U.S. Prepares To Sell Off Its Oil Reserves

Submitted by Nick Cunningham via OilPrice.com,

The U.S. is beginning to wind down one of the core energy security policies of the past half century as the boom in domestic drilling eases concerns about supply.

(Click to enlarge)

 

The U.S. Department of Energy could begin to sell off some of its strategic petroleum reserve (SPR) as soon as January, the beginning of a multi-year process to shrink the nation’s stockpile of oil. Congress has authorized DOE to sell off $375.4 million worth of oil in its recent budget resolution. The DOE said that such a sale could be held in January 2017.

To be sure, part of the motivation to sell crude is to finance upkeep for the SPR itself. The reserves are held in salt caverns in Louisiana and Texas, setup decades ago in the aftermath of the Arab Oil Embargo in 1973. The SPR system can hold more than 700 million barrels of oil, the largest strategic stockpile in the world. The idea is that the SPR holds 90 days’ worth of oil supplies, which could be released in the event of a global outage. A release has only occurred a handful of times, such as the Persian Gulf War, Hurricane Katrina and the Arab Spring.

Some of the storage systems are rusting and corroding after decades of use. In September, the DOE issued a report to Congress, which came to a dire conclusion about the condition of the reserve. “This equipment today is near, at, or beyond the end of its design life,” the report said. The sale “will allow the Department to take necessary steps to increase the integrity and extend the life” of the reserve, a DOE spokesperson said in December after the budget resolution was passed.

It is hard to overstate the significance of the SPR to U.S. energy policy. In fact, some analysts would argue the U.S. does not really have a comprehensive energy security policy. There is no coherent theory, policy or philosophy driving U.S. energy security concerns, other than the U.S. military policing the world to ensure the security of supply, a mission that has governed American actions abroad since the Carter administration at least.

The one cornerstone of energy security policy has been the SPR. As long as the U.S. had 3 months’ worth of supply, it could weather unexpected disruptions. The International Energy Agency was setup in the 1970s as well, and participating members – in addition to the U.S., the group includes Europe, Japan, Korea, Australia and New Zealand – also have pledged to hold a 90-day supply.

But U.S. policymakers no longer view the SPR is all that important. Even the more hawkish members of Congress have been lulled into a sense of security from the surge in U.S. oil production and the resulting crash in oil prices. The world is awash in oil, so why does the U.S. need to stockpile such a massive volume of oil at great expense? The ostensible reason of selling off oil from the SPR is to finance its maintenance to ensure its existence over the long-term, but if the Congress still truly believed in the importance of the SPR, they would have found funding elsewhere instead of reducing the stockpile.

Indeed, some of the proceeds from the sale of oil will go towards other uses beyond paying for repairs, namely, the U.S. treasury, which belies the notion that the sales are simply for upkeep. The sales are only occurring because U.S. policymakers are no longer concerned about the security of oil supply for the U.S. economy.

Various pieces of legislation have put the U.S. on a path to sell off 190 million barrels of oil from the stockpile gradually over the next decade. The sales are slated to take in $2 billion by 2020 to finance maintenance.

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Beyond the question about the SPR’s relevance to U.S. energy security, a few other issues come to mind. First, the sale of oil from the SPR will occur at a moment of unusually low oil prices. The government could have taken twice as much revenue if it had sold the oil a few years ago instead of today when WTI trades for $50 per barrel. In the event that the U.S. decides to replenish the stockpile at some future moment, it will probably do so in a higher price environment. Selling low and buying high, any investor will tell you, is not a wise strategy.

A more immediate question is how the SPR sales will affect global supplies today. The release of oil will occur in already oversupplied market, and while the volumes are not huge, they will add pressure to prices. “Given stretched bullish positioning and the toppy state of inventories at Cushing, the sales of SPR oil could temporarily curb incentives for barrels in Cushing to flow to the U.S. Gulf Coast,” Barclays analysts recently said. The oil could reach the market in March or April, just “as refineries exit their turnabouts, but that could still steepen the WTI contango,” the Barclays analysts added.

“The DOE could not have picked a worse time to test the market,” said Bob van der Valk, senior editor at The Bakken Oil Business Journal, according to MarketWatch.com

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The Big Theme for 2017: Global Cash Bans

The big theme for 2017 will be Cash… not a pro-deflationary “time to own cash” theme… but a “let’s ban it as quickly as possible” theme.

Let’s review.

In 2016:

1)   Former Secretary of the Treasury, Larry Summers, called for the US to do away with the $100 bill.

2)   Former Chief Economist for the IMF, Ken Rogoff, published his book The Curse of Cash.

3)   The New York Times and Financial Times publicly endorse a ban on cash.

4)   Fed Chair Janet Yellen, during a Q&A session said cash is “not a convenient store of value.”

Of course the above items are simply propaganda and words. But 2016 also featured major actions as far as the War on Cash is concerned…

The 7th largest country in the world by GDP (India) banned physical cash in denominations that comprise over 80% of all outstanding bills.

The move was a political disaster… temporarily, but no one was forced out of office and the legislation remains in place.

The message here: you can get away with this kind of thing… even in a country in which physical cash is STILL the dominant form of currency.

Venezuela has since followed suit, banning any bill that is worth more than 3 cents. There as well, the policy was met with political outrage… but the ruling part/people remain in power and no one was forced out of office over the matter.

Put simply, 2016 was the year in which the 7th and 33rd largest nations by GDP went effectively cashless… and no one lost their jobs over it.

You can imagine the glee the elites felt witnessing this… particularly in countries in which 50%+ of transactions no longer involve physical cash (60%+ in most developed nations).

After all, the only thing these people do worry about is losing their jobs. Provided no one is kicked out of office as a consequence, any policy, no matter how terrible, is considered viable to this crowd.

Which is why 2017 will shape up to be the year of the Global Cash Bans.

Numerous developed nations (France, Spain, Denmark, Sweden, etc.) have already banned cash for certain transactions. Next year (2017) is the year we expect to start seeing policy pushes for complete bans on cash.

Indeed, we’ve uncovered a secret document outlining how the Fed plans to incinerate savings in the coming months.

We detail this paper and outline three investment strategies you can implement

right now to protect your capital from the Fed’s sinister plan in our Special Report

Survive the Fed’s War on Cash.

We are making 1,000 copies available for FREE the general public.

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Best Regards

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Chief Market Strategist

Phoenix Capital Research

 

 

 

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Mystery Surrounds NATO Auditor General’s Suspicious Death

Police in Belgium are probing the suspicious circumstances surrounding the death of a high ranking NATO official – the auditor general, whose responsibilities included probing terror financing – after his body was discovered in his car with a gunshot wound to the head.

As SudInfo reports, troubling elements accumulate around the death of Yves Chandelon, a senior official of the NATO based in Luxembourg, who lived in Lens, near Tournai.

The man was found dead on Friday in Andenne, with a bullet in his head. An autopsy was performed on Tuesday. The family does not believe it was suicide as many have reported.

 

Did Yves Chandelon have any enemies? Was he threatened in the course of his work in NATO? Was it an odious crime made to look like suicide, or did the man go through a troubled period? For his relatives, the incomprehension is total.

The 62-year-old auditor general of NATO was found in the Belgian town of Andenne, 62 miles away from his home and office in Lens on December 16. As The Express reports,

As Auditor General, Mr Chandelon was responsible for internal accounting at NSPA as well as external investigations into money laundering activities and terrorist financing – and more bizarrely it has been reported locally that the gun which killed him was found in the glovebox of the vehicle.

 

According to local newspaper reports Mr Chandelon was the registered keeper of three weapons however the gun found at the scene did not belong to him, it has been claimed.

 

Police are currently probing whether he had received any threats that could be related to his work and highlighted that the gun used was not registered in his name.

 

According to Flemish newspaper ‘The Morning’, Mr Chandelon’s relatives said he attended his office Christmas party the night before he died.

Reporting gets even more confusing as LaMeuse carried two reports with additional facts about Chandelon’s death. The first stated that a “farewell letter” was found in Chandelon’s car. The second stated that the gun used in the apparent suicide was found in his right hand, despite the fact that Chandelon was left-handed.

It has been reported that the former director of The Institute of Internal Auditors (IIA) Luxembourg had complained of getting strange telephone calls before he died and “felt threatened”.

We are sure the facts will all come out and this ‘strange’ episode will be brushed under the carpet – like the mysterious deaths of various senior European bankers over the past few years.

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Typhoon causes heavy destruction in northern Philippines; 6 killed

Author: 
BULLIT MARQUEZ | AP
Tue, 2016-12-27
ID: 
1482778399978778000

BATANGAS, Philippines: A powerful typhoon blew out of the northern Philippines on Monday after killing at least six people and spoiling Christmas in several provinces, where more than 380,000 people abandoned celebrations at home to reach emergency shelters and other safer grounds.
Typhoon Nock-Ten cut power to five entire provinces due to toppled electric posts and trees, dimming Christmas revelries in Asia’s largest Catholic nation. More than 300 flights were delayed or re-scheduled and ferries were barred from sailing, stranding more than 12,000 holiday travelers.
Six people died from drowning or by being pinned by fallen trees, poles and a collapsed concrete wall in the provinces of Quezon and Albay, southeast of Manila, after the typhoon made landfall in Catanduanes province Sunday night, officials said.
Many military camps and outposts in Catanduanes and outlying provinces were damaged and some troops were injured, the military said.
Nock-Ten, locally known as Nina, then blew westward across mountainous and island provinces, damaging homes, uprooting trees and knocking down communications.
After weakening on landfall, the typhoon had sustained winds of up to 120 kilometers (74 miles) per hour and gusts of 180 kph (111 mph) when it blew into the South China Sea after battering the congested provinces of Batangas and Cavite, south of Manila, government forecasters said.
A cargo ship with about two dozen crewmen radioed for help as their vessel started to list off Batangas. It later ran aground and turned on its sided in Mabini town, the coast guard said.
The storm was one of the strongest to hit the Philippines since Typhoon Haiyan left more than 7,300 people dead or missing and displaced over 5 million in 2014. But officials in some provinces found it difficult to convince people to abandon their Christmas celebrations and head for the shelters before the storm hit. Some officials said they had to impose forced evacuations.
“Some residents just refused to leave their homes even when I warned them that you can face what amounts to a death penalty,” Cedric Daep, a top disaster-response official in Albay, said by phone.
Shopping malls and stores were ordered to close early on Christmas Day to encourage people to remain indoors, “but at the height of the typhoon, many cars were still being driven around and people were out walking,” Daep said. “We warned them enough, but we just can’t control their mind.”
Officials in Albay, where more than 150,000 villagers were displaced by the typhoon, declared a “state of calamity” on Sunday to allow faster disbursement of emergency funds.
About 20 typhoons and storms lash the Philippines each year. In the past 65 years, seven typhoons have struck the country on Christmas Day, according to the government’s weather agency.
Tens of thousands of villagers, forced to spend Christmas in crowded and powerless emergency shelters, started to return home Monday to deal with the damage.
“They have left the evacuation centers and we’re seeing the sun again,” Ann Ongjoco, mayor of the town of Guinobatan in Albay, one of five provinces that lost electricity, said by phone.
But she said her town, where more than 17,600 villagers fled to shelters in schools, will not be able to resume the holiday celebrations because of the post-typhoon mess. “Many houses made of light materials were destroyed,” she said.
___
Associated Press writer Jim Gomez in Manila contributed to this report.

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Vladimir Putin’s Christmas Speech: Russian Leader Criticizes Western Countries for Abandoning Christian Roots

Here’s another shit post — because things are slow. This one goes out to the democratic party, those Vlad haters out there this holiday season.
If you’ve ever wondered why Putin appeals to so many stable minded people in the United States, look no fur…

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