Tuesday, October 27, 2015

Nat Gas below $2


Potential bearish USD implications if the US producers start accepting lower bids from North American export customers in CAD and MXN terms.

While that could be offset by Canadian and Mexican oil producers further accepting lower bids from their export customers in USD terms.

Result would be price reductions in both nations for oil and gas with NO change in net terms of trade, ie the USD/CAD and USD/MXN pairs would remain stable.

Not sure of whether this is what macro-economists would metaphorically term "deflation" (who knows what those among the mathematically challenged think) but many commodities still continue to exhibit new lows.




5 comments:

Ryan Harris said...

With the US 'solving' budget impasse by selling off the strategic petroleum reserve... It was filled last at over 100bbl and now is being sold at less than 50! The two party government in Washington believes we are out of money and out of real resources. So the only thing they can do is sell off national assets. Idiots.

Ignacio said...

I had a chat yesterday with someone who is related to the construction sector and has a supply business in Alger (working with both public and private enterprises), I also have direct experience while not working there right now. This is paralyzing the country, they are "running out of money" so most contracts are being paralyzed and rolled back, there have been changes in legislation too to make it even harder for foreign corporations to work over there (was already very protective legislation).

You can tell the current commodity bear cycle in developing nations is being highly disruptive if they are failing to adapt (like Russia) to the new conditions, with a lot of disinvestment going on and the usually corrupt elites and officials dis-investing along the foreign contractors currencies are dropping left and right making hard for them to pay for needed imports, with the BoP returning to a new equilibrium their governments are 'running out of money' reducing overall spending and turning to austerity.

this is happening all over the place in South America, MENA and parts of Asia. This is good for nations which are net importers of raw materials and have high demand (from developed nations to highly populated developing nations like China and India). there is a shift of purchasing power from the export-driven commodity nations to the developed and highly populated nations.

If we get to continue a transition to a less consumer dependent and reduce carbon energy needs this is going to be highly disruptive for a few areas of the world, but overall will be good for the rest (as long as this is not driven by fall in demand due to lack of income and increasing poverty in developed nations, like it's right now).

Ryan Harris said...

With the US running smaller current account deficits and China paying less for imports from the EM, along with slower growth in China and then the European Union running the largest current account surpluses in human history, the rest of the world has to provide their own growth using their own currencies and fiscal policy rather than trying to export their way to economic nirvana. This global re-balancing away from international trade and back to the basics of economic development will be healthy but the politicians are kicking and screaming and protesting and making the process more difficult than it needs to be.

Ignacio said...

Well I can't wait for the day the rest of the world tell the EU to fuck off and stop their export craziness so we have an actual re-balance of world trade and a return to more sane local development policies because otherwise it's going to be impossible and this is putting more pressure over developing nations which will likely get worse. But instead what we are seeing is a flight forwards towards more international trade with less checks and balances reified by things like NAFTA and now TTP, TISA and all that garbage.

P.S: Not being selfish, as exports are a real cost and importing paper is useless on the long run. Germany used to understand this but along the way they got lost in their moralist nonsense and domination tendencies that comes back each few decades in one of their variations.

Matt Franko said...

Ignacio its not just Germany imo it is the entire Christendumb in the west...

Fall of the Soviet system in the 90's leading to a current reemergence of the Orthodox church about in parallel with the revelation of state currency systems...

Within "the Church" it is classic "Peter vs. Paul"... or "borrow, default, forgive" vs. "issue, redeem".... or "Roman (FD my background) vs. Orthodox" or "metals vs state currency" the two sides in these ancient western conflicts are grounded in the same principles imo....

Right now "Orthodox/issue/currency" seems to be on offense with "Roman/borrow/metals" playing defense... big battle brewing...