November 19, 2017

Oil prices could double if Middle East conflict escalates

The war that would transform oil markets

Scarcity doesn’t really justify the upward price movement. There isn’t a shortage of oil in the world. But there could be, in the worst case, if missiles start flying between two of the world’s largest oil players: Saudi Arabia and Iran.

Maybe it won’t happen. But maybe it will. And that’s what the “geopolitical risk premium” is all about. It’s an anxiety surcharge that’s tacked onto every barrel of oil, in fear of supply disruption on a moment’s notice. And the fear is back.

After three years of naivety we’re back to acknowledging the known unknowns of the Middle East, the uncertainties that strap a 10-to-20 percent premium on the price of a barrel.

Paying a risk premium for oil is nothing new. It’s been around for decades and has gone up and down with the hostility thermometer of the Middle East.

Unusually, the pricing of risk dropped to zero around 2015. Three main reasons prompted a sense of world peace: the promise of the Iranian nuclear deal; a feeling that booming oilfields in Texas could offset any disruption; and a growing surplus of oil inventories in storage tanks around the world.

Of late, the notion of oil obsolescence has also perpetuated a feeling of nonchalance. “Who cares about the Middle East and their oil?” has been a question driven by the utopian narrative: “I’m not worried, everyone will be driving electric cars in a few years anyway.”

But it’s all been a false sense of security.

Electric cars are still rare. Oil remains vital to the world economy. Its geographic concentration is such that a large proportion of the world’s needs is produced from underneath layers of geopolitics, religious antagonism, authoritarianism, civil strife and corruption.

When I reflect on the extremes of oily politics, I pull out my old copy of Life Magazine from 1973, the year of the Arab oil embargo. Back then, in a rare moment of unity, Arabs came together to curtail oil shipments to the west, demanding that Israel cede lands it captured in the 1967 war.

I’m struck by the two-page spread showing a Dutch freeway that’s completely empty, not a car on the road due to widespread gasoline and diesel shortages. The disruption was less than three percent of world supply and lasted only a few months, but it was enough to momentarily paralyze transportation in affected countries—and change attitudes about energy security too. The fallout led to big changes in personal mobility—smaller cars, greater fuel economy and alternate modes of transport like high-speed rail—especially in Europe and Japan.

Juxtaposed on the fuel-starved image is a photo inset of a meeting between various leaders of the embargo. The snapshot is taken at a moment with lots of laughter, suggesting the not-so-subtle message that they were pleased with their destabilizing accomplishment. Maybe.

FILE PHOTO Members of Saudi security forces © Ahmed JadallahWar between Iran Saudi Arabia could send oil to $300 per barrel impoverish the world

But no one is laughing now. Regional animosity is elevated, the weaponry is lethal and it’s hard to figure out allegiances and regional political ambitions. And the scale of consequence is bigger too: In 1973 oil consumption was almost 56 million barrels a day. Today it’s pushing 100 million bpd, with a quarter flowing through the Strait of Hormuz, a narrow, strategic chokepoint between Saudi Arabia and Iran.

The geopolitical premium is likely to increase over the next year. Oil markets are slowly heading back towards what OPEC calls “balance” and global inventories are gradually draining. The calculus is pretty simple: Progressively thinner margins for error, plus greater risk of disruption, equals more volatile prices to the upside.

If oil supply is pinched again, for whatever machination or military operation, the price of a barrel could easily double (prices quadrupled as a result of the 1973 embargo). And 20 years from now we may look back at a magazine spread of a freeway, this time showing a handful of cars—only the electric variety.

Higher oil prices are generally welcomed by petroleum producers and their upstream stakeholders. Yet amplified volatility and the potential of another oil crisis is a greater friend to purveyors of electric vehicles; they are the natural beneficiaries to their rival’s instability.

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‘Bitcoin is a gift from God to help humanity sort out mess it has made with its money’ – Max Keiser

Max Keiser: Why JPMorgan is in a bubble and not bitcoin

“Bitcoin will dominate and lead crypto going forward. Hundreds of obituaries have been written about bitcoin and none of them have come true and none will. Fact is, bitcoin is a gift from God to help humanity sort out the mess it has made with its money,” Keiser told RT when asked if alternative coins will dethrone bitcoin.

According to Keiser, the value of bitcoin will increase to $100,000 from the current record of $8,000. Speaking about alt-coins, Keiser said the top-20 are likely to survive the turbulence on the digital money market.

“Ninety percent of trading is in the top 20 coins, and that will continue. Coins will come and go. The composition of the top 20 will change less frequently. It’s similar to the thousands of stocks that trade on the NYSE and NASDAQ. Over the years, many disappear, new ones are listed. The difference being that with crypto, things move 100 times faster,” he told RT.

However, Keiser severely criticized bitcoin cash, the third most popular cryptocurrency, saying it uses the name of the original bitcoin to earn a buck. He accused it of plagiarism.

“Bitcoin cash is an alt-coin that has its fans just like many alt-coins. I don’t think anyone who uses bitcoin’s name and applies it to an alt-coin like bitcoin cash does is adhering to acceptable business practices. In other words, bitcoin’s brand is being stolen by a competitor that calls itself bitcoin cash and this is outright fraud in my opinion, just like it’s fraudulent to use Coca-Cola and Nike’s name to sell soft drinks or shoes,” said Keiser.

Bitcoin’s wild rollercoaster ride continues reaching record $8,000

According to Keiser, bitcoin is not a hyper-inflated asset, but the US dollar is.

“Bitcoin has been hyper-DEFLATING. The supply of bitcoin continuously shrinks until no new bitcoin will exist at all. I can buy ten times more Lamborghinis this year than I could last year with the same amount of bitcoin. The US dollar is an inflating asset. There are trillions more of them every year. The amount I need to buy a Lamborghini keeps going up, not down. It’s garbage,” he said.

Anyone who doesn’t believe in bitcoin can be compared to Michael Dell of the Dell IT firm, who was bearish about Apple, when the company was worth less than $100 million, according to Keiser.

“I remember when I bought Apple stock in the late 1990’s when it was valued for less than $100 million, Michael Dell publicly said that Apple should shut its doors and stop the embarrassment of being in business. Twenty years later, it’s approaching a $1 trillion market cap, and nobody talks about Michael Dell anymore.”

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Norway’s $1 trillion wealth fund looks to dump oil & gas stocks

Norway’s trillion-dollar sovereign wealth fund has proposed dropping investment for oil and gas companies. The plan, backed by the central bank, still needs approval by the finance ministry, but it would see the fund gradually divesting itself of oil and gas stocks over time. Currently, fossil fuel investments account for about 6 percent of the fund’s assets, or $37 billion.

Iceland wants UK to join Nordic alliance of non-EU countries

“Our advice is to simply remove the oil and gas sector, as it is defined in the FTSE reference index, from the fund’s reference index,” Deputy Central Bank Governor Egil Matsen told Reuters in an interview. “That would mean all companies that the FTSE has classified with the sector, should be removed from our reference index.”

The global movement for fossil fuel divestment has been one of the fastest growing divestment campaigns ever witnessed. According to Fossil Free, a project of, an estimated 808 institutions from around the world have committed to divestment, totaling $5.57 trillion in assets. The type of groups are varied – about 27 percent of them are faith-based, another 20 percent are philanthropic foundations, 18 percent are government, 16 percent are education institutions, and 10 percent are pension funds.

But the potential move by Norway’s sovereign wealth fund is one of the most significant pledges yet, for a few reasons. First, the size of the fund, with $1 trillion in assets, is obviously notable. Second, the fund was built on oil and gas money, so a diversification away from fossil fuels has symbolic importance. But third, the justification for divestment, according to the fund, is not because of concerns over climate change, which is the usual reason why most other institutions have opted to divest.

World’s largest wealth fund in Norway reaches record $1tn

Norway’s sovereign wealth fund wants out of fossil fuels in order to avoid exposure to oil price fluctuations.

The sovereign wealth fund is a massive investor in oil and gas, so the news of a shift in investment strategy is significant. According to Reuters, Norway’s sovereign wealth fund holds a 2.3 percent stake in Royal Dutch Shell, 1.7 percent stake in BP, 0.9 percent stake in Chevron and 0.8 percent of ExxonMobil.

But, as any energy investor would know, oil and gas stocks have been poor performers for the past few years. “It clearly stands out, perhaps not surprisingly, but not obviously, that indeed there is a substantial difference … in return between the oil and gas sector and the broad stock market in periods when the oil price changes substantially,” Matsen said. “Oil price exposure of the government’s wealth position can be reduced by not having the fund invested in oil and gas stocks.” The sovereign wealth fund, like other investors, would have been better off putting their money in other sectors of the global economy.

It isn’t just the most recent downturn that Norway is worried about. Over the long-term, peak oil demand looms. Pulling out of companies like Royal Dutch Shell and BP would make Norway’s wealth “less vulnerable to a permanent drop in oil and gas prices,” according to the country’s central bank, the FT reported.

Norway likely winner from OPEC-Russia oil production cuts

The sovereign wealth fund is seeded with revenues generated from oil and gas sales, so it is already vulnerable to oil price fluctuations. Moreover, the Norwegian government owns a substantial portion of Statoil, making the country even more dependent on oil and gas revenues. One way to reduce the country’s financial risk would be for the sovereign wealth fund to get out of the oil business.

Critics of the divestment campaign often note that liquidating one’s assets does very little to influence the actions of the oil and gas industry. After all, even if divestment dragged down the valuation of an oil company, its share price would merely be discounted for opportunistic investors to scoop up the asset on the cheap. But that was never the overarching goal. The objective of the divestment movement was to make fossil fuels so toxic in the minds of the public that it forces governments to change policies to force a transition towards cleaner energy. That fight is ongoing.

However, the proposal from the Norwegian sovereign wealth fund opens up an entirely new front on the oil and gas industry. Hard-headed central bankers are concerned about the long-term investment case for fossil fuels…unrelated from climate change. The largest sovereign wealth fund in the world simply doesn’t think it makes sense to hold onto oil and gas assets anymore.

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JPMorgan busted for money laundering after accusing bitcoin of doing the same

Bitcoin is fraud and will blow up – JP Morgan CEO

The sanctions are reportedly related to breaches of due diligence in connection with money laundering standards. That literally means the Wall Street banking giant assisted in money laundering.

The ruling was reportedly issued on June 30, but the regulator did not make it known as JPMorgan has been actively trying to prevent the publication. The Federal Administrative Court has since dismissed an appeal by the bank.

It is two months since JPMorgan CEO Jamie Dimon slammed bitcoin, the world’s leading cryptocurrency, labeling it a fraud. According to Dimon, bitcoin could be useful “if you were a drug dealer or a murderer.”

Dimon also compared bitcoin to the 17th-century Dutch tulip mania bubble. At the time, the CEO predicted the eventual demise of the digital currency and pledged to fire any trader trading bitcoin for being stupid.

“A fiat currency is when a government says this is your legal tender, you have to give it and accept it, and of course the central bank can misuse it and inflate it. But what is the use case for bitcoin? You’re in Venezuela, North Korea, you’re a criminal. Great product!” he said during a news conference in Washington.

Responding to the allegations of money laundering, JPMorgan said the bank is trying its best to support the safety and soundness of the global monetary system.

“We have made and continue to make significant enhancements to the firm’s anti-money laundering program to ensure we are meeting regulatory expectations,” the bank said in an emailed statement sent to Bloomberg.

JPMorgan refused to provide any further details as FINMA’s ruling in June isn’t public.

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Bitcoin’s wild rollercoaster ride continues reaching record $8,000

“I recommended bitcoin in 2011 at $3 with a price target of $100,000. The price has been compounding at approximately one percent a day for this entire run and will continue to do so until it reaches $100,000 when I foresee the price leveling off,” Max Keiser, host of RT’s financial program ‘Keiser Report’ said.

Keiser previously predicted bitcoin would be worth $1 trillion in the foreseeable future.

Bitcoin reached its latest high after altcoin bitcoin cash suffered a sharp decline, plummeting more than 25 percent in under 48 hours, according to CoinMarketCap data.

Bitcoin surges to $13,500 in Zimbabwe after military coup shortage of hard currency

Recent trading has been volatile for the world’s most popular cryptocurrency. After reaching a record $7,882 on November 8, bitcoin plummeted to $5,519 on Sunday. This week saw its price surge back to record levels.

The two digital currencies, bitcoin and its offshoot, have been competing for investment. Developers behind bitcoin have postponed the SegWit2x hard fork, which resulted in an over $2,000 decline in the bitcoin price, while bitcoin cash surged more than 50 percent.

“My sense is that today’s rally is driven by a resurgence in interest and viability for the SegWit2x hard fork,” Spencer Bogart, head of research at Blockchain Capital, told Bloomberg.

“Despite the fact that it was called off, there is still some group of people that will follow through with the intended fork. As a result, I believe some capital is rotating out of other crypto-assets and into bitcoin to make sure they receive coins on both sides of the fork,” he said.

In Zimbabwe, bitcoin is approaching $14,000 after the military coup which ousted 93-year-old President Robert Mugabe, who has been ruling the nation for 37 years. The country has faced hard currency shortages. Zimbabwe hasn’t had its own currency since 2009 when hyperinflation wiped out the local dollar.

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Saudi Arabia wants to kill the petrodollar

“I believe the next phase of the global economic reset will begin in part with the breaking of petrodollar dominance. An important element of my analysis on the strategic shift away from the petrodollar has been the symbiosis between the US and Saudi Arabia. Saudi Arabia has been the single most important key to the dollar remaining as the petrocurrency from the very beginning,” Smith wrote in an article for his website

China could shatter petrodollar by compelling Saudi Arabia to trade oil in yuan

The site claims its goal is to “facilitate barter networking and the exchange of knowledge and ideas for thriving in a faltering monetary environment.”

According to the economist, Saudi Arabia’s Crown Prince Mohammed Bin Salman has been seeking ways of cutting dependence on the US dollar. Smith says the country’s Vision 2030 program may be not about reducing oil’s share in the economy, but killing the petrodollar.

“Prince Mohammed’s revolutionary “Vision for 2030” developed as he entered power was touted as a means to end Saudi reliance on oil revenues to support economic stability. However, I believe this plan is NOT about ending reliance on oil, but ending reliance on the US dollar. In fact, the plan indicates a move away from the dollar as the world’s petrocurrency and a de-pegging of the riyal from the dollar,” he wrote.

A 1974 agreement between US President Richard Nixon and Saudi King Faisal meant Riyadh has been accepting dollars for all its oil exports.

“Prince Mohammed has also established much deeper ties to Russia and China, creating bilateral agreements which may end up removing the dollar as the mechanism for oil trade between the nations,” Smith added.

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Bitcoin megacity could rise in Russia’s Siberia

The city should be located in Siberia or the Far East, not far from a large hydroelectric power station, according to Russian State Duma member Boris Chernyshov.

Cryptocurrency mining has become popular in Siberia due to the region’s low energy costs. The process requires computing power and lots of electricity. Irkutsk has become a hub for cryptocurrency mining because electricity is very cheap, about five times less expensive than in Moscow.

Putin wants to tax bitcoin, cryptocurrency mining regulate initial coin offerings

“A mining city will help people make money, buy apartments and other things they need. It will replenish the state budget at the expense of taxes. If we build such a settlement near the border, for example, with China, this will immediately cause great interest, there will be flows of business tourists. Such a place will become a business hub, bringing investment from abroad. This is a driver, a point of growth,” said the deputy.

Chernyshov said cryptocurrency mining has not yet been legislated in Russia and this should be addressed after the city’s construction.

Russian Internet Ombudsman Dmitry Marinichev supported the idea of building the bitcoin city. At the same time, the state should not be the owner of the town, he said, or the project would fail.

“I am for any initiative that leads to the creation of jobs, added value, the opportunity to produce new technological products or services. I am against the state being the owner of the business. The state has nothing to do with business, the state must formulate the rules of the game. Any business should have a beneficiary, one who is vitally interested in the enterprise. Otherwise, all this is doomed to failure,” Marinichev told RT.

At the moment, bitcoin mining and selling are not regulated by Russian law. President Vladimir Putin has ordered the government to create legislation governing the status of bitcoin, other cryptocurrencies, mining, initial coin offerings, as well as defining everything that relates to digital money by July 2018.

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‘Perfect gemstones’: Russia exhibits unique collection of 5 diamonds worth $10mn (PHOTO, VIDEO)

“These are perfect gemstones. Russia has never seen such a quality before,” said Pavel Vinikhin, the CEO of the diamond division of the Russian mining giant Alrosa. The exhibition in Carnegie Hall was the diamonds’ final stop before they go on sale in an online auction on November 29. The New York venue winds up the roadshow that saw the gems displayed in Moscow, St. Petersburg, Vladivostok, Hong Kong and Israel.

“This is a real masterpiece, the Russian cut, the skill of Russian professionals to produce what others cannot do,” Vinikhin said, describing the “Dynasty” collection. “Each of these five diamonds was cut from a sole rough diamond. It was polished in Moscow, we have been working on it for a year and a half,” he said, adding that all five meet the highest standards of color and quality.

In 2015, the company unearthed the 179-carat rough at the Nyurbinskaya kimberlite pipe in the Siberian Sakha region. Named after the Romanovs dynasty, the finding was split into five polished gems, which were graded by the Gemological Institute of America. Less than 3 percent of the world’s diamonds can boast same quality and clearness, Alrosa claims.

READ MORE: Russia’s purest most expensive diamond to go on sale

Polishing five separate diamonds from one is “very, very rare,” according to the company’s sales director, Evgeniy Tsybukov.

Уникальная коллекция «Династия» состоит из пяти бриллиантов, которые были изготовлены мастерами «Бриллианты АЛРОСА» из одного алмаза весом 179 карат, добытого на кимберлитовой трубке «Нюрбинская» в Республике Саха (Якутия). Работы по его огранке заняли полтора года. Про каждый бриллиант в отдельности читайте в наших следующих постах. The unique collection “The Dynasty” consists of five faceted diamonds, which were created from the same magnificent crystal weighing an unbelievable 179 carats by the masters of “Diamonds ALROSA”. It was mined in 2015 at the Nyurbinskaya kimberlite pipe in the Republic of Sakha (Yakutia). It took one year and a half to cut “The Dynasty” diamonds. About each diamond separately you can read in our next posts. #alrosa #diamonds #mining #gem #yakutia

Публикация от ALROSA® (@alrosadiamonds) Сен 8 2017 в 11:26 PDT

“All five diamonds have become decolored, the best color, and with VVS1 clarity,” Tsybukov said. This is the third grade of clarity on a scale of 11, meaning any flaws are so miniscule, only an expert, equipped with a microscope and viewing the stone from the bottom, can detect them.

The collection’s biggest “Dynasty” piece “has no matches in Russian history in terms of overall quality characteristics. This is the most clean and expensive diamond ever cut in our country, the pinnacle of Russia diamond cutters’ craftsmanship.”

Центральный элемент коллекции – бриллиант традиционной круглой формы «Династия» весит 51,38 карата. The valuable specimen of the collection is a diamond “Dynasty” of a traditional round shape weighing 51.38 carats. #alrosa #diamonds #mining #gem #Yakutia

Публикация от ALROSA® (@alrosadiamonds) Сен 11 2017 в 5:23 PDT

Apart from the main 51.38-carat Dynasty gem, the set flaunts a 16.67-carat round-cut Sheremetevs diamond, a 5.05-carat oval Orlovs diamond, a 1.73-carat pear-cut Vorontsovs diamond, and a 1.39-carat Yusupovs diamond. All of them bear family names of the famed nobility dynasties of the Russian Empire, who contributed to developing the nation’s jewelry industry. The starting price for the collection is set at $10 million, according to Alrosa president Sergey Ivanov.

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Monsanto sues California over weed killer cancer warnings

Monsanto’s monster-herbicide blamed for killing millions of crop acres

California has added glyphosate, the main ingredient in Monsanto’s herbicide Roundup, to a list of cancer-causing chemicals. The state acted after the World Health Organization’s International Agency for Research on Cancer (IARC) recently ruled glyphosate a carcinogen. IARC said that along with other Monsanto chemicals Roundup could cause Parkinson’s disease, Alzheimer’s disease, autism, and cancer.

In the lawsuit, which was filed in federal court in California, Monsanto and groups representing corn, soy, and wheat farmers rejected that glyphosate causes cancer. They said the state’s requirement for warnings would force sellers of products containing the chemical to spread false information.

“Such warnings would equate to compelled false speech, directly violate the First Amendment, and generate unwarranted public concern and confusion,” Monsanto’s Vice President of global strategy Scott Partridge said in a statement.

According to the lawsuit, Monsanto has already suffered damage to its investment of hundreds of millions of dollars in glyphosate products since California added the chemical to its blacklist of products causing cancer.

READ MORE: No correlation between popular Monsanto pesticide and cancer ‒ study

For more than 40 years, glyphosate has been used by US farmers to kill weeds before planting corn fed to livestock. They spray it on genetically engineered soybeans and sometimes on wheat before it was harvested. In the US, the herbicide has been considered safe since 2013, when Monsanto received approval from the US Environmental Protection Agency (EPA) for increased tolerance levels for glyphosate.

Monsanto sued by Brazilian soybean farmers over GMO seed

“Everything that we grow is probably going to have to be labeled,” said Blake Hurst, president of the Missouri Farm Bureau, a plaintiff in the lawsuit.

Meanwhile, a state spokesman Sam Delson said California is considering a proposal known as a No Significant Risk Level (NSRL) under which certain goods that meet a standard for containing low amounts of glyphosate, could be sold without warnings.

“We do not anticipate that food products would cause exposures that exceed the proposed NSRL,” he said. “However, we cannot say that with certainty at this point and businesses make the determination.”

Monsanto has been facing a crisis over its Roundup herbicide. Its new version of another chemical known as dicamba has been blamed for widespread US crop damage this summer. This month the company was sued by Brazilian farmers, calling for the ending of Monsanto’s Intacta GMO seed patent. They claim irregularities, including the company’s alleged failure to prove it brings de facto technological innovation.

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Bitcoin surges to $13,500 in Zimbabwe after military coup & shortage of hard currency

According to the local exchange Golix, the price of bitcoin has risen almost 10 percent in Zimbabwe on news of the coup. The country also faces serious shortages of hard currency.

Zimbabwe hasn’t had its own currency since 2009 when hyperinflation wiped out the local dollar. In 2008, the central bank printed a 100 trillion note, and inflation topped 500 billion percent. Since then, Zimbabwe has been using the US dollar and South African rand, among other currencies.

Prime Zimbabwe investor China denies involvement in military coup

In the last month, Golix saw $1 million worth of bitcoin transactions, compared to $10,000 for the whole of 2016, Bloomberg reports.

The country’s economy is in deep crisis, as GDP has halved since 2000. Ninety-five percent of Zimbabweans don’t have a job.

Inflation has curbed in the recent years, but there are signs hyperinflation is returning. In October, Steve Hanke, an economics professor at Johns Hopkins University in the United States, who has written a book about the country’s 2008 crisis, warned of hyperinflation returning to Zimbabwe.

Real inflation in Zimbabwe was 313 percent annually and 112 percent on a monthly basis despite the official 0.78 percent in September. Hanke called the statistics a “truly fantastical piece of artwork.”

“Zimbabwe, welcome back to the record books! You have once again entered the inglorious world of hyperinflation. It is a world of economic chaos, wrenching poverty and death,” said Hanke.

Zimbabwe’s army seized power on Wednesday in a military coup. The army has confirmed the arrest of 93-year-old President Robert Mugabe, who has been ruling the country for 37 years.

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