Why China Is Being Flooded With Oil: Billions In Underwater OPEC Loans Repayable In Crude, by Tyler Durden

“When the price of oil was above $100, many of the less developed oil exporting OPEC members decided to capitalize on the high price and cash out by taking loans using the precious liquid as collateral … However, few oil exporters anticipated such an acute oil plunge in such as short time span, which resulted in the value of the collateral tumbling by 70%, and now find themselves have to repay the original loan by remitting as much as three times more oil!”

STRAIGHT LINE LOGIC

Here’s one of the dumber borrower schemes out there, and a bunch of clueless governments in oil producing countries are at the heart of it: borrow money and agree to pay back the equivalent amount in barrels of oil, not using the market value of oil at the time the deals are struck, but at the time the loans must be repaid. So loans incurred when oil was above $100 a barrel now must be repaid with oil that is only valued at $40-$50 a barrel, meaning debtors must repay 2 to 3 times the amount of oil they would have had oil prices stayed high. The Chinese, the creditor on the other side of these transactions, receive a lot more oil, but they’re running out of storage and refinery capacity. From Tyler Durden at zerohedge.com:

When the price of oil was above $100, many of the less developed oil…

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5 Reasons Oil Prices Are Dropping

Key contributing factors in the fall in oil prices range from surprise production levels in Libya to, in-fighting between OPEC members and EU economic outlook…

Source: oilprice.com

“> […]

1. The U.S. Oil Boom
America’s oil boom is well documented. Shale oil production has grown by roughly 4 million barrels per day (mbpd) since 2008. Imports from OPEC have been cut in half and for the first time in 30 years, the U.S. has stopped importing crude from Nigeria.

2. Libya is Back
Because of internal strife, analysts have until recently assumed that Libya’s output would hover around 150,000-250,000 thousand barrels per day. It turns out that Libya has sorted out their disruptions much quicker than anticipated, producing 810,000 barrels per day in September. […]

3. OPEC Infighting 
There have been numerous reports about the discord between OPEC members, leading many to believe that OPEC will not be able to reign in production like it has done so in the past. The Saudis and Kuwaitis have reportedly been in an oil price war, repeatedly lowering their prices in order to maintain their market share in Asia. […]

4. Negative European Economic Outlook
European Central Bank president Mario Draghi has left investors concerned about the continent’s slow growth. Germany’s exports were down 5.8 percent in August, stoking the fears of anxious investors that the EU’s largest economy had double dipped into recession last quarter. Across the Eurozone, the IMF again lowered its growth forecast to 0.8 percent in 2014 and 1.3 percent in 2015.

5. Tepid Asian Demand 
Beyond slow economic growth and currency depreciation, a number of Asian countries have begun cutting energy subsidies, resulting in higher fuel costs despite a drop in global oil prices. […]”<

 

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Price of Oil Continues to Drop Due to Oversupply

The price of oil has hit another five-year low as fears of oversupply continue to mount.  Brent crude was down $1.77 at $67.30 a barrel in Monday afternoon trading, having earlier hit $66.77 – its lowest since October 2009.

Source: www.bbc.com

>” […]US crude was down $1.44 at $64.40, after falling as low as $64.14.

Morgan Stanley predicted that Brent would average $70 a barrel in 2015, down $28 from a previous forecast, and be $88 a barrel in 2016.

The investment bank also said that oil prices could fall as low as $43 a barrel next year. Analyst Adam Longson said that markets risked becoming “unbalanced” unless the Opec producers’ cartel decided to intervene.

Saudi Arabia, the cartel’s biggest member, resisted calls at last month’s meeting to cut production despite the slide in prices, which have fallen more than 40% since June.

Kuwait, another Opec member, said that oil prices were likely to remain about $65 a barrel until the middle of next year unless Opec cut output. […]”<

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Leaked Documents Reveal Industry PR Push For “Energy East” a Larger Canadian Pipeline after Keystone XL

With the debate still raging over Keystone XL, the company behind the pipeline is already hard at work promoting a PR strategy for its larger and entirely Canadian pipeline, Energy East.

Source: thinkprogress.org

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