At the start of the year, hopes and expectations were that the US and China would come to a relatively speedy resolution on trade and the world economy would be set once again on a moderate path of expansion. These hopes have been repeatedly disappointed. Instead the failure of negotiations has seen the US escalate the dispute, prompting tit-for-tat tariff responses from China.
The impact on world trade is becoming ever more pronounced. The OECD’s Composite Leading Indicator fell to 99.06 in June, registering consecutive monthly falls since December 2017 and is now at its lowest level since the financial crisis of 2009. Growth in global container trade dropped to 1.3% in the first half of the year, compared with growth of 4.5% in the same period of last year.
In its latest oil market report, the International Energy Agency (IEA) put oil demand growth for January-May at just 520,000 b/d, noting it was the lowest increase for the period since 2008. Oil demand growth estimates for 2019 and 2020 were revised down by 0.1 million b/d to 1.1 million b/d and 1.3 million b/d respectively.
With further tariffs set to be imposed by the US on China September 1, and China ending purchases of US agricultural goods in response, the situation is unlikely to improve. The IEA commented that there is a greater likelihood of a further downward revision to oil demand than there is of an upward one. As suggested in earlier articles, the bottom of the downturn has yet to be reached.
Sustained trade war
Equally serious is the growing perspective that the US-China trade war is not so much a temporary glitch in post-war globalisation and the opening up of world trade, but a permanent reversal. Rule-based international trade will be replaced with unilateral protectionism.
In this scenario, China and the US become locked in permanent conflict, creating two rival economic zones, one based around the dollar and one based around the renminbi in Asia as Beijing develops its Belt and Road Initiative. Rather than crumble in the face of US economic warfare, China evolves the means to counter both US tariffs and Washington’s use of unilateral and extraterritorial sanctions as a primary tool of foreign policy.
Much depends on how resilient the Chinese economy proves.
Some commentators argue for resilience, pointing to a growing Chinese trade surplus with the US despite the imposition of tariffs, the opposite outcome to that intended by Washington, and Chinese cuts to import tariffs on European and Canadian goods as a means of replacing trade with the US with other countries.
Others argue that currency devaluation raises the price of Chinese dollar-denominated debt and that Beijing has no choice but to increase infrastructure spending to compensate for slowing export orders. Both actions increase the vulnerability of the Chinese banking sector to a debt crisis. While China reports GDP growth of just over 6%, they argue that real GDP growth is half that.
Scenario planning
There are three broad scenarios:
Sustained economic conflict, which pushes the world into a shallow recession and curbs global economic growth and overall energy demand over the medium term. This would likely be sufficient to impact long-term energy demand forecasts substantially to the downside.
Resolution or accommodation – the prospects for which have faded, but could be revived if the US economy slows further, or post the November 2020 presidential elections, if a Democrat wins. The quicker this occurs the less impact on long-term energy demand.
Crisis – recessions create strains and stresses which a healthy global economy would generally weather. In a weakened state, bad debt crises for example are more likely, with the possibility of contagion. This could happen in China, but more likely in a developing economy without China’s foreign currency reserves and ability to manage the economy via fiscal stimuli.
Supply-side reaction
The worsening outlook for oil demand and lower oil prices have prompted a supply-side reaction. US crude, still constrained by a lack of takeaway infrastructure, is bumping along in a low to mid-$50/b range for West Texas Intermediate.
The US oil rig count dropped to 764 August 9, the six consecutive weekly decline and is 105 rigs below its level for the same week last year. The US Energy Information Administration’s latest Drilling Productivity Report estimates the net gains from the country’s principal shale plays in August at 49,000 b/d, down from 83,000 b/d in June and 76,000 b/d in July.
Meanwhile, OPEC production in July dropped to a five-year low of 29.88 million b/d, according to secondary sources, led by a cut of 150,000 b/d by Saudi Arabia to 9.7 million b/d, 610,000 b/d less than it is formally allowed to produce under OPEC’s current agreement.
Saudi Arabia’s persistent over-compliance indicates its resolve to rebalance the market from the supply side. Reports have also surfaced that it has contacted other members of OPEC to discuss more stringent cuts, although this is likely to prove a hard sell.
Aramco IPO
Saudi Arabia is firming up its plans for an Initial Public Offering (IPO) of 5% of giant state oil enterprise Saudi Aramco. Following a successful bond offering in April, its first public statement of its annual net income and then its first ever earnings call August 12 to reveal its first-half 2019 results, the company is providing some of the financial transparency required for a stock market listing.
According to reports in the Wall Street Journal, the IPO could take place as early as next year. During the earnings call, Aramco executive Khalid al Dabbagh said the company was ready for an IPO when its shareholders (the Saudi government) agree that market conditions are optimal.
Although Riyadh could have abandoned the share sale – raising cash via debt as shown in April – the revived plans for an early IPO provide some clarity about its short-term intentions. A higher oil price means a higher valuation for the company and a more successful IPO, even if Riyadh’s target value of $100 billion for 5% of the company looks optimistic.
In the run-up to the IPO, Saudi Arabia will almost certainly maintain its policy of aggressive over-compliance. Even better, but more difficult, would be to secure further cuts coordinated through OPEC and potentially with the entire group of OPEC+ producers.
Post-IPO strategy
The question then arises – what policy does Saudi Arabia adopt post-IPO?
With its share sale cash in the bank ready to fund Crown Prince Mohammed bin Salman’s Vision 2030, Riyadh will have the opportunity for a new approach. It may not take that opportunity; continued oil market support in pursuit of a strong share price and sales of further tranches of the company as and when needed may prove the order of the day.
However, while an outside possibility, the conclusion of the IPO would offer a chance to move away from a position in which Saudi Arabia bears the lion’s share of OPEC+’s production cuts, a policy which, when it proves successful in the short term, prompts an expansion in US shale production and other longer-cycle non-OPEC investment. Saudi Arabia not only suffers barrels left in the ground unsold, but a gradual erosion of market share.
Vision 2030 is itself a recognition that the oil world is changing – that its long-term future is no longer assured. There is no shortage of forecasters, including major oil companies, predicting a peak in oil demand sometime post-2030 as a result of increased energy efficiency in transport, the use of gas and electrification. In an ever-expanding oil market, leaving a scarce resource in the ground made sense, but doing so in a market which passes peak demand implies some of the resource will never be produced at all.
Hence the need for Vision 2030 to become a reality sooner rather than later. Saudi recognition of the economy’s need for diversification is long-standing, but action has never before been so imperative. The IPO will provide the funds, but it also locks Riyadh into a particular policy path with costs. Better on two counts – finance and policy freedom – that, if the IPO is to happen, that it happens quickly. Riyadh can then reconsider the best long-term strategy for the monetization of its remaining oil reserves.
Robert Inget on Thu, 15th Aug 2019 9:17 am
WASHINGTON (The Borowitz Report)—In what may be the most serious allegation ever made against the former Secretary of State, Fox News Channel reported today that Hillary Clinton was involved in the conspiracy to murder President Abraham Lincoln.
The latest charge against Mrs. Clinton was reported by Fox host Sean Hannity, who said that the evidence of her role in the Lincoln assassination came mainly in the form of e-mails.
According to Mr. Hannity, “If it’s true that Hillary Clinton killed Lincoln, this could have a major impact on her chances in 2016.”
The accusation against Mrs. Clinton drew a strong response from Sen. Lindsey Graham (R.—-S. Carolina): “There’s been a concerted effort by Hillary Clinton to cover up her role in President Lincoln’s murder. She has said nothing about it. This is bigger than Watergate, the Cuban missile crisis, and the Second World War put together.”
Responding to the allegation, Mrs. Clinton issued a terse statement indicating that she could not have participated in Lincoln’s assassination because she was born in 1947.
“That’s what she wants us to believe,” Sen. Graham said.
JuanP on Thu, 15th Aug 2019 10:15 am
Robert Inget you are hilarious aren’t you, WTF. You and Idaho are a pair of Oregon nut cases.
Duncan Idaho on Thu, 15th Aug 2019 10:18 am
DAX and FTSE tanking into close
JuanP on Thu, 15th Aug 2019 10:20 am
LOL, get with it Duncan. The markets are manipulated and mean nothing anymore.
Darrell Cloud on Thu, 15th Aug 2019 12:10 pm
I thought Saudi Arabia had limitless supplies of oil. China, India and Europe need that oil. So, why go public?
Anonymouse on Thu, 15th Aug 2019 12:17 pm
China Slams Hillary’s Regime Change Record After She Praises HK “Democracy” Protests
China’s largest state-run newspaper group, People’s Daily, has produced a viral video slamming Hillary Clinton’s disastrous record of promoting regime change abroad from Libya to Syria to Iraq. It comes in response to a tweet this week where she expressed solidarity with the still raging Hong Kong protests, at a moment the Chinese military is staging outside the city possibly prepared to invade and put down the demonstrations. “May we all stand in solidarity with the people of Hong Kong as they speak out for democracy, freedom from repression, and a world they long to see,” she wrote Tuesday. May we all stand in solidarity with the people of Hong Kong as they speak out for democracy, freedom from repression, and a world they long to see. — Hillary Clinton (@HillaryClinton) August 13, 2019 In response Communist Party of China-owned People’s Daily had this to say: Hillary Clinton has called for support of the rioters in Hong Kong. Let’s see what happened when she “supported” Syria, Libya, Yemen, Iraq. The short video featured Clinton calling for regime change in various Middle East countries like Syria and Libya, while noting that hundreds of thousands had died as a result of US escalation and intervention in the region. .@HillaryClinton has called for support of the rioters in Hong Kong. Let’s see what happened when she “supported” Syria, Libya, Yemen, Iraq. pic.twitter.com/dAZcuqkljO — People’s Daily, China (@PDChina) August 15, 2019 Interestingly, the video also presented what Beijing sees as evidence that the Hong Kong protests, which began earlier in the summer over a proposed mainland extradition law, are part of a planned “Color Revolution” engineered by the United States. The riots in Hong Kong were also loosely paralleled to actions of the “moderate rebels” in Syria and Libya in the segment. Image via Salon Meanwhile, Trump’s response to soaring tensions and unrest in the semi-autonomous city appeared linked to a trade deal. In a Wednesday tweet the president warned President Xi that China must respond “humanely” if it wants to negotiate a trade deal. I know President Xi of China very well. He is a great leader who very much has the respect of his people. He is also a good man in a “tough business.” I have ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it. Personal meeting? — Donald J. Trump (@realDonaldTrump) August 14, 2019 However, as Middle East and geopolitics expert Joshua Landis has noted, we’ve been here before. “Democracy promotion becomes main policy objective in US trade negotiations with China,” Professor Landis said of Trump’s HK tweet. “Mission creep. Soon policy will not be about economics, but regime-change,” he warned.
More Obvious Davy ID Theft on Thu, 15th Aug 2019 1:01 pm
JUST MAKING SURE ALL KNOW THIS IS DAVY CHILDISH ID THEFT
JuanP on Thu, 15th Aug 2019 10:15 am
JuanP on Thu, 15th Aug 2019 10:20 am
Davy ID theft on Thu, 15th Aug 2019 1:05 pm
More Obvious Davy ID Theft on Thu, 15th Aug 2019 1:01 pm
Brent Georgeson on Thu, 15th Aug 2019 1:19 pm
Maybe the trade war is a result of de globalization? Trying to protect what is yours?
Robert Inget on Thu, 15th Aug 2019 1:45 pm
Platts Oil
@PlattsOil
#Equinor starts production from the Mariner heavy #oil field in the #UK North Sea, set to produce for 30+ years and add to growing production of heavy and ultra-heavy oil in UK waters.
Nick Coleman
Full story: (link: http://plts.co/e9o450vytWi) plts.co/e9o450vytWi
Average production life of shale OIL well, fewer than three years.
Conversation
Platts Oil
@PlattsOil
#Equinor starts production from the Mariner heavy #oil field in the #UK North Sea, set to produce for 30+ years and add to growing production of heavy and ultra-heavy oil in UK waters.
Nick Coleman (
@ncoleman100
) reports.
Full story: (link: http://plts.co/e9o450vytWi) plts.co/e9o450vytWi
Robert Inget on Thu, 15th Aug 2019 1:47 pm
correction:
Bakken’s Average Production Per Well Is Collapsing Fast …
https://seekingalpha.com/article/4050149-bakkens-average-production-per-well…
· For instance, given that the average age of those wells is about three and a half years, we know that a typical shale oil well in the Bakken will likely produce about 83 b/d after three years.
Author: Zoltan Ban
claes on Thu, 15th Aug 2019 2:08 pm
Two really bright and clever populations have set them selves into an almost impossible situation. The Chinese and the Americans, who both are supposed to be IQ supperior to the rest of the world, have created a situation that threatens the overall world peace and order. Both countries’s regimes have huge problems with internal “other-wise” thinking within their own jurisdiction. Both contries are under suspicion of having emperialistic ambitions, where the US has proven that rigth and China is about to prove it.
Maybe high IQ isn’t the solution to the worlds problems any more. Maybe high IQ is a bad thing for the planet.
Duncan Idaho on Thu, 15th Aug 2019 2:15 pm
who both are supposed to be IQ supperior to the rest of the world
Please, we elected an idiot to lead us in the US.
Greedy and grabby, but not that bright.
We are a stupid “country”.
Duncan Idaho on Thu, 15th Aug 2019 2:24 pm
(“Elected” is a term only a mentally challenged repug would use- the “winner” lost by 3 million votes)
Such a “democracy”!
claes on Thu, 15th Aug 2019 2:36 pm
Duncan, this is world wide – not just American – or Chinese for that matter.
claes on Thu, 15th Aug 2019 2:47 pm
High IQ is almost always connected to high personal ambitions, and maybe not so much to social/national responsibility.
High IQ is very often for sale to the highest bidder, where they do their job without any second thougth to the long term conseQuensies of their actions. We call them sociopaths.
JuanP on Thu, 15th Aug 2019 2:51 pm
“(“Elected” is a term only a mentally challenged repug would use- the “winner” lost by 3 million votes)”
Most of that was documented electoral fraud
claes on Thu, 15th Aug 2019 3:01 pm
Duncan, Without illegal immigrants votes, the dems are bound to lose anyway
claes on Thu, 15th Aug 2019 3:07 pm
JuanP, Could you please refer to these “Most of that was documented electoral fraud”.
I would like to tead about it.
claes on Thu, 15th Aug 2019 3:41 pm
The two high IQ nations have set them selves and the rest of the world in a very bad situation.
Both of these nations elites are in a problematic situation where they are about to lose control over the population.
Mainstream media in both china and US is losing confidence .
Highly intelligent people can’t anymore convince the ordinary people that they know how to solve society’s problems.
Once upon a time science was the solution to most of society’s problems.
Today many see science as creating problems that was not asked for.
It seems like whenever science created something new and exciting, they also created new problems that are almost unsolvable. And as I see it, that’s where we are now
JuanP on Thu, 15th Aug 2019 3:56 pm
Claes, google project veritas. They have infiltrated the extremist liberal arm of Dems. They have all the poop.
claes on Thu, 15th Aug 2019 4:12 pm
The white race digged it’s own grave by making science every mans property.
JuanP on Thu, 15th Aug 2019 4:48 pm
Claes, my dad was black and I turned out OK. I have a fetish for ebony cock because of it I guess.
claes on Thu, 15th Aug 2019 5:01 pm
Juan , Without you knowing about social/sexual science that would not be a problem at all.
Ignorance is blissful state of mind
Duncan Idaho on Thu, 15th Aug 2019 5:06 pm
Duncan, Without illegal immigrants votes, the dems are bound to lose anyway
You think I’m a Dim?
How insulting!
Repug and Dims
Pepsi, Pepsi Lite
claes on Thu, 15th Aug 2019 5:27 pm
Dun, we don’t want the pug back, and we sure don’t want any fizzwater president either
makati1 on Thu, 15th Aug 2019 5:37 pm
claes, average IQ by country:
#1 Hong Kong / Singapore – 108
#2 South Korea – 106
#3 Japan/China – 105
#4 Taiwan – 104
#5 Italy – 102
…
#9 US – 98
#10 Russia – 97
https://brainstats.com/average-iq-by-country.html
This site agrees and puts the US at #27.
https://www.worlddata.info/iq-by-country.php
The US is far down the IQ slope and dropping as we type. Brainwashing with propaganda is not education. The above charts show why the new power is in the East.
Duncan Idaho on Thu, 15th Aug 2019 5:37 pm
Dun, we don’t want the pug back, and we sure don’t want any fizzwater president either
I believe you need a larger box.
More Davy ID Theft on Thu, 15th Aug 2019 5:38 pm
JuanP on Thu, 15th Aug 2019 2:51 pm
JuanP on Thu, 15th Aug 2019 3:56 pm
JuanP on Thu, 15th Aug 2019 4:48 pm
makati1 on Thu, 15th Aug 2019 5:44 pm
Juan, give it a rest, you started the shit in the morning as
usual.
More Davy ID Theft on Thu, 15th Aug 2019 5:46 pm
makati1 on Thu, 15th Aug 2019 5:44 pm
Truth Buster on Thu, 15th Aug 2019 6:03 pm
claes, average IQ by country:
#1 Hong Kong / Singapore – 108
#2 South Korea – 106
#3 Japan/China – 105
#4 Taiwan – 104
#5 Italy – 102
…
#9 US – 98
#10 Russia – 97
makati, there is more to people than IQ don’t ya think. Stupid ignorant people think IQ is the only measure of worth. You are one of these stupid people
Anonymouse on Thu, 15th Aug 2019 6:04 pm
my IQ is 80 but I took the test online. Does that count?
claes on Thu, 15th Aug 2019 6:08 pm
OH Mak, About IQ, If these easterners are so f** intelligent, then why do they have these great internal economic problems.
And yes I hear you cry, why does the US have simmilar internal problems.
The answer is simple: highly intelligent people are in charge of their systems.
And the conclusion is: Well maybe they are not so intelligent. Maybe they are all just power maniacs, that will hang on to power no matter the cost. I’ll hang on to that conclusion no matter what
Davy Sock Puppet on Thu, 15th Aug 2019 6:24 pm
Truth Buster on Thu, 15th Aug 2019 6:03 pm
More low IQ Davy ID Theft on Thu, 15th Aug 2019 6:24 pm
Anonymouse on Thu, 15th Aug 2019 6:04 pm
More JuanP sock fraud on Thu, 15th Aug 2019 6:25 pm
More low IQ Davy ID Theft
Davy Sock on Thu, 15th Aug 2019 6:29 pm
More JuanP sock fraud on Thu, 15th Aug 2019 6:25 pm
claes on Thu, 15th Aug 2019 6:44 pm
The eastern people score high points in IQtests because of their great abilities in spatial tests, while they don’t score that well in verbal tests.
The difference is that they are good at physics,mathematics, technology and such, but they are not so good when it comes to the more abstract items like philosophy, curiosity, fantasy and word handling
This of course looks like pure racism, but go to hardcore scientific research, and you will find that it has a solid base in reality
Famlin on Thu, 15th Aug 2019 6:49 pm
Saudi Aramco is the Worlds #6 company in revenue and #1 in profits.
They have the smart strategy of building/buying/acquiring refineries worldwide and this provides a ready market for their crude oil. So they have a hand in both upstream (production) and midstream (refining). Soon they may acquire stakes in companies that do downstream (retailing). All this will ensure that they make more money instead of just selling the crude oil. So Aramco overtaking Walmart to get #1 position is not very far.
At the same time, there are lot of headwinds as the oil consumption in power & heating sector is declining drastically. On top of that, even in petrochemicals the growth of oil is slower.
Recently Pepsi & Coke decided to use aluminum cans for water instead of plastic bottles. This type of effort could reduce plastic and the oil consumption.
Still in transport sector, oil consumption continues to grow despite the rise of electric vehicles.
Aramco is saying that we are the ‘boss of oil’.
Duncan Idaho on Thu, 15th Aug 2019 7:29 pm
“We are in the end times”
https://www.cnet.com/news/pumpkin-spice-spam-is-coming-and-its-not-a-joke/#ftag=CAD-06-10abe3d
Davy on Thu, 15th Aug 2019 8:01 pm
I don’t know why y’all are so down on spam?
I live for the stuff. It’s my favorite.
The Truth Shall Set You Free on Thu, 15th Aug 2019 9:11 pm
DavyTroll thinks by ratcheting-up the ID theft and sock puppetry he can run everyone off or he thinks he can make conditions so intolerable that he will get his way.
The trolls intentions are so damn obvious that it’s funny.
The Truth Shall Set You Free on Thu, 15th Aug 2019 9:14 pm
Duncan:
Surely you realize, I hope, that you are “conversing” with just one person- DavySkum.
And you claim the “Dims” are obtuse…
I AM THE MOB on Thu, 15th Aug 2019 9:16 pm
White nationalists could have firearms taken under red flag law
https://www.usatoday.com/story/news/politics/elections/2019/08/14/kamala-harris-pitches-a-red-flag-law-targeting-white-nationalists/2009237001/
I AM THE MOB on Thu, 15th Aug 2019 9:18 pm
Donald J. Trump and Jeffrey Epstein allegedly raped Katie Johnson (13 years old) in 1994.
Here is her full 7 minute testimony of the event.
https://m.youtube.com/watch?v=YWnUzvlqpB0
claes on Thu, 15th Aug 2019 9:59 pm
A lot of niggers and White nationalists could have firearms taken under red flag law
Cloggie on Thu, 15th Aug 2019 10:25 pm
Yesterday night on the “German news” (straight from State/Pentagon): news reader Klaus Kleber…
https://documents1940.files.wordpress.com/2019/06/claus_kleber.jpg
…reporting about the formerly peaceful Texan border town El Paso, where recently “ein Weisser Rassist” (a racist white guy) shot a number of Latinos, thereby destroying the splendid multi-ethnic fabric of El Paso. Pictures were shown of a gun shop, where said Latino’s where buying guns in great numbers in order to protect their Latino culture .
But if you look at the demographic numbers it becomes clear that the “Luegenpresse” (lying press, natzi term) was at it again with their “multi-ethnic society”:
https://en.wikipedia.org/wiki/El_Paso,_Texas
Euro’s declined from 40 to 12% over the past half century.
El Paso is lost, just like most of Texas is lost, below the River Red, the future border river between a receding white America and advancing Latino’s.
https://en.wikipedia.org/wiki/Red_River_of_the_South
Retired German media insiders of several decades reveal that the “German news” is pure propaganda, straight from the US:
https://documents1940.wordpress.com/2018/07/29/german-media-insiders-german-news-is-fake-news-and-pentagon-propaganda/
Cloggie on Thu, 15th Aug 2019 10:33 pm
“White nationalists could have firearms taken under red flag law”
After Russians, Armenians [*] and Germans, now white Americans are next in the crosshairs of I AM THE MOB’s tribe.
The resulting geopolitical possibilities for Eurasia are endless, where poor Britain is about to park itself in a losing alliance.
[*]
https://documents1940.wordpress.com/2019/08/06/zog-turkey/
claes on Thu, 15th Aug 2019 10:35 pm
Kamala Harris
“We need to take action to keep guns out of the hands of dangerous people and stop violent, hate-fueled attacks before they happen,” Harris said. “By focusing on confronting these domestic terror threats, we can save lives.
What about stopping people from killing for no reason, what about cleansing black territories from weapons