Skip to main content

CAD and WTI

Ok, so most of North America is shut down today, family day in Ontario, and I'm not too sure what's the holiday in the U.S. But, what is interesting is the direction of oil prices -- not too sure what is driving them today, it is hard to believe that with Europe's economy is taters, China lowering interest rates (by 50 bps) because of the weakening housing market (although inflation is still sky high there), that the driver for higher oli price is a seemingly recovering U.S. economy... no, I suspect it is the neo-con (and evangelicals) trying real hard to start another war -- this one with Iran.

The most amazing commentary this weekend was that from a close confident of GW Bush (the young one) whose decision to invade Iraq was partly driven by a desire to see the apocalypse that woud eventually lead to the rapture (I wish I was joking), that and the ideal of finishing "dad's war" were the prime drivers -- despite what everyone say's in the GOP today there were no WMD in Iraq, the CIA didn't find any neither did MI6, Chenney, Bush and friends made it up.

So il prices are rising on the basis of rising tensions in the Middle East, specifically words of war with Iran, between the US or war between Iran and Israel, or war between Iran and Saudi Arabia... its hard to say who hates Iran more these days, the Americans, the Israel or the Saudis (granted they probably all hate them...).  So Brent crude has been hovering around $121/bbl -- Feb average of $115/bbl Vs $111/bbl for January.

Canada, and the CAD in particular, is a petrol related economy, despite Q4 GDP weakness, and an estimated 2011 GDP growth of less than 2.1%, Canada's currency has been sitting at or above par with the USD, and is unlikely to move lower until oil prices do the same.  In fact, odds are that the CAD will head back to its December high of 1.05/USD sooner rather than later.  This has nothing to do with Canada economic health, but rather rising oil prices (granted these are good for Western Canada's economies).

For America the problem is the critical $4/gallon threshold that is very near, and that has in the past been a hugh economic signal.  Like everything else, consumer eventually become desensitize to higher prices, once fuel is always around $3.5/gallon and then goes up a bit... still in the past this price rise has marked an economic slowdown.  


Comments

Popular posts from this blog

Trucker shortage? No a plan to allow driverless rigs

There are still articles on how America is running out of truckers -- and that its a huge problem, except its not a problem, if it was a problem salaries would rise to so that demand would clear. Trucking is one of those industry where the vast majority of participants are owner/operators and therefore free agents.

Salaries and cost are extremely well know, "industry" complains that there are not enough truckers, yet wages continue to fall... Therefore there are still too many truckers around, for if there was a shortage of supply prices would rise, and they don't.

What there is though is something different; there is a push to allow automatic rigs to "operate across the US", so to encourage the various authorities to allow self driving rigs you talk shortage and hope that politicians decided that "Well if people don't want to work, lets get robots to do the work" or words to that effect.

This has nothing to do with shortage of drivers, but every…

Every punter says oil prices are on the rise: Oil hits $48/bbl -- lowest since September 2016

What the hell?

How could this be, punters, advisors, investment bankers all agreed commodity prices  in general and oil prices in particular are on the rise...its a brave new era for producers and exporters -- finally the world is back and demand is going through the roof, except not so much!

What happened?  Well energy is complicated, the world operates in a balance -- 30 days of physical reserves is about all we've got (seriously) this is a just in time business.  So the long term trend always gets hit by short term variations.

Global production over the past 12 months has risen by somewhat less than 1.5% per annum.  As the world market changes production becomes less energy intensive (maybe), but the reality is that the world is growing more slowly -- America Q4 GDP growth was around 1.9% (annualized) Europe is going nowhere fast (the GDP growth in Germany is overshadowed by the lack of growth in France, Italy, Spain (lets say 27 Euro members generated a total GDP growth of 1.2…

Paying for research

This morning I was reading that CLSA -- since 2013 proudly owned by CITIC -- was shutting down its American equity research department -- 90 people will be affected!

Now the value of a lot of research is limited, that is not to say that all research is bad. In fact, I remember that GS's Asia Aerospace research was considered the bible for the sector.  Granted, there was little you could do with the research since the "buy" was for Chinese airlines...that were state owned.  Still it was a vey valuable tool in understanding the local dynamics.  It seems that the US has introduced new legislation that forces brokers to "sell" their research services!  Figures of $10,000 an hour have been mentioned...

Now, research can be sold many times; if GS has 5000/6000 clients they may sell the same research 300x or 400x (I exaggerate) but this is the key -- Those who buy the research are, I presume, prohibited from giving it away or selling it, at the same time the same rese…