Free College Opportunity In The Bakken; Saudi Central Bank Asks Banks To Re-Schedule Property Loans -- October 25, 2016

Link here over at Reuters.

Obviously Saudi Arabia is not going to go the way Venezuela went --- or, could it. Remember, a Saudi finance official says Saudi Arabia could go bankrupt in two years.

Maybe it's "tick-tick-tick-Saudi-Arabia."

From a John Kemp tweet yesterday: Brent and WTI timespreads have weakened significantly as traders become more pessimistic about oil market rebalancing in 2017.

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The Bakken Economy

Wow, this is really quite amazing. Look at the map at the linked article below. Hillary and Bernie talk about free college education. The Bakken is actually doing it (and not costing taxpayers a dime).

From The Williston Herald:

Williston State College expanded its Regional County Scholarship to include Burke, Divide, McKenzie and Mountrail in February 2016, but the WSC Foundation has an ambitious plan for 2017 — adding five counties in northeastern Montana. 

The college announced Monday that high school graduates and those who earn GEDs in Daniels, Richland, Roosevelt, Sheridan and Valley counties will be eligible for the WSC scholarship that would provide free tuition and fees for the first two years of their college experience. This inclusion could bring in 600 more graduating seniors.  

“An expansion of the WSC Foundation Regional County scholarship program into northeastern Montana is a natural extension of what has traditionally been a fertile recruitment region for the college, drawing on the close economic and cultural ties that have long existed between northeastern Montana and northwestern North Dakota,” explained John Miller, acting president of WSC.

Russia's Biggest Military Offensive Since The Cold War -- October 20, 2016

Americans are pre-occupied with:

• the presidential election;
• NFL ratings; and,
• whether their malls will be open on Thanksgiving.

Meanwhile, Russia is said to be launching biggest military offensive since the Cold War -- The [London] Telegraph.

The warning is not from a blog or from a newspaper but from NATO:

Russia has begun its biggest surface deployment since the end of the Cold War as it aims to effectively end the war in Syria on the eve of the US election, Nato officials warned last night.

Purpose? According to western intelligence:

The Kremlin is sending the full might of its Northern Fleet and part of the Baltic Fleet to reinforce a final assault on the city of Aleppo in a fortnight, according to Western intelligence. The final bombardment is designed to shore up the Assad regime by wiping out rebels – paving the way for a Russian exit from the civil war.

This is not simply an a/c carrier group. It is the nation's entire Northern Fleet and much of the Baltic Fleet in the largest surface deployment since the end of the Cold War. 

The additional military firepower is designed to drive out or destroy the 8,000 rebels in Aleppo, the only large city still in opposition hands, and to allow Vladimir Putin, the Russian president, to start a withdrawal.

Not Getting Any Better For Saudis -- October 17, 2016

Food. This was a surprise. Maybe I just haven't read the print edition of The WSJ in a long time, or there really is something new: a "meaty" journal report, fourth section, on Monday. Hmmm.

In the fourth section today, The WSJ  has a number of incredibly good articles on "Food." The one that caught my attention was the interview with Perdue Farms CEO. I don't know if you are hearing the ads in your area, but the issue of antibiotics in chicken seems to have become the biggest story in Texas, after football and Houston.

First, a link to a WSJ article published about ten days ago regard the Perdue Farms story: http://www.wsj.com/articles/perdue-farms-eliminated-all-antibiotics-from-its-chicken-supply-1475775456.

And then the interview: http://www.wsj.com/articles/jim-perdue-talks-about-change-in-chickensand-the-market-1476669781.

Absolutely fascinating.

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By The Way

I am preparing myself for a huge Hillary Clinton win in November.

All one has to do is read wikileaks and the WSJ to know that she is the right Machiavellian princess for the US at this point in time.

Source for graph below: http://graphics.latimes.com/usc-presidential-poll-dashboard/.

For investors, a Hillary win will be a short-term bonanza. Whether that will last past two years is hard to say. I think a Hillary win will widen the gap between the investor class and the non-investor class, which, of course, is good for America.

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Back to the Bakken

Active rigs:

	10/17/2016	10/17/2015	10/17/2014	10/17/2013	10/17/2012
Active Rigs	32	67	190	185	186

RBN Energy: natural gas exports, flows across Texas and intrastate pipelines. The series continues.

Handling the flood of Marcellus/Utica gas headed to Gulf Coast LNG export terminals and to Mexico will require pipeline reversals and expansions, new pipe and a coordination of interstate and intrastate pipeline capacity. That’s a tall order in itself, but there’s more: Texas’s intrastate pipelines operate under an entirely different set of regulations than their interstate counterparts––different rules on pipeline tariff rates, pipeline rules, permitting, eminent domain, you name it. In today’s blog we continue our look at developmental history of the Lone Star State’s two gas pipeline systems––one regulated in Washington, DC and the other in Austin––and how it may affect the transformation of the overall natural gas transportation grid.

Certainly the most significant region for both intrastate and interstate pipelines is the Gulf Coast Industrial Corridor, the largest single natural gas industrial market in the U.S.

Most interstate pipelines traversing the region were originally built in the 1940s, ’50 and ‘60s to move Texas Gulf Coast natural gas production on long-line transmission systems running from Texas through other producing states (Louisiana, Oklahoma) and finally delivering gas to weather-sensitive markets in the Northeast and Midwest.

In contrast, most intrastate systems were built in the 1960s and ‘70s to deliver Texas production to Gulf Coast industrial consumers during the period of federal price controls described above. Gas supplies for the intrastate pipes moved in from the West (Permian Basin), south from East Texas, and into the system from Texas producing regions along the Gulf Coast. Following market decontrol in the 1980s, intrastate and interstate pipelines expanded commerce between the systems, allowing supplies gathered on the interstates to move to intrastates, and vice versa. Small volumes of production, mostly sourced in South Texas, moved on both intrastate and interstate pipelines to Mexico.

Growing US industrial natural gas demand. Link at Forbes.

Saudi bank stress builds as kingdom's cash injection falls short. Link at Bloomberg. I track the Salman Plan at the sidebar at the right.

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Natural Gas

Growing US industrial natural gas demand. Data points at Forbes. The article seems to be poorly written, skipping around a lot, but there are some interesting data points, and even some notes on winter temperature projections this year.

• three rapidly growing baseload natural gas demand markets
• domestic power generatin
• LNG exports globally
• pipeline exports to Mexico and eastern Canada
• the industrial sector is second after power generation
• accounts for 28% of US gas demand, compared to 40% two decades ago
• some feel US industrial gas demand has peaked; author not so sure
• global demand for plastics and other chemicals will increase by more than 4% this year, double the demand growth rate for energy
• EIA has industrial and electric power sectors at 49% and 34% of growth in natural gas and renewables, respectively
• the market could be short natural gas this winter if projections are correct and it's 12% colder than last year; could push total US gas demand to a record 92.3 Bcf/d

Much more at the link.

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Not Getting Any Better For Saudis

Data points at Bloomberg:

• central bank pledge of $5.3 billion failed to ease liquidity crunch
• the interest rate banks charge one another for loans rose by the most since August over the weekend for the KSA; extending a trend that's slowing earnings and corporate borrowing for Saudi Arabia
• the rate for Saudi Arabia grew much faster than Gulf peers
• rates for KSA would only go down if there's a much larger cash injection; $5 billion won't cut it
• loans-to-deposit ratio among Saudi banks, a key measure of liquidity, rose to 91% in August, the worst since 2008

Much more at the link.

The linked Bloomberg article, and the post at this link, go hand-in-hand.

By the way, with regard to Saudi Arabia's $1 trillion mistake they made in 2014, they should have quietly been building refining plants and natural gas processing plants around the world. They had the cash and the product to feed these plants. Saudi has one of the biggest, if not the biggest refinery in the US and that guarantees them around a million bopd of their own product to refine. I suggested that to another reader who suggested that Saudi should have started that five years ago -- building refineries for their crude oil. I can't disagree. But had they made the choice even two years ago, instead of "talking" the price down to $26/bbl, they would be in a much better spot today. As it is, they are now doing that, but they have a lot less cash with which to do, much stronger headwinds, and many more competitors.

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Autumn Photos

Meanwhile, back at the ranch, Ms Veeder continues to post some of the nicest home photos on the internet. 

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The Market

Another dismal day for the market, Dow 30 down about 60 points in mid-afternoon trading. NYSE:

• new highs: 45 -- RSP Permian;
  new lows: 32

Control Of The Entire Middle East And World Oil -- Putin's Quest? October 15, 2016

Updates

October 21, 2016: update on Moscow's Club Med. 

October 21, 2016: the number of ships in this flotilla has now increased to ten; the original seven went to eight, and now we learn that these eight will join another two already en route.

October 20, 2016: Russian ready to land a knock-out blow on the Aleppo rebels; give Assad a huge victory; and give President Obama (perhaps golfing) a black eye. Russia's entire Northern Fleet and much of the Baltic Fleet in the largest surface deployment since the end of the Cold War will soon launch on Aleppo.

October 19, 2016: The [London] Sun's take on this. A bit of hyperbole, methinks:

Defence expert for Russian news agency RIA, Alexander Khrolenko, said: "While the North Atlantic bloc is stalling in the sands of the Middle East, the Russian Navy seizes control over the Atlantic, not to mention the Mediterranean and Black Seas."

October 15, 2016: see first comment. The source is Russian press, and their focus is something different than what the Western press might note. Reading things quickly, and possibly misreading things, this is what I see:

• Russia is moving an a/c carrier group into America's Sea
• Russia has one aircraft carrier
• they are moving that aircraft carrier (and six additional vessels) to the eastern Mediterranean

This a/c carrier group has been in the Mediterranean on several prior occasions beginning back in 1995.

The deployment may be nothing more than a "PR" move but it does give Putin more options. We will know more over the next several days when the Western media begins to report this story. I'm looking for the WSJ to report the story on page 3 of their first section (page A3).

I doubt the Russians are bringing the a/c carrier group in to support President Obama's goals in the region.

October 15, 2016: Another missile was fired earlier tonight -- http://www.nbcnews.com/news/world/uss-mason-fired-again-coast-yemen-officials-n666971. One must assume these rebels are getting "intel" with outside help, and most likely, "someone else" is "calling the shots."

Original Post

 

I am tracking recent events in the Mideast in various posts on the blog. The earlier post today was to help me keep track of what this all means. There are just too many moving parts, and I often "lose the bubble."

A reader responded with a great observation. I can't disagree. I, too, am concerned that we are coming perilously close to a major US/Russian confrontation somewhere in the Mideast. Where, I have no idea, but the reader presented this very interesting observation and argument:

For all the reasons you give (at the linked post above) I personally feel some of this is a diversion on the part of Russia and Iran to go after a much bigger prize: control of the whole Middle East and world oil.

I think the real battle shaping up will take place in the Bab el-Mandeb Strait a narrow chokepoint between the Gulf of Aden and Red Sea and in the Straits of Hormuz between the Gulf of Oman and Persian Gulf.

Recent unchecked harassment of our naval vessels in the Straits of Hormuz and then the three recent missile attacks on two US destroyers and a US flagged leased ship off of Yemen is a sign of Iran’s aggression now with their pockets full of cash as a result of the Iranian Nuclear agreement.

Following our retaliatory strike, the Iranians deployed several Iranian naval vessels to the Bab el-Mandeb Straits which ups the ante. I would imagine new radar systems will reappear in time but protected with Russian supplied modern anti-aircraft missiles systems. [An "actionable" observation to watch.]

Controlling these two choke points and isolating movement of Saudi oil except through the Suez Canal along with diminishing their regional influence. This would put Iran and Russia in a very dominate position considering the current weak and spineless US administration which will likely be followed by the same policies after the election.

Personally I think we are dealing with a repeat of the late 1930s and a devastating war in the future.

I don't think it's beyond the pale to think that Iran/Russia are looking to make Saudi Arabia a land-locked country. I don't think it's beyond the pale this could happen within the next 36 months. Remember: Hillary supports Iran. Congress recently overrode President's only veto in his presidency, voting against Saudi Arabia.

More on the Bab el-Mandeb Strait here and it's strategic significance.

The Obama Legacy In The Mideast -- October 15, 2016

The phrases that come to mind when thinking about the Mideast and Obama's eight years as president:

• withdrawal of US troops from the region
• creating a vacuum
• lack of interest in the region
• self-described "no-drama Obama"
• a chess game: Putin vs Obama
• Obama: "red lines"
• Putin: no "red lines" 
• ISIS: the JV team
• Yemen: poster child for democracy
• Saudi Arabia's security no longer a US responsibility
• throwing allies under the bus

The resulting legacy:

• the vacuum resulted in ISIS
• the vacuum resulted in loss of "western coalition" gains in Afghanistan and Iraq
• first president to be at war (in fact, two wars) for his entire presidency
• resurgence of Russian influence in the Mideast

Going forward.

• Putin will still be in office after Obama leaves office in about three months
• it's hard to believe Putin will give up gains he has made in the Mideast any time soon
• Putin looks to be putting the Russian empire back together again; Alexander the Great comes to mind; it looks like Putin is not afraid of a new Cold War
• ISIS may or may not remain a credible force, but Putin will 
• US no longer dependent on OPEC oil or constrained by OPEC policies

I thought about all that after seeing this story in today's Wall Street Journal: "Egypt Juggles Its Allegiances As Russian Influence SURGES."

Note the word SURGES. Not "increases," or "grow," but SURGES.

I remember during the early years of the Cold War, "Egypt was a client of the USSR." That changed in the 70's when the US started providing significant economic and military aid to Egypt. Putin took advantage of two "events":

• President Obama distanced himself from the Middle East
• Saudi Arabia can no longer support Egypt financially

From the linked WSJ article:

Balancing acts are precarious by definition and, as Egypt is finding out, even a small move can have cascading consequences.

Until recently, Cairo managed to maintain strong relations with Saudi Arabia and other Gulf monarchies that provide it with tens of billions of dollars in aid, while also cultivating warm ties with Russia and staying away from Saudi-led efforts to topple the Syrian regime.

Then last Saturday, Egypt had to vote on a Russian-sponsored United Nations Security Council resolution favored by the Syrian regime. Alone among Muslim nations on the Security Council, it decided to support the Russian draft, which received only four out of 15 votes and failed to pass. The same day Russia vetoed a separate resolution drafted by France and backed by 11 Council members.

By the way, no one has yet commented on this: generally the US GDP rises when it is at war. Despite being at war during his entire presidency, President Obama was also the first president in modern history to never preside over a year with 3% growth -- not even during the energy revolution early in his presidency. Wow. Sounds like thesis material for a budding US Nobel Laureate in Economics.

Update On The Sunni Caliphate: ISIS -- Aleppo And Mosul -- October 15, 2016

Again, I've lost the bubble on ISIS; the importance of Mosul and Aleppo; and, Kurdistan. This is for my benefit only; it has nothing to do with the Bakken.

If you came here looking for the Bakken, scroll down, or go to the sidebar at the right.

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Miscellaneous

April 3, 2017: BBC update -- again, a very nice update with many maps. Allied forces have taken eastern Mosul and are ready to attack western Mosul. Western Mosul is expected to be much more difficult: more densely populated; civilians pro-ISIS. And, of course, ISIS militants using civilians as shields. One can assume an energy/food/weapons blockade will severely hurt ISIS.

December 2, 2016: the Sunni caliphate footprint continues to shrink. Nice map.

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Part Four

Syria Update

See the post; at the link, scroll to the bottom.

With Turkey having taken Afrin and about to take Eastern Ghouta, Syria now has three local groups supported by foreign sponsors: Assad's Syrians/Russia; Kurdish Syrians/US; and, now Turkish Syrians. One needs to look at the current situation in Syria and this new analysis (the war will go on for at least another four years until a stable balance of forces is established) and then think about Trump's "plan" to pull out of Syria sooner than later.

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Part Three

Update On Kurdistan

Link here.

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Part Two

"Part Two" below is about Aleppo and Mosul and appeared in recent issue of The Economist. "Part One" was from a long piece on the Sunni Caliphate (ISIS) from London Book Review back in March, 2016, which provided the background to how we arrived where we are today.

The Spanish Civil War as a proxy conflict between major world powers comes to mind.


Where we stand, October 15, 2016, from The Economist

The Sunni Caliphate (IS) Outcome May Well Be Determined By What Happens In Aleppo, Mosul

Background:

• in the entire region of the Fertile Crescent, from the Mediterranean to the Gulf, the brunt of war for the most part sustained by the Sunnis
• the Sunnis: the largest ethnic group, heirs of fabled empires; many of their cities now in the hands of others
• Jerusalem: held by the Jews
• Beirut: held by Christians and Shias
• Damascus: held by the Alawites
• Baghdad: held by Shias
• where Sunnis do hold power they feel a) encircled; and, b) abandoned by the US
• the Sunnis' sense that they are assailed from all sides helps to explain how the jihadists of Islamic State (IS), offering to help the ancient caliphate, were able to take over vast Sunni-populated areas in Syria and Iraq
• nothing will be complete until the Sunnis' dispossession is dealt with
• right now the future of the region is being decided in two venerable cities: Aleppo and Mosul
• Aleppo: the last urban redoubt of the Syrian rebellion against Mr Assad
• Mosul: IS's most prized possession in Iraq

Aleppo

• Russia is helping Assad; the Iranian and Shia allies pound the besieged Sunni rebels
• it appears Russia/Assad's goal is to take the entire city before Obama leaves office in three months
• even if Russia/Assad "win", Aleppo will "never" be the same

Mosul

• a loss would deal a blow to IS: it was from there that Abu Bakr al-Baghdadi, the IS leader, declared his caliphate
• better outcome possible
• Iraqi, Kurdish, local Sunni forces, and America closing in on Mosul
• Turkey is complicating things; wants to be part of the coalition (of course: to keep an eye on the Kurds)
• operations to retake Mosul begin this month 

Iraq

• The Economist argues that Iraq could provide new model of devolved power
• Mosul offers a chance to convince beleaguered Sunnis that there is a better alternative to the nihilism of jihad

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 Part One

Original Post, March 10, 2014, link here.

End Times for the Caliphate (IS / Abu Bakr al-Baghdadi)
Kurdistan, Rojava, and ISIS

This was from the London Review of Books, March 3, 2016. 

The war in Syria and in Iraq have produced two new de facto states in the last five years and enabled a third quasi-state greatly to expand its territory and power.

The two new states are two separate Kurdish states, one to the west (Syria) and one to the east (Iraq). Neither are recognized internationally but they are stronger militarily and politically than most members of the UN.

Both states are very, very small in population.

17 million Kurds live in Turkey.

The three states:

• the caliphate: ISIS -- eastern Syria / western Iraq
• Rojava: Syrian Kurds (PYD) along Syrian / Turkish border (rojava means "west")
• Kurdistan Regional Government (KRG): northern Iraq along Iraqi / Turkish border

For me, this is how I will keep track of them:

• ISIS
• Rojava (Syria) -- 2.2 million -- surrounded by much larger states
• Kurdistan (Iraq) -- 6 million

The three states -- origin and geography:

• ISIS: established itself in the summer of 2014 after capturing Mosul and defeating the Iraqi army

• Rojava: the Syrian Kurds who filled the vacuum when the Syrian Army withdrew in 2012; west of the Tigris; across northern Syria between the Euphrates and the Tigris; along Syrian-Turkish border

• KRG: Kurdish Regional Government; had been highly autonomous; took advantage of IS's destruction of Baghdad's authority in northern Iraq; expanded territory 40% -- south toward Baghdad to include the Kirkuk oilfields 

The question as discussed by Cockburn: will any of these "states" persist after the current conflict is over.

Cockburn gives short shrift to ISIS: "The Islamic State is likely to be destroyed eventually ... though its adherents will remain a force in Iraq, Syria, and the rest of the Islamic world.

So, it comes back to the age-old battle between the two Kurdish divisions AND the age-old battle between Kurdistan and Turkey AND Kurdistan and outside forces (US and Russia).

Urban Centers

Extent of Two Kurdish States: About 600 miles west to east

Along the Turkish border (Syria/Rojava)

• Afrin, about 50 miles northwest of Aleppo; key transit city across Turkish border; current flashpoint between Turkey and the PKK/Rojava
• Kobani, northeast of Aleppo; on the Euphrates river; key to Rojava/PYD/PKK -- see below)
• Tal Abyad -- key to linking two of three enclaves (Kobani and Qamishi)
• Hasak
• Qamishi

Along the Turkish border (Iraq/Kurdistan)

• Sinjar
• Erbil (about 50 miles east of Mosul)
• Kirkuk
• Sulaymaniyah
• Halabja (on Iranian border) 

Caliphate (ISIS may or may not hold these cities); all to the northeast of Damascus, or north of Baghdad

• Aleppo: Syria
• Raqqa: Syria (currently held by ISIS) (on the Euphrates River); capital cityof ISIS -- self-declared; about 80 miles due east (slightly southeast) of Aleppo)
• Manbij: on road to Raqqa in Syria; "allies" re-take Manbij, August, 2016
• Mosul: back and for between ISIS and Kurds; on the Tigris
• Tikrit: midway between Mosul and Baghdad; on the Tigris
• Ramadi: on the Euphrates, west of Baghdad, west of Falujah
• Fallujah: on the Euphrates, between Ramadi and Baghdad

Rivers, Borders, and Boundaries

• Neither major river separates Syria/Iraq; no natural boundary between northern Syria/northern Iraq
• Euphrates cuts northern Syria in half
• Tigris cuts northern Iraq in half
• Syria reaches the Mediterranean Sea; small seacoast between Lebanon and Turkey

Geo-Politics

The West: Rojavo/PKK/PYD/SDF

• Turkish response: belligerent in tone; ambivalent in practice
• it appears that current conflict, starting with Kurdish uprising in 2011, resulted in resurgence of PKK (Kurdistan Workers' Party) which Turkey has been fighting since 1984
• the ruling party in Rojava is PYD (Democratic Union Party)
• so, PYD = PKK
• IS finally defeated in Syrian city of Kobani: Rojava expanded territorially in every direction
• by capturing Tal Abyad last June, Rojava/PKK/PYD linked up two of its three most important enclaves (Kobania nd Qamishli)
• now working to link up Afrin on the far west
• Turkey has drawn a line in the sand at the Euphrates but seems uneasy to act
• Rojava's Arab proxy militia: Syrian Democratic Forces (SDF)
• SDF crosses Euphrates and Turkey does not respond: US + Russia --> a/s on ISIS in that area
• Key area of concern now: narrow corridor between Aleppo (once Syria's 2nd largest city) and Turkish border (Afrin) -- if opposition cut off -- the Sunni states of Turkey, Saudi Arabia, and Qatar -- will have failed to overthrow Bashar al-Assad.
• if the "allies" fail, Rojavo/PKK/PYD/SD becomes that much stronger; 17 million Kurds
• Turkey wants to intervene, but Turkey would be fighting: US, Russia, Iran, Syrian Army, PYD, and IS (LOL)
• Turkey's only allies: Saudi Arabia and a few Gulf monarchies
• this is the area where Turkey shot down a Russian bomber; carefully planned; Russia responded by setting up "permanent" bases in this area (Turkey: one meager step forward; result: stomped on by Russian)
• US + Russia: begrudging/suspicious but supporting the Kurds, and not the Turks in this area

Kurdistan / KRG / Iraqi Kurdish state

• once considered the "new Dubai" with its oil fields
• now Kurdistan is a failed nation; a disaster; its rich folks trying to get to the west
• Kurdistan: an economic disaster; low oil prices have led to the debacle; government taking to stealing bankers' money; has nothing but oil for revenue; nothing indigenous -- imports vegetables
• Kurdistan: before ISIS, before the plummet in oil prices was becoming more independent; now Kurdistan looking to Baghdad for help

The Caliphate is similarly falling

• loses Manjib, August, 2016
• defeated at Kobani: IS now changing tactics -- not fighting to last man to save its territory but it may do so in Raqqa (Syria) and Mosul (Iraq)
• conditions in the Caliphate unbearable (a holocaust by any other name)
• people smuggled out of Mosul say IS is buckling; fled Mosul to safe refuge in Rojava -- this is where the migrants are coming from -- from rich Kurdistan oil regions to Rojava into Turkey and on to Greece
• IS opponents have captured/re-captured: Sinjar, Ramadi, Tikrit (Iraq) and closing in on Raqqa (Syria)
• Ramadi: still in contention
• YPG, Syrian army, Iraqi armed forces, and Peshmerga: inadequate supplies against IS, but can call in Russian and US devastating air support

How the two Kurdish states see this playing out

• the allies (YPG, Syrian army, Iraqi armed forces, Peshmerga, Russia, US) will ultimately prevail
• once IS defeated once and for all, Kurds concerned Baghdad will again turn against Kurdistan; Damascus will turn against Rojava

Last comments (mine)

• Iran, the 800-pound gorilla, not mentioned in the article
• Assad (Syria) given new lease on life with US + Russia emphasis on taking out IS
• Sunni allies Turkey and Saudi Arabia stymied in taking out Syria (Iranian proxy?)
• when it's all over, who gets Kirkuk's oil fields? Kurdistan or Baghdad
• when IS is taken out, how much longer do Russia + US stick around? 
• one wonders if after IS, if Russia (pro-Iran) and US (anti-Iran) get back to where they were before IS
• it looks like the current situation has "destroyed" any progress Kurdistan had made in previous 50 years
• Turkey is becoming more and more repressive; is it feeling the stress; it looks like while Kurdistan might be failing, Turkey's real Kurdish nemesis, the PKK (Rojava) is gaining strength

Note: greater Kurdistan

• west Kurdistan: Rojava, northern Syria
• east Kurdistan: northwestern Iran 
• northern Kurdistan: southern/southeastern Turkey
• southern Kurdistan: northern Iraq (military forces - Peshmerga)

Another Geico Rock Award 2016 Nominee -- Professor Peter Wadhams, Cambridge University, A Leading Expert On Arctic Sea Ice Loss -- October 8, 2016

This is pretty cool. For quite some time now, I've predicted (it's on the blog in multiple places) that Saudi Arabia would have difficulty providing aid to various Mideast countries because of its own financial problems.

Well, here it is. Reuters is reporting: "Without Saudi oil aid, Egypt rushed out big buy tenders." Data points:

• Saudi Arabia recently agreed to provide Egypt 700,000 tonnes of refined oil products per month for five years under a $23 billion deal between Saudi Aramco and Egyptian General Petroleum Corporation
• the deal was made during a state visit by none other than Saudi Arabia's King Salman himself
• Saudi Aramco products were halted as of October 1, 2016
• "the reason for the halt in aid remains unclear" -- LOL

From the linked article:

The kingdom has pumped billions of dollars, including grants, into Egypt's flagging economy since the toppling of President Mohamed Mursi of the Muslim Brotherhood in 2013 after mass protests against his rule.

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The Arctic Sea Is Not Ice-Free

For at least a decade, The Algore School of Global Warming has forecast that the Arctic Ocean would be completely free of ice by now. For a partial "list" of articles with that forecast, see Real Science":

• The Argus, July 17, 1954: "The ice-paced Arctic Ocean might become navigable in another 25 or 50 years if the present "warming-up" tendency of the Polar region continues. This was stated yesterday in the United States Congress."
• The Tuscaloosa News, May18, 1972: "Arctic Ocean to be ice-free by year 2000?
• Google/Newspapers, July 16, 2011: "With Arctic Ice at record low, NSIDC Director Serreze says 'we are on track to see an ice-free summer by 2030. It is an overall downward spiral."
• BBC News, 2009: Arctic summers ice-free 'by 2013'
• John Kerry: "... the Arctic Ocean may be ice-free for a short period of time as early as 2015, according to the 2009 Arctic Marine Shipping Assessment Reportt completed by the eight Arctic Council Nations."

Meanwhile, seven years ago today, Algore predicted North Pole would be ice free in five years.

Well, it did not happen -- the Arctic is not ice-free. In fact, the ice is 21% thicker now than it was in 2012. It will be interesting to see if The National Geographic reports that. David Muir on ABC News won't be reporting that fact.  

The [London] Telegraph did: "Experts said Arctic sea ice would melt entirely by September 2016 -- they were wrong."

Scientists such as Prof Peter Wadhams, of Cambridge University, and Prof Wieslaw Maslowski, of the Naval Postgraduate School in Moderey, California, have regularly forecast the loss of ice by 2016, which has been widely reported by the BBC and other media outlets.

Prof Wadhams, a leading expert on Arctic sea ice loss, has recently published a book entitled A Farewell To Ice in which he repeats the assertion that the polar region would free of ice in the middle of this decade.

As late as this summer, he was still predicting an ice-free September. (Geico Rock Award 2016 nominee.]

Yet, when figures were released for the yearly minimum on September 10, they showed that there was still 1.6 million square miles of sea ice (4.14 square kilometres), which was 21 per cent more than the lowest point in 2012.

Nice Update On Where Saudi Arabia And Iran Stand With Regard To Crude Oil -- Rigzone -- September 27, 2016

Rigzone link here. Some data points:

To "square the books":

• Saudi Arabia needs $67 oil
• Iran needs $61.50 oil
• currently: about $45

Fiscal deficit:

• Saudi Arabia: fiscal deficit equal to 13.5% GDP
• Iran: compare at 2.5% GDP
• Saudi Arabia: facing double-digit deficit this year
• Iran: nearly balanced its budget this year after economic reforms in 2012/2013 following sanctions 
• Saudi Arabia, 2015, drew down $115 billion last year; 1H16, drew down $52 billion

Economic growth:

• Saudi Arabia: slowly sharply; about 1%
• Iran: accelerating toward 4%

Production:

• Saudi Arabia: around 10 million bopd
• Iran: about 3.4 million bopd; target 4 million bopd

*********************************

Bakken Revolution

From The Wall Street Journal today: two years into oil slump, US shale firms are ready to pump more:

Few predicted that in the fall of 2014, when Saudi Arabia signaled that it wouldn’t curb its output to put a floor under crude prices. Oil pundits concluded that a brutal culling would force higher-cost players known as marginal producers—a group that includes shale drillers—out of the market.

But the greatest consequence of the Saudi decision and subsequent price drop is that it has delayed costly oil megaprojects, from deep-water platforms off Angola to oil-sands mines in Canada.

“The U.S. isn’t the marginal barrel but the most flexible,” said R.T. Dukes, an analyst at Wood Mackenzie. “We’ll be the fastest to snap back.”

More than 100 North American energy producers have declared bankruptcy during this downturn, but even companies working through chapter 11 keep pumping oil and gas. Many exit bankruptcy stronger thanks to a balance sheet that has been wiped clean. SandRidge Energy Inc., which filed in May, will exit next month after erasing nearly $3.7 billion in debt.

Many shale operators are still struggling at current prices, drilling at a loss and tapping Wall Street for new infusions of cash. But the strongest producers, including EOG Resources Inc. and Continental Resources Inc., soon will be able to generate enough money to pay for new investments and dividends—as well as boost production—even at low prices, analysts say.

U.S. production began inching up in July, shortly after oil prices rebounded to $50-a-barrel territory. Producers quickly put 100 rigs back to work this summer.

*********************************

The Political Page

I did not watch "the debate" last night. Based on how little reporting I see this morning regarding "the debate" it appears I did not miss anything.

This is the USC-LA Times poll from this morning (it is a poll released every day; 3,000 likely voters nationwide). I assume the poll is too early to reflect the sentiments of last night's debate. Red is Trump, blue is Hillary:

Drudge Report poll shows Mr Trump beat Ms Clinton by about 94% to 6%.

************************************
The Market

Close: up 133 points. NYSE --

• new highs: 78 -- FedEx
• new lows: 21 --

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The Apple Page

Problems with math?

Earlier this month, Apple unveiled the new (and slightly improved) Apple Watch. The Apple Watch has a battery life of about 18 hours, meaning that most people tend to leave their watches charging on their nightstand overnight. Given that the Apple Watch doesn’t last through the night, and also is considerably bulkier than the average FitBit or Jawbone tracker (and probably uncomfortable to sleep in), it’s not entirely clear how Apple intends to leverage the existing watch into something that could track sleep. 

I don't know about you, but if my watch battery lasts 18 hours, that will get me through the night.

Oh, I see. You mean if I get up at 6:00 a.m. and then go to bed at 11:00 p.m. the battery will die at midnight -- 18 hours.

Yes.

Oh, I see.  I guess that's why my wife has two Apple watches. I don't think Apple has a problem.

Help Me Make It Through The Night, Norah Jones

Iranian Oil Output Stagnates; GDPNow -- 3Q16 At 3.3% In Latest Forecast -- Friday, September 9, 2016

Iran Output Stagnates

From Reuters:

Iran's steep oil output growth has stalled in the past three months suggesting Tehran might be struggling to fulfill its plans to raise production to new highs while demanding to be excluded from any OPEC deals on supply curbs.

Iran's oil output soared to 3.64 million barrels per day in June from an average of 2.84 million bpd in 2015 following the easing of Western sanctions on Tehran in January. 

But since June, output has stagnated and reached just 3.63 million bpd in August.

Unless I missed it, the article does not say why Iranian output stagnated. But it fits my view that there's more to the oil patch than just "saying you're going to do something."

*****************************

GDP Now

Latest forecast: 3.3 percent — September 9, 2016

The GDPNow model forecast for real GDP growth in the third quarter of 2016 is 3.3 percent on September 9, down from 3.5 percent on September 2.

The forecasts of third-quarter real consumer spending growth and real equipment investment growth declined from 3.5 percent to 3.4 percent and from 3.3 percent to 2.0 percent, respectively, on Tuesday after the motor vehicle sales release from the U.S. Bureau of Economic Analysis and the Non-Manufacturing ISM Report On Business.

The forecast of the contribution of inventory investment to third-quarter real GDP growth decreased from 0.62 percentage points to 0.57 percentage points after this morning's wholesale trade report from the U.S. Census Bureau.

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Valiant Ambition: George Washington, Benedict Arnold, and the Fate of the American Revolution

Nathaniel Philbrick

c. 2016

DDS: 973.4 PHI

The waterways along the East Coast played a major role, a subject well suited for Nathaniel Philbrick. A key to understanding the Revolution War -- the war itself -- is the role water played for moving troops quickly.

In this book, Philbrick will cover the two "fronts" in the Revolutionary War: the shooting war between George Washington's troops and William Howe's troops; and, the non-shooting civil war among squabbling colonists

Chapter 1:

• spring of 1776
• March, 1776: British abandon Boston, after a 9-month seige
• May, 1776: Continental Congress commissions Charles Willson Peale to paint Geo Washington's portrait
• June, 1776: George Washington has established his army's headquarters in NYC
• August 5, 1775: British General Clinton joins them; he had recently been defeated at Charleston, SC
• important landmarks

• New York City and New Jersey
• Sandy Hook: barrier beach; last landing before ships sail north, through "the Narrows"
• the Narrows: a chokepoint -- between Brooklyn (western end of Long Island) and Staten Island that ships must sail through to reach Port of New York, south Manhattan; the Narrows opens up into the Upper Bay
• Upper Bay: northern opening just north of the Narrows; Ellis Island; Governor's Island
• Ellis Island, smaller of the two, to the west; Governor's Island, larger of the two, to the east
• Hudson River, up the west side of Manhattan
• East River, up the east side of Manhattan

• recent history:

• three months earlier (in March) British General William Howe had abandoned Boston with 9,000 soldiers; George Washington had set up cannon on Dorchester Heights overnight, March 4, 1776; General William Howe evacuates to Halifax, Nova Scotia; again, using the sea (waterways) -- provided quick movement whereas land impeded movement; re-armed in Nova Scotia; heads back to NY
• brothers Richard and William had an older brother George who had been killed in the French and Indian War; had "soft spot" in their hearts for the colonists; hoped war could be avoided; declaration of independence, 1776, had ended all hopes of a peaceful resolution

• contemporary events:

• June 27, 1776: British Navy seen on open sea, arriving
• middle of August, 1776: 400 vessels; 45,000 soldiers and sailors
• William Howe, Army general; when British military returns from Nova Scotia to attack NY, the British Navy is under command of William's older brother: Admiral Richard Howe; another British Army General on those ships, General Henry Clinton; so two British Army generals, staging at Sandy Hook before moving through the Narrows to New York harbor: General William Howe and General Henry Clinton
• late August, 1776: British unload 15,000 soldiers at Gravesend Bay, far south Brooklyn; far west Long Island
• Washington appoints General Israel Putnam of Connecticut to take charge of troops in Brooklyn
• American defense at Wallabout Bay; three easily defended passes
• British attack; American General William Alexander, Scottish, defends
• but the Brits took a fourth pass: Jamaica Pass -- far to the east -- that the colonists had forgotten about; huge lapse in judgement

• the evacuation from Brooklyn, across the East River (overnight, August 29 - 30, 1776)

• the Brits are in command of Brooklyn; will eventually take Fort Putnam and secure the island
• Geo Washington had no option: evacuate, but make it look like he was going to replenish his troops
• huge, huge story: evacuation began where base of Brooklyn Bridge now is

the reason NYC strategically important

• Brits in St Johns (present day, Quebec), planning an assault on Fort Ticonderoga on Lake Champlain
• Hudson River to Albany and then to For Ticonderoga
• if Brits control New Jersey "sea" up the Hudson all the way to Lake Champlain, the Brits have cut "America" in half

• Washington evacuates NYC

• controls the Hudson 14 miles north of NYC from Harlem Heights 
• Admiral Howe moves north of Brooklyn, to Queens County, still on Long Island
• Chapter 1 ends with the Brits taking NYC; Geo Washington severely beat; and retreating across New Jersey to the Delaware River

Black Friday For VW; Black Friday For Saudi; US Schools Italy In Women's Water Polo -- August 19, 2016

Olympic women's water polo: For the gold, USA gives Italy a clinic in water polo. Led by 11 - 4 early in 4th period. Game ends with USA winning, 12 - 5. Early in the fourth, both teams pretty much played with the outcome known.

*********************************

Not Going Well For Saudi Arabia?

US ends support for Saudi in war against Yemen rebels? -- Reuters. It appears the decision to withdraw was made by President Obama based on reasons cited for the withdrawal.

The U.S. military has withdrawn from Saudi Arabia its personnel who were coordinating with the Saudi-led air campaign in Yemen, and sharply reduced the number of staff elsewhere who were assisting in that planning.

Fewer than five U.S. service people are now assigned full-time to the "Joint Combined Planning Cell," which was established last year to coordinate U.S. support, including air-to-air refueling of coalition jets and limited intelligence-sharing, Lieutenant Ian McConnaughey, a U.S. Navy spokesman in Bahrain. 

That is down from a peak of about 45 staff members who were dedicated to the effort full-time in Riyadh and elsewhere. 

The staff withdrawal, which U.S. officials say followed a lull in air strikes in Yemen earlier this year, appears to reduce Washington's day-to-day involvement in advising a campaign that has come under increasing scrutiny for causing civilian casualties.
The U.S. military personnel were withdrawn from Riyadh in June.

*******************************************

VW Grinds To A Halt

 
VW production grinds to a halt.

Imagine if we saw this headline in the US: GM and Ford stop all production. That's about what this amounts to.

Bloomberg has the story.

VW stopped Passat production on Thursday and will halt assembly of its best-selling Golf on Monday if the conflict isn’t resolved.

VW has officially said the factories producing those models face slowdowns, as do plants that build chassis, the basic underpinnings of vehicles.

The supplier has essentially called the automaker a bully, prompting VW’s top labor boss to respond that he’s “furious” and the leader of its home state to say “coercive measures” by a court may be needed to end the conflict.

The production holdup threatens to reduce Volkswagen’s earnings by as much as $45 million a week at a time when the carmaker is trying to boost sagging profit at its namesake brand by lowering annual spending by 1 billion euros.

The conflict centers on a contract that VW signed with the supplier, then later canceled.

The parts maker, which builds seat and transmission parts, says it wants the auto manufacturer to pay for the plant alterations it made to provide the services.

Sounds like the supplier should have negotiated a clause in the contract that if VW....

***********************************

Blame It On The Bossa Nova

Link here.

GM's Opel to trim hours of German workers: workers at two assembly plants in Germany will be cut as auto maker faces negative effects from Brexit.

Already! The Brexit switch won't even be "turned on" this year, and it will take a couple of years to "unwind." Whatever.

General Motors Co.’s Opel unit is paring back the hours of German factory workers in a move aimed at blunting the impact of Brexit and breaking even in Europe for the first time in nearly two decades.

GM is scaling back work at two Opel assembly plants in Germany that make models popular in the U.K. Auto makers have said the U.K.’s decision to leave the European Union could result in currency headwinds and weaker British demand for light vehicles, potentially slowing momentum in Europe’s healthy auto market.

The Detroit auto maker’s European unit had been on track to end a long streak of financial losses in the region before the Brexit vote. Last month, however, GM executives have said softer vehicle sales and the negative effect of a weaker British pound could result in a $400 million hit in the second half of the year, endangering the break-even goal.

One wonders if there might not be more to the story, more to the decision-making process. But blame it on the bossa nova.


Blame It On The Bossa Nova, Eydie Gorme

Breakeven Prices Continue Lower In The US -- Mike Filloon; Saudi Strikes Out On Its Own After Being Abandoned By Obama -- August 17, 2016

Updates

August 17, 2016: Cisco says it will layoff 5,500 employees, much fewer than the rumored 14,000, and in line with previous summer layoffs. Seems to be a non-story. 
 

Original Post

 

NOG ex-CEO facing SEC sanctions, from a press release:

On August 16, 2016, Northern Oil fired its Chief Executive Officer, Michael Reger, after he admitted to the Company that he is facing sanctions in a U.S. Securities and Exchange Commission investigation.  Northern Oil said that Reger was sent a Wells Notice from the SEC regarding its 2012 investigation of Dakota Plains Holdings Inc. Reger was an investor in Dakota Plains Holdings Inc. since 2008.  Northern Oil announced that Reger was removed from its board, effective immediately, and that Northern Oil does not believe that Reger will be entitled to any severance payment.  Following this news, Northern Oil stock dropped as much $0.31 per share, or 7.79%, to $3.67 during intraday trading on August 16, 2016.

NOG, from a press release dated August 16, 2016: 

Northern Oil and Gas, Inc.announced today that Michael L. Reger has been terminated as Northern's Chief Executive Officer and has ceased being a member of Northern's Board of Directors, effective immediately.

Thomas W. Stoelk has been named Interim Chief Executive Officer. Mr. Stoelk has served in several executive positions in the oil and gas industry over the last 25 years and has been Northern's Chief Financial Officer since December 2011.

Prior to joining Northern, Mr. Stoelk served as the Vice President of Finance and Chief Financial Officer at Superior Well Services, Inc. from 2005 to 2011, as the Chief Financial Officer of Great Lakes Energy Partners, LLC from 1999 to 2005 and as the Senior Vice President of Finance and Administration for Range Resources Corporation from 1994 to 1999.

Chad Allen, Northern's existing Corporate Controller, has been named to the position of Chief Accounting Officer. Chad has over 10 years of public accounting experience with firms servicing public companies.

*******************************************

Breaking news: Russian government sees sale of country's largest oil producer Rosneft as top priority. Over at Reuters.

 *******************************************

Active rigs:

	8/17/2016	08/17/2015	08/17/2014	08/17/2013	08/17/2012
Active Rigs	32	74	194	183	199

RBN Energy: LNG exports impact US natural gas supply, demand and price.

Fillooon: Bakken update -- breakeven prices continue to lower in the US.

Summary:

• Mega-Frac well designs continue to impress in all US unconventional plays from the Bakken and Eagle Ford to the Wolfcamp
• Although the Permian and STACK plays have been better, the Bakken/Three Forks are seeing huge production improvements
• This analysis of core Three Forks locations in North Dakota shows the Mega-Frac well design produces over 200K barrels of oil in the first 365 producing days
• The core Three Forks, at 365 producing days, seems to model near the middle Bakken in areas of higher well pressures
• Mega-Fracs are significantly improving decline rates and breakeven prices

**********************************

ObamaCare is killing jobs. Over at Yahoo!Finance.

Turkey will release 38,000 prisoners to make room for coup plotters. Over at Los Angeles Times.

Aetna foreshadowed ObamaCare exit if merger denied. Over at The Huffington Post.

Perfect timing. Note the time this story was posted yesterday, August 16, 2016, at 1:32 p.m. Eastern Time. The Cisco story that the company would layoff 20% of its workforce (14,000 employees) hit the wires just after midnight, early this morning, August 17, 2016. Futures were up about 30 points before the Cisco story. Immediately after the story was posted, futures were down about 80 points (a swing of over 100 points). On opening, CSCO is down about 2%.

Barnes and Noble ousts CEO after a year. Story over at CBS Money Watch.

Saudi strikes back. Story over at Yahoo!

Chariot on fire. Video over at Fox News.

XLNX up about half a percent on a day a) the market is down about 80 points on opening; and, b) reports that Cisco could layoff 14,000 employees.

TGT: down a staggering 6%; losing $4.60. Wow. Target cuts outlook as it sees fewer customers in stores. Social media is all over Target: apparently the transgender bathroom policy emanating from Minnesota not impressing folks. Bigger problem: folks shop once or twice a month at Target; fresh produce spoils in between visits. Both my older daughter and I prefer produce at Wal-Mart compared to that of Target. [Update, later, 4:50 p.m. Central Time: Target has announced it will add private bathrooms to quell transgender debate. Comment: I think the damage has already been done. This company is making as many "PR" mistakes it seems as Fidelity/MDU made operational mistakes. Just my personal opinion.]

*******************************

Barnes And Noble

Barnes and Noble ousts CEO after a year. Story over at CBS Money Watch.

Previous posts on B & N:

• adult coloring books driving B & N's earnings, March 7, 2016 
• Amazon considers opening 400 bookstores, February 3, 2016
• commentary, September 10, 2015
• commentary, January 8, 2015
• commentary, February 22, 2014
• will axe the Nook; thoughts on B & N, January 9, 2014

*******************************

Saudi Strikes Back
Mideast On Edge

Saudi strikes back. Story over at Yahoo!

For those concerned about the fallout from President Barack Obama and his administration’s nuclear deal with Iran — the Joint Comprehensive Plan of Action, or JCPOA — the hits just keep on coming. The recent revelation that the United States handed over $400 million in cash to Iran on the same day that it was releasing four American captives is but the latest disturbing detail in the saga that has become Obama’s extended experiment in appeasing the mullahs.

Add it to the long list of other threatening post-deal developments, including the intensification of Iran’s ballistic missile program, the continuation of its efforts to illicitly procure nuclear materials, and the expansion of its aggressive and destabilizing activities across the Middle East. Oh, and don’t forget the detention of three new American hostages, of course.

Somewhat less noticed in the JCPOA’s aftermath, but potentially no less consequential for regional security, has been the steadily escalating confrontation between Saudi Arabia and Iran. This was not a wholly unexpected development. Many analysts warned that the Saudis would not look kindly on a U.S.-Iranian agreement, negotiated largely behind their backs, that ended up leaving the country’s arch-enemy, the Shiite theocracy across the Gulf, with a large nuclear infrastructure, hundreds of billions of dollars in sanctions relief, and a more or less open field to indulge its quest for regional hegemony. The Saudis, inevitably, would read it as America abandoning its historical role as the guarantor of Gulf security in favor of some new dispensation with an unreconstructed Iran — one that threatened to irreversibly alter the region’s correlation of forces in Iran’s favor.

Obama’s penchant for stoking Saudi paranoia and fears has no doubt made matters much worse: Declaring, for example, that his aim was to establish an “equilibrium” between the Saudis, a longstanding U.S. ally, and Iran, a revolutionary power that has systematically attacked U.S. interests for four decades. Or publicly complaining about the fact that he’s “compelled” to treat Saudi Arabia as an ally at all. Instead, Obama has opted to diss the Saudis repeatedly as free-riders who seek to exploit American muscle for their own narrow, sectarian purposes. In Obama’s telling, the Iranians — handmaidens to the Bashar al-Assad regime’s multi-year campaign of war crimes and mass murder — have legitimate “equities” in places like Syria that deserve to be protected (Could he mean the land bridge via Damascus by which Iran supplies its Lebanese client, the terrorist group Hezbollah, with tens of thousands of missiles and rockets that will be used in its next war with Israel?). Rather than seeking to counter Iran’s revisionist agenda, Obama’s view is that the Saudis need to accommodate themselves to “sharing” the Gulf with the world’s leading state sponsor of terrorism.

Needless to say, the Saudis beg to differ. Confronted with a newly empowered Iran and a retrenching America, the kingdom is striking back, not rolling over. It believes Obama’s policies have purposefully created a dangerous vacuum in the region, one that is primarily being filled by an Iran bent on sowing chaos and destruction, ultimately targeting the downfall of the House of Saud itself.

No longer able to rely on Pax Americana, and unwilling to watch passively as the mullahs slip the noose over their collective neck, the Saudis have increasingly taken matters into their own hands, especially since the ascension of King Salman bin Abdulaziz Al Saud in 2015, adopting a much more assertive and high-risk, even provocative, national security posture with a single-minded mission to challenge and confront Iran.

The opening shot (literally) in Salman’s new anti-Iran campaign was fired even before the JCPOA was finalized in July 2015. In March of last year, the Saudis intervened in Yemen to stop Iran-backed Houthi rebels from taking control of the country. The Obama administration subsequently supported the effort, reluctantly, by supplying intelligence and military equipment. Though the Saudis — and a handful of Sunni allies, led by the United Arab Emirates — succeeded in rolling back rebel gains in southern Yemen, the war has been bogged down for months, with the Houthis still entrenched in the capital, Sanaa, as well as their strongholds in the north, including strategic positions on the Saudi border. Peace talks and ceasefires have come and gone.

Prospects for a political settlement appear dim. Desperately poor and dysfunctional even before the war, Yemen has largely been laid to waste, a failed state that — already home to one of al Qaida’s most dangerous affiliates — appears destined to be a fertile breeding ground for jihadism, sectarian conflict, and regional instability for yeas to come.

Much more at the link.

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Blind Spot

To Say The Least, This Is Really Strange

Over at Yahoo!Finance, reporting:

Target reported disappointing Q2 earnings on Wednesday, and management placed part of the blame squarely on Apple.

Comparable store sales at Target overall fell by 1.1%, but Target executives noted that electronic sales decreased by double digits and “accounted for 70 basis points [0.7%] of overall comp decline.”

Even more notably, Target specifically pointed out that Apple product sales were down by “more than 20%” year-over-year and were to blame for a third of the overall plunge of electronic sales at Target.

Apple’s growth has been running into a bit of trouble recently, as the astounding success of the iPhone 6 has made for tough comparisons. Earnings growth for the tech giant was bad enough in the second quarter to shift overall tech sector year-over-year earnings growth from positive to negative.

Disclaimer: this is not an investment site. Do not make any investment, financial, relationship, travel, or job changes or decisions based on what you read here. For the record, I bought shares in Target for the first time back on June 9, 2014, and sold all shares that I had in TGT two days ago, August 15, 2016. I no longer own any shares in Target and have no plans to initiate a new position in TGT. I did use that cash to buy something else, not in retail and not in energy. 

********************************

The Market

Closing: will probably close slightly up, about 15 points. NYSE:

• new highs: 73, including BKR (a big whoop); CAT; Enerplus; Pioneer Natural Resources; WPX (a huge whoop); XLNX is trading near its 52-week intraday high; it may close at a new closing high (a big, huge whoop -- at $52.19 closing, I see an intra-day high of $52.43 in the past 52 weeks, but no closing higher than $51.74)
• new lows: 11 (somewhat of a surprise, so few; after all, the market was down 80 points in early trading)

Mid-day trading: this is almost predictable. Once traders got the Cisco story behind them they move on. Market up is (barely) by about 10 points.

Opening: market opens down almost 80 points after futures being up about 30 points last evening; that all changed with story that Cisco likely to layoff 14,000 workers (20% of its workforce). 

The Perfect Storm: China's Economy Slowing; Iran Sanctions Lifted; Price Of Oil Plummets; And Then, That Pesky Little Yemen War -- August 14, 206

Updates

August 15, 2016: the original post linked a very recent Breitbart article. The [London] Telegraph also had a similar analysis of Saudi Arabia back in February, 2016. Saudi Arabia is truly in dire straits. This was the headline: Saudi Arabia may go broke before before the US oil industry buckles.

The contract price of US crude oil for delivery in December 2020 is currently $62.05, implying a drastic change in the economic landscape for the Middle East and the petro-rentier states.

The Saudis took a huge gamble last November when they stopped supporting prices and opted instead to flood the market and drive out rivals, boosting their own output to 10.6m barrels a day (b/d) into the teeth of the downturn.

Bank of America says OPEC is now "effectively dissolved". The cartel might as well shut down its offices in Vienna to save money.

Saudi cannot survive on $60 oil. Look how far out we see $60 oil: out to 2020 -- that's four years from now (an important timeframe -- see original post). Historically, Saudi has budgeted for $100 oil, and can probably survive on $80 oil. But $60 oil? Nope. 

Original Post

The perfect storm.

Wow, this is interesting. What do you know? Posted today over at Breitbart.

With China’s economic crash driving U.S. oil prices down to $42 a barrel, Saudi Arabia is the oil-exporting nation suffering the worst economic decline.

The 15,000 members of the six branches of the Saudi royal family have been buying national support with massive social welfare spending. But with the oil price plunging by 60 percent, causing a massive budget deficit, the kingdom’s foreign exchange reserves could be wiped out in four years. [That's how long it takes some kids to finish high school.]

Most analysts have focused on Russia as suffering the worst impacts of the oil price crash. The value of Russia’s oil & gas production is approximately $350 billion per year; it accounts for 20 percent of Russia’s GDP, and equals two thirds of all exports. But even at current prices, Russia will still achieve a trade surplus of about three percent of GDP. As an oil exporter, Russia’s is uniquely self-sufficient and a military exporter.

Saudi Arabia, on the other hand:

Saudi Arabia’s oil and gas sector makes up 45 percent of GDP, funds about 80 of the government’s budget, and accounts for 90 percent of exports. Saudi Arabia’s 2014 budget spending was $294.3 billion, with a $14.4 billion deficit. The 2015 Saudi budget was cut down to $229.3 billion in spending, with an expected $38.6 billion deficit.
But in June with the average price of oil estimated to be $60 a barrel for the year, the IMF estimated that Saudi Arabia’s $745 billion GDP would fall to $649 billion and the nation would post a budget deficit of 20 percent of GDP, or $130 billion.

With international oil prices at $49 a barrel, the Saudi deficit will jump to about $163 billion and Saudi GDP will plunge by another $80 billion, to $570 billion.

And that pesky war:

The IMF also did not make any mention of the added cost of Saudi Arabia’s air campaign against the Islamic State in Syria, and its war and invasion of Yemen.

$5000-traffic fines won't be the answer:

Unlike the Russians’ legendary ability to hunker down and rely on their own self sufficiency in food and production, Saudi Arabia imports 70 percent of its food and does not produce military hardware, cars, refrigerators, civil airplanes, ships, or most manufactured consumer and industrial goods. Saudi Arabia’s only real domestic industry is petrochemicals. [They can't even do new solar projects.]

The Saudi Arabian kingdom is in no position to implement severe austerity measures, like Russia. The vast majority of Saudis enjoy their standard of living due to government handouts. [It's one big rez.]

Saudi citizens tend to lack employable skills and are culturally not inclined to work. Of the 30 million residents, only 5.5 million work and 3 million work directly for the government. The small private sector tends to employ foreigners.

Much more at the link.

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Not Looking Good For That Russian Female Swimmer: Tea Leaves

From Time:

Track’s global governing body banned all but one Russian track athlete from Rio after a report commissioned by the World Anti-Doping Agency found rampant performance-enhancing drug use on the team. And on Saturday that lone [Russian] holdout, long jumper Darya Klishina, was also suspended.

And now we're waiting the outcome of the appeal by the Russian swimmer who took silver in the 100-meter breaststroke.

Russian swimmer Yulia Efimova had served a 16-month ban for doping. After Efimova competed in the 100-m breaststroke semifinals, she waved a “No. 1” finger in the air.

Efimova was suspended but "on appeal" was allowed to participate in the Rio Olympics. Her case is still being reviewed. My hunch is that if she loses the appeal, the finger wagging will be what "did her in."

If the IOC doesn't do the right thing ... well, it won't be the first time.

If Oil Prices Don't Rise, The Mideast Will Sink -- Contributor At The Street - August 13, 2016

Link here. 

The one thing that appears certain, however, is the Middle East is on a path toward social upheaval that will make the Arab Spring pale in comparison, if oil prices don't at least start rising toward where they were before the collapse began two years ago.

I think we will know more in September after OPEC meets.

My 30-second soundbite: Iran is on the way up; everyone else in the Mideast (except Israel, a special case) is on the way down.

Saudi Arabia No Longer Has Cash For Big Projects; Iran Does; Update On The Glut At Cushing -- RBN Energy -- August 12, 2016

North Texas under heat alert. Real temperature 103 to 105 today; feel like temperature in direct sunlight this afternoon could be 115. I plan to be riding my bike about that time. Maybe I'll wear a cap today. Carry some water. 

Active rigs:

	8/12/2016	08/12/2015	08/12/2014	08/12/2013	08/12/2012
Active Rigs	34	72	194	184	199

RBN Energy: glut at Cushing.

Retail sales flat in July: flat vs 0.4% increase expected. Wall Street trifecta yesterday: Dow, S & P 500, and NASDAQ all hit new record highs on same day (first time that has happened since 1999). Americans have only three places to put their money month-over-month: retail sales; the stock market; ObamaCare. My hunch is that the Wal-Mart crowd -- retail sales were flat in July --is throwing their money into the stock market. A bubble, Trump calls it. Retail sales are flat and ObamaCare is unraveling (it was never "raveled" to begin with), so that leaves the bubble we call the "market."

 ************************************

Prince Salman Has A Huge Problem 

Anyone paying attention knows that Saudi Arabia is facing a huge cash crunch.

The fact that Saudi canceled a huge solar energy project some months ago spoke volumes. Saudi no longer has the cash for big projects. From Bloomberg: Saudi Arabia "delays" $109 billion solar plant by 8 years. These projects are critical for desalination plants; desalination plants are not "nice-to-have" budget items for Saudi Arabia. They are in the "must fund" column.

It now appears that there is a very good chance Prince Salman's IPO will be a bust if he doesn't turn things around (see below -- the "$2 trillion mistake").

Meanwhile, Saudi's #1 adversary, Iran hardly seemed to miss a beat even under severe sanctions. Now that sanctions have been lifted, Iran is moving forward with huge projects and has gotten back to "full" crude oil production.

Those huge Iranian projects? Not solar energy. Nope, nuclear reactors.

Iran is permitted to pursue the construction of two newly announced nuclear plants under the parameters of last summer’s nuclear agreement, Obama administration officials informed the Washington Free Beacon, setting the stage for Tehran to move forward with construction following orders from President Hassan Rouhani.

Ali Salehi, Iran’s top nuclear official, announced on Thursday that Iran has invested $10 billion into the construction of two new nuclear plants after receiving orders from Rouhani, according to reports in Iran’s state-controlled media.

Saudi Arabia can't even "handle" Yemen. That war rages on and Saudi is losing so many tanks in that war, that it did not go unnoticed when they ordered more US tanks to replace what they've lost.

This has to absolutely scare the Hades out of Prince Salman. And unlike Saudi Arabia, Iran has a steady source of income: kidnapping and ransoms, which guarantee as much as a half a billion dollars for four Americans as long as President Obama calls the shots for the DOJ.

And apparently the "$1 trillion mistake" made by Saudi Arabia in October, 2014, could turn into a "$2 trillion mistake" -- if the Salman IPO is a dud. 

In the Mideast, this is the story to watch: the rise of Iran, and Saudi Arabia is watching it very closely, but may not be able to do much about it. We know whom Hillary supports.

Later: it is not going to get any better for Saudi Arabia. Almost everyone agrees Saudi Arabia could become a net importer of oil by 2030. On the other hand, global tight oil production will double by 2040, and most tight oil will come from the United States.  Russia, Canada, and Argentina will each produce a significant amount but nowhere near what the US will produce.

SolarCity Losses Widen On Higher Expenses -- WSJ -- August 9, 2016

Updates

August 10, 2016: SolarCity was not the only MuskMelon company losing money. From CNNMoney today:

Likewise, Tesla revealed last week that its losses for the second quarter ballooned to $150 million, more than twice what Wall Street had expected, as it invests heavily in building a battery factory and the cheaper, mainstream Model 3 vehicle.

Original Post

Link here.

SolarCity Corp. , which is in the process of being acquired by fellow Elon Musk company Tesla Motors Inc., reported a wider quarterly loss Tuesday as operating expenses climbed sharply.

For the current quarter, the home solar company forecast an adjusted loss between $2.55 a share and $2.65 a share, worse than estimated by analysts surveyed by Thomson Reuters, who forecast a loss of $2.26.

For the latest quarter, SolarCity reported a loss of $250.3 million, or 56 cents a share, compared with $155.7 million, or 23 cents a share, a year earlier. The quarter’s adjusted loss was $2.32 a share, better than analysts’ predictions of $2.44 a share.

Revenue rose 81% to $185.8 million, far above analysts' expectations of $146 million.

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Saudi Losses In Yemen war Exposed By US Tank Deal

Link here.

The U.S. State Department and Pentagon Tuesday OKed a $1.2 billion sale of 153 Abrams tanks to Saudi Arabia Tuesday. But that’s not the real news.

Turns out: 20 of those tanks, made in America by General Dynamics Land Systems, are “battle damage replacements” for Saudi tanks lost in combat.

Even though the formal announcement of the sales does not say where the tanks were fighting, the Saudi military is believed to have lost some of its 400-plus Abrams tanks in Yemen, where it is fighting Iranian-backed Houthi separatists.

In addition to this Abrams tank deal, the State Department has approved two other sales to Saudi Arabia, $200 million for training, and $155 million for Gatling guns that defend ships from missiles — sending the week’s total value past $1.5 billion. Still, Riyadh’s 2016 shopping bill has a ways to go to match last year’s total, when State approved more than $20 billion in sales of ships, helicopters, missiles defenses, bombs and ammunition.

There may be a reason that Saudi Arabia is spending less on arms this year. 

Coals To Newcastle -- Part II -- The Saga Continues -- Energy? America's Century -- August 3, 2016

Just last week I posted a note, "Coals to Newcastle" about the US exporting LNG to the mideast. Now tonight, over at Twitter, the Oil & Gas Journal is reporting that the Mideast and North Africa (or as those in the know say, MENA) are investing more than $10 billion in LNG import terminals. This is really quite incredible:

Countries in the Middle East and North Africa account for a rapidly rising share of global LNG demand and will invest about $10.3 billion in the “medium term” to meet import needs.

The MENA share of LNG demand will rise to 6.5% by the end of next year from 1% in 2013.

LNG imports by MENA consumer countries totaled 10.5 billion cu m in 2015, of which 40% was from Qatar.

The countries, some of which have problems with creditworthiness, will be cautious about investment in permanent LNG import terminals and increasingly will charter floating storage and regasification units (FSRUs) “as a temporary and lower cost solution.”

Kuwait, the first Gulf Cooperation Council member to import LNG, is an exception. Now using an FSRU, it plans a permanent terminal at Mina Al-Ahmadi with capacity of 15 billion cu m/year, capable of being doubled.

In the United Arab Emirates, where LNG imports by Dubai meet peak gas demand during summer, plans for an import facility in Fujairah have been cancelled in favor of a chartered FSRU at Ruwais, Abu Dhabi.

That option has been called a “flexible solution” to meeting power shortfalls until four nuclear reactors are completed in the UAE in the early 2020s.

A "big story" entry: LNG exports.