ENERGY JOB CUTS MOUNT

Job cutbacks in the energy section continue to grow and as we've noted before these are mostly good paying jobs not the burger-flipper kind we've seen accelerate over the last six years or so.

Here's a list of recent news about some of those cuts from: http://theeconomiccollapseblog.com/archives/12-signs-economy-really-starting-bleed-oil-patch-jobs

#1 It is being projected that the U.S. oil rig count will decline by 15 percent in the first quarter of 2015 alone.  And when there are less rigs operating, less workers are needed so people get fired.

#2 Last week, 55 more oil rigs shut down.  That was the largest single week decline in the United States in 24 years.

#3 Oilfield services provider Baker Hughes has announced that it plans to lay off 7,000 workers.

#4 Schlumberger, a big player in the energy industry, has announced plans to get rid of9,000 workers.

#5 Suncor Energy is eliminating 1,000 workers from their oil projects up in Canada.

#6 Halliburton’s energy industry operations have slowed down dramatically, so they gave pink slips to 1,000 workers last month.

#7 Diamondback Energy just slashed their capital expenditure budget 40 percent to just$450 million.

#8 Elevation Resources plans to cut their capital expenditure budget from $227 million to$100 million.

#9 Concho Resources says that it plans to reduce the number of rigs that it is operating from 35 to 25.

#10 Tullow Oil has reduced their exploration budget from approximately a billion dollars to about 200 million dollars.

#11 Henry Resources President Danny Campbell has announced that his company is reducing activity “by up to 40 percent“.

#12 The Federal Reserve Bank of Dallas is projecting that 140,000 jobs related to the energy industry will be lost in the state of Texas alone during 2015.

And of course it isn’t just workers that are going to suffer.

Some states are extremely dependent on oil revenues. Just take the state of Alaska for instance.  According to one recent news report, 90 percent of the budget of Alaska comes from oil revenue…

THE FRACK THICKENS

What if owing to reduced investment and cost cutting crude oil hit $200 a barrel by the end of the decade?

Some might call this political theater. But Claudio Descalzi, the chief of the big Italian oil firm, Eni, just posed that question.

Saying a a lack of production in four or five years along with continued cost cutting and lower capital expenditures "would create a condition for a dramatic rise in oil prices," he floated the number $200 a barrel.

Descalzi referred to Opec's need to stabilize prices by cutting back production, something Opec officials contend ain't in the hydrocarbon deck any time soon as crude traded below $50 a barrel, near a six-year low.

Opec defended it stance, claiming its not directed "at any one country." But that's a meal U.S. fracking firms may have a difficult time digesting.

Stories on the Internet are popping up routinely now about who--Saudi Arabia or U.S. fracking firms--will toss in the stained oil rag first. 

News about jobs cuts and reduced rig counts too are almost daily fare. This is theater, but it's also the stuff of huge profits sometime, somewhere down the oil patch lane.

Speaking to Reuters at Davos, Descalzi compared Opec to central banks and the need to create and maintain price stability. With all due respect to Descalzi, given what we really know about central banks, it was probably a poor choice of metaphors.

FIAT LAND

The long awaited moment is nigh as investors and assorted believers in Qualitative Easing, aka Qualitative Squeezing, depending on one's view of this monetary madness, later today see what's on the mind of the ECB and its astute leader Mario Draghi.

The sure bet is not everyone wll be happy no matter what the ECB pulls out of its magical chapeau.

For QE apologists like Financial Times columnist Martin Wolf who blames something he calls "chronic demand deficiency syndrome,"claiming in his latest garble that Europe is afflicted with it to those austerity prone Germans Wolf labels as pathological, disappointment will carry the day.

Too much or too little too late or too whatever, it's the nature of people carp and grumble.

In our humble view, Wolf's description should more correctly be labeled "chronic supply crock syndrome," but that's just our us being us.

 Wolf takes the ultimate swipe at those who favor prudence over profligacy and those stubborn Germans when he notes whatever Draghi does, if it fails, it won't be because the bank is "too independent but because it's not independent enough."

That's not the call of the wild you're hearing, it's the call of the fiat paper printing shills. 

(Reuters) - Asian shares held near eight-week highs on Thursday as investors bet on the likely size and scope of a bond-buying program the European Central Bank is poised to unveil later in the day as it attempts to revive the flagging euro zone economy.

DECIDE FOR YOURSELF

There's an old joke about a company CEO who asks his chief accountant what two plus two equals.

After a brief hesitation the accountant replies: "Whatever you want it to be, boss."

It appears that same philosophy prevails when it comes to forecasts, a multiple-billion dollar business. In this case when is a forecast not a forecast or, if you will, a non-forecast.

Forecasts or projections or whatever you want to call them are inherently political. They are made with an eye to pleasing whoever pays for them, in this case, the U.S. Congress.

The above is a quote from a recent piece about the accuracy of the U.S. Department of Energy's statistical right arm, the Energy Information Agency (EIA) and its forecasts about America's growing supply of natural gas owing the the fracking revolution in it Annual Energy Outlook 2014.

 http://resourceinsights.blogspot.com

For a little background here's a quote from President Obama.


When US President Barack Obama talks about the future, he foresees a thriving US economy fuelled to a large degree by vast amounts of natural gas pouring from domestic wells. “We have a supply of natural gas that can last America nearly 100 years,” he declared in his 2012 State of the Union.

The above quote is from the December 2014 issue of well-known magazine, Science, that took the EIA to task over its rosy projections.  

http://www.nature.com/news/natural-gas-the-fracking-fallacy-1.16430

Like most government agencies the EIA doesn't like to be questioned or second guessed. And that's precisely the point and why if your interested in the energy markets you need to read these three posts. And as we always say, decide for yourself.


http://www.oilgasdaily.com/reports/Nature_fires_back_at_EIA_shale_gas_critique_999.html

EXCESSES LEAD TO OPPORTUNITIES

A boom in anything--bond, home, oil prices--creates excesses.

Yesterday, we mentioned how many big Wall Street firms were just now releasing their most bearish reports on energy at a time when the hay is already in the barn. In short, they didn't see it coming.

Now as is Wall Street's frequent want, there rolling out the damage control to their reputations.

First come the excesses, then the inevitable cuts. It's a market way of doing things that reflects human behavior so long as one can keep the bureaucrats and politicians at bay.

Here's a headline from today's Financial Times, "Total to slash capital spend by 10% under new chief."

Total, the French  oil-and-gas giant plans to reduce group-wide capital spending by 10 percent this year and speed up billions pf dollars in asset disposals, under an accelerated cost-cutting plan led by new chief executive Patrick Pouyanne.

The move comes as thousand more job cuts were announced in the energy industry yesterday, with Baker Hughes, the oil field service provider being acquired by Halliburton in  a $26.8bndeal, saying that it would lay off 7,000 employees.

The executive also said it was considering a company-wide hiring freeze and it would cut its capital spending by $2-$3bn from 2014's total of $26bn. This is hardly the first of the big guys to take such a stand.

Earlier, ConocoPhillips, announced a 20 percent cut in capital spending for 2015 and BP, still struggling with its legal problems, already took a $1bn charge off to pay for job losses. At the same time rig count, a much followed industry indicator, recently fell for the sixth straight week.

According to a statement from Baker Hughes, "Oil drilling is falling faster in North America than the rest of the world," as the company warned of the beginning of "a downturn in the industry of the type seen once or twice every decade."

Some of the cuts, as in the case of Total, are to help maintain the group's dividend, a point their new leader noted was essential to retain investor confidence.

The other shoe from the lower energy prices is consolidation, something Total's new chief mentioned: "I  think you will see some impact on smaller players. I think it will be an opportunity for larger players maybe to have access to resources at a lower cost."

MORE ON GOLD

Here's the real story behind the Swiss national bank's sudden ending of its 2011 peg to the euro.

Economist John Maynard Keynes was noted for saying lots of things and one of them was a response to a question about changing his view to which he reportedly replied: "What do you do when you find out your wrong? I change my mind."

And that's what the Swiss central bank did last week, change it's outlook before their central bank doors get blown off their hinges in a modern day central bank version of your pain tolerance is important but not as important as ours.

Last one out turn off the lights because you won't be needing them any time soon.

http://www.mining.com/swiss-franc-farce-may-be-gold-price-tipping-point-89548/

VOLATILITY CHECK

American humorist Will Rogers presciently pointed out a long time ago that he was more concerned about the return of his money rather than the return on it.

In case anyone doesn't understand, Rogers' observation is a metaphor for what's going on big time in today's markets as investors scramble for yield while turning a blind eye about the risk to their capital.

As this Thursday approaches and the nearly consensus market expectation the ECB will roll out some form of QE, interest rates are likely to head lower once the economic cards hit the table in full view. 

In a world of falling interest rates or one central bank instigated and supported with a put option, investors will be scrambling for yield more than ever.

Such a scenario would bode well for safer dividend yielding stocks and certain asset mangers who can out perform returns investors get from traditional accounts like savings and CDs.

If you feel the limb getting slimmer and slimmer as investors scoot farther and farther away from the trunk, you're probably onto something.

One might say the interest rate and yield climate is the opposite of what's going on in the oil market where any positive news is being totally ignored and only the negative given any traction as many Wall Street firms that completely missed the oil downturn are only now tripping over each other to get out their most bearish reports.

In our view too many investors are expecting QE European style to mimic what QE American style did at least in part and that is keep volatility in check.

That's a meter for the last couple of years that's been relatively flat.

WATCH WHAT YOUR HOLDING

Gold hit a four month high Monday pending the ECB's expected but long-awaited QE program.

Talk about looking for a four leaf clover in a field where uncertainty and indecision reign, the wished-for-magical elixir of QE's been on the minds of too many for too long.

The euro recently hit an 11-year low against the rising U.S. dollar. Printing money debases the currency being printed. If one writes favorably about gold he or she is by MSM standards a gold bug. But those who vilify the yellow stuff are mostly fiat paper shills.

So the gauntlet has been tossed. Priced in euros gold is now back to prices not seen since 2013, having risen 3.5% since the Swiss central bank performed its monetary tap dance on currency markets last week.

Low bond yields are part of what goes around comes around. Low bond yields lower the holding costs associated with gold helping wipe out one its critics favorite points--gold doesn't yield anything while one is holding it. 

To the less MSM-annointed members strolling around the planet that seems a curious thought given the current yields on checking and savings accounts, notwithstanding taxes and government lies about the absence of inflation.  


In 2011 gold topped out at a record $1,921.17 an ounce before falling just under 30% in 2013 to the cheers of the fiat money crowd. Last year it eked out a small rise.

The bigger message from the Swiss bank heist is one fiat money shills could come to hate--central banks are not what many believed, fortresses of stability. 

While for those who choose the easy road, targeting greedy individuals and corporations for widening the income inequality gap, central banks with their easy money madness might be the real villains hiding in the economic clover.

Make no mistake. If Euro-style QE, even in its most-watered down form, happens, there will be money to be made. But it won't be made by those at the  bottom of the economic pit. That's not the way central banking works. It's only the way they talk.

So be careful what you're holding.

DOWNSIDE PRESSURE

 
 U.S.markets were closed for the Martin Luther King holiday but that didn't stop oil futures from declining.

NEW YORK (MarketWatch) -- ICE Brent crude oil futures for March delivery lost $1.33, or about 2.7%, to close at $48.84 a barrel on Monday during a session when U.S. markets were closed in observance of Martin Luther King Jr. Day. The London-traded benchmark is now down 57.5% from its 52-week high of $115.06 in June, and has fallen during 13 of the past 17 sessions, according to Dow Jones data. Brent crude is down 14.81% in 2015.

It will be interesting to see if New York follows suit when things get back to full stride Tuesday.  

With all the downside pressure on oil prices one could postulate much of the pressure that goes into the fracking business is being pumped in another direction.

Just where the point of equalization is, nobody knows. But there will be one, that much is clear.

GREED TAKES A HIT

Greed may know no bounds, but Thursday last week greed--the Federal kind--took one across the face.

U.S. District Judge Carl Babier ruled that British Petroleum unloaded 3.2 million barrels of oil in the Gulf not 4.2 million the U.S. government claimed.

That's a 25% decrease and as we previously noted U.S. officials wanted to fine BP $4,300 a barrel. On Friday BP's shares jumped 5.5% to close at $37.86. Even at this price the shares on a $2.40 dividend are  yielding 6.7%.

Instead of the old milk bottle, this is a game of spin the oil price wheel and see where she stops. Nor is it how long the price stays there, despite the palaver about falling knives and lost opportunity costs owing to tied up capital.

Big oil is cutting costs. Most of these programs means job cuts, too. In this case higher paying jobs--not those hamburger flipping types created since 2008. Those job cuts effect to a degree any benefit of lower prices at the gas pump.

If there is a mainstream media meme more over-worked today than that expected $150 billion tax break to consumers if oil stays in the $50 a barrel range, we have not seen or heard it.

 Much of the current attitude around the Street about oil disallows for the unseen.