One important indicative price, that of Brent Crude, fell a further 1.7% this morning to $68.40 a barrel - which means the price is now 40% below its peak in June.
Crikey.
And the price of West Texas Intermediate is down to $65, a price we haven't seen since the middle of July 2009, when the world was gripped by its worst economic slump since the 1930s.
Crikey.
And the price of West Texas Intermediate is down to $65, a price we haven't seen since the middle of July 2009, when the world was gripped by its worst economic slump since the 1930s.
What's going on?
Well, demand for oil has been falling - because of the eurozone's stagnation, Japan's recession and China's slowdown - while output has been rising, largely thanks to America's shale boom.
So an oil glut has been created, which was reinforced last week when the oil producers of OPEC - to the great surprise of many - didn't cut their output target of 30 million barrels a day.
Anyway, the important point is that an oil price fall represents a transfer of cash into the pockets of consumers, via lower prices for petrol and all goods and services where energy is a big component of the price.
Well, demand for oil has been falling - because of the eurozone's stagnation, Japan's recession and China's slowdown - while output has been rising, largely thanks to America's shale boom.
So an oil glut has been created, which was reinforced last week when the oil producers of OPEC - to the great surprise of many - didn't cut their output target of 30 million barrels a day.
Anyway, the important point is that an oil price fall represents a transfer of cash into the pockets of consumers, via lower prices for petrol and all goods and services where energy is a big component of the price.
Consumers have a habit of spending this freed-up cash, which then stimulates economic activity and growth.
There are of course losers - the huge oil companies, governments and plutocrats in oil-rich countries, from Saudi to Russia and Nigeria.
But their marginal propensity to spend is less than that of consumers. So the fall in producers' income and profits is less harmful for the world.
What's the net benefit to the global economy of the tumbling oil price? Well, economists estimate that a 40% fall in the oil price, if sustained, would add something over 0.5% to global economic growth, perhaps as much as 0.8%.
There are of course losers - the huge oil companies, governments and plutocrats in oil-rich countries, from Saudi to Russia and Nigeria.
But their marginal propensity to spend is less than that of consumers. So the fall in producers' income and profits is less harmful for the world.
What's the net benefit to the global economy of the tumbling oil price? Well, economists estimate that a 40% fall in the oil price, if sustained, would add something over 0.5% to global economic growth, perhaps as much as 0.8%.
Hooray.
That said, whenever there is such a pronounced change in the price of such an important item, the redistribution effects can have dangerous political and economic consequences.
The impact, for example, on oil-dependent and financially-stretched Venezuela, Iran, Nigeria and Russia is likely to be pretty dire. If nothing else, they'll have to slash public spending, if they're to avoid a disastrous deterioration from their already strained public finances.
It would not be a surprise - and wouldn't be the first time - that a dramatic change in the oil price led to major social upheaval in an oil-rich state.
That said, whenever there is such a pronounced change in the price of such an important item, the redistribution effects can have dangerous political and economic consequences.
The impact, for example, on oil-dependent and financially-stretched Venezuela, Iran, Nigeria and Russia is likely to be pretty dire. If nothing else, they'll have to slash public spending, if they're to avoid a disastrous deterioration from their already strained public finances.
It would not be a surprise - and wouldn't be the first time - that a dramatic change in the oil price led to major social upheaval in an oil-rich state.
Oil prices fell to a five-year low on Monday, sending the rouble tumbling, while fears over slowing manufacturing activity in Europe and China undermined global confidence.
The Russian currency slid as much as 6% against the dollar to a new record low.
The rouble was on track for its biggest one-day fall since Russia's 1998 currency crisis.
Brent crude sunk as low as $67.53 a barrel, the cheapest it has been since October 2009.
It later regained some ground to trade just above $70 a barrel, while US crude was at $66.34 a barrel, having hit an intraday low of $63.72 - the lowest since July 2009.
Oil prices have fallen by more than a third since the summer, while the rouble is down some 40% since January.
The latest falls in the oil price follows Opec's decision last week not to cut output and leave its production target at 30 million barrels a day.
Saudi Arabia, the cartel's biggest producer, said on Monday said it was content with the decision to maintain output despite a supply glut and plunging prices.
Amrita Sen, Energy Aspects' chief oil analyst, said: "The market is still very much in panic mode. Once we get over the panic, Brent prices will probably stabilise at around $65 to $80 a barrel in the short term."
Eugen Weinberg, a Commerzbank analyst, said: "The market is still looking for a new equilibrium below $70 [a barrel], which is a little surprising given that with the current prices much of the shale oil production in the US, or part of it, will be unprofitable."
Ksenia Yudayeva, deputy chairman of the Russian central bank, tried to reassure traders by saying there was sufficient liquidity in currency markets and that the bank had prepared new economic forecasts based on a price of $60 a barrel.
The rouble gained some ground in afternoon trading on Monday, to be down 3.8% at 52.41 against the US dollar and 3.5% lower at 65.39 versus the euro.
Traders said the relatively sudden rally pointed to intervention by the central bank, which declined to comment.
The Russian currency slid as much as 6% against the dollar to a new record low.
The rouble was on track for its biggest one-day fall since Russia's 1998 currency crisis.
Brent crude sunk as low as $67.53 a barrel, the cheapest it has been since October 2009.
It later regained some ground to trade just above $70 a barrel, while US crude was at $66.34 a barrel, having hit an intraday low of $63.72 - the lowest since July 2009.
Oil prices have fallen by more than a third since the summer, while the rouble is down some 40% since January.
The latest falls in the oil price follows Opec's decision last week not to cut output and leave its production target at 30 million barrels a day.
Saudi Arabia, the cartel's biggest producer, said on Monday said it was content with the decision to maintain output despite a supply glut and plunging prices.
Amrita Sen, Energy Aspects' chief oil analyst, said: "The market is still very much in panic mode. Once we get over the panic, Brent prices will probably stabilise at around $65 to $80 a barrel in the short term."
Eugen Weinberg, a Commerzbank analyst, said: "The market is still looking for a new equilibrium below $70 [a barrel], which is a little surprising given that with the current prices much of the shale oil production in the US, or part of it, will be unprofitable."
Ksenia Yudayeva, deputy chairman of the Russian central bank, tried to reassure traders by saying there was sufficient liquidity in currency markets and that the bank had prepared new economic forecasts based on a price of $60 a barrel.
The rouble gained some ground in afternoon trading on Monday, to be down 3.8% at 52.41 against the US dollar and 3.5% lower at 65.39 versus the euro.
Traders said the relatively sudden rally pointed to intervention by the central bank, which declined to comment.
The central bank has not intervened in the foreign exchange market since 10 November, saying it would do so only if it considered the rouble's fall a threat to financial stability.
Malaysia's oil-dependent ringgit also suffered heavy losses, while the yen hit a seven-year low against the dollar and Nigeria's naira was down 2% to a new record low against the greenback.
China slows
The slide in oil prices was compounded by China's factory activityslowing by more than expected in November, with the official purchasing managers' index (PMI) dipping to 50.3 in November from October's 50.8, closer to the 50 point mark that separates growth from contraction.
The fears of declining demand from China also sent copper prices to their lowest level in four-and-a-half years in London and hit shares in mining companies.
Neil Williams, chief economist at fund manager Hermes in London, said: "Over-optimistic global growth forecasts have been pared back, and probably rightly so, and also China has come back on to the radar. And that of course has become a big driver for a lot of commodity prices."
Adding to the gloom were figures showing that eurozone manufacturing growth stalled in November as new orders fell at the fastest pace in 19 months, despite heavy price cutting.
The final PMI reading for the manufacturing sector in November came in at 50.1, the lowest number since June 2013.
Chris Williamson, chief economist at survey compiler Markit, said: "The situation in euro area manufacturing is worse than previously thought... there is a risk that renewed rot is spreading across the region from the core."
Meanwhile, Moody's downgraded its credit rating for Japan on Monday, citing "rising uncertainty" over the country's debt situation and prime minister Shinzo Abe's faltering efforts to boost growth, with an election a fortnight away.
The ratings agency cut Japan's rating by one notch to A1 from Aa3, after the economy sank into recession during the third quarter.
The slide in oil prices was compounded by China's factory activityslowing by more than expected in November, with the official purchasing managers' index (PMI) dipping to 50.3 in November from October's 50.8, closer to the 50 point mark that separates growth from contraction.
The fears of declining demand from China also sent copper prices to their lowest level in four-and-a-half years in London and hit shares in mining companies.
Neil Williams, chief economist at fund manager Hermes in London, said: "Over-optimistic global growth forecasts have been pared back, and probably rightly so, and also China has come back on to the radar. And that of course has become a big driver for a lot of commodity prices."
Adding to the gloom were figures showing that eurozone manufacturing growth stalled in November as new orders fell at the fastest pace in 19 months, despite heavy price cutting.
The final PMI reading for the manufacturing sector in November came in at 50.1, the lowest number since June 2013.
Chris Williamson, chief economist at survey compiler Markit, said: "The situation in euro area manufacturing is worse than previously thought... there is a risk that renewed rot is spreading across the region from the core."
Meanwhile, Moody's downgraded its credit rating for Japan on Monday, citing "rising uncertainty" over the country's debt situation and prime minister Shinzo Abe's faltering efforts to boost growth, with an election a fortnight away.
The ratings agency cut Japan's rating by one notch to A1 from Aa3, after the economy sank into recession during the third quarter.
Some of us were discussing this in the akphidelt/willie99 handicapping challenge thread
few decent links in there...here is another good link I read this morning (I know how to imbed all the Sopranos videos in the world but still don't know how to imbed articles lol)
http://www.cnbc.com/id/102224725
few decent links in there...here is another good link I read this morning (I know how to imbed all the Sopranos videos in the world but still don't know how to imbed articles lol)
http://www.cnbc.com/id/102224725
Rouble falls as oil price hits five-year low
The price of oil has fallen by more than a third since the summer
http://www.theglobeandmail.com/repo...falling-oil-prices-sanctions/article21862859/
Russia’s central bank is trying to resist a brutal assault on the ruble, but any respite is bound to be short-lived.
The Central Bank of Russia waded into currency markets Monday as the ruble plunged to levels not seen since the 1998 financial crisis that triggered a devaluation and government debt default.
Like the Canadian dollar and the Norwegian krone, the Russian currency has been under extreme pressure amid the collapse in oil prices.
The ruble plunged as much as 6.5 per cent Monday, hitting a record low against the U.S. dollar before retracing some its lost ground to close down 4 per cent, which traders attributed to central bank intervention. The ruble has lost close to 60 per cent of its value against the greenback so far this year.
But if there’s any relief in Russia’s case, it promises to be temporary as a combination of falling oil prices, Western sanctions, capital flight and a string of policy mistakes threaten to drive an already stumbling economy off a cliff, carrying the currency with it.
“What we are seeing is a perfect storm,” said Anders Aslund, a senior fellow with the Peterson Institute for International Economics in Washington.
On Tuesday, the ruble sank for a sixth day, as crude resumed declines and the Economy Ministry said Russia may enter its first recession since 2009 next year. Gross domestic product may shrink 0.8 per cent next year, compared with an earlier estimate of 1.2 per cent growth, Deputy Economy Minister Alexei Vedev said in Moscow.
Despite the Kremlin’s best efforts to deride Western sanctions as little more than an irritant, they are taking a heavy toll on Russia’s financial sector and other parts of the economy.
Gazprom axed a $40-billion (U.S.) pipeline project on Monday that would have carried natural gas to southern Europe while bypassing Ukraine.
As for the ruble, the central bank had largely maintained a hands-off policy in recent weeks while hoping in vain that tighter monetary policy – four rate hikes so far this year, topped by a stunning 150-basis-point jump to 9.5 per cent in October – would do the trick. But the currency continued weakening.
Analysts expect the central bank to raise its key rate again by 100 basis points at its next meeting Dec. 11, despite pressure from lawmakers to loosen policy in response to worsening economic conditions. Several have called for an investigation of the bank’s manoeuvres and are urging more aggressive use of foreign-exchange reserves to prop up the ruble.
But those reserves are eroding more rapidly than many observers realize, Mr. Aslund said, warning that Russia will face a serious financial squeeze in 2015. “The situation is far worse than the Kremlin says.”
Central bank reserves total what appear to be a comfortable $420-billion. But that’s down more than $100-billion in just one year and will probably shrink by a similar amount in the coming year. What’s more, $172-billion of the total is controlled by the Finance Ministry, another $45-billion or so sits in gold and $12-billion is parked with the International Monetary Fund. Another $150-billion is likely to be needed to cover foreign debt repayments over the next year, because the country has been cut off from normal U.S.-dollar refinancing channels by the sanctions.
So actual liquid reserves available to defend the ruble are rapidly shrinking. And the government takes a direct hit from a narrowing oil revenue stream, because of its heavy reliance on its take from high marginal tax rates on the industry to finance its budget.
Still, for all its self-inflicted woes, there are no signs that the Russian economy is mirroring the steep drop in the ruble or facing a rerun of the 1998 collapse, said Neil Shearing, chief emerging markets economist with Capital Economics in London. “The economy’s stagnating, but it’s certainly not collapsing.”
And there may even be a silver lining to the oil slide, if it shakes policy makers out of their complacency and forces them to tackle the structural problems weighing down the economy. Low oil prices were the trigger for previous reform efforts, Mr. Shearing notes. But he acknowledges that the Putin government has shown no inclination to pursue major economic changes.
His forecast puts Russia in recession territory for most of the coming year with a contraction of 1 to 1.5 per cent, which is in line with Moscow-based predictions. “Clearly, the risks lie to the downside.”
Mr. Aslund does not do such crystal-ball gazing, but suspects the slump could be much greater, perhaps as deep as 4 to 6 per cent. Mr. Putin, he said, “has made every economic mistake in the book. We are reaching a tipping point.“
worth repeating....
"Mr. Aslund does not do such crystal-ball gazing, but suspects the slump could be much greater, perhaps as deep as 4 to 6 per cent. Mr. Putin, he said, “has made every economic mistake in the book. We are reaching a tipping point.“
LMFAO
is Mr.Putin playing chess while the world is playing checkers?
how can the clown save face?......Putin, how those counter sanctions coming along? LOL
