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90 seconds at 9 am: Oil price rises, gold falls; PIMCO dumps boss; China shadow banking stress; Saputo wins Warrnambool; Labour-Greens ahead; NZ$1 = US$0.831 TWI = 78.8

90 seconds at 9 am: Oil price rises, gold falls; PIMCO dumps boss; China shadow banking stress; Saputo wins Warrnambool; Labour-Greens ahead; NZ$1 = US$0.831 TWI = 78.8
23rd Jan 14, 7:26am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of some shareholders and customers fighting back.

But first, the price of oil has risen sharply overnight, with the US benchmark reaching US$97/barrel, and the Brent benchmark making an equivalent move up. Gold on the other hand has fallen under US$1,240/oz. New York equities are holding their record highs, and bond yields are starting to push higher again with the benchmark UST 10 yr bond now yielding 2.84%.

In a bit of a coup at the top of the huge PIMCO bond manager, Mohamed El-Erian has been dumped as CEO and heir apparent to Bill Gross as the company struggles with large funds outflows.

In China, angry bank customers are trying to involve the police as they are threatened with a wipeout of their investment in a big 'wealth trust' product. Bernard had the details in yesterday's Top 10. But today it has emerged that the coal mine behind the project may be rescued. It's a story worth following because it highlights the huge risks involved in the Chinese shadow banking system. China's dodgy financial system could easily affect us if it suffers significant stress.

In Australia, Canadian dairy giant Saputo has won majority control of Warrnambool, Australia's oldest dairy processor after four months of a bitterly contested takeover battle, with acceptances to its bid creeping up to 53%.

Also from Australia, credit ratings agency Fitch says Australian house prices have grown faster than those in any other major economy and are forecast to outstrip even countries recovering from the GFC in 2014. But low interest rates, high incomes and only modest employment declines mean Australian houses are still relatively affordable, they say. And the boom is spreading. It's an interesting counter-point to other recent surveys.

The latest Roy Morgan political poll out overnight for New Zealand has the Labour-Green group starting the election year with an edge over the National Party.

The NZ dollar starts today pretty much unchanged at 83.1 USc, 93.9 AUc and the TWI is at 78.8.

If you want to catch up with all the changes on Wednesday, we have an update here.

The easiest place to stay up with today's event risk is by following our Economic Calendar here »

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29 Comments

by  powerdownkiwi  |  23rd Jan 14, 9:06am 1390421171

It has been long pointed out, here, that oil is the one to watch.

 

If everyone thinks things are on a roll, it will rise. At some inflection-point, the rise will stifle the roll. Crash. Rinse and repeat.

 

But we will continue blaming anything but an energy-curtailment for the ongoing fiscal recoiling. After all, if you have money, you can just buy stuff, right? And if you have more money, you can buy more stuff, right? No need to investigate how much stuff there actually might be,

 

Tui ad.

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by  steven  |  23rd Jan 14, 9:48am 1390423695

I think you have to recognise that ppl are blind to this because when they start to think on it they start to realise there is no solution to BAU without fossil fuels so the shutters come down.

There is an interesting comment/sudy on ppl living directly under a failing/failed dam. Those so close to the flood so that there is no chance escape simply didnt panic, just ignored it, those a little further away with a chance of survival actually were the panickers.....whcih of course is bad news as well...

That and for the right in particular the realisation that the "free market" / capitalism is finished because capitalism wont do it because of the too high risks v too low or no rewards so the only viable option left is Govn does it to protect/continue society.

regards

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by  Ergophobia  |  23rd Jan 14, 11:17am 1390429029

And, there is the interesting comment/study on greenie people living nowhere near a perfectly sound dam, who suffer panic attacks too. 

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by  powerdownkiwi  |  23rd Jan 14, 11:59am 1390431575

then there are the those who can see clearly, and who are also brave.

 

http://www.e-n.org.uk/p-4662-War-stories.htm

(a german pastor). I'm rather violently anti-religion, as it allows folk to off-lay their responsibilities onto some vague deity rather than shoulder them, themselves. But it was the best link that came up. There went a brave man.

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by  dh  |  23rd Jan 14, 12:20pm 1390432818

I have to say, that does read a little like a romantised legend, and checking I can find some pages in German that say that his body, and his sister who also lived there, were found in the basement of the rectory.

http://www.faz.net/aktuell/gesellschaft/zweiter-weltkrieg-nach-der-bomb…

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by  DFTBA  |  23rd Jan 14, 10:58am 1390427933
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by  powerdownkiwi  |  23rd Jan 14, 11:51am 1390431065

Not just interesting - it nails it.

 

Thanks - good link.

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by  Neven911  |  23rd Jan 14, 1:33pm 1390437207

PDK

I think what AEP misses is that any fall in oil price will cause an immediate drop in production (Shale esp as they have to drill constantly) so any fall will be short lived IMO, Instability in oil price / production is more likely

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by  steven  |  23rd Jan 14, 3:58pm 1390445884

I'd qualify that and say any sizable drop will cause a fall in future production, and yes non-conventional production. Not so sure on immediate, as its not un-reasonable to expect that the OPEC countries will be desperate for revenue to prop up their regimes.  If indeed we see this I think there will be pretty hefty production drops  (10~15% per annum) a few years off that will be un-mitigatable and that will be nasty.

regards

 

 

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by  profile  |  23rd Jan 14, 1:23pm 1390436628
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by  powerdownkiwi  |  23rd Jan 14, 2:13pm 1390439592

Every oil source has a threshold, below which it is 'not economic' to produce. As we go down the EROEI track (sequentially-worsening options) the 'price at the margin' rises.

 

  Logically enough, if you reduce your demand, you slip back down the 'price at the margin', but never to $60. Those days are gone.

 

What AEP finished with in the first link, is correct:

"To avoid confusion, let me be clear that the dangers of dwindling oil supplies in the long-run have not gone away. Easy reserves of crude are being depleted. New fields are more costly. Peak oil may have the last laugh. Yet this should not be confused with the short-term risks of deflationary shock.

I recently attended a Transatlantic Dialogue on Energy Security with senior military officers in London and Washington. The message was that shale will come and go - with US tight gas peaking by 2017 - creating a false sense of security as the deeper strategic threat continues to build. That is broadly my view as well. Much drama can intrude along the way."

 

He's right. That graph David Chaston put up the other day - from p16 of the BP outlook - shows the problem. You are simply ;richer' if you own the energy, than if you are left clutching vast piles of paper proxy. Or IOU's.

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by  steven  |  23rd Jan 14, 4:02pm 1390446179

You are engaging with a libertarian / right wing politico type who frankly doesnt care what's said no matter how un-truthful, out of context or plain wrong just as long as the game of "free market" continues just a  little longer.

NB Even $80 seems gone....and fracking is in that ball park and more...

IOUs, yes funny really, they are worthless....but he and others will cling to them as there is no other game.

regards

 

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by  Alex13  |  23rd Jan 14, 4:49pm 1390448953

I’ve observed my phone line producing echo every now and then, but now the computer screen is generating it too!

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by  Gummy Bear Hero  |  24th Jan 14, 7:34am 1390502081

Yup , itsa virulent  computer tinnitus , a nasty buzzing sound ....

 

....  and it echoes " peak oil - all is woe - peak oil - you're all doomed - peak oil - world will end - peak oil - over-population - peak oil - EROEI - peak oil  - - "

 

But hey , for those of us who live in the real world , didya see Christchurch based Energy Mad shares ( NZX : MAD ) rocket 69 % yesterday on news their products have been accepted onto Amazon.com's website ..... ripping good news , what !

 

.... ah .... 69 .... Gummie's favourite number ..... ahhhhhhhhhhhhhhhhhhh .....

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by  Plutocracy  |  23rd Jan 14, 7:32pm 1390458752

"Peak oil may have the last laugh"



Of course it will, it's a geological certainty.

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by  Plutocracy  |  24th Jan 14, 7:15am 1390500907

The fact that it is a finite resource dictates that we will one day reach a maximal production peak, it's not rocket science. The debate can only ever be about the timing of when this point may occur.



How much are oil prices headed down? As explained by other posters the marginal cost of producing oil has risen so much over the last decade that sustained low price would crush production. The US tight oil looks like it will buy us a few years, unfortunately this doesn't change the underlying fundamentals that oil is becoming more expensive and harder to produce, and that our societies were geared for cheap rather than expensive energy.

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by  Gummy Bear Hero  |  24th Jan 14, 8:06am 1390504012

... actually - and you'll  love this - the Germans have gone back to burning horrible brown lignite high CO2 & SO2 producing coal , because they're short of electricity .... due to shutting down all their zero-CO2 emitting nuclear power plants ..... because of an earthquake in Japan ....

 

Nyuk nyuk nyahhhhhh !!!! ..... that's what the " green " movement calls progress ... ...

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by  steven  |  24th Jan 14, 9:17am 1390508245

Yes, the worst grade...rock and a hard place......

Not green really, in fact nothing to do with green, but fear of the BWRs doing a japan....no where to put the waste etc.

regards

 

 

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by  PeakEverything  |  24th Jan 14, 8:06am 1390503980

Your statement about coal is totally incorrect.  Over 40% of world energy is derived from coal the next biggest source of energy at  21% is gas.

 

its interesting that despite this "glut" in oil the market isn't dropping prices.

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by  powerdownkiwi  |  24th Jan 14, 8:09am 1390504150

zz = apply a little logic, and from a broader perspective.

 

Coal is heading to overtake oil, as the major energy-source. Not because it's better; because the less and less high-EROEI alternative. Peak Coal estimates average out at 2027. I make no prediction as to date - there hss to be a global fiscal meltdown well before that, which will presumably dampen demand.

 

Solar is indeed the way of the future. I've lobbied, advocated, and demonstrated it for years. Lived off-grid for a decade now. But - the EROEI of solar will never support BAU as you understand it, it only does electricity (not plastic, bitumen, fertiliser etc) and storage is the resource-requiring question.

 

Neither peal oil, nor peak coal, have been relegated to any 'rubbish heap;. We are using more than ever - you need to get the facts first, before the ideology. Better that way.

 

http://www.indexmundi.com/energy.aspx?product=coal

 

 

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by  Your Landlord  |  24th Jan 14, 9:53am 1390510382

But 'Peak oil' is rubbish PDK. The 'Oil Drum' is gone. 

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by  PeakEverything  |  24th Jan 14, 10:16am 1390511795

Are you joking? 

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by  steven  |  24th Jan 14, 9:08am 1390507700

You talk absolute rubbish and show complete ignorance of the subject.

To start with coal peaked in the UK in 1913, today Im not aware any is mined in the UK, or maybe just one mine.  Its not mined because a) there is so little left and b) its un-economic to do so.  Same will and has happened with oil, Indonesia I think passed its peak oil last year, it now imports oil, quite a few such as the UK now import oil as they peaked some time back.

Solar is not a transport fuel, never will be in terms of what our present economy can afford. Sure its going to be more common but its not an effective subsitute and never will be for transport on the scale we need.

We have said this often enough, its like groundhog day. Yet another poster starting to comprehend that his "wealth" is make believe, based on BAU, it aint gona continue.

regards

 

 

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by  PeakEverything  |  24th Jan 14, 10:19am 1390511955

You don't happen to be a residential property investor by any chance?

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by  steven  |  24th Jan 14, 10:33am 1390512823

yep....one whos "wealth" is based on keeping the la la land BAU game going.

fear and greed....

regards

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by  rastus1  |  24th Jan 14, 10:57am 1390514246

...if there were any truth in your view that technology is going to solve energy  problems.....then tell me why the world powers are trying to out manouvre each other so as to secure energy supply.........or haven't you noticed?  Blinkers off old chap.

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by  profile  |  23rd Jan 14, 2:35pm 1390440922
APOV. The list of winners and losers is interesting. Relies on the fact that the rest of the world geting its act together.   "Shale oil is rapidly emerging as a significant and relatively low cost new unconventional resource in the US. There is potential for shale oil production to spread globally over the next couple of decades. If it does, it would revolutionise global energy markets, providing greater long term energy security at lower cost for many countries."  

https://www.pwc.com/en_GX/gx/oil-gas-energy/publications/pdfs/pwc-shale…

 

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by  scarfie  |  23rd Jan 14, 3:31pm 1390444278

People would be better placed to watch this, it really is the most important video you will ever see. But then it assumes some logical ability to reason.

 

http://www.youtube.com/watch?v=F-QA2rkpBSY

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by  steven  |  23rd Jan 14, 3:49pm 1390445392

No it isnt...many of the plays, the best ones are known and limited.  Even the USA with its well drilled and surveyed lands will peak in 2016 or so....at a huge drilling cost.

So at best it delays the decline in oil production, maybe a few years, maybe only a few months.

PWC, clueless....rentiers or a surrogate.

regards

 

 

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