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Pain In The Oil Patch

Published 09/30/2015, 08:43 AM
Updated 07/09/2023, 06:31 AM

Big pain in the oil patch as Chesapeake Energy (NYSE:CHK) cuts 15% of its total workforce amounting to 740 high paying energy jobs. The company, which has already cut its capital spending by over 40% is retrenching even more to stay what CEO Doug Lawler will be an "enduring enterprise." Of course, the Obama administration is not helping the patch by insisting that the outdated oil export ban stays in place. President Obama, the 1970's called, they want their energy policy back. Because of President Obama's green agenda he would rather let OPEC bury the U.S. energy producer as opposed to letting them compete without one hand tied behind their back even though it would bring down energy prices and have little impact on the environment. In fact, one might argue that it would have a net positive impact on the environment because shale oil is easier to refine than heaver blends produced by Saudi Arabia.

This is one of the reasons that we are seeing U.S. oil output fall as quickly as it is. We saw more evidence of that in yesterday's American Petroleum Institute (API) report that showed yet another drop in the CME Group's (NASDAQ:CME) delivery point of Cushing Oklahoma. Even though over all the API showed a hefty 4.6 million barrel increase in Oklahoma, land of the fracker, supply fell 1.2 million barrels.

The API also provided a surprise with a big 1.5% uptick in refinery runs. That helped gasoline inventories rise by 3.3 million barrels and distillates to increase by 176,000 barrels. U.S. demand seems robust and that should help supplies tighten.

Tropical Storm Joaquin, in the Atlantic, will impact Gulf Imports and will lead to a drop in Gulf Crude stocks next week. While the storm is projected to go up the East Coast it will cause havoc in shipping lanes.

Brazilian financial problems is forcing the state owned company Petroleo (NYSE:PBR) is raising fuel prices. Consumers in Brazil get gas below market prices.

Russia parliament voted to give Vladimir Putin war powers in Syria. Now Russia is telling U.S. planes to not get in the way. Fox News Reported Russian officials demand U.S. warplanes exit Syria immediately. The AP reported that Russian lawmakers voted unanimously Wednesday to let President Vladimir Putin send Russian troops to Syria. The Kremlin sought to play down the decision, saying it will only use its air force there, not ground troops. Putin had to request parliamentary approval for any use of Russian troops abroad, according to the constitution. The last time he did so was before Russia annexed Ukraine's Crimean Peninsula in March 2014.

The Federation Council, the upper chamber of the Russian parliament, discussed Putin's request for the authorization behind closed doors Wednesday, cutting off its live web broadcast to hold a debate notable for its quickness. Sergei Ivanov, chief of Putin's administration, said in televised remarks after the discussion that the parliament voted unanimously to give the green light to Putin's plea. The proposal does not need to go to another legislative body. Russia will not put ground troops in Syria but will only use its air force "in order to support the government Syrian forces in their fight against the Islamic State". Ivanov insisted that Moscow is not going to send ground troops.

Putin and other officials have said Russia was only providing weapons and training to Syrian President Bashar Assad's army to help it combat the Islamic State group. Recent satellites images, however, have shown giant Russian military cargo planes in Syria, and Russian navy transport vessels have been shuttling back and forth for weeks to ferry troops, weapons and supplies to Syria.

Pain in the patch will mean less oil output and the seeds of a longer term bottom. Oil is acting like the late nineties that after the pain in the batch went onto one of the greatest oil bull markets in history.

Chinese auto tax lifted palladium.

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