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Duc's Daily Dozen

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Bond vol. is dangerously high:



One reason:



Which is creeping onto the mainstream radar.



The USD needs to be weakened due to energy issues around the Western world:



This trend is strengthening the wrong direction as US Shale is decreasing.



Again POO is looking to move higher on a secular basis, unless a deal can be struck with OPEC to increase supply. That is a deal that will be struck behind closed doors.

Jim Bianco:
jog on
duc
 
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The higher POO is good for US Shale. If the POO stays high enough, long enough, there may be some investment back into shale to retard the falling supply. If not and the POO is somehow manipulated lower, then you have lower prices for a while and much higher prices later.

If the latest war in the ME continues, expands, whatever and POO rises: bad for inflation but better for actual supply.

Now just last week POO was getting shellacked:



Why?

Because higher POO means that UST continue lower. They continue lower because those that buy oil in USD need to obtain USD so they sell UST. More selling of UST = lower prices or higher yields.

So this war in the ME, if it raises POO, has implications for UST prices that are opposite to US Shale supply.

The powers that be are certainly trying to lower POO and USD because they are trying to save the Bond market, which with falling prices is raising its volatility to really dangerous levels again on the MOVE index. It is again above 140. If the Bond market falls apart, then the stock market will implode.

So higher POO is bad news for stocks via a Bond market blow-up.

jog on
duc
 
ducati916 said:
They continue lower because those that buy oil in USD
Click to expand...

but has that equation changed this time with oil being able to be purchased in various currencies , sure not everybody will buy in a non-US currency , but will there be enough to take the sting out the UST sell-down , and there are other reasons why some sovereign actors are reducing UST holdings .

to me , it looks like this time might be extra complicated , for instance would the US have to crank up oil exports when the Strategic Reserves are low ( and it should really be topping up the Reserve ) while coming into storm season ( reducing some production and also diverting some shipping )

please note , sometimes rising 'bond yields' means that bonds are being sold or less than face value ( say 95 cents in the dollar ) not increased interest paid on the face value
 


Mr divs,

1. It is the BRICS coalition that are forcing the use of non-USD currencies. Essentially what has happened is that Yuan can be used to purchase oil from OPEC. This net expense is settled in Chinese exports to OPEC. The difference is settled in gold. Gold therefore, at least for BRICS is the reserve asset, replacing UST.

This means if you are say the UK who need to import significant energy, you can print pounds sterling, buy your oil at whatever the price in pounds is calculated as an exchange rate against USD and obtain oil without needing USD. Of course, the more you do this without netting out some exports to someone, the faster the pound devalues. But what it does do is return sovereignty to your purchases of energy, ie. you don't need to obtain USD first.

For China, this means that its stash of UST are no longer required as a reserve asset to convert into USD to buy oil. China can use Yuan. That has significant ramifications to the cache of UST held. These UST are now a weapon. The US through stupidly weaponising the UST/USD against Putin, have accelerated the conversion of gold to the reserve asset, which collapses the USD over time.

Japan who is a US ally has $1.7T in UST. As the USD rises and the Yen falls, Japan must and will sell down UST to obtain USD to purchase energy if net-net their trade balance with OPEC is in deficit. A rising POO and USD compounds this process. Japan selling UST creates a UST market collapse that requires the Fed to bail out the UST market. It has happened 3 times already in the last 4 years.

The war in the ME is the worst thing that could have happened to the US.

Oil is rising again after the oil market had been attacked and manipulated lower last week. Oil must be lower for the US to avoid an increasingly unstable bond market.

2. The US can't crank up oil exports. Shale oil is in decline and accelerating. Shale needs higher prices for increased investment. A lower POO just accelerates the decline of shale. A higher POO drives increased inflation in the PPI and CPI. The Fed is making noises about a pause currently, but accelerating inflation could see another round of rate rises.

3. Of course. And that is exactly what is happening. Holders of UST (Japan, UK, etc) are selling UST to obtain USD to buy energy. The issue is that the current marginal buyer are the Hedge Funds, levered 500:1 on a basis trade. If that is forced to unwind, only the Fed will be able to buy the supply. Which is outright money printing.

Next year $5T in debt needs to be rolled over + the deficit needs to be funded. There is no-one with a Balance Sheet large enough to absorb that supply. That's just assuming China doesn't tactically sell down its holding of UST as say Japan does, magnifying the sales of UST. The West's fiat system is breaking down.

The apologists would have you believe that the West is winning this war. Not even close. The West is getting their arse kicked.

jog on
duc
 
firstly the West is kicking it's own butt , i have never seen 'a business ' run so badly ( and remain funded )

Japaneses bond-selling was predictable ( except the date of the sell-down )

as far as i can tell China is unwinding it US ( not just Treasuries ) bond holdings i am guessing the proceeds is going into physical gold ( and silver ) bought on the suppressed US markets ( i would if i had that clout )

i guess we will soon find out which nations are ( nearly ) self-sufficient ( because most will be in default )

as far as i can tell rigging the 'official data ' has never solved inflation , but can stall the civil unrest
 
Oil News:

The double whammy of peak driving season being over and high crude prices have brought US gasoline demand much lower than it seasonally should be, shedding some 1 million b/d in demand since the July peak.

- Supplies of finished gasoline in the US market fell to 8 million b/d in the latest weekly EIA numbers, which combined with soaring gasoline stocks (up 6.5 million barrels last week, the highest week-on-week jump in 20 months) adds to the pressure on light distillates.

- NYMEX RBOB gasoline futures have lost more than 15% in the past month alone, currently trading at $2.24 per US gallon, well below last year’s October readings.

- Peaking at $30-35 per barrel in the summer, gasoline cracks are down to $5-6 per barrel across all continents - in Europe they’re the lowest as gasoline inventories in the ARA region (Amsterdam-Rotterdam-Antwerp) surged to the highest level since 2008.

Market Movers

- Germany’s embattled utility giant Uniper (ETR:UN01) is preparing to sell its German district heating business, having hired Rothschild to run the transaction and eyeing $400-500 million from the deal.

- Canada’s oil major Suncor Energy (NYSE:SU) agreed to buy the 31% stake of TotalEnergies (NYSE:TTE) in the Fort Hills oil sands mine for $1.07 billion, adding 61,000 b/d of bitumen production capacity.

- The 290,000 b/d Corpus Christi refinery operated by US refiner Valero (NYSE:VLO) was partially shut down after a fire, the second at the plant in 2023 already, stretching diesel supply even further.

Tuesday, October 10, 2023

The rapid escalation of the military conflict between Israel and Palestine’s Hamas allowed oil prices to regain some of the lost ground from last week, with ICE Brent adding almost $4 per barrel Monday and closing at $88 per barrel. The focus is on Iran now, with ramifications of the Gaza standoff potentially impacting the country’s oil exports if the US political establishment enforces stricter enforcement of sanctions.

OPEC Raises Oil Demand Outlook. In its recently published 2023 World Oil Outlook, OPEC defied IEA calls to abandon fossil fuels and raised its world demand forecast, expecting peak demand by 2045 at 116 million b/d, which is a whopping 6 million b/d increase compared to last year’s report.

Exxon-Pioneer Deal Hard to Derail. The White House would struggle to thwart ExxonMobil’s (NYSE:XOM) mulled $60 billion takeover of Pioneer (NYSEXD) despite its previous adverse disposition towards the US major, as it’s usually refinery or retail deals that trigger antitrust risks.

Russia Lifts Ban on Diesel Exports. Following Friday’s announcement that Russia would lift the ban on most diesel exports, the world’s top seaborne exporter of the fuel has resumed full-blown port operations, though the prohibition of gasoline exports remains in place.

EU Set to Launch Chinese Steel Anti-Subsidy Probe. According to the Financial Times, the European Union is planning to announce an anti-subsidy investigation against Chinese steelmakers, aligning with the US so as to avoid the re-imposition of Trump-era tariffs on EU steel.

Uganda’s Drilling Bonanza Halted. Ugandan authorities have suspended works at the Kingfisher oil field operated by China’s state-owned firm CNOOC (HKG:0883) after a fatal incident during drilling operations, with a resumption only expected after security checks are fully over.

China Issues Fourth Round of Import Quotas. The Chinese Ministry of Commerce issued a new batch of crude import quotas totaling 9.54 million tonnes (70 million barrels), mostly to independent refiners that didn’t receive their full allocation for 2023, boosting the outlook for China’s oil imports.

US-Venezuela Sanctions Relief Talks Ongoing. The United States and Venezuela have progressed in negotiations that would see at least one additional foreign company, believed to be the French upstream firm Maurel & Prom (EPA:MAU), would be allowed to resume operations alongside PDVSA.

Israel Shuts Largest Field Amidst Hostilities. Israel has suspended operations at the Tamar offshore gas field operated by US major Chevron (NYSE:CVX) off the southern coast of the country, fearing a retaliatory strike by Hamas as the platform is within rocket fire range from the Gaza Strip.

Subsea Gas Pipeline Leak Puts Pressure on Gas. European gas prices moved above the €40 per MWh threshold after a subsea gas pipeline connecting Finland and Estonia experienced a sudden drop in pressure, with the operator saying it might take months or more to repair the leak.

Copper Outlook Worsens by the Day. The International Copper Study Group (ICSG) announced that the balanced 2023 copper market will transition to a major supply surplus next year, with the production surfeit hitting 467,000 metric tonnes, aggravated by a worsening demand outlook in China.

Iraq Launches Upstream Licensing Round. Iraq’s oil ministry called on international oil companies to submit letters of intent into the country’s 6th oil and gas licensing round, expected to award 14 oil and gas projects with a new profit-sharing agreement, eyeing increased gas output to meet demand.

Pemex Cuts Production Outlook, Again. Mexico’s national oil company Pemex cut its production forecast for 2024 to 1.89 million b/d, significantly lower than the initial 2.6 million b/d plan and even lower than the 1.95 million b/d announced a mere three months ago as legacy fields continue to decline.

US Gasoline Prices Decline Across the Board. With gasoline demand decreasing and oil prices dropping below 90 per barrel, US gasoline prices have declined in virtually all 50 states and edged lower to a national average price of 3.704 per gallon, down 3% week-on-week.




The charts that need watching: USD, Yields, Oil. All positive for the market today.

The tremendous growth in the Shadow banking system.

History of market reactions to unexpected events.

Michael Pento: always entertaining:
jog on
duc
 
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Mr @ducati916 , puzzled by the list of funds with circle representations just posted.i miss a legend, does it represent growth on size, growth of bonds ownership..do I miss something or have lost the legend display.
when you have a sec.
Amazed that oil is not going thru the roof with potential Iran involvment..or at least seen that way by the US.
Or will the US stay quiet..as higher POO is a death sentence for both USD and economy so Biden regime...
 

Bonjour,

It represents this: https://www.wsj.com/finance/fed-rate-hikes-lending-banks-hedge-funds-896cb20b

Energy: https://smeadcap.com/missives/energ...nDg&utm_content=277576959&utm_source=hs_email

World Series: https://www.insidehook.com/article/sports/creed-fueling-texas-rangers-mlb-playoffs




The remaining charts focus on the bond market:



One of the most overcrowded trades was long UST at the long end. It has been a conditioned buy-the-dip mentality occasioned by the Fed will drop rates.

Only to date, the Fed have not dropped rates.

Forget the 'inflation' narrative put forth by the Fed. The Fed is complicit with the Treasury in running a currency war against the BRICS, specifically China and Russia. The idea being, as has happened numerous times before, Emerging Markets, read economies, will run out of USD and collapse and in this case, collapse before the US.

This is working out very badly. The weaponsised USD and UST is hurting the US more than BRICS.

With the war in ME (actually very good for long end UST) there is a 'run to quality'. This is what used to happen. It will not last. The 'sellers' of UST, China, Japan, Europe, hold multiples of UST required to crush the UST market.

The spark that will ignite the conflagration is likely the Hedge Fund 'basis' trade.

This time is different.

Tomorrow's charts will evidence exactly what is different and the inevitable result.

jog on
duc
 
So let's start with the CPI number. Pretty much up across all the iterations that the Fed follows. There are so many charts out there breaking down the various iterations, core, services, rent, blah, blah, blah.

It is the Bond market that is important.

Next is from Ed Yardini. Now as economists go, he is pretty good:



He is missing the point:



In 1983 the 'Bond Vigilantes' did not have the firepower to sink the market. Today they do. And are.



Energy will continue to be the weapon that kills the US.



LOL.



The debt is so out of control that nothing can stop the inflation other than an outright default into massive, 1930's style and worse deflation.



And it will.

jog on
duc
 
More bonds I'm afraid:



Why would you buy the long end?

Because you believe that the Fed is going to drop interest rates back down to zero and you get to hand onto a decent yield and garner capital appreciation all in one fell swoop.

The problem is that inflation will eat the long end alive if interest rates return to ZIRP.

Possibly you sell for the capital gain. After all the duration is on your side 5 x 17 = 85% return. What happens if that's everyone's plan?

The recession will probably hit Q2 2024. That's a lot of pain to endure in the meantime. It is retail that is plunging into the TLT.

We are entering Bank earnings next week:



Banks hold massive amounts of UST. Which is why they are increasing their loans via BTFP lending at the Fed. The holes in their Balance sheets are impressive. Will they come clean? Of course not.

Oil News:

Friday, October 13th, 2023

The sanctions hammer wielded by the Biden administration this week has been inadvertently supporting oil prices, with ICE Brent set to finish this week at 88 per barrel, an unlikely prospect given the huge US inventory builds reported mid-week. However, a pledged ramp-up in Russia’s oil price cap enforcement, kicked off with two sanctioned tankers, and an increasing market expectation that there will be more sanctions on Iran amidst the Israel-Palestine standoff has heightened geopolitical risks and brought the $90 per barrel mark closer again.

Exxon Merges with Pioneer, Creating US Shale Giant. ExxonMobil’s (NYSE:XOM) purchase of US shale rival Pioneer Natural Resources (NYSEXD) in an all-stock deal valued at $59.5 billion propels Exxon to become the largest Permian producer, with the deal expected to close in early 2024.

EIA Lowers 2024 US Production Outlook. The US Energy Information Administration lowered its output forecast for 2024 to 13.12 million b/d, down 40,000 b/d compared to the previous issue of the STEO, all the while hiking its WTI forecast by almost 8 per barrel to $90.91 per barrel annual average.

India Courts Saudi Arabia to Boost Its SPR. India wants Saudi Arabia’s national oil company Saudi Aramco (TADAWUL:2222) to participate in its upcoming 6.5 million tonnes buildout of strategic petroleum reserves, eyeing the construction of two new storage tank farms across India.

Japan Launches Its Own Carbon Trading Scheme. The Tokyo Stock Exchange started trading Japanese carbon credits this week, combining emissions trading starting next year and a carbon levy starting in 2029, with the world’s fifth-largest carbon emitter seeking to achieve net zero by 2050.

Qatar Inks Multi-Billion LNG Deal with France. QatarEnergy signed a 27-year term deal with French major TotalEnergies (NYSE:TTE) to supply up to 3.5 million tonnes per year of LNG from its North Field East and North Field South expansion projects, delivered on an ex-ship basis to the Fos terminal.

US Sanctions Russia Cap-Defying Tankers. The Biden administration slapped sanctions on two tanker owners that allegedly carried Russian oil above the G7 price cap of $60 per barrel, one based in Turkey and the other in the UAE, seeking to close loopholes in its sanctions mechanisms.

Egypt LNG Export Suffer as Israeli Flows Halted. US oil major Chevron (NYSE:CVX) has halted natural gas exports through the East Mediterranean Gas pipeline to Egypt where production from the Tamar gas field was routinely exported as LNG, jeopardizing the seasonal restart of Egyptian LNG flows.

Diesel Stock Increases Soften Shortage Fears. Distillate inventories in the US, Europe, and Singapore have increased month-on-month in September, although the U.S. is 21 million barrels below the seasonal average and Europe is 25 million barrels below the seasonal average as diesel cracks outperform all other products.

Finland Gas Leak Raises the NordStream Specter. Finland’s Gasgrid confirmed that external marks were found along a gas pipeline and a data cable connecting Finland and Estonia, with the operator expected to take at least five months for repairs, sending TTF gas prices to €53 per MWh.

Saudi Aramco Eyes Another Chinese Farm-In. Saudi national oil company Saudi Aramco (TADAWUL:2222) is reportedly in talks to purchase a 10% stake in Shandong Yulong Petrochemical, a 400,000 b/d refinery that is currently being built and could lock in a term supply agreement.

Mozambique LNG Nears Final Investment Decision. Italian oil major ENI (BIT:ENI) plans to reach a FID on its second floating LNG project in Mozambique by mid-2024, with the additional ship assumed to produce 3.5 mtpa of liquefied gas and to be operational within four years.

Canada Confronts TMX Headache. Canada’s government might not fully recoup the $26 billion that it invested into the soon-to-be 890,000 b/d Trans Mountain Pipeline connecting Alberta to the country’s Pacific Coast, as its plans to sell its stake after the pipeline’s launch have seen very limited interest from pipeline operators.

Iraq Prepares Turkmenistan-Iran Gas Swap. Iraq might be buying up to 10 bcm per year of natural gas from Turkmenistan despite not having a shared border, with Turkmen gas flows administered under a swap arrangement through neighboring Iran.

jog on
duc
 
Is it slowly dawning on the market that:






Why?

Lots of reasons. But one of them is this:



The US can supply lots of USD or UST. But actual bullets, err no, China supplies us with those.

That being said, there is a massive 'onshoring' move back to mainland US and building new manufacturing plant. More on this later in the week.

For today: Ukraine or Israel? Only enough munitions for one of them.

jog on
duc
 
The divide is now clear to most that monetary and fiscal have sharply divided. One will trump t'other and this will drive the outcome.



The orange line represents medicare, medicaid, social security: all COLAs (inflation linked and set to grow with inflation).



The drain was when in 1968 the 'Gold Pool' collapsed. Led by France, sovereigns demanded gold, not paper. China and Russia are leading the current drain. The result: gold went from $42.50oz to $800oz.



The fiscal choices are: (a) inflation or (b) deflation. They will (always) choose inflation.



The deficits are due to the US being the Saudi Arabia of USD. The US has exported USD and UST. Hence the NIIP is negative. Foreign sovereigns/Hedge Funds/etc own +/- $20T of US assets, $7T of those being UST, which, can be sold to obtain USD (more on USD later)



Hidden from the general public: a decrease in the Fed's Balance Sheet is offset by a fall in Repo's. At the current rate of reduction, we will be back to zero in +/- 8mths. That is June 2024. The crisis will hit before then. Probably just as we enter Q2 2024 or April/May 2024.

So the immediate issue is that 'high nominal rates' drive USD strength. How do you get the USD lower without actually cutting rates (in the face of accelerating inflation) and maintain some sort of credibility?

You jawbone for all you are worth:



Almost every Fed member is now talking, talking, talking, to get the USD lower.

The higher the USD goes, the greater the Bond market instability is, the closer to a market meltdown we are. The dollar was forced lower last time by the Treasury reducing its TGA almost to zero. Since then the Treasury has issued $1.7T in new debt another $300B before end of year...all push USD higher.

Assuming they are successful and USD moves lower, TLT will move higher (price increase, yield fall), which we have already seen a hint of. To avoid a market meltdown it has to be USD down, TLT up.

Obviously, USD down, yields down means inflation up and gold up. The 'real' value of TLT is zero/negative after accounting for inflation moving forward.

There are other secular forces that will drive inflation higher. More on that later.

Obviously the double war currently echoes Vietnam and the collapse of the Gold Pool in 1968. War is highly inflationary. Of course you also have had Gulf I, II and Afghanistan that have cost $XT. The echoes don't end there: there is a new Kennedy vying for the US Presidency. If he were to do well in the polls, would he even survive to the election? There is already huge social unrest (to put it mildly) in the US.

jog on
duc
 
Worth a quick look:


This time around, war in Israel shouldn’t upend the market

The response of financial markets following unprovoked attacks by Hamas on Israel has been modest thus far.
thehill.com

Biggest Crypto Heists and Thefts of All Time - Daily Updated

Since the arrival of cryptocurrencies, it caught worldwide eyeballs from being proposed as an alternative currency and digital money to becoming one of the
themoneymongers.com

2023 Was a Win for Small-Market MLB Teams...Just Not in the Playoffs

Of MLB's final four teams, three are in the league's top 10 in spending
www.insidehook.com





So manufacturing returning to the US is a positive for the US.

However while that process takes place, there will be a secular inflationary cost to that. There will need to be tremendous capital expenditures (debt) and as indicated, labour, presumably skilled, will be in high demand.

Unless AI can replace skilled labour in a manufacturing base. I have no idea on this.

High inflation means that real returns to Bonds will be lower/bad. If investors are not buying the bonds (corporate) due to poor real returns and there is a requirement for capital to reshore, who will provide that capital? Probably the Fed. Loans for productive infra-structure are far better than loans for consumption, but they are still inflationary in the shorter term.






jog on
duc
 
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Oil

Which is actually true?



Full story: https://www.msnbc.com/rachel-maddow...ts-weird-republican-talking-points-rcna120622



Full story: https://www.reuters.com/business/en...ale-regions-set-fall-november-eia-2023-10-16/

Oil news generally:

Qatar has been actively leveraging fears over energy security in the long run with decades-long term LNG supply deals still only covering a third of its incremental production from the North Field East and North Field South expansions.

- Once the world’s largest gas exporter dethroned by the US, Qatar is expected to regain that spot again by ramping up its LNG production capacity by 64% to 126 mtpa by 2027.

- However, up until now Qatar has only contracted 15.3 mtpa of future production out of the total 48 mtpa of total capacity, with Shell, ExxonMobil, and ENI (all minority stakeholders in the expansion project) still waiting for their respective shares.

- The Russia-Ukraine war has put the continent’s gas supply front and center to EU policy, which is why Qatar has been making inroads into infrastructure, too – it booked regasification capacity in France, Belgium, and the UK until 2050, seeking to squeeze out US LNG volumes that currently account for 43% of the European market.

Market Movers

- Canadian oil producer Tourmaline Oil (TSE:TOU) agreed to buy rival firm Bonavista Energy for $1.1 billion in cash and stock, bringing its total production to more than 600,000 boe/d.

- The world’s largest energy trader Vitol will invest around $1 billion, half of its capital expenditure this year, into its burgeoning renewable energy and electricity portfolio.

- Italy’s oil major ENI (BIT:ENI) started drilling one of the most anticipated exploration wells this year, the Orion-1X wildcat in Egypt’s part of the Eastern Mediterranean, brushing aside war risks in adjacent Gaza.

Tuesday, October 17, 2023

Whilst the reported deal between the United States and Venezuela on the relaxation of sanctions has driven Brent back below the $90 per barrel threshold, tensions in the Middle East continue to keep the oil market on tenterhooks. Now the attention is on US President Joe Biden traveling to Israel on Wednesday, a move that could either mark the launch of a full-blown offensive or, alternatively, cool tensions in the region and push oil prices lower.

US to Announce Venezuela Sanctions Deal. The White House and Venezuela’s Presidential Office are expected to announce a deal as early as Tuesday, easing US sanctions on the embattled Latin American country’s oil sector in return for freer 2024 presidential elections.

Saudi Calls for More Focus on Emissions. Speaking at the Energy Intelligence Forum in London, Saudi Aramco CEO Amin Nasser said the COP 28 climate conference should focus on cutting emissions from hydrocarbons rather than aim to cut supply of conventional energy sources.

Albemarle-Liontown Megadeal Falls Apart. US lithium miner Albemarle (NYSE:ALB) abandoned its $4.2 billion buyout bid for Australia’s Liontown Resources after Australia’s richest person Gina Rinehart raised her stake in Liontown to 19.9%, seeking to block the A$3 per share takeover.

Lebanon Block 9 Sees No Gas Discoveries. Lebanon’s energy minister confirmed that exploratory drilling at the country’s offshore Block 9 yielded no hydrocarbon discoveries, pouring cold water on the plans of TotalEnergies (NYSE:TTE) and ENI (BIT:ENI) in the Eastern Mediterranean.

NY Rejects Majors’ Request for Higher Prices. The regulator of New York state NYPSC denied requests from oil majors BP (NYSE:BP), Equinor (NYSE:EQNR), and Orsted to renegotiate power supply contracts to include inflation and other cost increases on new wind power plants.

Kazakhstan Wants Billions from Oil Producers. Following a failed attempt to sue an international consortium managing the Kashagan oil field for $5 billion over excessive sulfur deposits, Kazakhstan’s Ecology Ministry has appealed the decision and seeks another court battle.

Shale Output to Continue Falling in the US. The US Energy Information Administration (EIA) expects US shale production from the country’s leading producing regions to decline for a third month in a row in November, falling to 9.533 million b/d from 9.604 million b/d this month.

Germany Starts Up Coal Generation for Winter. As heating season started in Germany, the country’s authorities have decided to fire up a 500 MW coal-fuelled power plant in the State of Brandenburg to cope with this winter season’s first cold snap in northern Europe.

VLCC Freight Rate Soar to Strength. Freight rates for VLCC tankers from West Africa to Europe soared to a 16-week high as the market assessed early November-loading fixtures at w75 thanks to strong demand, a sea change compared to the 19-month low w41 seen as recently as October 6.

Brazil Prepares Huge Offshore Auction. Brazil’s oil regulator ANP has allocated 33 oil and natural gas leases in its upcoming December auction, the fourth lease sale that would use the concession model (considered to be more market-friendly than PSAs) generally applied for onshore and post-salt fields.

EU Tries to Settle Franco-German Dispute. EU energy ministers will convene in Luxembourg this week to resolve an ongoing spat between France and Germany regarding state aid allowed to fund power projects, with Berlin still fearing the French nuclear fleet will allow Paris to subsidize other sources of energy.

India Uneasy About Using Yuan in Oil Trade. Payment in Chinese yuan for at least seven cargoes of Russian crude imported by state-owned Indian oil refineries is being held up over Delhi’s hesitancy to accept such transfers as Russian exporters are increasingly demanding a dollar-to-yuan switch.

Suez Canal Clinches Major Chinese Deals. Egypt’s Suez Canal Economic Zone signed a $6.75 billion with China Energy to produce green ammonia and hydrogen at the entrance of the canal in Ain Sukhna, concurrently signing a $8 billion deal with Hong Kong’s United Energy to produce potassium chloride.

Actual drills:



Which rather suggests the lower number is more accurate.

So to gold:



Gold premiums higher again in SGE. Indicating that China wants the gold. The flow from West to East is told in the LBMA data.

Meanwhile:



Moving lower as required by Yellen and the Treasury. A weaker USD will drive US inflation numbers higher the next time if commodity markets remain unchanged or higher.

Which means that the US needs commodity prices to move lower: specifically oil. The MSNBC article? But just assuming it is true and accurate, lower POO means less production. Shale oil has a much higher cost of extraction. Less production means higher POO.

With Exxon moving into this space, they will have better capital control than the smaller chaps. They will not sell for a loss or far lower margin. They will be looking to recoup their investment.

jog on
duv
 
Back to UST and USD. These are the two critical charts to watch:





So a number of Fed members have tried to 'talk' the USD lower. That USD chart looks 'higher'. Higher USD will drive higher UST, which will drive higher USD.

The MOVE was last week already in big trouble. It will be even worse this week.

The Bond market is breaking now.

The Fed cannot and therefore will not allow a total melt down. They will step in. The question is: how bad does it need to get before they do so?

Equity markets are sanguine currently. If the Fed are late (LOL) to the Bond market, stonks will have a bad time of it.

jog on
duc
 
War:

https://warontherocks.com/2023/10/iran-israel-and-war-in-the-middle-east/

Belt and Road Initiative: Is China's trillion-dollar gamble worth it?

Xi Jinping’s signature policy to transform the world has cost billions - has it paid off?
www.bbc.com

Markets in Chaos: A Return to the Gold Standard?

The grand monetary experiment of the last decade and a half has undermined the global financial system and necessitates a radical solution.
blogs.cfainstitute.org

Fed Reserve:



Nuclear:

America is finally righting its 100-year wrong

After abandoning nuclear power for decades, the US reopened its Palisades nuclear plant in Michigan and built its first new nuclear unit in 30 years. As the nuclear renaissance grows, Cameco (CCJ) will benefit from rising uranium demand—as uranium is the fuel that powers nuclear plants.
www.riskhedge.com

Copper:



The move from commodity suppliers to ditch the USD is a move to stop undervaluing/giving away their production for a rapidly depreciating piece of paper.

Earlier in the week I posted on the relocation of manufacturing in the US. This will require huge amounts of copper to build out the power generation (wherever it comes from) to these new factories.

Now I want to open a position in copper. The time is propitious. What product?

CPER:



So why not hold the shares of a single copper producer? Well then you hold a lot of company risk. So that's off the table for me.

A diversified basket of producers?

Sprott does have an ETF product, COPJ which holds junior miners:



Anyone have any better/great ideas, feel free to chime in.

jog on
duc
 
So I bought COPJ on sale today:





Copper Is Critical For America’s New Energy Economy | ZeroHedge

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Friday, October 20th, 2023

The US government has been one of the key oil market players this week, announcing both the easing of Venezuelan sanctions and a potential US SPR replenishment. While the first of those two announcements sent oil prices lower, news of the U.S. potentially refilling its oil reserves then sent prices spiking. Meanwhile, the Israel-Gaza crisis continues to escalate, stoking fears that it may spread into a wider regional war, with the geopolitical risk premium adding further upside to prices. As of Friday morning, WTI was trading above the $90 per barrel mark and ICE Brent was nearing the $94 per barrel mark.

White House Starts Replenishing SPR. The US Department of Energy announced it would seek to buy 6 million barrels of crude oil for delivery to the Strategic Petroleum Reserve in December-January, adding that it seeks to sign purchase contracts at $79 per barrel or less.

US Starts Sanctions Squeeze on Iran. The US Treasury Department issued a new set of sanctions against Iran, targeting 11 individuals and 8 companies involved in missile and drone production, refraining from slapping additional restrictions on Tehran’s oil sector.

US Warship Intercepts Missiles Fired From Yemen. Three missiles fired from Yemen were intercepted by a U.S. warship in the Red Sea. Brigadier General Pat Ryder said that while they could not be certain as to the targets of the missiles, they were potentially heading in the direction of Israel.

Shell Signs LNG Megadeal with Qatar. UK-based energy major Shell (LON:SHEL) signed a 27-year term deal with QatarEnergy that would see Qatar deliver as much as 3.5 million tonnes LNG per year to Rotterdam’s Gate import terminal starting from 2026.

Greenpeace Loses its UK Oil Challenge. Environmental group Greenpeace lost a legal challenge in the UK High Court after the court found the British government’s decision to authorize new licenses for oil and gas exploration in the North Sea was lawful, following four years of no lease sales.

Venezuela Gets 6-Month Sanctions Clearance. The US government will temporarily lift some of the key sanctions targeting Venezuela’s oil industry, allowing Western companies to carry out transactions with PDVSA for six months in return for the Maduro regime’s pledges to hold fair elections.

BHP Sheds Major Coal Assets. Australia’s BHP (NYSE:BHP), the largest mining company globally, agreed to sell its Daunia and Blackwater coking coal mines in Australia for $3.2 billion to Whitehaven Coal, extending its gradual withdrawal from fossil fuels towards energy transition metals.

French Firm Suspect of Sanctions Busting. French engineering firm Technip (EPA:TE) saw its shares plunge almost 15% on Thursday after the country’s leading newspaper Le Monde said the company failed to comply with EU sanctions by continuing to supply equipment to the Arctic LNG 2 project in Russia.

Chesapeake Eyes Takeover of Gas Peer. US natural gas-focused producer Chesapeake (NASDAQ:CHK) reportedly reached out to its peer Southwestern Energy (NYSE:SWN) for a potential takeover for $12 billion including debt, a deal that could create the US’ largest gas producer by market value.

Yuan-Settled Trades Get More Frequent. China’s national oil company CNOOC (HKG:0883) completed a yuan-settled LNG trade with France’s Engie (EPA:ENGIE) through the Shanghai Petroleum and Natural Gas Exchange, the fourth such trade on record as China seeks to expand its currency into commodities.

White House Loosening Venezuela Sanctions. The energy minister of Trinidad and Tobago confirmed the US granted a license amendment allowing the island nation to jointly develop the offshore Dragon gas field in Venezuelan waters, with future production feeding Trinidad’s LNG terminal.

China Optimism Lifts Iron Ore. With China reporting above-expectations 4.9% growth in Q3, sentiment in the metals market was buoyed as iron ore futures extended their rally and the most-traded Dalian futures contract rose to $120 per metric tonne, also boosted by lowest stocks since 2016.

Devon Energy Joins the Exxon Drive. Oklahoma-based shale producer Devon Energy (NYSEVN) is exploring major acquisition targets in the wake of the Exxon-Pioneer deal, with market rumors suggesting a move could be made towards Marathon Oil (NYSE:MRO) or privately held CrownRock.

European Gas Prices Rise on War Risks. Fears of a wider regional war in the Middle East are starting to weigh on natural gas markets, too, as benchmark TTF futures jumped to €52 per MWh ($17.5 per mmBtu) on the back of a deteriorating outlook for Egypt’s LNG exports into the winter.



jog on
duc
 
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