Oil News:
Thanksgiving has disrupted a highly eventful week that saw OPEC+ ramp up its shuttle diplomacy as the oil group postponed its December 1 meeting. Despite that move, ICE Brent settlements moved in a very narrow bandwidth of less than $1 per barrel all week, between $72 and $73 per barrel. As the Russia-Ukraine war intensifies and Iran comes to the forefront of Trump’s policy moves, geopolitics could make a surprise comeback in December, complementing OPEC+’s decisions and pushing oil prices higher.
OPEC+ Postpones December Meeting. OPEC+ has
delayed its upcoming policy meeting to December 5 as members are reportedly discussing postponing the anticipated output hike due to start in January 2025, simultaneously coordinating the future of compensation cuts with Iraq and Kazakhstan.
Iran Prepares for New Uranium Enrichment Boost. Iran has notified the International Atomic Energy Agency that it would seek to install more than 6,000 additional uranium-enriching centrifuges at its enrichment plants,
according to an IAEA internal report, raising the risks of confrontation with Tehran.
Russia Bombards Ukraine’s Energy Infrastructure. Russia
attacked Ukraine’s energy assets with 91 missiles and 97 drones this week in the second largest attack of the past month, with over 1 million people losing power in the immediate aftermath of the strikes and damages reported in 9 regions.
Argentina Expands into Brazil’s Gas Market. Brazilian firm Matrix Energia and French oil major
TotalEnergies (NYSE:TTE) confirmed the first deal to supply shale gas from Argentina’s Vaca Muerta patch to Brazil via Bolivia’s gas grid as the latter’s gas exports to Argentina ceased in September.
Indonesia Courts Russia, US for Nuclear Plants. The new Indonesian government is in
negotiations with the United States and Russia on acquiring nuclear technologies for power plants, seeking to start operating its first unit as early as 2036, despite a very pressing seismic risk across most of its islands.
Europe’s Key Driller Expands in West Africa. Italy’s oil major
ENI (BIT:ENI) managed to lock in four new exploration contracts offshore Ivory Coast, boosting its presence in the country after its 2.5 BBbls Baleine and 1.5 BBbls Calao discoveries, with the new contracts giving it nine years to explore.
EU Tightens Tariff Pressure on China. Members of the European Union
approved the imposition of anti-dumping duties on titanium dioxide from China, provisionally setting the tariffs between 14.4% and 39.7% as China’s share rose to almost 25% lately in the product mostly used in paints and printing.
Trump Mulling Sanctions on Iraq. US President-elect Donald Trump is reportedly
considering placing secondary sanctions on Iraq, terminating Baghdad’s sanction waivers to import Iranian gas, sanctioning individuals across the country’s energy sector, and clamping down on fuel smuggling from the country.
Panama Canal Transit Recovers on Higher Water Levels. Since September, vessel transits through the Panama Canal rose to 730-740 per month, the
highest traction in a year with LPG flows ramping up to previously unseen levels, although more available tonnage also resulted in lower VLGC freight rates.
Mexico Freezes New Oil Service Contracts. Mexico’s embattled state oil firm Pemex froze most of its new service contracts with drilling companies as the NOC’s top management mandated a $1 billion E&P budget cut, owing more than $5.2 billion overall, in a move that would lower the country’s production.
China Doubles Down on Coal Imports. China is set to import its highest-ever volume of thermal coal amidst rising electricity demand,
bringing in 37.5 million tonnes this month according to Kpler data, as global coal prices have been trending lower than domestic production, around $140 per metric tonne.
Trafigura Adds Excitement to Zinc Markets. Global trading firm Trafigura has single-handedly
launched a rally in zinc prices after it ordered thousands of tons of zinc out of LME warehouses, with total orders surging to a record 97,225 tonnes, sending prices of the base metal to $3,130 per metric tonne.
ADNOC Spins Off Low-Carbon Business Unit. ADNOC, the national oil company of the UAE, has
launched XRG, its new unit focused on investing in natural gas, low-carbon energy and chemicals that is slated to operate independently starting from Q1 2025, with an enterprise value of more than 80 billion.
Nvidia's extraordinary growth amidst the AI-driven boom has turned it into the largest company in the world by market value. Its market cap first surpassed the combined total of Italy, Spain and Portugal in May 2023. By January 2024, the company had overtaken the total market sizes of Australia, Germany and the Nordics. By June 2024, it had surpassed even the United Kingdom for the first time, one of the world’s biggest developed markets. Nvidia's valuation growth underscores the growing dominance of mega-cap technology companies amid speculation and enthusiasm over the transformative potential of emerging technologies like AI.
Several insights emerge from this analysis: EUR/USD and aluminium may look like an attractive trade, as they are priced significantly below fair value. But their R2 values hover around 50, indicating price movements are likely influenced by factors such as momentum or market sentiment rather than macroeconomic drivers.
On the other hand, GBP/USD and Hang Seng Index both show R2 values around 70 and FVG exceeding 1.5 standard deviations, making them attractive candidates for further exploration, particularly after accounting for trading cost. Investors can use this table to identify and prioritize assets for potential trading strategies based on valuation gaps and the influence of macroeconomic conditions.
Both the Sharpe and Sortino ratios are widely used measures of risk-adjusted returns, with higher values indicating better performance relative to risk. However, the two ratios differ in how they treat volatility:
- The Sharpe ratio uses total volatility (both upside and downside) in its denominator, treating all fluctuations as negative for returns.
- The Sortino ratio, on the other hand, focuses only on downside risk, recognizing that upside swings are desirable to investors.
By comparing the two ratios in a scatter plot, we can observe that several developed markets fall above the green line, where the Sharpe ratio exceeds the Sortino ratio. This suggests that the Sharpe ratio may overstate the risk-adjusted performance by penalizing positive volatility alongside negative. The Sortino ratio offers a more nuanced view, particularly for investors more concerned with downside risks.
European gas markets are navigating heightened uncertainty amid ongoing geopolitical and weather-related challenges:
- Price dynamics: Dutch TTF gas prices surged nearly 20% in November, driven by colder temperatures and reduced wind energy output.
- Storage levels: Europe's gas reserves dipped below 90% for the first time in 2023, raising concerns about winter supply.
- Geopolitics: The Russia-Ukraine conflict continues to strain energy supplies, compounded by Gazprom's recent suspension of gas deliveries to Austria.
Looking ahead, projections from Goldman Sachs suggest TTF prices could spike to €77/MWh in extreme scenarios, with storage levels potentially dropping to 40% by the end of March 2025 compared to 53% in March 2024. Based on the five-year seasonal pattern, this chart projects storage levels to fall to 44% by the end of March 2025.
The concept of a Strategic Bitcoin Reserve, proposed by Trump during his 2024 presidential campaign, has stirred significant debate. Proponents suggest that such a reserve could serve as a hedge against inflation, diversify national reserves and position the US as a leader in the evolving digital economy. Critics, however, point to Bitcoin’s high volatility, the risk of public fund losses and the uncertainty surrounding the long-term viability of cryptocurrencies as reserve assets.
In this simulation:
- 2017-2020: Had the reserve been established during Trump’s first term, its value would have reached approximately US$38 billion by 2021, despite Bitcoin's significant price volatility.
- 2021-2023: A sharp decline in Bitcoin prices during 2022 led to a temporary dip in the reserve’s value.
- 2024: Renewed investor interest in the crypto market spurred a strong recovery, doubling the reserve’s hypothetical value since its completion in 2021.
This simulation underscores Bitcoin’s potential for significant returns, but highlights the inherent risks and volatility of incorporating cryptocurrencies into strategic reserves. It also reflects broader market trends and the potential implications of large-scale national adoption of digital assets.
BTC drawdowns:
More evidence that we are caught in a euphoric melt-up.
The week that was:
So we have skyrocketing confidence in the market as indicated by the above chart.
What could possibly go wrong? What is believed to be true, but is actually false?
A Strange Defeat, by Aurelien – 11/20/24 A Strange Defeat. - by Aurelien
I’ve written a number of times now about the
unreality with which the West habitually approaches the continuing crisis in and around Ukraine, and the almost clinical dissociation from the real world that it displays in its words and its actions. Yet as the situation deteriorates and Russian forces move forward everywhere, there is no real sign that the West is becoming more reality-based in its understanding, and every probability that it will learn nothing, and continue to live in its constructed alternative reality until it is dragged out forcibly.
True, some daring leading-edge thinkers in the West are starting to wonder about the need for negotiations, even if they are on the West’s terms. They have begun to accept that perhaps some of Ukraine’s 1991 territory will have to be considered lost, if only in the short term. Perhaps, they muse, there will be a Korean-style DMZ in place, guaranteed by neutral troops, until such time as Ukraine can be rebuilt to take the offensive again. And then they look at the map of Russian advances, and they look at the size and power of the two armies, and they look at the size and readiness of NATO forces and they fall into despair.
But actually, no: scrub that last sentence. They don’t look, and if they did, they wouldn’t really be able to understand what they were seeing anyway. The “debate” (if you can call it that) in the West largely excludes real life factors. It takes place at a high normative level, where certain facts and truths are simply assumed.
The result is a decision-taking and influencing class that has no real idea about strategy and conflict at all, and just repeats words and phrases it has heard somewhere, as magical incantations. One minute “F16s” (whatever they are precisely) will save the day, the next, “deep strikes” are going to bring Putin down.
So for example, it is impossible for a society brought up on just-in-time delivery and impulse purchases on Amazon to understand the importance of logistics and the nature of the attrition war the Russians are fighting. If you look at a map and try to understand it (I know!) you can see the Ukrainian forces are fighting at the end of very long supply lines, especially for western equipment and ammunition, whereas the Russians are only a few hundred kilometres, at most, from their borders.
The fuel consumption of heavy armoured vehicles is measured in gallons per mile, and even if they can be delivered to the area of operations by train or transporter (which has its own problems) they consume frightening amounts of fuel, all of which has to be brought, dangerously and expensively, into the operational area.
They also break down, require new tracks and new engines and an endless supply of ammunition, all of which has to be brought forward. So Leopard tanks are not just teleported into the battle area, and when they are damaged they have to be sent back to Poland for repairs. And just about every aspect of military operations requires electrical power: yes, even drone operations.
The Russians of course know this, and have been targeting power generation and distribution systems, bridges and railway junctions, ammunition and logistic storage sites and troop concentrations and training areas. But they are not capturing large amounts of territory with daring armoured thrusts, so the Ukrainians must be winning, mustn’t they?
Yet tanks without fuel or ammunition, or whose engines have broken down, are useless, and once Ukrainian forces are operationally isolated from their supply lines it’s only a question of time before they lose their combat capability and have to surrender or make a run for it. This is what appears to be happening now around Kursk.
And if you are fighting an attrition war, and your stocks and replenishment capabilities are greater than your enemy’s, you want your enemy to use up those stocks as quickly as possible. So why not send, for example, large numbers of cheap drones that can be replaced, to soak up large numbers of defensive missiles that can’t? But this is too much for most alleged western experts to wrap their neurons around.
…
I think that what we are seeing, as well as culpable deliberate ignorance, is the beginning of a gnawing realisation that NATO is not strong but weak, that NATO equipment is mediocre, that talk of “escalation” is meaningless in the absence of something to escalate with, and that if the Russians felt so inclined they could do a lot of damage to the West. But even there, western pundits are stuck in narratives of armoured warfare and territorial conquest.
The Russians don’t need to do that, of course. With their missile technology, which the West has consistently ignored and downplayed, they can make a mess of any city in the western world, and no western state is in a position to respond. Of course the Russians, who understand these things, realise that they don’t need to actually use these missiles: the psychological leverage they have from just possessing them will do quite nicely.
…
The French historian and Resistance martyr Marc Bloch, who fought in the Battle of France in 1940, wrote a book about it,
only published posthumously, after the war, called L’Étrange défaite, or The Strange Defeat, in which he tried to explain what had happened. His central conclusion was that the failure was intellectual, organisational and political: the Germans employed a more modern style of war that the French were not expecting and could not cope with.
Time has nuanced that conclusion: the German tactics were certainly innovative, involving fast-moving, deep penetration armoured units and close cooperation with aircraft, but they were also extremely risky and required a lot of luck to pull off successfully. But Bloch was right that the Germans had developed a style of warfare, dictated by the need to avoid long wars, to which there was no counter at the time, and which posed unexpected and, for a period insoluble, problems for the defender.
There’s something about the dazed incomprehension of the French political and military class and the people themselves, in the summer of 1940 that seems very relevant today. The defeat of the West—not yet even recognised as such—is at once intellectual, organisational and political. The ruling classes of the West seem to have no idea at all what has happened to them and why, nor what is likely to follow.
Which actually, extrapolated, means that the US is in danger of losing the (currently) trade war with China as the Chinese are streets ahead strategically.
We have market valuations very, very high and getting higher. This simply means that markets are priced pretty much for perfection. No flies in the ointment.
The other hidden issue, manipulated by manipulated data, unemployment. If this canard blows up and there is a de facto recession with deficits blowing up to $6T and above, what happens to markets?
FOMO rules the market currently. The last time I saw this was 1999. Trying to grab every last penny is dangerous unless you are in the market everyday and ready/willing to flippe-floppe very quickly...assuming of course that you actually correctly catch the top and do not succumb to BTD. Of course we have been conditioned to BTD, 2020 was the classic case-in-point.
jog on
duc