Negative Oil (Futures) Prices! — Brian Romanchuk

When we think of a "squeeze" we usually assume "short squeeze." However, the collapse in WTF price is apparently due to a long squeeze.

The main lesson to be taken away is for financial speculators. If you are incapable of taking delivery of a futures contract, you should be asking yourself exactly why you are trading the product. One of the standard trade strategies I saw in sell side research back in the day was hedging breakeven trades with oil futures. Although that looked cute, there was no way to deal with delivery, so I didn't pay much attention. Thanks to modern technology, it is possible to pretend that you are a hedge fund trading futures at home. However, just because a thing is possible, it does not mean that it is a good idea.

Bond Economics
Negative Oil (Futures) Prices!
Brian Romanchuk

Sputnik — Saudi Oil Industry at Risk as American, European Refiners Refusing Riyadh’s Crude – Reports

Oil glut?

Sputnik
Saudi Oil Industry at Risk as American, European Refiners Refusing Riyadh’s Crude – Reports

Russia's Rejection Of OPEC+ Was The Result Of Cold Geostrategic Calculations — Andrew Korybko

Russia rejected its OPEC+ partners' request late last week to further curtail its oil production next month because it understood that doing so would make its American shale rivals more competitive, which would in turn empower the US to continue weaponizing energy for geostrategic ends, thus eventually leading to a dangerous scenario that Moscow might have been powerless to reverse if it didn't act when it finally did....

One World
Russia's Rejection Of OPEC+ Was The Result Of Cold Geostrategic Calculations

Andrew Korybko

See also

Reminiscence of the Future
"Experts".
Andrei Martyanov

Oilprice.com
Will Trump Bail U.S. Shale Out?

Nick Cunningham

Nick Cunningham — The Threat That Will Send Oil Down To $10

Oil prices will need to trade at around $9 to $10 per barrel in the long run if gasoline is going to be able to compete with electric vehicles and renewable energy. That startling conclusion comes from BNP Paribas, which warned in a new report that crude oil is facing an existential and likely mortal threat from renewable energy and EVs....

Oilprice.com
The Threat That Will Send Oil Down To $10

Nick Cunningham

Middle East Tanker Insurance Rates Soar 10-Fold — Irina Slav

The effect of these events on oil prices has been more marked than OPEC+’s largely expected decision to extend the oil production cuts of 1.2 million bpd into the first quarter of 2020. Pricesspiked towards the end of June, when reports began emerging that insurers are upping their premiums for tankers passing through the Strait of Hormuz and they haven’t fallen much from that level.

The effect events in the Persian Gulf and the Gulf of Oman from the last two months have had on oil prices will last until tensions between the U.S. and Iran, and Iran and Saud Arabia subside, that’s for sure. Higher insurance premiums are only one aspect of this effect, by all means an important one.

One other aspect of this effect was expressed by RBC’s head of commodities Helima Croft to the NYT. Croft noted that what happened to oil prices in the wake of the attacks highlights the importance of Strait of Hormuz as a global oil artery even at a time when many believe U.S. production can offset any drop in supply elsewhere.

“There is no way the market is insulated from that because of U.S. shale,” Croft said.

OilPrice.com
Middle East Tanker Insurance Rates Soar 10-Fold

Irina Slav

The War Risk Premium For Oil Prices — Ross McCracken

Last week’s attacks on two tankers in the Gulf of Oman have ratcheted up tension in the Middle East. Lloyd’s List has reported a tenfold rise in war risk marine rates for tankers....

Oil Price
The War Risk Premium For Oil Prices

Ross McCracken

Why Trump now wants talks with Iran — Pepe Escobar

Maybe Iran holds the Trump card? Putting the West on notice.

The Vineyard of the Saker
Why Trump now wants talks with Iran
Pepe Escobar

See also

Reminiscence of the Future
Pepe Escobar's Superb Segment On European Elections.
Andrei Martyanov

Sputnik International —India-China Oil Bloc Proposal a Good Step, Say Energy Analysts

The expiration of US waivers on sanctions targeting Iran and its foreign trade partners ends this Thursday. This will affect India, China, Japan, S. Korea and Turkey. While China is currently the largest purchaser of Iranian crude oil, both India and China have warned that such a step could destabilise the global energy market and the Middle East....

Sputnik International
India-China Oil Bloc Proposal a Good Step, Say Energy Analysts

Sanjeev Choudhary — India, China set up joint working group to tackle crude volatility

The two countries have set up a joint working group that would identify subjects of cooperation in the energy sector, including ways to rein in global oil prices. The group, set up a month ago, will be co-chaired by a joint secretary in the oil ministry and his Chinese counterpart.

China and India, second- and third-largest oil consumers, respectively, have been meaning to form a joint front for more than a decade to assert their weight in the oil market, dominated by a producers’ cartel, OPEC....

Monopsony power confronts monopoly power to squeeze out rent extraction.

China and India are also under no illusions about the US plan is dominate energy in order to gain another lever of power in addition to the global reserve currency to control the world economically as well as financially — in the favor of US interests, of course, despite all the noise about "rule-based order," "freedom and democracy," "human rights," and "Western values." The US has exhausted the creditability of that, actions speaking louder than words.

This is not only economic but also strategic.

The Economic Times (India)
India, China set up joint working group to tackle crude volatility

Sanjeev Choudhary, ET Bureau
 

Pepe Escobar — How the Iran sanctions drama intersects with OPEC-plus

The bottom line is that despite the agreement in Vienna, the price of oil, in the short-term, is bound to go up. Analyses by BNP Paribas, among others, are adamant that supply problems with Venezuela and Libya, plus the proverbial “uncertainty” about the sanctions on Iran, lead to “oil fundamentals still…favorable for oil prices to rise over the next six months despite the OPEC+ decision.”...

Take-away.

Considering that in realpolitik terms Riyadh simply is not allowed any “decision” in oil policy without clearing it first with the US, what remains to be seen is how Washington will react to the new, long-term Riyadh-Moscow entente cordiale. As far as oil geopolitics goes, this is in fact the major game-changer....

The OPEC-plus-Iran puzzle is far from solved. Only one thing is certain; the future spells out brutal, covert resource wars.

Asia Times
How the Iran sanctions drama intersects with OPEC-plus

Pepe Escobar

Zero Hedge — Gas Price Tops $4 In California For First Time Since July 2014

According to the Urban-Brookings Tax Policy Center, Americans will spend an average $400 per household more on fuel this year than in 2016. By contrast, middle-income US households will on average gain $930 from the tax cut bill....

Zero Hedge
Gas Price Tops $4 In California For First Time Since July 2014

Tyler Durden

Geopolitika — All Eyes On Iran As Oil Prices Soar

Misleading title. The post is a list of links about global oil conditions.

Geopolitika
All Eyes On Iran As Oil Prices Soar

Jillian Ambrose — China to launch rival oil futures market in spring

 It's on.

China will soon be able to trade oil using its own currency by creating a futures market to rival the international benchmark contracts which are traded exclusively in dollars. 

The China Securities Regulatory Commission confirmed its plans to begin the trade of yuan-based oil futures on the Shanghai Futures Exchange from March 26 on Friday. 

China is now the world’s largest crude importer which is understood to be a large part of its drive to establish a benchmark which reflects its local market and offers its mega refineries more clout....

The Telegraph
China to launch rival oil futures market in spring
Jillian Ambrose, energy editor

Also

Long-anticipated move hopes to chip away at dollar’s grip on global markets

Asia Times
Yuan-denominated crude futures launch finally announced

Shimshon Bichler and Jonathan Nitzan — Profit warning: there will be blood

As we show in our recent research note ‘Blood and Oil in the Orient, Redux (2017)’, the Weapondollar-Petrodollar Coalition might no longer be in the Middle East driver’s seat. However, with the oil and armament companies, the region’s oil-exporting autocracies and various non-state groups all keen on seeing their oil incomes rise from record lows, the prospects of a new energy conflict, whether premeditated or coincidental, seem extremely high.

More evidence suggestive that economics drives politics.

Real-World Economics Review Blog
Profit warning: there will be blood

Shimshon Bichler and Jonathan Nitzan

China, Venezuela decouple oil from US dollar

The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.

The crude oil futures will be the first commodity contract in China open to foreign investment funds, trading houses, and oil firms. The circumvention of U.S. dollar trade could allow oil exporters such as Russia and Iran, for example, to bypass U.S. sanctions by trading in yuan, according to Nikkei Asian Review. To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges....

OilPrice.com
China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold
Tsvetana Paraskova

Apparently confirming what President Maduro had warned following the recent US sanctions, The Wall Street Journal reports thatVenezuela has officially stopped accepting US Dollars as payment for its crude oil exports....

Zero Hedge
De-Dollarization Spikes - Venezuela Stops Accepting Dollars For Oil Payments
Tyler Durden

Tsvetana Paraskova — China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold

The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.

The crude oil futures will be the first commodity contract in China open to foreign investment funds, trading houses, and oil firms. The circumvention of U.S. dollar trade could allow oil exporters such as Russia and Iran, for example, to bypass U.S. sanctions by trading in yuan, according to Nikkei Asian Review. To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges.… 

Looks like the rumors are turning out to be true.

China already runs fixed rate with the yuan pegged to the dollar. This would mean that the Chinese government would need to obtain gold rather than USD, but China is a major gold producer while the US has a monopoly on dollar issuance. More importantly, this system would bypass the financial system under US control that the US is using politically, including economic warfare.

Could a gold standard be coming back?

Oil Price
China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold

Tsvetana Paraskova

UPDATE

Martin Armstrong points out that the proposed yuan-gold convertibility is not a fixed rate but at a floating rate, linked to the gold market.

You either PEG it to the dollar (unwise for political reasons) or you “LINK” it to gold – but do not PEG it to gold. If you attempt to PEGthe yuan to gold, that would fail for you are making the same mistake as Bretton Woods. The only possible way is to “LINK” it to gold but on a floating exchange rate. That way you are encouraging confidence in the yuan allowing it to be redeemed on a floating basis with gold. Hence, the political risk of the currency is reduced for it could become possible that the currency system breaks apart and politically currencies could be politically frozen and nonredeemable.

Armstrong Economics
Gold – Oil – Dollar
Martin Armstrong

The Saker — The IMF admits that Russia has survived both the drop in oil prices and the sanctions and is on the path of recovery

IMF report provided.

The Vineyard of the Saker
The IMF admits that Russia has survived both the drop in oil prices and the sanctions and is on the path of recovery
The Saker

Jillian Ambrose — Oil market faces supply crunch within a year, warns HSBC

Population increases and investment-discovery decreases. In addition, the global economy is considerably underperforming relative to capacity owing to insufficient effective demand to utilize available resources.

Right now the metro industry is undergoing a shakeout.

No brainer without other energy sources substituting to meet increasing demand, especially with the push for reducing emissions by not only conservation and greater efficiency of existing sources, but new sources of clean energy. That is happening already, and oil price increases will accelerate investment in alternative energy sources and scaling them up.

The Telegraph
Oil market faces supply crunch within a year, warns HSBC
Jillian Ambrose

Jacques Sapir — Substituting for imports in Russia

Detailed.

It seems therefore that since 2014 the mechanism of substitution to imports has worked out in the case of Russia.

RussEurope
Substituting for imports in Russia

Jacques Sapir

Translated by Anne-Marie de Grazia

Zero Hedge — Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt

What this means is simple: as a result of the budget imbalance driven by low oil prices, largely a Saudi doing, the kingdom is forced to give workers an implicit pay cut. It also means that since the government has to "pay" through the issuance of debt, that the liquidity crisis in the kingdom is far worse than many had anticipated.

Which brings up the question of devaluation: how long until the SAR has to follow the Yuan and see a substantial haircut. According to the market, 12 month SAR forward are now trading at a price which implies a 12% devaluation in the coming months.

Then Saudis are going to have to pump more oil to pay the bills, even though that means lower prices. The question is whether or how long the Saudis will maintain the the USD/SAR (dollar-riyal) peg.

Zero Hedge
Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt

Tyler Durden

ht Don Quijones at Raging Bull-Shit