175 were off by at least 20 percent through Dec. 30, according to Ryan Detrick, market strategist at Kimble Charting Solutions in Cincinnati.
That broad decline was offset by the narrow leadership of the “FANG” stocks – Facebook, Amazon, Netflix and Alphabet. Combined, they comprise more than 5 percent of the weighting in the S&P 500 and have all risen at least 35 percent for the year.

Get this: Iraq sold over 1 billion barrels of oil in 2015. In other words, we “liberated” Iraq, using American blood, so that a corrupt government could take power and flood the market with cheap Iraqi crude, crushing American oil interests. Moreover, the remnants of the Saddam loyalist “Republican Guard” were spun off to start their own dark realm, dubbed ISIS–who sells their crude for under $10 per barrel.

Iraq said it exported 1.097 billion barrels of oil in 2015, generating $49.079 billion from sales, according to the oil ministry.
It sold 99.7 million barrels of oil in December, generating $2.973 billion, after selling a record 100.9 million barrels in November, said oil ministry spokesman Asim Jihad. The country sold at an average price of $44.74 a barrel in 2015, Jihad said.

Iraq, with the world’s fifth-biggest oil reserves, needs to keep increasing crude output because lower oil prices have curbed government revenue. Oil prices have slumped in the past year as the Organization of Petroleum Exporting Countries defended market share against production in the U.S.

Has there ever been a worse foreign policy blunder in American history. Once again, no one is held accountable.

Oh, by the way, the spokesman for the Iraqi oil ministry goes by the name of a Mr. Asim Jihad. You.can’t.make.this.shit.up.

As you were.

This is what happens when you pile into a single stock like a fucking megalomaniac. Your fucking accountants tell you to take tax losses and you look like a pie faced moron.

Ackman’s Pershing Square Capital Management sold about 5 million shares of Valeant in order to create a tax loss for investors in two accounts, according to a regulatory filing on Thursday. The fund retained its stake in two accounts that wouldn’t get the same tax advantage. Annual losses on investments can be used to lower investors’ total U.S. taxes in some cases, according tothe Internal Revenue Service.

Bill reduced his position to 8.5% from 9.9%. Remember when he got all bold and shit, talking about if he could buy more he would? Yeah, he was selling.

In other news, Greenlight Capital suffered its largest drawdown since ’08, off by 20%. No word on what the fucked faced from Pershing Sq did in 2015 yet. I am sure the news will be charming.

Two thousand and fifteen was a Morton’s Fork type of market, with both long and shorts frustrated by the grind. To be fair, opportunistic short sellers cleaned house in a variety of sectors; but there wasn’t any downward momentum in the broader indices. Those who tried to manifest their destiny were expeditiously ushered to the gallows, or worse, the gibbet! It was an invidious year that will be forgotten, so I’ll stop discussing it right now.

For me, the changing of the Gregorian calendar, from one year to the next, represents opportunity. Past grievances, trials and tribulations, can be left behind, replaced by a new normal, a prosperity and happiness that can accrue over time. Everything that you did wrong this year, leave it behind and start anew. Eschew the indecorous loungers, who bog you down and stifle productivity. Form new relationships, habits, and surround yourself with positivity.

Tell the family idiot to place you on the do not call list, for the sake of posterity, if nothing else.

I want to thank all of you for visiting iBC, making it the preeminent destination for serious minded, and wholly belligerent, investors. I intend to bring the fire in 2016, offering a cornucopia of actionable strategies, designed to win on a consistent basis. I haven’t been this excited over my investment prospects since New Year’s eve, circa 2007, when I knew my portfolio of highly levered ETFs would hit pay dirt.

Cheers to the New Year (taps cane onto oak floors).

Le Fly

It was the worst year for oil exploration since George Bush blew up his fledgling oil business back in 1988. I suppose one could make the argument that a decline in drilling activity of this magnitude can only mean that the price of oil is nearing a bottom. The only problem with that theory is the House of Saud’s financial jihad, upping their oil production into the teeth of a cataclysmic oil decline and glut.

Rigs targeting crude in the U.S. fell by 2 to 536 in the past week, Baker Hughes Inc. said on its website Thursday. Natural gas rigs were unchanged at 162, bringing the total of working rigs to 698. Drillers searching for oil idled 59 percent of their rig fleet this year, the steepest annual cut since at least 1988.

The downward slide in working rigs probably will continue into the new year, crimping output from shale fields by at least 400,000 barrels a day, Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, said in a Dec. 28 report. Rigs designed to drill straight down into traditional fields have been hit harder than those capable of boring sideways through shale, Baker Hughes’ data showed.

For the most part, oil and gas stocks were halved in 2015, aside from the few companies who smartly hedged before the meltdown.

The best performing oil and gas stocks of 2015 were: GNE (+77%), CPE (+53%), ERN (+47%), PDCE (+32%), NFX (+15), FANG (+12%).

Almost ever other oil and gas stock traded lower.

The dollar rose by 9%, oil declined by 45%, and king coal dropped by a staggering 55%. The only commodity that bucked the preverbal trend was cocoa, rising by 9%–as African tribal leaders shoot each other for control of the cherished crops.

Make no mistake, a drop of this magnitude is bullish for the U.S. consumer, who benefits from the dramatic decrease in input costs.

The CRB Index, new lows attained on a daily basis

I see the CRB index, and then I look at the retail numbers coming out of the shopping mall cadre of dysfunctional retailers and ponder to myself: “where the hell is the money going?” Clearly, it isn’t going into casual dining, as those stocks have been less than inspiring, down 10% for the year. Retail stocks are off by 30% and Amazon is up 100%+.

Bingo!

All of the savings is going directly into Amazon, as Americans transform into a cavernous hermit class of people, couch bound, watching Netflix all day, ordering random items from the luxury of their Amazon apps.

Of course there’s also the specter of $500 billion of oil and gas debt becoming distressed, rippling its way into the general economy, ravaging stocks, reducing the world to a dystopian society reminiscent of the dust bowl days of 1932.

I remain confident in the yield curves ability to invert.

So, if I’m right about possible recession (give recession a chance, lads), the yield curve will invert, making TLT a winner for 2016. Aside from that, I will let Exodus be my illuminating mining helmet, as I explore the treacherous catacombs and underbelly of this insidious market.

The new GARP index is up in Exodus, which is a semi-annually managed portfolio of 15 stocks that I maintain. It has, in what I consider to be, the very best growth stocks with the lowest risk. Last year’s first half portfolio returned 13%; the second half gave it all back for a giant wash. I will do better in 2016.

Also, I updated the Bubble Basket, Old Man Portfolio and Tech indexes, again all found in the hallowed halls.

Moving on: I am out of the stock business. I cleared the decks for 2016 and will be solely focused on trading the oversold/overbought signals from Exodus. This will be a tremendous boon for members, since I am going to dedicate all of my time in the system and not get harangued by the stupidest shit in the world, which is individual stocks.

With a portion of my very large cash position, I purchased TLT for safe keeping. I do believe the yield curve will invert, so TLT should do well.

The only position I have listed is SHAK, a name that will either curse the devil out of me, or glorify my early bullish position on the burger chain of win.

Please note that Jeff Macke will be partaking in the day to day activities in Exodus for the entire month of January, which will include videos, community notes and the blog. It should be fun. Also, iBC’s own, “The Devil”, is now working behind the scenes in Exodus, assisting in business development strategies. I only tell you this because some of you enjoy to know what he’s up to, in regard to the site.

We added a shitload of content and writers in 2015. Finally, I’ve moved away from the me, me, me form of content, in favor of an empirically superior version that widens out the tent, significantly. The results have been nothing less than staggering, with traffic leaps of 50%, over the previous period. Plus, I am 100% happier writing about the day’s events, people behaving badly, than having to tell you about every nuance of my trading life.

This isn’t my last post of the day, so I won’t wish you all a Happy New Year’s yet. However, I do want to thank all of my readers in 2015 for coming to iBankCoin, making it the special place that we all know it is.