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Monday, 4 April 2016

Cash- Strapped Saudi Arabia Won't Hold Production

Bear or Bull?

Negative pressure on crude oil prices was influenced further by a slight increase in the U.S. unemployment rate to 5 percent in March. The U.S. Bureau of Labor Statistics reported retail, construction and healthcare jobs increased, though job losses occurred in manufacturing and mining. 

Oil Prices Back to Square One

Heavy losses for crude oil prices after doubts over production freeze and weak U.S. labor figures.

NEW YORK, April 1 (UPI) -- Oil prices took one of their biggest hits of the year Friday as pressure from Riyadh's response to a production freeze was doubled by weak U.S. labor figures.
Mohammed bin Salman, the deputy crown prince of Saudi Arabia, poured water on a fire set by talks of a production freeze from Russia and members of the Organization of Petroleum Exporting Countries in an interview with Bloomberg News.
"If all countries agree to freeze production, we're ready," he said. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door."
Saudi Oil Minister Ali al-Naimi in December suggested there would be no limit to the kingdom's oil production.

The last year has seen a slight dip in aggregate profits because of the high dollar and the effect of the oil price on energy firms. But profits are at near-record highs relative to GDP (see chart 1) and free cash flow—the money firms generate after capital investment has been subtracted—has grown yet more strikingly. Return on capital is at near-record levels, too (adjusted for goodwill). The past two decades have seen most firms make more money than they used to. And more firms have become very profitable

And that is when things go horribly wrong. Applying blanket policies on heterogeneous groups, trying to force behaviours that contradict man’s evolutionary traits, positive or otherwise, enforcing one-size-fits-all rules to tame the inherent unpredictability of human nature, it’s all basically tantamount to hubris. As a direct result, we have seen the intended and unintended consequences of these grand designs wreak havoc with the lives of law abiding citizens, entire societies splinter apart and once-great nations razed to the ground. Toxic ideas, cultivated in this environment of delusional omniscience and absolute certainty, fostered by reckless arrogance, soon metastasised to politics and became the law of the land: Central planning, state monopolies, interventionism, they are all a thorny rose by any other name.

They want to keep a country in existence paying up forevermore. Now, they could do that, in this case, in several nasty ways. The threat on Greece, first of all, is to declare a default, and that will freeze the system. Secondly, they could declare a bail-in of all the money in the Greek banks, and Greek depositors would lose all their money.
There are other sinister possibilities by which the IMF and the West, generally, can use threats against Greece to force it to bend to their will, which is so that it becomes a debt serf or a debt peon forevermore.

Auto Makers Post Mixed U.S. Sales in March

U.S. auto sales rose 3% in March over a year earlier, but new warning signs emerged that car companies are stretching to keep demand humming after record results last year. March’s selling pace came in at a disappointing adjusted annual rate of 16.57 million light vehicles, well below analyst expectations and the 17.5 million clip the industry reported in February. Detroit’s three auto makers each reported sales gains, but their results missed expectations, sending shares lower. Auto makers overall sold 1.6 million light vehicles in March. Discount spending is on the rise and new evidence emerged in March that sales to fleet customers such as rental agencies in some key cases boosted new-car tallies. Car loans stretching 84 months or longer and the share of vehicles leased both increased, according to researcher J.D. Power. […]

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