It's a Shoot-Out -- January 7, 2015; SM Energy To Exit The Mid-Continent

This is cool. Reuters calls it "high-noon." I called it a "shoot-out" quite a while ago. My first post on the subject had a great video - that was December 6, 2014, a month ago. Reuters is reporting:

As a test of wills between OPEC nations and U.S. shale drillers fuels a global oil market slump, a brewing battle between Canadian and Saudi Arabia heavy crudes for America's Gulf Coast refinery market threatens to drive prices even lower.

While the stand-off between the oil cartel and U.S. producers of light, sweet shale oil has captured the limelight in recent months, the clash over heavier grades - playing out in the shadowy, opaque physical market - may put even more pressure on global prices that have halved since mid-2014.

Two factors will come into play over the next few weeks: From the North, new oil pipelines will pump record volumes of Canadian crude to the southern refineries, many better equipped to process heavy crudes than lighter shale oil.

From the Middle East, top exporter Saudi Arabia is offering crude at discounted prices in an attempt to defend its remaining share of the important regional market, which has shrunk by more than half in recent months.

I still like the video.

More:

The looming clash of barrels comes at a time when oil markets already face a global glut expected to last for a year or longer.

Large volumes of foreign heavy oil reaching the Gulf Coast will give many U.S. refiners more choice after they have upgraded their systems to process cheaper, heavier crudes. The new supply also marks a breakthrough in Canada's years-long effort to bring its growing Alberta oil sands crude output to new markets.

Enbridge Inc's 600,000 bpd Flanagan South pipeline, which runs from Illinois down to the Cushing, Oklahoma, oil hub began commercial service on Dec. 1; Enterprise Product Partner announced that its 450,000 bpd Seaway Twin pipeline from Oklahoma to Freeport, Texas, shipped its first volumes on December 21, 2015.

That promises another quantum leap for Canadian crude after its U.S. Gulf Coast sales already hit a record 274,000 bpd in October, nearly three times as much as a year earlier, according to U.S. data.

The new flows will compete with other crudes as well. Some refiners see Saudi's medium crude as a more direct substitute for Mexican and Venezuelan crudes.

However, some refiners are likely to blend oil sands crude with overabundant super-light U.S. condensate, creating medium blends that may rival Saudi Arabia's main grade, said Citi global commodities strategist Ed Morse. He warns the clash could set up another tumble in global prices.

Bakken oil is now down to the $30-range in some spot prices, I am being told.

And it's not going to quit any time soon. The Wall Street Journal is reporting that drillers will keep drilling due to the amount of debt they have (they have no choice except to keep drilling). Same with Russia, Venezueala, Iran, etc., they have not choice but to keep drilling.

American oil and gas companies have gone heavily into debt during the energy boom, increasing their borrowings by 55% since 2010, to almost $200 billion.

Their need to service that debt helps explain why U.S. producers plan to continue pumping oil even as crude trades for less than $50 a barrel, down 55% since last June. But signs of strain are building in the oil patch, where revenue growth hasn’t kept pace with borrowing.

On Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money and citing debt of between $10 million and $50 million. Neither the Austin-based company nor its lawyers responded to requests for comment.

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SM Energy Exiting The Mid-Continent

The story here.

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ObamaCare
A TrainWreck?

Bloomberg Businessweek is reporting:

A year ago, PreferredOne looked like an Obamacare success story: The Minnesota health plan offered some of the lowest premiums in the country and captured 60 percent of the state's roughly 55,000 new Obamacare enrollees. But those premiums were too low, it turns out, to cover the medical care and other expenses of all those new customers. 

In the fall, PreferredOne steeply hiked rates for 2015 and dropped out of Minnesota's Affordable Care Act marketplace entirely, saying it was “not sustainable" to continue. 

Now roughly 12,000 people who bought PreferredOne policies in 2014 and haven’t switched plans will face bigger insurance bills this year, according to Joe Campbell, communications and marketing director for MNsure, the state's Obamacare marketplace. 

By law, customers who enrolled will automatically be renewed in coverage plans at the new, higher premiums. And those who were getting subsidies to make premiums more affordable will lose them, because the assistance is available only for plans sold through the Obamacare markets. A spokesman for PreferredOne declined to comment for this story.

There will be a huge number of ObamaCare stories this year. The provisions were deferred or waived until 2015/2016. Most Americans will, for the first time this year, start to see the impact of ObamaCare. It isn't going to be a pretty story. 

Note: the "gotcha" -- by law, customers who enrolled will automatically be renewed in coverage plans at the new, higher premiums.

This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here. However, having said that, this story warms the cockles of my heart. I had this exact discussion with a physician less than a week ago on investing opportunities. His wife, the family's portfolio manager, understood.

By the way, if folks have not yet caught on, ObamaCare is, at the end of the day, high-cost catastrophic health care insurance with thousands of pages of rules and regulations written by the health care industry. Most people will never need catastrophic health care insurance but it is crucial to have. The problem: most folks don't understand that's all they are buying.

For a health care insurer not able to make money despite "low premiums" suggests to me there is a) a huge administrative cost providing this health care; and, b) the first folks to purchase low-premium heath care insurance had catastrophic chronic illnesses already diagnosed (AIDS, cancer, liver disease etc). But I could be wrong, way wrong.

But think about this:

By law, customers who enrolled will automatically be renewed in coverage plans at the new, higher premiums. And those who were getting subsidies to make premiums more affordable will lose them, because the assistance is available only for plans sold through the Obamacare markets. A spokesman for PreferredOne declined to comment for this story.

Can you imagine that if ATT said they could not afford the plan you subscribed to, unilaterally stopped it and then you were automatically re-enrolled into Verizon at a higher monthly cost.

Pelosi supported this. Just saying.  It's no wonder PreferredOne declined to comment.

Remember, the heathcare insurers wrote this bill. This would be like ATT/Verizon writing all bills relating to the internet.