Goldtent TA Paradise

GDX/GLD RATIO CUP HANDLE

1. Steins1 says:

   July 4, 2018 - 2:42 pm at 2:42 pm

   LST, did you get my response about Carl?

   In some ways the acknowledgement of the birth of the United States is a celebration of identity. However as successful as the United States had been in many ways, its past success is no guarantee of the future. People in the United States are now aligning themselves with competing visions and understandings of the national identity of the United States.

   The good news economically is that because of the actions of the Federal Reserve since 2010 we have about as close as possible to full employment levels. However the bad news is that may change over the next few years. Many problems are emerging that will ultimately lead to job loss including high oil prices. And of course there are all of the other problems both psychological and financial including but not limited to, growing nationalism across the planet, and the fear of the loss of national identity in the U.S. and everywhere else. Combining the need for a national identity with a growing national debt, an expanding cash flow deficit in the tax picture of the United States, increasing interest rates, the decline of the middle class in the United States, the possible breakdown of the for profit and parts of the non-profit healthcare system in the United States, and the emergence of inflation and possibly stagflation, the outlook for the next 5 to 10 years is at best challenging.

   Oil prices are determined by two primary issues production and consumption. Right now two things are happening. The first is consumption continues to increase on a world wide basis. The article titled “Crude Reality” details issues about consumption. The second is as the first article suggests production may peak in 2021. That means without offsetting drops in consumption eventually there will not be enough oil produced to satisfy demand. Hopefully by the middle of the next decade alternative energy sources will replace a larger percentage of the of use of oil for energy production. It is a very difficult issue.

   The use of excessive amounts of oil is harming the environment as climate change is impacting the quality of life in parts of the planet. Not using oil however may harm the environment in other ways. If oil is not available for the production of energy stresses on the infrastructure will develop almost everywhere, the availability of electricity and other products will decline and larger numbers of people will become poor. Nations can morph from prosperity to economic disaster in very short periods of time. Venezuela is the most recent example of the most successful economy in South American to becoming the worse economy. Argentina is well into a negative cycle of what could turn into a disastrous decline.

   The threat to our environment by people living in poverty will be devastating. Food sources will decline, the water supplies which already are becoming more polluted across the planet will be even more harmful to all who have contact with it, and people will have less ability to protect themselves from the weather without the relief that energy produced from oil provides. Luckily there are very large sources of natural gas which can be developed for future use, but the change for many from oil to natural gas will take time and lots of money.

   The good news for the environment is that people will reduce their consumption of oil and releasing its pollutants into the atmosphere as the cost of oil increases forcing governments, corporations and individuals to seek other sources of energy. The creation of new technologies and advances of current alternative energies will be the only chance humanity has to prevent a return to the 1800’s. The most likely source of advances will be the production of energy from hydrogen—but it will take some major advances and decades to put a new infrastructure in place to produce energy using hydrogen as the feedstock. And of course this is just another example of creative destruction taking aim at many segments of society and the business world.

   The changes that are going to thrust upon everyone will challenge an individuals ability to manage change—and of course understanding how our brain works is another emerging issue that will lead to enormous change for all future generations and redefine what it means to be human. Brain development is another topic for another time.

   Carl Haefling

   USA and World Oil Production.

   http://peakoilbarrel.com/usa-and-world-oil-production-2/

   Crude Reality: Is $100 The Next Stop?
   Jul. 3, 2018 4:44 PM ET
   |
   RMB Group
   Investment advisor, commodities, portfolio strategy, Managed Futures
   RMB Group
   (274 followers)
   Summary

   Today’s surprising strength in crude is due to three factors: 1) growing global demand, 2) constrained supply and 3) political risk.

   Global demand for crude oil was 90.4 million barrels per day (mb/d) in 2012.

   Today it is 98.4 mb/d and is expected to reach 101.5 mb/d by 2020.

   The productivity miracle of the 20th and early 21st centuries was fueled by crude oil and its derivatives. Diesel made from crude oil powered tractors and combines. Farmers, aided by fertilizers synthesized from the same, produced exponentially more food on the same land, leading to rapid population growth. The modern transportation we all take for granted would be impossible without gasoline and jet fuel. Solar, wind and other forms of renewable energy may be making big inroads, but the modern world still runs on crude oil.

   Today’s surprising strength in crude is due to three factors: 1) growing global demand, 2) constrained supply and 3) political risk. Global demand for crude oil was 90.4 million barrels per day (mb/d) in 2012. Today it’s 98.4 mb/d and is expected to reach 101.5 mb/d by 2020. The growing influence of population-heavy China and India account for the lion’s share of this growth. Higher standards of living mean bigger budgets for motorbikes, cars and electricity.

   Source: International Energy Agency (NASDAQ:IEA)

   Horizontal drilling and hydraulic fracturing (“fracking”) have boosted US production to more than 11 mb/d. This has made the United States one of the world’s biggest producers and helped drive down prices to as low as $26 per barrel in early 2016. Low prices were met with increased consumption as Americans ditched their small sedans for pickups and SUVs and the global economy went on a tear. It did not take demand all that long to catch up.
   Supply Constrained By OPEC and Venezuela Collapse

   Rising demand for crude oil has not been met by a consummate increase in supply due to successful market manipulation by OPEC and the economic collapse of OPEC member Venezuela. OPEC’s 2016 agreement with mega producer Russia to cut production by 1.8 million barrels per day succeeded beyond even the wildest expectations due to Venezuela’s rapidly decreasing production and the shuttering of expensive production capacity.

   Source: International Energy Agency (IEA

   Venezuela’s inflation rate was 112% in 2015. It is now 13,865%. Skilled oil workers, unable to afford to eat on salaries decimated by hyper inflation, have resorted to vandalizing production facilities, selling off anything they can to earn cash. Venezuelan production, already in a steep decline, has fallen off a cliff. Production expected to drop to 1 mb/d by the end of 2018, subtracting 1.5 mb/d from global supply.

   New US sanctions on Iran have the potential to remove yet another 1 mb/d from production. This is why oil prices have risen despite OPEC’s late-June agreement to increase production by 600,000 barrels per day. The possibility for further kinks in supply due to ongoing conflicts in Syria and Libya as well as the continuing proxy war between regional powers Saudi Arabia and Iran also have helped blunt the effects of OPEC’s recent production increase.
   Refining Margins Remain Bullish

   The “crack spread” measures the profitability of turning crude oil into end products like gasoline, diesel and jet fuel, and what it’s telling us is that the refining business is good. Refiners are making roughly $17 per barrel turning crude into gasoline and roughly $20 per barrel turning it into distillates like diesel and jet fuel.

   These kind of margins encourage crude oil consumption. Higher gasoline prices could eventually impact consumption, causing these margins to shrink. But this probably won’t happen until the average retail price of a fill-up approaches $4.00 per gallon. This is roughly $1.00 per gallon higher than the current average retail price.

   Data Source: Reuters
   What to Do Now

   As the chart above suggests, there seems to be plenty of room to the upside for crude oil. We believe the psychologically important $100 per barrel market is a reasonable long-term target given growing global demand and structural supply tightness. Old resistance at roughly $62.50 per barrel has now become good support. Front month crude needs to hold February lows at $58 per barrel on a weekly closing basis in order to maintain bullish momentum.

   Oil’s big decline in 2016 caused many expensive production ventures like offshore drilling and Artic exploration to get mothballed. It will take years for these projects to restart and to come on line, if at all. However, oil for delivery in the future is trading at a huge discount to oil trading for immediate delivery, counting on supply to equal or exceed future demand. This “backwardation” is generally a bullish sign. It also enables us to take a position in long-dated crude oil options for a very reasonable cost. Today’s supply/demand imbalance is not shrinking. Consequently, we expect back month futures contracts to catch up to the near month contracts as supplies flatten out.

   The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that R.J. O’Brien believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

2. Music Man says:

   July 5, 2018 - 1:00 am at 1:00 am

   Thank, Stein1.