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ChrisJCook

ChrisJCook
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  • This Is What Will Really End OPEC [View article]
    Why would Iraq produce any more oil than is necessary to keep the market supplied at the upper 'seller's market' boundary price where demand gets destroyed?

    Sure they might develop their capacity to produce: but actually pump the stuff...not so much.
    Dec 15, 2014. 08:47 AM | 2 Likes Like |Link to Comment
  • Will Oil Price Decline Be The Trigger For A Larger Global Economic Slowdown? [View article]
    Oil price decline reduces the extraction of economic rent by oil producers from consumer nations.

    Temporarily removing this drain on the productive sector of the global economy can only be good for the global economy, but not so good for the essentially unproductive bauble and bling industry which serves the elites in control of oil resources.
    Dec 7, 2014. 09:18 AM | 2 Likes Like |Link to Comment
  • Consider Crude Oil Now [View article]
    I do not recognise the global economy in which you live.

    In my view we will see $60/bbl before we see $110/bbl again.
    Oct 11, 2014. 09:28 AM | 1 Like Like |Link to Comment
  • Saudi Price War, But We Still Like Oil Here [View article]
    If the Saudis were to have any effect on this market they would have cut production significantly two months ago. As it is, we're a lot more likely to see $60/bbl before we next see $110/bbl.
    Oct 6, 2014. 09:18 AM | 1 Like Like |Link to Comment
  • The People's Republic Of Scotland [View article]
    Interesting article but I have a few quibbles.

    Firstly, the referendum questions and who qualified to vote were agreed by both governments, so please do not accuse a Machiavellian SNP!

    Many observers here believe that if Cameron had opted for a third 'Devo Max' question it would not only have been accepted by the SNP but would also have won by a landslide. IMHO Cameron is guilty of one of the greatest misjudgements in UK political history by taking the decision he did.

    Secondly, Jim Sillars and his 'Day of Reckoning' is as relevant to mainstream SNP thinking as (say) Bernie Sanders is to the Democrats. ie not at all, as the embarrassingly biased UK Press well know.

    My forecast is that Yes will win - and win handsomely - on Thursday because hundreds of thousands of long disillusioned Labour voters (who feel like I do that Labour left me, rather than vice versa) are parting company from the useless Westminster Labour hierarchy in search of better Scottish policies.

    In an age where the ideology of the Left died with the fall of Communism and the ideology of the Right died with the fall of Lehman Brothers there is now a policy vacuum opening up which Scotland is uniquely well-placed to fill. That's why I look forward to Friday morning with both hope and expectation: that is when the work begins to build a networked economy from the ground up in Scotland.

    And as a matter of interest, there are better ways to skin the currency cat than the SNP's out-dated bank-centric thinking.

    http://bit.ly/1pi668b
    Sep 16, 2014. 09:51 AM | 2 Likes Like |Link to Comment
  • How To Annoy A Peak Oil Theorist: The Soft Patch In Oil Prices Is Here To Stay [View article]
    No mention of the most important factor of all: demand reduction & substitution cased by high prices of marginal production.

    The cheapest carbon fuel of all is carbon fuel saved. Absent a new financial market paradigm expect continuing booms and busts.
    Sep 14, 2014. 08:53 AM | 2 Likes Like |Link to Comment
  • Cushing Drawdown Not A Concern For The Oil Market [View article]
    If WTI is in backwardation there is no reason for traders to store it and every reason to refine it asap.
    Jul 25, 2014. 08:45 AM | 1 Like Like |Link to Comment
  • Planning For Future Rate Hikes: What Can We Learn From History? [View article]
    Money has no cost: Credit has a cost and Capital has a price.

    Any attempt to increase $ interest rates without increasing the purchasing power of the 99% will collapse the economy
    Jul 6, 2014. 08:48 AM | 1 Like Like |Link to Comment
  • Oil Supply Overflowing [View article]
    Brent continues to be manipulated. A handful of cargoes control the price.
    Nov 28, 2013. 09:26 AM | Likes Like |Link to Comment
  • Iran Oil Outlook (Part 2): How Iran Stockpiles Oil And Hides The Fact [View article]
    I admire your energy and imagination Alex but it bears no relation to the facts.

    I've been to Iran seven times, most recently in May this year, and I have had good access to the highest levels of the oil and gas complex. Now under the new government I could not have better access.

    For crude oil producers, strategic reserves are oil left in the ground, but it is true that they do tend to maintain some buffer stocks, typically no more than a couple of weeks supply..

    I have some direct knowledge of Iran's storage. Yes, they perceive that increased buffer storage is necessary, since there is a limit to the number of tankers they have available for floating storage.

    They have contracted at least one conventional concrete storage installation (I know the original contractor personally), but it really is de minimis - eg by comparison to South Africa's Saldanha Bay - and has been held up by corruption issues and mis-management for six years to my knowledge.

    Your entire article lacks knowledge of the realities on the ground in Iran and the catastrophic management and governance vacuum that exists there.

    Finally, why on earth would Iran dump oil on the market knowing that if they did so they would almost certainly end up selling 2m bpd at $50/bbl and end up with less cash than through selling 1m bpd at > $100/bbl?

    They're not a charity, you know.
    Nov 16, 2013. 08:43 AM | 1 Like Like |Link to Comment
  • Crude Fundamentals Continue To Point Down [View article]
    Is a refiner hedging crude oil purchases through being long crude oil futures also speculating?

    Not unless your position is that futures contracts are by definition 'speculation'.

    Crude oil futures positions held by index fund and ETF investors are for the most part motivated by 'inflation hedging' aimed at avoiding loss, rather than make profit.

    My point is that these investors do not have speculative motives whatever the market risk they are running. They have been mis-sold market risk on a heroic scale by the investment bank swap dealers we see are on the other side of the trade but are themselves backed off against producers.
    Sep 21, 2013. 05:05 PM | 1 Like Like |Link to Comment
  • Crude Fundamentals Continue To Point Down [View article]
    A couple of points.

    Firstly, any private sector holder of inventory will sell it in a backwardation, and boy, do we have a backwardation, not because of prompt demand, but because of forward selling to lock in margins.

    Secondly, I don't think 'speculator' - which in my analysis is an investor looking for transaction profit - is a good descriptor of most of the 'long' investors in the market.

    What we see here is mainly 'passive' long-only investors - eg index funds and ETFs - which investment banks used to deal with OTC, but which are now all on-exchange and hold long positions which are matched by a large part of the swap dealer short positions.

    The investment banks have essentially shut down that part of their business, put all the risk on-exchange in a single point of failure, and left it to God and Providence.
    Sep 21, 2013. 10:25 AM | 1 Like Like |Link to Comment
  • Crude Oil Inventories Drop Again [View article]
    When crude oil is in backwardation commercial interests have no interest in storing it, and they either sell it, or refine it, and get the best price for the crude oil or product they can

    It's not difficult.
    Jul 25, 2013. 08:24 AM | 1 Like Like |Link to Comment
  • Record Speculation On Crude [View article]
    I omitted on this occasion (sorry about that) to mention index investors, who were of course the first in this game courtesy of GSCI and the long partnership/collaboration between BP and Goldman.

    ETFs came later.

    Of course oil and gas are two different markets - I architected the UK natural gas balancing point futures contract so I know something of natural gas.

    But natural gas prices have not been historically linked to oil prices for no reason.

    There are essentially two trend lines in all commodity markets: there's the lower boundary buyer's market at which production gets locked in, and then there's the upper boundary seller's market at which demand gets destroyed.

    Whenever they can - ie when they have the leverage - producers will always attempt to hold the price at the upper bound. That is precisely what has been happening due to the entry into the market of long only funds, firstly Index funds (as you say) and then ETFs and ETPs.

    These 'passive' inflation hedgers essentially contribute to the very inflation they aim to avoid.

    When such passive funds come to dominate a market they destroy the price formation of that market, and they turn the forward curve into a reflection of the $ yield curve (provided interest rates remain at the Zero Bound).
    Jul 23, 2013. 02:06 PM | 2 Likes Like |Link to Comment
  • Record Speculation On Crude [View article]
    My take is that what we are seeing is that massive off-exchange prepay contracts between the Saudis and JP Morgan - which were backed off against 'muppet' investors in crude oil ETFs - have essentially now been brought 'on-exchange' pending liquidation.

    The price risk of a market price discontinuity (think Tin Crisis 1985) is therefore now concentrated in a single point of failure also known as a clearing house

    We are in the end game of perhaps the greatest market manipulation the world has ever seen - which makes Hamanaka's 10 year copper manipulation for Sumitomo look like a car boot sale. Essentially this has been an extension of the Saudis' post 1973 petrodollar pact with the US, to the effect that crude oil has since 2009 been pegged with a collar at levels politically acceptable to the Saudis,and a cap at levels politically acceptable to the US.

    The crazy WTI/Brent spread has been prima facie evidence of a market manipulation price bubble maintained over years by the usual suspects using the completely dysfunctional Brent benchmark. This support was made possible with the support of leverage provided by the risk averse 'passive' investors who were sold on inflation hedging using ETFs and ETPs by investment banks.

    The other prima facie evidence of the bubble now about to end has been the divergence of crude oil and natural gas prices, and I believe that this is about to correct.

    Note in Paulo's very useful chart the Curious Incident of the Speculator in the Night-Time. ie the complete absence of 'speculation' in 2008 - whether active investors or passive investors - during the biggest price spike and dump ever seen.

    Once the Iran risk premium ends - and believe me, the new Iranian government will be completely engaged in ensuring that it does - then Brent will at last lead the market down.

    How fast that descent will be is an interesting question.
    Jul 23, 2013. 09:51 AM | 1 Like Like |Link to Comment
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