# OPEC meeting tomorrow



## daddybigbucks (Jan 30, 2011)

Opec is meeting tomorrow and will decide if they will cut production.
If they don't, oil prices will continue to slide under oversupply.

I sold all my oil stock (just by luck) in summer except rds.b. might be a good time to buy if OPEC slash production.
Anyone else looking forward to the meeting?


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## HaroldCrump (Jun 10, 2009)

Yes, I am interested in the geo-political dynamics i.e. the Iran vs. Saudi vs. Venezuela dynamics.


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## Gabs (May 7, 2014)

Definitely looking forward to the meeting tomorrow, have a fair bit of coin waiting on the sidelines and debating which oil stock(s) to invest in once oil eventually stabilizes & trends upwards. Anyone have a suggestion for the best site to look at for accurate oil index listings? I've been using http://www.bloomberg.com/energy/ but not sure if there's better ones.


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## cainvest (May 1, 2013)

I'm keeping an eye on this as well, might see some good deals shortly depending if they cut production or not.


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## HaroldCrump (Jun 10, 2009)

The worst case scenario for OPEC is that they decide to cut production (a little or a lot), yet the price does not recover.
That'd mean the OPEC can no longer influence world oil prices the way they used to 30 years ago.
Russia has already said they'll keep pumping oil regardless of price...in fact, if prices drop, they will pump _more_ oil.

IMO, the OPEC has pinned itself into a corner.
The market might call their bluff on Friday when trading resumes.


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## CPA Candidate (Dec 15, 2013)

If OPEC stands pat, oil will fall through the $70 mark almost immediately. This has significant implications for Canada.


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## HaroldCrump (Jun 10, 2009)

^ Correct.
Although...it is possible that WTI oil might fall below the $70 mark even with a (small) production cut.
There are several demand side factors at play, too (depression in Europe, recession in Japan, China slowdown, etc.).
The strengthening US$ is also a major factor.

Canada is suffering regardless because of our falling currency.
Although the WCS has stood its ground rather well.
The spreads have narrowed since June.


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## 1980z28 (Mar 4, 2010)

oil has put a dent in my future

Opec will look after me


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## daddybigbucks (Jan 30, 2011)

cainvest said:


> I'm keeping an eye on this as well, might see some good deals shortly depending if they cut production or not.


Personally, I think by tomorrow will be too late.
I'm watching surge energy right now because I think a lot of investors in that stock are shaking in their boots right now.
If I pick the right stink bid and OPEC cuts, might be a 20% payday.


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## 1980z28 (Mar 4, 2010)

Its a lottery

Don`t hold back


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## daddybigbucks (Jan 30, 2011)

```

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1980z28 said:


> Its a lottery
> 
> Don`t hold back


Yeah you can tell my greed is getting the best of me. :cower:

There will probably be some good deals tomorrow as we may be able to see some direction.


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## HaroldCrump (Jun 10, 2009)

I wonder if no production cut from OPEC isn't already factored into the market price of oil stocks, royalties, drillers, service companies, etc.
The Saudi energy minister has made no secret of the fact that the Kingdom is not in favor of cutting production.

The only ones insisting on a cut are Iran & Venezuela, with Nigeria making a little bit of noise too.
The Islamic republics couldn't care less about Venezuela, and Nigeria doesn't have enough clout to sway the decision.
So it comes down to Iran vs. Saudi Arabia.

The market seems to be fully factoring in no production cuts.


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## 1980z28 (Mar 4, 2010)

Nice to have cash at the ready

To balance the losses


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## webber22 (Mar 6, 2011)

It wouldn't surprise me to see the oil prices rise if there's no agreement - market logic right lol


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## jwilliams (Nov 26, 2014)

daddybigbucks said:


> Opec is meeting tomorrow and will decide if they will cut production.
> If they don't, oil prices will continue to slide under oversupply.
> 
> I sold all my oil stock (just by luck) in summer except rds.b. might be a good time to buy if OPEC slash production.
> Anyone else looking forward to the meeting?


I defenitely believe now is the time to place long term investments in oil.


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## Fraser19 (Aug 23, 2013)

So what is the best case scenario and the worst case scenario?


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## HaroldCrump (Jun 10, 2009)

Fraser19 said:


> So what is the best case scenario and the worst case scenario?


For who? OPEC, or consumers, or investors?
Everyone has conflicting interests...
Worst case scenario for OPEC is that they cut production and price doesn't bounce back, but continues sliding.


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## dubmac (Jan 9, 2011)

jwilliams said:


> I defenitely believe now is the time to place long term investments in oil.


Is this not company specific?
Which investment are you referring to? Some companies are profitable at low prices for oil, others not at all. It's no surprise that low prices will eliminate / reduce those companies (mostly Cdn) that will not be able to compete.
Who will be the winners in a year? Who will be the losers?

Maybe best to watch XEG as an index for oil and buy below 15.32 (it's 1 yr low)


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## PuckiTwo (Oct 26, 2011)

I have withdrawn the post --EDIT: Maybe this isn't the press release.


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## 1980z28 (Mar 4, 2010)

Webcast LIVE

[email protected]


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## PuckiTwo (Oct 26, 2011)

1980z28 said:


> Webcast LIVE[email protected]


 Thks 1980z28. So, no cut.


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## HaroldCrump (Jun 10, 2009)

Yup, completely expected.
Saudi Arabia would have made a joke out of themselves if they agreed to a cut after all the efforts & PR they went through to insist they are holding current production levels.


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## 1980z28 (Mar 4, 2010)

Buying opportunity


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## cainvest (May 1, 2013)

1980z28 said:


> Buying opportunity


Yup ... once the big slide ends.


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## daddybigbucks (Jan 30, 2011)

I'm really surprised. I thought for sure they would appease. 
Even more surprising is my only oil holding RDS.B is up today. I think that is because they are aggressively buying back shares.



Edit: rds.b is not trading today, so the uptick was from yesterday.


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## Fraser19 (Aug 23, 2013)

cainvest said:


> Yup ... once the big slide ends.


This sure does hit the oil section of my portfolio, good opportunity to average down over the next few weeks. 
Something I have been thinking about is, how do you guys think this will effect the housing market in cities that are built off oil? Calgary, Lloydminster, Ft Mac ect?


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## webber22 (Mar 6, 2011)

Why don't they just announce a production cut, but sneak out a production increase, nobody's watching 
Or maybe Putin will start a major war with Ukraine to boost the price - I don't trust these guys


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## CPA Candidate (Dec 15, 2013)

1980z28 said:


> Buying opportunity


Buying now is basically a gamble on the direction of oil prices, I don't think it meets the definition of an investment.

I thought the energy patch presented opportunities in the past few months when I thought there was floor to how low oil could go. There is no floor.


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## Killer Z (Oct 25, 2013)

CPA Candidate said:


> Buying now is basically a gamble on the direction of oil prices, I don't think it meets the definition of an investment.
> 
> I thought the energy patch presented opportunities in the past few months when I thought there was floor to how low oil could go. There is no floor.


Based on these thoughts CPA, would you Sell or Hold?


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## HaroldCrump (Jun 10, 2009)

webber22 said:


> Why don't they just announce a production cut, but sneak out a production increase, nobody's watching


The market is watching like a hawk.
These things don't go unnoticed.
In the 1980s, OPEC had agreed to a production cut, but individual members violated the quota and kept producing anyway.

That said, it is possible for the Iran-Russia-China tripartite to circumvent the OPEC and buy & sell from/to each other.
Iran can sell oil to China and get paid in Renminbi.
They can swap those Renminbi for either Francs or Gold.

Iran also routinely sells oil to India in exchange for gold.

Russia and China already have several bilateral agreements for oil & gas.

Overall it would seem that the OPEC cartel is receding into the sunset...



> Or maybe Putin will start a major war with Ukraine to boost the price - I don't trust these guys


There is already a war going on...just because bombs are not going off everywhere does not mean there is no war.


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## relk19 (Mar 13, 2014)

Fraser19 said:


> Something I have been thinking about is, how do you guys think this will effect the housing market in cities that are built off oil? Calgary, Lloydminster, Ft Mac ect?


I am curious about this as well. I am in the process of saving up for a downpayment on my first house located in Calgary. Only thing keeping me back right now is the inflated prices from the boom here, a pull back is just what I am looking for. My prediction is if companies start to slow down on exploration and drilling, many of the people that moved here for the boom will be heading back. I am not in the O&G industry though, so I don't know how companies will react. If things do slow down, I think the hardest hit will be Fort Mac, as I have heard that their real estate market is inflated beyond belief.


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## CPA Candidate (Dec 15, 2013)

Killer Z said:


> Based on these thoughts CPA, would you Sell or Hold?


I am holding, hoping for a recovery but I think it depends on what an investor owns.


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## gardner (Feb 13, 2014)

CPA Candidate said:


> There is no floor.


I once read some Saudi prince saying that they could economically sell oil for under $10 per barrel. The Saudis and Kuwaitis can definitely manipulate the price lower than $65 if they want to. I haven't read a lot of theories about why they're doing it though. I can only guess that they are trying to force the Americans (and us) to give up on exporting oil. It would have to remain uneconomical to develop fracking for export, or oil sands for export for a couple of years before folks would totally give up. I think the Saudis could hold the price at < $60 for 5 years if they wanted. The general trend in OPEC is to overproduce, so it does not take much effort or discipline to hold the price low.


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## HaroldCrump (Jun 10, 2009)

gardner said:


> I once read some Saudi prince saying that they could economically sell oil for under $10 per barrel.


Yes, they can...but not due to economic reasons.
They can do so because of the US backing i.e. the petro-dollar deal.



> The Saudis and Kuwaitis can definitely manipulate the price lower than $65 if they want to. I haven't read a lot of theories about why they're doing it though.


There are 3 main theories:
- General demand & supply dynamics (global recession, low demand, need for OPEC to maintain market share, etc.)
- Shaking out high cost & over-leveraged US shale producers (and some Canadian Oil Sands producers)
- Bringing Russia to its knees by draining their forex reserves

I explained the last theory in a couple of posts on this thread, and another.


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## cainvest (May 1, 2013)

CPA Candidate said:


> Buying now is basically a gamble on the direction of oil prices, I don't think it meets the definition of an investment.
> 
> I thought the energy patch presented opportunities in the past few months when I thought there was floor to how low oil could go. There is no floor.


For the longer term investor it's a pretty safe gamble IMO, providing they want extra energy exposure that isn't already covered by their current CDN holdings. The recovery time for oil prices might take some time so be prepared to wait for a while if you do take a position now.


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## My Own Advisor (Sep 24, 2012)

For the life of me, I can't see how oil prices won't roar back at some point. When, I don't know, but if you're buying low I suspect you'll be rewarded long-term.


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## daddybigbucks (Jan 30, 2011)

I wonder if now is the time that big foreign oil will gobble up some of the smaller entities with oily land like STP?


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## Eder (Feb 16, 2011)

Oil had a fairly fast recovery from $40/barrel only a few years ago.


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## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> *There are 3 main theories:*
> - General demand & supply dynamics (global recession, low demand, need for OPEC to maintain market share, etc.)
> - Shaking out high cost & over-leveraged US shale producers (and some Canadian Oil Sands producers)
> - Bringing Russia to its knees by draining their forex reserves


Given the timing & rather unexpected swift decline, a couple more theories could be added.

The winners/losers provide some clues [by losers, Russia does not come first to mind].


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## HaroldCrump (Jun 10, 2009)

Can you share your theories as well, please.
As you know, I am deeply interested in these matters.

Russia has a higher cost of production, and a fall in oil prices reduces their forex earnings, exacerbating their domestic currency and BOP situation.
They have said they will keep increasing the production to offset that (which might further push down oil prices).
And keep using all their free forex to hoard gold.


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## webber22 (Mar 6, 2011)

On our baby TSX we have evidence of some type of manipulation. All day long I've been checking level2 quotes for energy stocks and wasn't surprised to see goldman sicks and merrill linchpin (Buffets baby via BOA) on the SELL side of most orders. By sell I mean complete price collapse!! Morgan Stanley is scooping up most of these orders from them. You can figure out the rest


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## gibor365 (Apr 1, 2011)

Looks like muslim countries declared Jihad against western world  imho they want to destroy as much as possible by dumping oil prices, and than gonna sharpy raise it....


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## Toronto.gal (Jan 8, 2010)

*HC:* Rather not share here since too political for this thread [even conspirational].  But thanks for sharing yours.


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## webber22 (Mar 6, 2011)

There's a book called "Oil, Jihad and Destiny" from 2005 where they talk about oil shortages plunging us into depression. Today it's the exact opposite !

http://www.amazon.com/Oil-Jihad-Destiny-production-depression/dp/1930847629


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## gibor365 (Apr 1, 2011)

webber22 said:


> There's a book called "Oil, Jihad and Destiny" from 2005 where they talk about oil shortages plunging us into depression. Today it's the exact opposite !
> 
> http://www.amazon.com/Oil-Jihad-Destiny-production-depression/dp/1930847629


Both , shortage and oversupply can lead to depression... Just don't understand why western world doesn't do anything to restrict OPEC shahids


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## webber22 (Mar 6, 2011)

It's all that friggin frackers fault for finding too much f**kin oil


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## eddyo (Oct 28, 2009)

webber22 said:


> It's all that friggin frackers fault for finding too much f**kin oil


say that fast 5 times!


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## dogcom (May 23, 2009)

How do we know it is not just geopolitics putting the screws to Putin that is the name of the game. Also low prices kills expensive fracking and oil sands competition. Besides we still don't know how quick the depletion rate on fracking is and all this extra reserves are just a mirage.


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## doctrine (Sep 30, 2011)

Conspiracy theories: This is my take. It's anyones guess to as how oil prices are going down. Institutions, currency traders, shorts, etc, who is making the money, etc. I see that as irrelevant. 

The real reason oil is going down is because there is too much, and everyone in the world is telling everyone else they're going to produce more oil, not less. This is fuel for the fire of every trader in the world, whether they have thousands of dollars or billions of dollars. Down we go. Suspect Canada got hit harder than the US because US markets were closed. A nice side effect is that some oil producers think they can screw other ones because their costs are lower, but any suggestion of national manipulation in North America in particular is a stretch.

Canadian majors announced capital plans 20% or more higher for 2015 than 2014, predicting that with lower margins, they'll just increase production. OPEC isn't blinking. $70 is broken. $60 is not looking that far off. Sticking it to Russia? Rosneft was bragging that they'll be happily pumping below $60. Perhaps capital budgets should be expanded another 20%, because margins are even tighter now. Suncor sounds like a lot of gold mining companies did last year.


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## gibor365 (Apr 1, 2011)

> Suspect Canada got hit harder than the US because US markets were closed.


 Actually both S&P and Dow futures were up at 12:00 when TSX was down more than 0.5%

Off shore drillers already suspended dividends.... wondering what first Canadaian stock that will do it....


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## doctrine (Sep 30, 2011)

All of the super leveraged ones (P/CF > 4) have pretty much done that. It will be interesting to see which of the mid-tier companies do first. There will, and should, be cuts at $70.


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## gibor365 (Apr 1, 2011)

doctrine said:


> All of the super leveraged ones (P/CF > 4) have pretty much done that.


 Who?



> It will be interesting to see which of the mid-tier companies do first. There will, and should, be cuts at $70.


 Now it's $68

LRE should declare Dec dividend in about 1 week...we'll see....


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## doctrine (Sep 30, 2011)

There have been dividend cuts in the small names. PLT.UN just halved their dividend today. They're at a P/CF of nearly 6 (nearly $220M debt vs cash flow of $37M), and that probably just got worse today. SGL will be one of the next. The equity in those companies is becoming worthless.


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## gibor365 (Apr 1, 2011)

as per morningstar PLT P/CF is 2.7 ... and twice less than LRE


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## doctrine (Sep 30, 2011)

You can't trust those reports, on practically any website. Perhaps that's with Brent at $125 a barrel it was 2.7. Here are their own projections released yesterday:

_*Based on the Trust's 2015 production guidance and other assumptions described herein, Parallel's 2015 cash flow is estimated to be approximately C$37 million. Parallel reported bank debt of US$157.6 million drawn under the facility at September 30, 2014. Parallel currently has C$63 million of convertible debentures due on June 30, 2017.*_

It's simple math from there. That is just not a good situation. Hint: It's also based on $80 WTI, which is a long way in the rearview mirror now.


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## HaroldCrump (Jun 10, 2009)

doctrine said:


> Sticking it to Russia? Rosneft was bragging that they'll be happily pumping below $60


Rosneft is essentially already bankrupt.
The Kremlin is carrying it...


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## Cal (Jun 17, 2009)

With the US on the rise the past few months, and now oil plunging, it sure helps the US recovery. Extra cash to spend on stuff for the Christmas season will help their economy more.


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## bmoney (Jun 22, 2013)

This is good for the world economy. I've read estimates that low oil prices could add a quarter point to US GDP. The world needs a lift, and eventually oil will rebound. The absurdity of the collapse is that oil demand is fairly inelastic, whether the price is $65 or $115, we are not seeing much if any change in demand. Traders can continue to short this sucker, but it will not do much to change the supply/demand equation in the short run, we really need 6 months to understand the implications of this collapse. For now, it's just fear and bots moving prices around


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## CPA Candidate (Dec 15, 2013)

I'm not sure cheap gas is really as good for the Canadian economy and consumers as is believed. What about all the people who will lose their jobs in the energy sector, the massive loss of government revenues, the collapse of housing prices? If you were living in Calgary and employed by the energy sector with a big mortgage and a BMW, is saving $10 bucks on a fill up is hardly going to save you now. Not to mention the decline of the CDN, which makes everything imported more expensive. Make no mistake, if this continues through 2015, companies will go bankrupt, people will go bankrupt, jobs will be lost and housing prices in Alberta will fall. The ripple effects are nothing small. Government surpluses turn into deficits, taxes go up or services are slashed, not just in Alberta but across the nation.

Netting everything out - this is seriously bad for Canada. I don't care what's good for the world economy, I live in Canada.


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## HaroldCrump (Jun 10, 2009)

^ + 1.
If you want to imagine a "worst case scenario" for the oil sands patch, and the rest of Canada, just look at what happened in the 1980s in Texas & Oklahoma the last time OPEC crashed prices (down to $10 at that time, between 1985 and 1986).
There was massive unemployment (in the 10% range) throughout the US oil patch.


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## bmoney (Jun 22, 2013)

Hey I agree with you two, this is not good for parts of Canada, but keep in mind a lower loonie is good for exports & manufacturing, it's not all bad. Also, this is not good for parts of the US either. Many Shale companies have been largely financed, not good for the banks either. The 80s were too long ago and memories are short, the same mistake is being repeated. The difference now is there is another major global consumer of oil, and we are past peak (cheap) oil, so there is a new higher floor, although in the short run this can, and maybe already has been breached.


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## bmoney (Jun 22, 2013)

Also, I'm down about 20% on COS average cost around $18.60 so I would be completely thrilled for oil to turn around. But I'm 30 years out to retirement (if I'm lucky to make it) so this is more amusing to me than anything else, I won't be realizing a loss unless COS goes belly up.


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## gibor365 (Apr 1, 2011)

CPA Candidate said:


> I'm not sure cheap gas is really as good for the Canadian economy and consumers as is believed. What about all the people who will lose their jobs in the energy sector, the massive loss of government revenues, the collapse of housing prices? If you were living in Calgary and employed by the energy sector with a big mortgage and a BMW, is saving $10 bucks on a fill up is hardly going to save you now. Not to mention the decline of the CDN, which makes everything imported more expensive. Make no mistake, if this continues through 2015, companies will go bankrupt, people will go bankrupt, jobs will be lost and housing prices in Alberta will fall. The ripple effects are nothing small. Government surpluses turn into deficits, taxes go up or services are slashed, not just in Alberta but across the nation.
> 
> Netting everything out - this is seriously bad for Canada. I don't care what's good for the world economy, I live in Canada.


For sure! considering fact that Alberta practically feeding all Canada!


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## HaroldCrump (Jun 10, 2009)

bmoney said:


> but keep in mind a lower loonie is good for exports & manufacturing, it's not all bad.


No, it's mostly all bad, IMHO.
We import almost everything we consume, including food, clothing, and gasoline.
Since those imports become dearer (have been for a while now), households will have less money to spend on other things.

Regarding exports, depreciating a currency (either via market forces or by direct central bank action) never works out the way it's desired.
The boost to exports, if any at all, is temporary.
Since our manufacturers import most of the plant and machinery required to produce their products, those costs go up.

Canada has anyway been losing its manufacturing exports for many years now, so I am not sure if it's even worthwhile cheapening our currency to boost exports.

Note that over 40% of our exports are oil/energy and mining/materials related.
Automobiles are a distant 3rd at 14%.










Note that the core consumer goods (food, clothing, etc.) comprise about 22% of our imports.
Add in our energy imports (refined petroleum) of about 10% and nearly 1/3rd of our core essential imports will be hurt by this devaluation of the loonie.


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## gibor365 (Apr 1, 2011)

> We import almost everything we consume, including food, clothing, and gasoline.


 in other words, we're like "banana republic" , only instead of bananas we have oil...


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## bmoney (Jun 22, 2013)

Harold I was paying attention when Poloz said that this recession was different and capacity has not shrunk it's disappeared, so I don't disagree that low oil prices are bad; just not ALL bad there is some silver lining. After all about 70% of Canadian exports are to the Americans, so if low oil prices is generally good for the American consumer and bad for a smaller segment (oil), well then don't rule out the possibility that a rising tide can raise all boats. Also, some of the currency risk is borne by the exporters to Canada so not everything goes up when the loonie goes down, at least not in the short term. Anyway it will be interesting to see how this pans out by the spring time.


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## sags (May 15, 2010)

Some say the lower prices will hurt Alberta and benefit Ontario.

Personally, I don't see a huge benefit to Ontario if gas is a few dollars cheaper. Ontario lost auto industry jobs to Mexico where an auto worker earns $300 a month. 

There is no way we can compete with that salary............no matter what we do or what oil prices are.

The losses in Alberta will probably be much greater than any gains in Ontario.


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## HaroldCrump (Jun 10, 2009)

There won't be any gains in Ontario, other than perhaps increased sales of larger vehicles, pickup trucks, etc.
In fact, Ontario govt. will lose some of its precious, precious gas tax revenue.
New taxes coming to a gas pump near you....


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## HaroldCrump (Jun 10, 2009)

bmoney said:


> Harold I was paying attention when Poloz said that this recession was different and capacity has not shrunk it's disappeared


I am not sure that's the context of that comment from Poloz.
There is lots of spare capacity.
We have 7% unemployment.
That's capacity.

Yes, this recession is different because it has been engineered via fraud, followed by central bank financial repression.
This is not a normal market cycle.


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## fatcat (Nov 11, 2009)

if these prices hold, which i don't think they will, charlie munger will be dancing at the local pub (to the degree that men of his age dance at all)

since opec is now selling product at dirt cheap prices and lowering their reserves while forcing north america to leave shale oil in the ground (to the degree that this is part of the plan)

all of which is something charlie wants us to do since thinks oil is going to get a lot more valuable and we should be using up other peoples energy



> If energy independence was such a good thing, let’s just imagine that we go back to 1930 or something like that and we were hell bent to have total energy independence from all the foreigners. And we just drill and use every technique we can and we produce our hydrocarbon reserves which are absolutely certain to be limited.
> 
> Well, by now have way less in reserve and are way less energy independent. In trying to get energy independence we would have destroyed our safety stock of oil within our own borders.
> 
> ...



Read more: http://www.businessinsider.com/charlie-munger-on-energy-independence-2013-7#ixzz3KPr1yUc3


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## gibor365 (Apr 1, 2011)

Interesting article
http://www.bloomberg.com/news/2014-...ble-as-market-transforms-caracas-to-iran.html



> The International Monetary Fund in October assessed the oil price different governments needed to balance their budgets. At one end were Kuwait, Qatar and the United Arab Emirates, which can break even with oil at about $70 a barrel. At the other extreme: Iran needs $136, and Venezuela and Nigeria $120. Russia can manage at $101 a barrel, the IMF said.





> Winter is coming and I am sure the market will come into balance again in the first quarter or toward the middle of next year,” Putin said Nov. 28 in Soch


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## Nemo2 (Mar 1, 2012)

http://www.bloomberg.com/news/2014-...lump-as-oil-drops-on-opec-failing-to-cut.html



> Saudi Arabian stocks plunged into a bear market after OPEC took no action to stem a slump in oil, triggering a rout in Middle Eastern equities.
> 
> The Tadawul All Share Index (SASEIDX) retreated as much as 6.3 percent, the most since March 2011, before settling 4.8 percent lower at the close in Riyadh.





> Saudi Arabia, OPEC’s biggest oil exporter and the largest Arab economy, has spending plans valued at more than $500 billion. It needs prices to average $99.2 a barrel this year to balance its budget


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## bmoney (Jun 22, 2013)

HaroldCrump said:


> I am not sure that's the context of that comment from Poloz.
> There is lots of spare capacity.
> We have 7% unemployment.
> That's capacity.
> ...


Yes, we have [expensive] labour capacity, big deal. Why don't we take a page out of Milton Freedman do away with the minimum wage, put that capacity to work! Of course I'm being sarcastic.

Poloz candid comments went for the most part unnoticed, they were made on the same day as the terror attacks in Ottawa. What our Bank Governor was describing is that this past recession was unlike a normal one. Output contracts during a normal recession, but the capacity is there as hangover from the prior period of expansion. What's different this time is that the capacity is gone, GONE! These companies didn't just lay people off per the usual cycle, they packed up and left. This has changed the composition of industries in Canada, and it's making it much more difficult for our Government to foster job creation and bounce back to full employment. The question is how do we get these businesses to come back? It's a far more a precarious position for us to be in.

Back on the topic of oil, already some people are calling for a bottom at $35. Absurd.


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## HaroldCrump (Jun 10, 2009)

bmoney said:


> Why don't we take a page out of Milton Freedman do away with the minimum wage, put that capacity to work! Of course I'm being sarcastic.


It would have been a valid strategy, but for the labor arbitrage being employed by global corporations these days.
Doing away with minimum wage might provide a temporary boost to employment at the low end, but the effects will not be long-lasting.
The low end jobs are all service sector jobs.
However, service sector is a derivative sector - it cannot survive without growth and expansion in the primary sectors.
My suspicion is that once the initial effect has passed, employment will plateau off again.



> Poloz candid comments went for the most part unnoticed, they were made on the same day as the terror attacks in Ottawa. What our Bank Governor was describing is that this past recession was unlike a normal one. Output contracts during a normal recession, but the capacity is there as hangover from the prior period of expansion. What's different this time is that the capacity is gone, GONE! These companies didn't just lay people off per the usual cycle, they packed up and left.


Well, Poloz & Carney deserve some of the blame themselves.
They have pursued an inflationary, and currency devaluing policy.

However, the larger problem is structural in nature i.e. it is a combination of fiscal policy, tax policy, and the subsidy policy.
To that extent, he is perhaps right that the capacity is gone.
But it is only the capital capacity, not labor - labor is still here and in fact, more is pouring in every day via immigration.



> This has changed the composition of industries in Canada, and it's making it much more difficult for our Government to foster job creation and bounce back to full employment. The question is how do we get these businesses to come back? It's a far more a precarious position for us to be in.


Yeah I agree...structural problems are much harder to solve that monetary problems.
It has to do with taxation - over-taxation in our case, the structure of the labor market - unionization and collective bargaining "rights", the regional imbalances - Quebec and Ontario pursuing fiscally irresponsible policies, B.C. blocking or over-taxing energy developments, etc.
These are all structural issues that the BOC cannot solve or even intervene in.
But these are not unsolvable problems, if the right political will is there.


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## bmoney (Jun 22, 2013)

Hey Harold, I'm not in any disagreement with what you wrote above. The Government has wasted opportunities to make things right, one of the big untouchables has been real-estate which they continue to blow bubbles through CMHC. I know lots of wealthy and ordinary people in some form or another playing real estate, working for cash or selling houses every few years taking the principle residence exemptions. And on the topic of taxation, it's killing the middle class. In Ontario if you make 100k the Government calls you rich, taxes you 42% and another 13% when you pay your bills; if you're lucky to end up in the top bracket you have the pleasure of paying 62% in taxes (49% marginal 13% HST).

Any way back on topic, there are internet rumours of possible factions within OPEC looking to take a lead on price action without Saudi - probably a low chance. Wonder at what price Saudi says enough, some people are calling for $35-$40 oil.


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## HaroldCrump (Jun 10, 2009)

Some unofficial messages coming out of Saudi Arabia that the OPEC will be happy with WTI at *$60*.
This level hurts vast majority of US Shale and Canadian Oil Sands producers, except some marginal, exceptionally low cost producers in the Bakken with costs in the $40 - $50 range.
$60 is relatively comfortable for Saudi - it hurts a little, but doesn't bleed.

The ones hurting badly at $60 is Venezuela, Iran, and Nigeria (in that order).
Russia is offsetting its loss of oil revenue by using its higher USD exchange to buy gold to protect itself.


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## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> 1. $60 is relatively comfortable for Saudi - *it hurts a little, but doesn't bleed.*
> 2. Russia is offsetting its loss of oil revenue by using its higher USD exchange to buy gold to protect itself.


*1.* How long would it take them to spend the $700+ banked up billions?
*2.* In Russia's State of the Union Address yesterday, Putin: '"The difficulties we are facing also create new possibilities for us. We are ready to meet any challenge of the times, and win."


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## HaroldCrump (Jun 10, 2009)

Toronto.gal said:


> *1.* How long would it take them to spend the $700+ banked up billions?


They don't need the reserves to last decades.
2 years will be more than enough to shake out the shale oil & oil sands producers.

Venezuela is fast dissolving into a failed state.
Iraqi oil supplies are curtailed because of war.
Iran can't sell freely into the global market because of sanctions.
Russia can't sell to most of Europe for same reason (although the sanctions are less draconian, so far).

Saudi is betting that over the next 2 - 3 years, oil supply from these competitors will reduce, leading to a natural increase in price.

That aside, under the petro-dollar deal, the Saudi Kingdom is assured of unlimited forex reserves by the US.
The price cut by OPEC is effectively a currency devaluation, right?
The net effect is the same as devaluating their currency by 40%.

That increases the value of their forex reserves, which are denominated in US$.
More forex will come pouring in from the US under various excuses, such as foreign aid, military & logistical support, oil-for-arms programs, direct swap agreements, etc.
There are quite literally an unlimited number of ways the US can keep funding the Saudi welfare state & budget deficits.



> *2.* In Russia's State of the Union Address yesterday, Putin: '"The difficulties we are facing also create new possibilities for us. We are ready to meet any challenge of the times, and win."


You better believe him:


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## Toronto.gal (Jan 8, 2010)

^ Yes, but it shouldn't take 2-3 years given their high reliance of oil revenues on their economy [90% & even higher for others in the region], though certainly the revenue loss has been worthwhile for them for all the reasons you've mentioned. 

Do you think any of the House of Saud's thousand princes/princesses, nearing 15,000 members last I checked, are bleeding just a little bit? 

http://www.economist.com/blogs/pomegranate/2014/03/saudi-royal-family


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## HaroldCrump (Jun 10, 2009)

Toronto.gal said:


> ^ Yes, but it shouldn't take 2-3 years given their high reliance of oil revenues on their economy [90% & even higher for others in the region], though certainly the revenue loss has been worthwhile for them for all the reasons you've mentioned.


Let's look at some numbers...

Currently the Kingdom is spending about $265B on social programs, infrastructure projects, etc.
Their forex reserves are $768B (all USD denominated).
Most of it is in US treasuries.
So, all else being equal, the Kingdom can spend at their current level for about 3 years.

Prior to the OPEC meeting, Deutsche Bank estimated that Saudi Arabia has 8 years of reserves with Brent oil at $83.
It has fallen since then, so let's say at least 4 years of reserves at these levels.

Reference:
_*Saudi Arabia Can Afford to Keep Oil Prices Low for Years to Come*_

Now let's keep in mind that so far they have been running a budget surplus (since 2009).
So there is lots of capacity for spending more money by running a small deficit.
They will be able to borrow cheaply from the international money markets because of their massive USD reserves.

In fact, they can probably issue sovereign bonds denominated in USD.
It would be a perfect hedge for them - all their revenues are in USD, therefore, denominate their debt in USD as well.

The IMF is forecasting a deficit of 1.4% of GDP in 2015.
This is a very small budget deficit compared to many other countries.
It is even better fiscal situation than Canada, since we will continue to have provincial deficits beyond 2015.

The IMF is forecasting that if oil prices stay below $75, the deficit may increase to an uncomfortable level (7.5% of GDP) only by 2019.
That gives the Kingdom a lot of leeway.

Now, if we make the further assumption that this situation is being engineered jointly by the US & Saudi Arabia, that gives them even more leeway with their budget spending.
The US will keep pumping money into the Kingdom using various means and mechanisms.
The royal family - all 15,000 of them - are well taken care of.


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## doctrine (Sep 30, 2011)

Saudis are still actively cutting prices. 

http://business.financialpost.com/2014/12/04/oil-prices-saudi-asia/?__lsa=1816-77d0

Oil probably would have fallen further, but the cutbacks have begun in North America. Capital budgets are being slashed - Athabaskan oil sands, for example, by over 75%, and most majors that have spoken by at least 20% (like CNQ). Oil drilling rig counts already down in the US, and weekly oil production growth is slowing. Offshore rig operators are planning to idle rigs and are thinking of mothballing. 

A month ago, everyone was still holding their heads up high. Those heads are a little lower now. More pain might be coming, but at least, it's the end of the beginning now that growth is slowing. Otherwise, oil would have fallen by 5% today.


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## HaroldCrump (Jun 10, 2009)

If this WSJ article about Saudi intentions are correct, watch out below...

_*Saudi Arabia Sees Oil Prices Stabilizing Around $60 a Barrel*_

Once it gets to $60 it will cause independent, non OPEC producers like Russia to in fact produce more and more.
Russia has massive oil reserves and are not dependent on US energy companies, service providers, money market financing, etc.
If oil breaks the $60 floor, there is nothing stopping it from going to $40 like 2009.


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## doctrine (Sep 30, 2011)

At $40, production starts being tied in, I would expect. That article implies the Saudis would be cutting back below $60.

Interestingly, I took at a look at the biggest US fracker, Continental Resources. They traded at a debt to cash flow >2.5:1 as of end-Sep, and prices have just plummeted since then. I would guess they are well in excess of 3:0 now. And CLR sold all of their hedges at higher prices. Unbelievably enough, they still trade at 3 times book value. Imagine if they were priced similar to Canadian frackers who are trading well below.

US frackers are going to come to a hard reality very soon.


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## gibor365 (Apr 1, 2011)

_if we make the further assumption that this situation is being engineered jointly by the US & Saudi Arabia_ this is the most logical scenario.... Saudis can tolerate for time being low oil prices, but do they really need it? About half of OPEC members are very unhappy with current oil prices...do Saudis need those conflicts?
US first priority is to destroy Russia's economy and they don't care nor about Canada neither about their own oil producers or even new big recession... In late 80's crush in oil prices was one ot the reasons CCCP broke apart.... but current Russia is completely different country from artificial CCCP Empire


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## HaroldCrump (Jun 10, 2009)

gibor said:


> US first priority is to destroy Russia's economy and they don't care nor about Canada neither about their own oil producers or even new big recession...


+ 1 !


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## geoffh (Nov 15, 2014)

I don't see how destroying the Russian economy would benefit the US in any way. 

First, if Russian imports start to decline due to weakening domestic demand and incomes, the European economy would take a huge GDP hit. About half of Russia's imports come from Europe. Also, China comprises about 15% of Russia's imports. If China and Europe decelerate faster, the entire global economy could be dragged down, which would kill the US.

Also, an enemy in dire economic straits is more likely, not less likely, to be aggressive and unpredictable. The whole "nothing to lose attitude" has gotten us into trouble many times over the last 100 years. The Russian revolution started because times were so difficult economically in Russia during WW1. Hungry and/or newly poor people are much easier to convince to do radical things.


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## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> *1.* The royal family - *all 15,000 of them - are well taken care of.*
> *2.* Currently the Kingdom is spending about $265B on social programs, infrastructure projects, etc. *Saudi Arabia Can Afford to Keep Oil Prices Low for Years to Come*..


*1.* Sure, had never any doubt about the well-being of the 15,000 princes/princesses! What I actually meant is that, the royals have been more scared, hence less greedy with the oil fortune in recent years.

*2.* I'm not convinced about potential long-term low oil prices, regardless of the kingdom's 200 billion + in proven oil reserves.

In 2011 alone, Saudi spent nearly $100 billion to avoid an Arab Spring in their own backyard [many more billions by now]. 

*Saudi King Abdullah offered $93 billion in handouts on Friday and boosted his security and religious police forces, opting for a mixture of carrot and stick to stave off unrest rocking the Arab world.*
http://www.reuters.com/article/2011/03/18/us-saudi-king-idUSTRE72H2UQ20110318

How are things today with increased Islamic Fundamentalism in the region? We have ISIS, et al. So, I do not believe that this country [with whatever other collaborator] is in a position to manipulate or do whatever they please to punish everyone else/protect their market share, for however long they wish, and not just manipulation when it comes to oil prices. The broad repercussions in the kingdom, are about much more than unemployment these days, but about the very survival of their constitutional & absolute monarchy.

The reality is that, there is a global thirst for oil that's not going anywhere any time soon, or have we suddenly become less oil dependent? Let's ask China.

*'Sales in China, the world's biggest auto market since 2009, surged 13.9 percent to 21.98 million vehicles last year [2013], the China Association of Automobile Manufacturers (CAAM) said.'* How long would any growth deceleration last there? Years? I think not.

And how about wrapping your head around this: *'By 2035, the number of vehicles on the road worldwide will double to 1.7 billion. Yes, that's billion with a "B". That's the latest forecast from the International Energy Agency.'*
http://www.cnbc.com/id/49796736#.


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## Chris L (Nov 16, 2011)

I glaze over when conspiracies are involved. Why is this not just an oversupply issue?


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## gibor365 (Apr 1, 2011)

geoffh said:


> I don't see how destroying the Russian economy would benefit the US in any way.
> 
> First, if Russian imports start to decline due to weakening domestic demand and incomes, the European economy would take a huge GDP hit. About half of Russia's imports come from Europe. Also, China comprises about 15% of Russia's imports. If China and Europe decelerate faster, the entire global economy could be dragged down, which would kill the US.
> 
> Also, an enemy in dire economic straits is more likely, not less likely, to be aggressive and unpredictable. The whole "nothing to lose attitude" has gotten us into trouble many times over the last 100 years. The Russian revolution started because times were so difficult economically in Russia during WW1. Hungry and/or newly poor people are much easier to convince to do radical things.


When US dealing with political issues, they don't think about economy!
Russia (and to certain extent China) is practically the only US real opposition in the world. US want to be the only "cop of the world".
Russia didn't "allow" Obama to bomb Syria... didn't allow US/NATO to invade Ukraine (where US admitted spending 5 bil $ on "democratization"reforms).... Sanctions against Russia is not helping (even more, they are killing Western Europe first of all...and you think US cares?)... if US destroys Russia's economy , they think Russia will be much weaker and softer from geopolitical point of view.
Just check how much billions US give away for "military aid" to different countries and how many US citizen live in poverty and don't have even basic health insuarance. You will see where the US priorities are....



> Hungry and/or newly poor people are much easier to convince to do radical things.


 Explain this to US leaders


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## gibor365 (Apr 1, 2011)

Chris L said:


> I glaze over when conspiracies are involved. Why is this not just an oversupply issue?


If oversupply happens, cuts in production should follow.... and this what many of oil producing countries want, but the best US friend - Saudis, don;t want to do it...
There is nothing to do with "conspiracies ", just look who benefits from it


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## Chris L (Nov 16, 2011)

gibor said:


> If oversupply happens, cuts in production should follow.... and this what many of oil producing countries want, but the best US friend - Saudis, don;t want to do it...
> There is nothing to do with "conspiracies ", just look who benefits from it


So when oil was up, people said it was because the Saudis cut supply to boost prices...but today, they aren't interested in the prices anymore?

Isn't the technology in oil, et al. not the culprit in boosting supply? Plus a drop in demand...

The politics of this doesn't sound totally legit to me. But I'm obviously not the guy in the know.

I would think there is a vested interested in keeping prices high, but if there are too many competitors, then simply dropping YOUR supplies does nothing for YOUR bottom line. Your competitors will simply take more of the $ pie. This is what I see.


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## gibor365 (Apr 1, 2011)

> .but today, they aren't interested in the prices anymore?


 Harold in one of the posts in this thread gave his explanation that I agree...
When your "best friend" asking you to hold prices low for time being and promises very good incentive, wouldn't you agree?!
Also Saudis can have their own strategy, like "killing" less profitable oil producers and than drastically increase prices...



> Plus a drop in demand...


 by 40+ %?! Really?!


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## Chris L (Nov 16, 2011)

It's an interesting theory. Unfortunately, I don't have enough information to know the truth.

40%? Yeah I don't know. Is all the new supply not coming from the US and relative Saudi stability?

How quickly stability can change?

How long do these incentive last (in theory)?


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## Chris L (Nov 16, 2011)

Okay I read back and I'm trying to break things down a bit more.

US wants to crush Russia so they got the Saudis to pump up oil production to kill the Russian economy?

Why don't they just bomb the crap out them? That's not enough these days?


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## gibor365 (Apr 1, 2011)

Chris L said:


> Why don't they just bomb the crap out them? That's not enough these days?


Are you serious now?! To bomb Russia?! Don't you know that Russia has nukes and can just erase half of States?! No country , never, could've defeat Russia in military action....


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## Eder (Feb 16, 2011)

You don't win cold wars with bombs.


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## Toronto.gal (Jan 8, 2010)

Saudi stable? Medieval regimes will continue to unravel.


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## gibor365 (Apr 1, 2011)

Toronto.gal said:


> Saudi stable? Medieval regimes will continue to unravel.


This is another joke! Saudia is one of most un-democratic and obscurantists countries in the world! All non-local man treated like slaves there... woman cannot vote, cannot drive cars, cannot even leave country without formal permission of husband.... I work with Indian guy who lived many years in Saudia...he was talking about some things that I couldn't believe in 21st century... Iraq comparing to Saudia - one big democracy! And...Saudia is the biggest US friend! Isn't is strange?!


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## Nemo2 (Mar 1, 2012)

gibor said:


> .Saudia is the biggest US friend! Isn't is strange?!


Trust me, I spent 7 years, 6 weeks and 2 days in Saudi......the Saudis are no friends to the US or the West.


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## gibor365 (Apr 1, 2011)

Nemo2 said:


> Trust me, I spent 7 years, 6 weeks and 2 days in Saudi......the Saudis are no friends to the US or the West.


Nemo, you are talking about regular people, I;m talking about "royal" families


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## Toronto.gal (Jan 8, 2010)

gibor said:


> This is another joke! *Saudia is one of most un-democratic and obscurantists countries in the world*!


Another farce was that, it was elected by the UN General Assembly last year, receiving the highest # of votes after Nigeria and Chad, only for them to decline the seat.

The explanation given for the renunciation was pretty laughable, and of course it had much to do with the US' refusal to go to Syria, not to mention the rapprochement between the POTUS and Iran. And what exactly stops the KSA from going after their own enemies? They are happy with any Western nation doing the dirty/dangerous work, just not them.

'Accordingly, the Kingdom of Saudi Arabia, based on its historical responsibilities towards its people, Arab and Islamic nations as well as towards the peoples aspiring for peace and stability all over the world, announces its apology for not accepting membership of the Security Council until the council is reformed and enabled, effectively and practically, to carry out its duties and responsibilities in maintaining international peace and security.' :rolleyes2:

Anyone figured the real reason the Wahhabists turned down the seat? The answer is pretty transparent. Funny how much the experts in repression, double standards, et al., had to say. But the behind the scenes string pulling, ie, manipulation, won't last long.

And this year, one of the winners to the UNSC was Venezuela. Is that the same seat Canada lost in 2010? LOL.


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## gibor365 (Apr 1, 2011)

One small point "


> The hijackers in the September 11 attacks were 19 men affiliated with al-Qaeda, and 15 of the 19 were citizens of Saudi Arabia.


... so why Iraq got bombed for ?!


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## HaroldCrump (Jun 10, 2009)

The cracks are already beginning to appear, within less than 3 months of oil slide:

_*For Russia, a perfect storm of economic woe looms *_

_*Russian CDS trading at same rate as Lebanon, El Salvador and Iraq*_

*Putin’s New Deal Spells End to 15 Years of Wage Gains *


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## Chris L (Nov 16, 2011)

When Russia is crushed, oil goes back up?

How long will this take?


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## HaroldCrump (Jun 10, 2009)

Toronto.gal said:


> *2.* I'm not convinced about potential long-term low oil prices, regardless of the kingdom's 200 billion + in proven oil reserves.
> In 2011 alone, Saudi spent nearly $100 billion to avoid an Arab Spring in their own backyard [many more billions by now].


Of course...the Kingdom has to keep its welfare spending going to avoid a massive uprising.
I guess there are two key issues here, regarding Saudi Arabai

#1 - How long can their forex reserves last at < $60 oil?

#2 - How much under-the-table support will they receive from the US via petrodollar?

Regarding #1, let's keep in mind that they price their oil in terms of a discount to North Sea Brent Crude.
They are also the _only_ OPEC producer that sets customer specific prices i.e. they set a price and allow customers to buy as much (or as little) as they want at that price.
Also, because of their position within the OPEC, they can set customer specific prices i.e. they can sell their oil cheaper to the US vis-à-vis say China.

They can also swing prices by increasing/decreasing the discount to Brent.
Increasing the discount by even $2 will have significant impact on the demand of Saudi oil vs. WTI.

Notice how the spread has been tightening in the last 3 months :










So essentially, they are a market maker...their behavior is exactly the same as a regular market maker in stocks, bonds, etc.

Regarding #2, I believe the US support will be _substantial_.
The Saudi Kingdom still represents significant strategic interest for the US, notwithstanding the nuclear deal with Iran.
It is very important for US to keep propping up the Kingdom, lest the entire region devolves into a mother-of-all messes.

The "support" to the Saudi welfare state will come in various forms - swap LOCs, military and logistical aid, foreign aid, arms for food programs, discount sale of US treasuries, and so on.
There are literally unlimited ways the US can keep discounting the Saudi welfare state.

That being said, it is entirely possible that all of these prove ineffectual, and the Kingdom devolves into civil unrest and rebellion.
After all, nothing can stop a revolution whose time has come.


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## Toronto.gal (Jan 8, 2010)

Not much to disagree with Harold.

As someone wrote, Saudis play, and Washington dances to their respective tunes.


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## HaroldCrump (Jun 10, 2009)

Chris L said:


> *When *Russia is crushed, oil goes back up?


Ha - I see that you ask _*when*_, not _*if*_.
I wouldn't be so sure just yet...Russia is not Venezuela, Nicaragua, Panama, or some other banana republic.



> How long will this take?


Let me call my chum Putin...I will call you right back :biggrin:


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## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> Let me call my *chum Putin*...I will call you right back :biggrin:


:biggrin: We would appreciate a quicker answer HC - the tsar might be a lil busy, so how about checking your crystal ball? :biggrin:

Or, could try calling the POTUS.


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## gardner (Feb 13, 2014)

CPA Candidate said:


> How long will this take?


Last run through was 72 years -- from 1917 to 1989. And in there they fought off Hitler. The russkies can hold out for a considerable spell.


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## Chris L (Nov 16, 2011)

HaroldCrump said:


> Ha - I see that you ask _*when*_, not _*if*_.
> I wouldn't be so sure just yet...Russia is not Venezuela, Nicaragua, Panama, or some other banana republic.
> 
> 
> Let me call my chum Putin...I will call you right back :biggrin:


A breakdown of what Putin stands to gain and lose: http://www.huffingtonpost.com/mark-siegel/putins-real-agenda_b_4999070.html


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## gibor365 (Apr 1, 2011)

Chris L said:


> He's going to sink with the ship? Why bother? Putin is just a man... and he's doing a poor job of leading his people. His people will ultimately decide his fate and as you pointed out, they aren't too comfortable at the moment. They will ultimately decide, not Putin.





> Last run through was 72 years -- from 1917 to 1989. And in there they fought off Hitler. The russkies can hold out for a considerable spell.


 Yes, Russians used to live in difficult conditions for ages... this is big difference between Russians and Western people



> Ha - I see that you ask when, not if.
> I wouldn't be so sure just yet...Russia is not Venezuela, Nicaragua, Panama, or some other banana republic.


 Very true... and it's not even Serbia...

Support of Putin by Russians are huge "


> By late June, a record-high 81 percent of respondents felt that political protests were unlikely at the current time, and a record-high 86 percent said they "generally approved" of President Vladimir Putin's activities. It is no coincidence that both figures are similarly high.


Compare it with what % of Americans support Obama


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## HaroldCrump (Jun 10, 2009)

Chris L said:


> You put a lot of trust on Putin not caring about his future prospects!....


No I don't...in fact, I suspect he didn't see this coming at all.
He was off making 1-on-1 deals with the Chinese on oil & energy, he was (is) involved in Ukraine, etc.
State controlled Russian companies like Rosneft have been issuing debt denominated in USD.
If Putin had seen this coming, they would not have done this.

I don't think _any_ of the oil-driven governments incl. Canada saw this coming.
Our leaders were debating double TFSA, more tax cuts, etc. as recently as October.



> I believe that he will eventually come around and rebalanced his "priorities." However, I'm not totally sold that this isn't a simple oversupply issue.


Why would the OPEC not cut production when it is clear that pretty much all of them are suffering at these levels?
Around $60, Saudi Arabia is hurting as well.

China is now the largest buyer of Saudi crude...yet, the Saudis cut the price to the USA.

Oil has _always_ been a "managed" market. A cartel, a rigged market.
Nothing is as political as oil.

Normal demand & supply dynamics don't work here...there is always politics involved.


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## gibor365 (Apr 1, 2011)

> Normal demand & supply dynamics don't work here...there is always politics involved.


True again.... 
Just PS, western countries always underestimated Russia.... France, Germany, GB.... now Obama :stupid:


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## gibor365 (Apr 1, 2011)

With all those ridiculous sanctions and dumping oil price..... US will just force Russia (who obviously needs money) to sell more newest kinds of weapons .... there are many countries who need good weapon and who doesn't give a sh$t about Saudis or Obama, China, India, N.Korea, Venezuela, Shi Lanka just to name a few...

I also don't understand no reaction from Harper ... those oil prices will hit CAnada even stronger than Russia.... Russia at least can sell weapons (invlude WMD), forestry (China, Japan, India who need it right on the border) etc.... What Canada gonna do?! Increase export of maple [email protected]


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## Nemo2 (Mar 1, 2012)

http://www.bloomberg.com/news/2014-12-08/energy-insiders-see-fire-sale-buy-most-shares-since-12.html




> The rout in energy stocks reminds Tim Rochford of something else he’s seen in Texas.
> 
> “What happened is almost like a herd of cattle, one cow turns left, all the cows follow it and it’s a stampede,” said the 68-year-old co-founder of Midland-based Ring Energy Inc., one of 118 industry executives who bought shares of their own companies in the last month amid the worst losses since 2008.
> 
> “This is an absolute fire sale,” he said. “It’s an overreaction and the result is it’s oversold.”


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## HaroldCrump (Jun 10, 2009)

gibor said:


> I also don't understand no reaction from Harper ... those oil prices will hit CAnada even stronger than Russia....


There is literally nothing Harper can do to influence the price of oil, unlike Obama.


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## HaroldCrump (Jun 10, 2009)

That said, I do believe the current sell-off is way overdone.

The China manufacturing report from this morning was expected...China slowdown has been talked about for nearly 2 years now.
It had been priced into the price of commodities and commodity mining stocks like Vale, Rio Tinto, Teck Cominco, Lundin etc.
China slowdown is old news.

It was barely 6 months ago that analysts and talking heads were falling over each other raising targets for oil price....$150, $200, even more.
Now they are falling over each other talking about $40, even $30.

$30 oil cannot last one way or another.
If civilization is still intact, at $30 USD no producer can produce oil profitably.
And if this is a deflationary spiral, then oh well...$30 wouldn't hold either...it will go to $10.

If that indeed comes to pass, other than the US, all other countries will simply stop pricing oil in USD.
Oil producers will demand payment in gold only - no other currency will hold equivalent confidence.
It will surely be the end of petrodollar.

It is plausible for a US-Saudi coalition to hold oil range bound between $40 - $60.
That range can hold for 1+ year, if the US is truly determined.
No idea what will happen.


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> There is literally nothing Harper can do to influence the price of oil, unlike Obama.


Putin too...but he`s talking and warning...



> Putin said Russia’s economy had the reserves to withstand a collapse in oil revenues, but added: “We are considering all the scenarios including the so-called catastrophic fall of prices for energy resources, which is entirely possible and we admit it.”
> 
> He said he regarded sanctions as pointless, illegal and likely to harm not just Russian but world trade. “This contradicts international law because sanctions can only be imposed within the framework of the United Nations and its security council.”
> 
> He claimed that as many as 300,000 German jobs could be at risk if there were no contracts with Russia. Putin is also due to see Angela Merkel at the summit.





> Vladimir Putin said Friday that the global economy would collapse if the oil price was allowed to remain at around $80 a barrel for too long. At a press conference following talks on the Ukrainian crisis in Milan, Italy the Russian president warned that prices as low as $80 a barrel would cause US oil production to crash as well as putting pressure on the rest of the global economy.


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## HaroldCrump (Jun 10, 2009)

gibor said:


> Putin said Russia’s economy had the reserves to withstand a collapse in oil revenues


Of course he'll say that.
But Russia is fast depleting its resources.
Up until the summer, Russia was able to use its USD income to purchase large amounts of gold.
This oil situation puts an end to that plan as well, at least for now.


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> Of course he'll say that.
> But Russia is fast depleting its resources.
> Up until the summer, Russia was able to use its USD income to purchase large amounts of gold.
> This oil situation puts an end to that plan as well, at least for now.


But Harper doesn`t talk at all ! Like Canada doesn`t care about oil prices ....


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## HaroldCrump (Jun 10, 2009)

There is nothing to say.
In fact, I like it that the Prime Minister of our country is not making rhetorical statements and panicking about the price of oil or stock markets.
After all, the correction is barely -10% from the Sep highs.

What they should be doing is quietly evaluating the budget and public expenditures in preparation for the spring budget, and making conservative assumptions around oil revenues.
Ensuring we can maintain a balanced budget with $60 oil, how to prevent the CAD$ from sliding further, more free trade agreements, etc.

If the PM were making rhetorical statements like Putin, it'd simply cause more panic in the market.


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## gibor365 (Apr 1, 2011)

> If the PM were making rhetori cal statements like Putin, it'd simply cause more panic in the market


 It can be more?!
As per situation in East Ukraine.... why they just don't do referendum under UN observers?! But US and their puppies will never agree as they know that majority will vote to join Russia!


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## HaroldCrump (Jun 10, 2009)

I won't comment in Ukraine, but regarding PM making some "announcement" about falling oil prices, precisely what would you like him to say?
Please post a sample statement of what you suggest he says.

Words are worthless, IMO - if the PM is to intervene, it should be followed up by direct action.
Such as the Govt. of Canada buying up oil sands companies' bonds or shares, or taking a direct investment in some companies.
Like they bailed out GM by buying shares in the company.

They could also guarantee a specific price to the producers, such as say $75 for WCS.
That is basically supply management, like dairy, wheat, and poultry.

Unless they are willing to take such steps, there is no point in huffing and puffing publicly.
They should spend the time preparing 2015 budget assuming oil revenues based on approx. $60 WCS and plan accordingly.

Goodbye...double TFSA, adult fitness credit, free daycare, etc.


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## Chris L (Nov 16, 2011)

Shhh about double TFSAs. Harold!

I agree with that much...nothing to say. It's the doing. 

Now everyone go buy some undervalued oil stock. You can't really think this is a permanent situation. 6 mos is going to look a whole lot different.


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## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> 1. Please post a sample statement of what you suggest he says.
> 2. Goodbye...double TFSA....


*1.* Was reminded of what the PM said in late 2008. 

*PM:* “The stock market will sort itself out. I suspect some good buying opportunities are opening up with some of the panic we’ve seen in the stock market in the last few days.” *Peter Mansbridge:* “Do you really want to be heard saying that? Are you suggesting people should be buying?” *PM:* “I think there are some great buying opportunities out there.”

*2.* Ms. Yalnizyan would be very happy about that. 

Listen to her at 11:25.
http://tvo.org/video/209196/canadas-income-gap


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## HaroldCrump (Jun 10, 2009)

Toronto.gal said:


> *2.* Ms. Yalnizyan would be very happy about that.


In her world view, the so-called rich should be hung, drawn, and quartered for daring to have any money at all.
Sigh, unfortunately, she will probably get her way...if not now, then in Oct. 2015.


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## Chris L (Nov 16, 2011)

Wealth comes from savings, but only rich people can save? Well I guess the poor are bound to fail no matter what. What's it to the rest of us? At least we're actually trying.


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## HaroldCrump (Jun 10, 2009)

If you ask the CCPA, wealth is created by progressive taxation and income re-distribution.
That is why TFSAs are bad and any kind of tax cut is bad.
Taxes must always go up, never down.


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## PuckiTwo (Oct 26, 2011)

Opec must be really worried that the price of oil doesn't go fast enough down further.:biggrin: Every 2nd day another announcement that they will not cut production. People could forget that they want it down to $40 or so. Will be interesting how many more announcement they will make.


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## HaroldCrump (Jun 10, 2009)

Notice how they keep saying they don't have a price target...and then promptly proceed to talk down the price by promising not to cut output.


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> Notice how they keep saying they don't have a price target...and then promptly proceed to talk down the price by promising not to cut output.


in order to undestand their logic you need to live in Arab country.... lie is a norm there


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## Nemo2 (Mar 1, 2012)

gibor said:


> in order to undestand their logic you need to live in Arab country.... lie is a norm there


As I noted, back on August 25:


> As a friend in Riyadh once noted, (and I forget the context, but it applied equally to so many, many subjects), "Makes sense to me.....I must've been here too long".


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## gibor365 (Apr 1, 2011)

> People could forget that they want it down to $40 or so.


 with such trend oil will be $40 until new year .... and my portfolio will finally delete all 2014 gains :upset:


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## gibor365 (Apr 1, 2011)

Nemo2 said:


> As I noted, back on August 25:


Real story from my work in police.... one arab who got convicted in rape and murder of 16 years old girl, was able to "lie" to polygraph ... I later talked to psychologist who said that this guy was able to do it as he really believed in his lie


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## Nemo2 (Mar 1, 2012)

gibor said:


> Real story from my work in police.... one arab who got convicted in rape and murder of 16 years old girl, was able to "lie" to polygraph ... I later talked to psychologist who said that this guy was able to do it as he really believed in his lie


Doesn't surprise me one bit..........."regular mindsets need not apply" :wink:


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