Oil slides below $33 to near 12-year low as China turmoil rattles investors

Yahoo Finance ^ | 01/07/2016 | Simon Falush

[expat_panama]

LONDON (Reuters) - Oil slid below $33 a barrel on Thursday to levels not seen in more than a decade, as a tumble in Chinese equities rattled investors already concerned by near-record production and massive stockpiles of unwanted crude and refined products.

The price of oil has shed around 70 percent since the current downturn began in June 2014, causing pain to oil companies and governments that rely heavily on crude revenues.

China let the yuan slip on Thursday, sending regional currencies and stock markets globally tumbling as the offshore yuan fell to its lowest since trading started in 2010.

China's stock markets were suspended less than half an hour after opening, the second emergency suspension this week.

"Negative sentiment is hurting demand expectations, growth is easing in China and there is a spillover from the inventory build in (U.S.) gasoline stocks from yesterday and this is reflected in prices," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

Brent fell more than 5 percent, or about $2 per barrel, to a low of $32.16, a level not seen since April 2004. It had recovered to $33.45 by 1043 GMT.

U.S. crude futures dropped more than 5 percent to a low of $32.10 per barrel, the lowest since late 2003, before bouncing slightly to $32.97.

[expat_panama]

--and a lovely Sure Happy It's Thursday morning to all!   Yesterday gold'n'silver popped up (now at $1,102 and $14.13) but after yesterday's stock plunge in heavy trade we're now really going for it with stock index futures a grim -1.26% on top of a -0.04% for metals.  Reports:

7:30 AM Challenger Job Cuts
8:30 AM Initial Claims
8:30 AM Continuing Claims
10:30 AM Natural Gas Inventories

--plus all the news that's fit for wrapping fish:

Despite weak start to year, Wall Street stocks have room to rebound
The Good, Bad and Ugly of the Global Economy - Simon Constable, OZY
How Market Reacts to SOTU Speeches - Robert Schroeder, MarketWatch
Black Swans In Our Midst? Get Ready For 2016 - William Pesek, Barron's
How Economics Morphed From Theory To Data - Justin Fox, Bloomberg
Unlike Hillary, Sanders Wants Wall Street Overhual - David Dayen, TNR
Beware All the Animus Toward Banks - Jonathan Macey, Hoover Institution
After Mass Shootings, Some Investors See Gun Gold - Julie Creswell, NYT

 

[expat_panama]

[click here for the lost missing page]

[CincyRichieRich]

I suspect this hurts Saudis also whereas Iran would benefit? I’m thinking Jarrett/0bama are Shia so they love this.

[mad_as_he$$]

Market is going to get very ugly before today is over.

[demshateGod]

I think 0 is Sunni, but he has enough American pragmatism (a progressive philosophy) to put away that silly distinction in order to destroy the West.

[bert]

—— the current downturn——

the current down turn and 2014 in the same sentence needs some examination. a down turn in the economy that has lasted for in excess of a year, more than 4 quarters, could be said to be exhibiting a trend that is receding. That is, the slope of the curve is negative.

so, the question becomes with a receding curve of more than 4 quarters, can the condition be described as recession?

that is, can it be reliably stated that the worsening Obama recession began in 2014?

[MeneMeneTekelUpharsin]

Wonder when the real estate scam in the U.S. is going to collapse. No jobs, no economy, worldwide turmoil and houses are still price WAY beyond what a common man can make. Interesting.

[conservativesister]

So how much did we pay at the pump the last time the barrel was $33? Anyone know?

[palmer]

From the good bad and ugly article:

So where does China's sluggishness stand in all of this? Its economy is definitely slowing down, though the country makes up less than 15 percent of the global economy, says John Canally, chief economic strategist at broker-dealer LPL Financial, in Boston. "What matters more is the U.S. and Europe," he adds. Canally is, of course, correct, because...

The author is of course, wrong. The "China rattles investors" headline said it best, investors are the rattles and China is the rest of the snake and the snake is dying. Over time the speculators (which they like to call investors) can get out of China Inc (not just the Chinese stocks but the whole cheap crap economy) and switch to something new, another bubble somewhere else. But that takes time and in the meantime it will be ugly.

[palmer]

A barrel turns into 20 gallons of gas and 12 diesel. But the barrels being refined right now cost more than $33.

[grania]

Everything is rigged, unless and until the puppet masters can't control the theater. It happened with the meltdown when the "great recession" began. The solutions made the rich and powerful more rich and powerful, leaving us little folk to suffer while they impose their sick Kalergian policies.

Everybody should research Kalergi and the movement named after him. It's scary stuff and it explains a lot.

The question is, will the puppet masters lose control? What if the Saudi family and some leaders who are destroying Europe and the US abandon their countries if the little folk decide to party like it's the French Revolution?

I suspect we'll know in a few days if things spin out of control. I can see some wisdom in stocking up on food and supplies, just in case.

[bert]

not so. the problem is at least two fold

first the rest of the world has reduced purchasing and that loss of sales has forced restrictions in a booming business that has difficulty reversing

secondly, irrational exuberance by the new Chicaps over the period of extreme economic growth resulted from a lack of experience with the resilience of an economy dependent on exports.

like the rest of the world, China will muddle through and a generation of chastened Chicaps will go forward

[John W]

How ugly would you estimate?

[Jack Hydrazine]

It’s not China, but America’s sluggishness that is spooking investors.

[thackney]

U.S. All Grades All Formulations Retail Gasoline Prices
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=emm_epm0_pte_nus_dpg&f=m

But remember all the other costs associated with refining, distributing, marketing, taxes, etc have gone up since then.

The cost of the crude oil is now less than half of the cost in gasoline.

[thackney]

I suspect this hurts Saudis also whereas Iran would benefit?

Why would Iran benefit from lower priced oil?

[r_barton]

It’s all Japan’s fault. They make the Prius that gets 45-miles to a gallon. I remember my old ‘67 Ford LTD with a 390-cu in. engine that got 9-miles per gallon, downhill with a tailwind. ;-)

[palmer]

The Chicommcaps may muddle through but their speculative bubble is over. The investment world is going to have to adjust and that will be painful. The root of the problem is that all investors speculators leveraged that bubble in some way. Even my ultra conservative portfolio in one of my accounts has some exposure. There are no investors anymore. The Chinese will devalue and try to push another cycle of speculation and the Fed will keep a favorable policy for carry trade. There will be another carry-trade fueled bubble with a rise in Chicommcap currency and another crash although neither will be as big. The real speculators will start to look elsewhere.

[palmer]

I tend to agree. China is just an excuse. But China has been the source of tripling and quadrupling and more, and that is going away. America’s problem is that printing money and giving it to politicians to hand out is not sustainable. A rapidly shrinking labor force participation rate is the problem and that is caused by the politicans.