In October, after announcing that it would cut oil production in September — and watching oil rally — Saudi Arabia has announced that October OPEC production was up to all-time highs.
On top of that, it was released that the U.S. is importing a larger amount of oil from overseas now as well and will cut production in November.
Why wouldn’t we be encouraging the U.S. oil and gas industry to start producing rather than buy from Saudi Arabia and others abroad?
Because it’s bigger than energy prices. As Bob Livingston has observed for some time, the banksters and their inept attempts to fix their own problems are playing themselves out in the energy patch.
Energy prices have stabilized in their current $40-50 range and they’re likely to stay there through the winter, if not head lower. The winter in the Northern Hemisphere is actually a slow time for energy prices.
Unless there’s a vicious winter ahead — which at this point there is no sign of — and there were to be a significant increase in demand for heating oil, electricity and natural gas, there’s not much pressure on oil prices.
U.S. producers are currently in production even though prices are below the cost of production on unconventional rigs. Most of our shale production is by unconventional methods, where breakeven is about $50 a barrel. Brent North Sea oil and WTI (West Texas Intermediate) are both around the mid-40s right now.
This explains the big layoffs happening in the North Sea from most production companies in the region. For example, Norway’s Statoil company just announced a $1 billion cut in capital expenditures in the next year. Less stuff to operate, less operators.
In the U.S., banks are so deep in with these energy companies they are doing everything in their power to allow these firms to continue operations because if they shut them down, it would take down — or at least seriously cripple — a number of regional and national banks.
That’s why U.S. exploration and production (E&P) firms are producing oil again and putting rigs back on line. They need some money to keep the banks happy, even if they’re selling their products at a loss.
Once again, this is how yet another key economic sector — the energy market — is rigged by the banks. And the banks could care less whether the U.S. companies succeed or fail, they just want to make sure they get paid. That means manipulating the entire oil and energy market right now.
Bear in mind that Iran, Nigeria and other countries have yet to ramp up oil production. When they get on line, whatever Saudi Arabia cuts — if it does — will easily be replaced by new sources.
That means oil prices are likely to go lower before they ever go higher.
While big oil companies are starting to turn the corner it seems smaller players are still very much in danger. Mergers and acquisitions could be in the works in coming months if big players snap up weaker E&P firms. But that’s not a trend to bet on, it’s just speculation.
Right now, the most attractive way to invest for gains in the current cycle is to buy on the post-election dip in gold and silver prices.
Not only do election results push down gold since a “November surprise” is no long priced into the markets, but the Fed planning on raising rates is December is also pushing down demand for precious metals.
But it won’t last. That makes this a good time to start buying into precious metals. You can nibble on purchases through at least mid-December and then sell for some profit if you don’t want to hold too much gold.
Remember, Wall Street will be all about a rally to close out Q4 so they can get their bonuses. But that won’t last either.
If you haven’t sold the stocks that are on your sell list — which should be all but a select handful — now is the time to invest in gold for investment sake.
If the Fed raises rates, many economists predict a recession to follow, which would kill stocks but absolutely levitate gold and silver.
Play the long game here, not the short one.
— GS Early