The Siberian Winter That’s Helping Russia Comply With OPEC Cuts

Russia cut 100,000 bpd of its crude oil production as early as in the first few days of the New Year, but it wasn’t the agreement between OPEC and non-OPEC producers that was Moscow’s biggest incentive to start cutting output beginning January 1, it was the unusually cold temperatures—cold even for Siberia. At least part of the 100,000-bpd cut was the result of the freezing, as low as minus 76 degrees Fahrenheit, temperatures across Siberia, Reuters reports, quoting industry sources. In the deal with OPEC to curtail global crude…

BofA Finds Consumer Spending Tumbled In December, Warns Of Disappointing Retail Sales

With this week’s most important economic data point – this Friday’s retail sales – fast approaching, economists are keen for clues if this key datapoint giving insight into the health of the US consumer will maintain the recent outsized spike in favorable and better than expected economic data, or if adversely, it may be a downward inflection point which could have significant implications on the dollar trade as RBC explained earlier. And according to BofA’s internal debit and credit card data, always released just ahead of the retail sales report, it looks like it will be the latter.

As Bank of America’s chief US economist Michelle Meyer reports, the aggregated BAC credit and debit card data showed that retail sales ex-autos declined 1.0% mom seasonally adjusted in December. “This contrasts with other indicators of consumer strength including reports of a robust holiday shopping season, a rebound in consumer confidence and strong autos sales” according to Meyer.

Actually, based on earnings reports of those companies who have recently closed their quarter, a weak December is precisely what one should expect, further corroborated by JPM’s satellite imagery at early December showing empty parking lots (recall: “Satellite Imagery Reveals Sharp Retail Spending Slowdown After The Election“) and a plunge in brick and mortar sales, which has been greater than the offsetting pick up in online sales.

This is how the bank’s adjusted retail spending data looks when charted.

As BofA notes, “the BAC aggregated card data showed that retail sales exautos declined 1.0% mom SA in December. This reversed the strong gains over the prior few months, leaving the 3- month average growth rate to slow.

Amusingly, while in the past everyone ignored seasonal adjustments when it comes to retail sales (a reconciliation which as we have shown on various occasions, would always undermine the adjusted data), this time it is BofA which tries to justify the weakness with seasonal adjustments. This is how it “justifies” the sharp drop in data:

We think the explanation is that our BAC aggregated card data is biased lower due to our seasonal adjustment process. Note that the Census Bureau uses a similar approach, and therefore, we expect their data to be subject to a similar downward bias.

 

 

The two major holidays in December — Christmas and the New Year — are fixed in terms of the date but not in terms of the day of the week. This year, Christmas Eve and New Year’s Eve both fell on Saturdays. Spending on those dates was much weaker than on a typical Saturday, presumably since people were enjoying the holidays. However, the seasonal adjustment process treated these days like any other Saturday. This suggests that the adjustment process “over-fits” the data and biases the seasonally adjusted figures lower.

 

We think the bias in December should correct in January, translating to strong growth in January. A strong gain in January would support our view that the weakness we are seeing in the data is simply “noise”. However, that means waiting until February 15th for the January data to provide confirmation.

Unless, of course, January data does not rebound, in which case that bank’s economists can simply blame the “abnormally cold weather” for the lack of spending, as they have every time over the past three years.  Even so, with that caveat in mind, BofA warns, “since the Census Bureau uses a comparable approach, we think it is prudent to prepare for a similarly negative number in Friday’s report.”

And while the December, or even January, data may surprise to the up, or downside, due to quirks in seasonal adjustments, reporting, one thing is undisputable: long-term spending trends, especially when it comes to goods and products, continue to deteriorate. Here’s BofA:

  • The sector data suggests that consumers continue to spend on experiences, with airlines and lodging spending up impressively over the prior three months. Presumably, consumers are taking trips around the holidays.
  • On the flipside, consumers appear to be spending less on goods, with particular weakness in electronics spending, home goods, and clothing. As we also show in Chart 6, spending at restaurants continues to weaken.

Also, as a result of surging gasoline prices, spending at gasoline stations is rebounding but only due to nominal spending increases. Which means less disposable income available to be spent on other potential purchases. 

And here is the evidence:

Restaurant spending is tumbling

Furniture and home improvement spending has flatlined

Spending on young adult clothing has tumbled.

Spending at food and beverage stores is growing at the lowest rate in 5 years.

 

And finally, luxury spending – that traditionally reserves to the upper middle and higher classes- continues to crash.

So aside from all that, the consumer is doing great.

The post BofA Finds Consumer Spending Tumbled In December, Warns Of Disappointing Retail Sales appeared first on crude-oil.top.

Is This The Biggest Commodity Story Of The Year?

Lithium saw its price triple in 2016, and cobalt—another massively important element in the lithium-ion battery—rose almost 50 percent in the same year, and is poised to become the next critical metal as the world sits on the edge of an energy revolution driven by mainstream electric vehicles, battery gigafactories and power walls. Together, lithium and cobalt are the most alluring investment duo on the global market, and we’re only getting started. Supply is expected to be short, prices are expected to spike, and small-cap explorers…

Blockbuster Oil Deal In Argentina Could Trigger Drilling Boom

A blockbuster deal between the oil and gas industry, labor unions, and the Argentine government could pave the way for a flood of new investment in shale oil and gas in the South American nation. The deal involves a determination by the state to shoulder the cost of new drilling, but it could lead to the spread of the shale revolution beyond North America. Argentina’s government has agreed to extend regulated natural gas prices at elevated levels, in effect a public subsidy to entice major oil and gas companies to flock to Argentina’s…

Blockbuster Oil Deal In Argentina Could Trigger Drilling Boom

A blockbuster deal between the oil and gas industry, labor unions, and the Argentine government could pave the way for a flood of new investment in shale oil and gas in the South American nation. The deal involves a determination by the state to shoulder the cost of new drilling, but it could lead to the spread of the shale revolution beyond North America. Argentina’s government has agreed to extend regulated natural gas prices at elevated levels, in effect a public subsidy to entice major oil and gas companies to flock to Argentina’s…

The “Curse” Of Labor-Saving Machinery Is Nothing New

Submitted by Brittany Hunter via The Mises Institute,

At the end of last year, Amazon unveiled, “Amazon Go,” a futuristic, fully-automated convenience store set to open its doors in Seattle, Washington, within the next few months. While this exciting new venture promises to make quick-stop shopping trips easier for busy consumers, critics are wary of this type of advanced automation, and fear its widespread use could jeopardize a vast amount of jobs.

Amazon Go is a truly unique shopping experience free of lines, registers, and checkouts of any kind. Instead, the store utilizes its customers’ smartphones and “grab and go technology,” which allows the consumer to simply walk in, grab desired items, and then get on with the rest of their day.

However, since this modern convenience store does not require human employees, labor activists fear the negative implications Amazon Go could potentially have on employment rates, especially if more companies begin moving toward automation.

These concerns in regards to employment are not necessarily unwarranted, nor are they specific to our modern world. In fact, mankind actually has a long track record of fearing mechanical progress and blaming it for high unemployment rates throughout history.

During the Industrial Revolution, many workers resented mechanical innovation, believing it would result in mass unemployment across sectors which traditionally relied on manual labor. In the stocking industry, for example, fear of machines was so intense, massive riots erupted as soon as workers were introduced to the new mechanical knitting machines known as, “stocking frames.” In the midst of all the chaos, new machines were destroyed, houses were burned, inventors were threatened, and peace was not restored until the military eventually intervened.

Unfortunately, the stocking industry example is not an isolated instance of machines causing mass hysteria over employment concerns. In fact, similar outrage was experienced across the globe throughout the entire Industrial Revolution. In the United States, the Great Depression caused another wave of mechanical skepticism, when a group calling themselves the “Technocrats” blamed mechanical advancements for high unemployment rates.

So widely-held was this fear of machines, economist Henry Hazlitt felt compelled to dedicate an entire chapter to debunking the myth that machines cause mass unemployment in his economic manifesto, Economics in One Lesson. In his chapter entitled, The Curse of The Machinery he writes:

The belief that machines cause unemployment, when held with any logical consistency, leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.

To the credit of these mechanical skeptics Hazlitt called, “technophobes,” their fears of unemployment were not entirely incorrect.

In the case of the British stocking knitters, it is true that as many as 50,000 were left jobless in the wake of mechanical stocking frames. However, as Hazlitt points out, “But in so far as the rioters believed, as most of them undoubtedly did, that the machine was permanently displacing men, they were mistaken, for before the end of the nineteenth century the stocking industry was employing at least 100 men for every man it employed at the beginning of the century.”

Likewise, 27 years after the invention of the cotton-spinning machine, which was met with similar hostility as the mechanical stocking frame, the number of workers employed in the industry had grown from 7,900 to 320,000, a rate of 4,400 percent.

Yet, no matter how applicable Hazlitt’s words of wisdom may be in our modern world, there are still those who fear technological progress, rather than celebrate it.

Unfortunately for the naysayers, automation is likely to play a greater role in our lives in the very near future. Already, several fast food companies have begun replacing human cashiers with automated kiosks in order to cut back on costs. Additionally, Uber began piloting its fleet of self-driving cars last year and plans to eventually use these autonomous vehicles to replace its human drivers.

However, there is no need to fear this change. As the great Frédéric Bastiat reminds us, there are positive market elements which may be unseen to many, especially critics of automation.

Uber, for example, may soon be significantly decreasing its need for human Uber drivers, but that does not mean these drivers will be left destitute or jobless. Instead, Uber has simultaneously been expanding its delivery services. From flu shots, meals, and even puppies, Uber offers a variety of services that, at this point in time, still require human employees. If, in the future, drones are capable of replacing human delivery services, it will only be a matter of time before new opportunities become available on the market.

Many may be surprised to learn that despite the advanced weaponry available today, there are more blacksmiths now than at any other point in history. Progress does not come without an initial shakeup of traditional norms as the market adjusts to new technology, but this change should be embraced. As the stocking makers and cotton spinners have taught us, innovation should never be discouraged because with technological progress comes more opportunities for the human race.

 

The post The “Curse” Of Labor-Saving Machinery Is Nothing New appeared first on crude-oil.top.

Shale Break-Even Level Could Rise $10 In 2017

The joy for shale producers stemming from rising oil prices following the OPEC production cut agreement may soon be over as oilfield service providers join the party, raising the prices for their services. According to an analysis from Tudor, Pickering, Holt &Co., the costs of drilling and fracking new wells in the shale patch could grow by 20 percent by the end of this year. In real terms, this means that the breakeven level for new shale wells could rise by U.S.$10 a barrel. This would be problematic for many shale producers who are already…