Tag Archives: oil

The world`s biggest oil producer Aramco are struggling to arrive at the $2 trillion valuation and their IPO is being delayed

Aramco is planning to go public, and it has long been talked about it. But when will Aramco be listed on an international stock exchange? The FT stated that advisors are struggling to arrive at the $2 trillion valuation sought by Saudi`s crown prince, Mohammed bin Salman.

Aramco (formerly Arabian-American Oil Company) is the worlds biggest oil producer. Its market value has been estimated at about $2 trillion, making it the most valuable company in the world.

Aramco is one of the largest companies in the world by revenue. Aramco has both the world`s second-largest crude oil reserves, at more than 260 billion barrels, and second-largest daily oil production.

Aramco is owned by Saudi Arabian government and have about 65,266 (2016) employees. Their revenue in 2011 was $311 billion. Its 2013 crude oil production was 3,4 billion barrels, and it manages over one hundred oil and gas fields in Saudi Arabia, including 288,4 trillion standard cubic feet (scf) of natural gas reserves.

The company was founded in 1933 as California-Arabian Standard Oil Company. Ten years later they changed the name to Arabian-American Oil Company, and in 1988 they changed to Saudi Arabian Oil Company/Saudi Aramco.

If the right price for Aramco is $2 trillion, it is more than 6 times the value of Exxon Mobil. But Saudi Arabian government is not planning to sell everything. «Only» 5 percent of Aramco will be listed on the stock exchange.

Aramco has made all the preparations for the IPO to take place this year, but it seems like it could be delayed. Maybe next year will be the right moment to enter the market.

Aramcos valuation of $2 trillion is more than Exxon, Shell, BP and Chevron combined, and proposed $100 billion sale dwarfs Alibabas record $25 billion offer.

According to FT, people briefed on the negotiations say London was a prime contender to land the actual listing. The battle between where Aramco`s stock would list is seen as a horse race between the New York Stock Exchange and the London Stock Exchange.

Saudi Aramco are looking at New York, London and other exchanges around the world.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Understanding Gold

Gold and silver are complicated assets to price, because prices depend on the valuation of other assets and on differences between U.S data and the rest of the world. Stocks and currencies depend on fundamental data, but for gold and silver it is more complicated. The gold and silver prices express the strength of the global economy vs the expectations of real interest rates in the U.S.

Gold

Understanding the gold and silver prices is the key to unlocking the mystery of fiat money. Do you remember the collapse in Russia in 1999, South East Asia in 1997, and Brazilian and other South American currency crises from 1992 to 1994? Many lost all their savings, because of the collapse of their governments currencies.

Gold cannot suffer such a collapse in value because gold cannot be created by any government at will. That`s why the governments would like to convince the populace that it should disregard gold as a monetary asset and embrace its fiat currencies.

All previous experiments with fiat currencies ended in disaster. Our history books are littered with examples of empires that were built on hard work and destroyed by a devaluation of their currency. But this time is different. Central banks are doing the same thing at the same time; printing money. So, you have to look at the dollar compared to other currencies.

Understanding the gold and silver prices is the key to unlocking the mystery of fiat money. Compared to the prices in the past, the gold price should be $2,500, $4,000, $7,000 or even $14,000, but it isn`t. It is declining.

Fed successor Janet Yellen said (November 2013); «I don`t think anybody has a very good model of what makes gold prices go up and down.» Fed Chairman Ben Bernanke told (July 2013) Congress he doesn`t pretend to understand gold prices. Nobody does.

Gold and Silver are correlated to copper, oil price, Chinese investments and to global money supply and inflation. Higher supply of U.S oil and slower growth weakened the oil price and also the gold and silver price. Copper and oil got under pressure by the slowing Chinese real estate investments.

Chinese law to disallows to buy a second home, helped to calm these investments along with high interest rates.

The main driver for high gold prices in the «gold bubble» during the end of 1970`s was driven by U.S inflation, but what now as the emerging markets achieve half of global GDP? It will be difficult to view the gold price related to U.S inflation now. Falling food and energy prices in Europe are an indicator of weak EM.

Central banks in EM reduced their dollar share and bought gold between 2010 and 2012. India holds 10% of reserves in gold, while China holds 1,7% and Brazil only 0,5%. Countries with current account deficit (India: 10% Central bank gold holdings), Belarus (30%) and Egypt (25%), prefer gold to stabilize their currency.

Western central banks still stick with the former IMF rule not to buy gold any more.

The gold share is very high for many European countries, while it is still low in EM central banks. Central banks of Germany, Italy and France are all three with 70% gold holdings, and they could all build up their reserves during the Bretton Woods era.

All other countries fixed their N currencies against 1 currency, the U.S dollar, in the Bretton Woods system. The Fed was obliged to exchange on ounce of gold into $35 U.S dollar. (N:1 currency system). President Nixon closed this cheap gold at $35 window in 1971.

Gold lost its status with flexible exchange rates, and the IMF demonization of gold policy even urged central banks to sell their gold. Central banks in Switzerland and the UK followed these calls, and the Fed is still the leasing central bank in an implicit N:1 system of central banks (Bretton Woods II).

Quantitative easing makes the gold rise and the dollar to weakens, because private investors and some central banks move out of the dollar and into gold. If the U.S employment falls, then the dollar appreciates which is about to happened now. EM will be more expensive and with lower oil prices the U.S trade deficits diminishes.

U.S funds will find treasuries more attractive relative to gold and silver and normally when the real interest rates is high, the gold price is weak and vice verse. When the U.S economy improves the gold price falls, and the chances of a Fed Funds rate hike increase, but that`s far in the future.

The gold price moved upward together with oil prices and wages during the 1970`s inflation expectations. Wages is playing a role as an underlying factor for interest rates and the gold price. At that time, Fed Chairman Volcker hiked interest rates so that unions stopped higher wage demands, new supply (North-sea oil) suppressed the oil price and the incomes of EM, while the global growth was sluggish.

Fed Chairman Volcker destroyed the gold price by keeping inflation (and company margins) under control and the stock price rose again. Now wages is declining (wage share of GDP) and the company margins are increasing. The gold price have dropped sharply in a few days and are trading below its 1,200 support level. It can go down to 1,000 and below.

A report published by the World Gold Council «China`s gold market: progress and prospects» suggests that the demand for gold will increase by 20%, from 1,132 tonnes per year to at least 1,350 tonnes by 2017. It was a record level of Chinese demand for gold in 2013, and 2014 is suggested to see consolidation, the succeeding years are likely to see sustained growth.

The market began liberalising in the late 1990s, and China is the number one producer and consumer of gold. It is expected to see the market to continue to expand, irrespective of short-term blips in the economy.

Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by government. Gold is down 1/3 since it’s all time high of $1,921,50 in September 6, 2011. On October 29, he told the Council of Foreign Relations that the Fed`s $4 trillion balance sheet is a «pile of tinder, but hasn`t been lit.» Once the central banks stop «sitting on» their reserves, said tinder will ignite «inflation will eventually have to rise,» and in turn, «gold will move higher, measurably so.» (Fxsteet.com).

Gold is a hedge against inflation, and not against times of crises. Right now, the problem is not inflation, but the opposite; something worse called; deflation. Gold can go down while inflation increases, as they did from 1980 to 2000. It`s difficult to understand the setting of the gold price, so I will continue to look at the technical analysis. Gold is still  in a bearish market.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Black Gold is up on Iraqi war

Brent traded at its highest level since September as militants in Iraq seized more territory and President Barrack Obama warned that the crises may spill over into other countries. Fighters from the Islamic State in Iraq and the Levant took control of Iraq`s border crossing with Jordan and Syria.

Black gold

Iraq pumped 3,3 million barrels a day last month. Saudi Arabia is the largest producer in the 12-member Organization of Petroleum Exporting Countries. U.S Secretary of State John Kerry arrived in Baghdad to try to get political leaders to set aside sectarian divisions and confront the growing threat.

John Kerry will spend the day meeting with Prime Minister Nouri al-Maliki, as well as ministers and party leaders. But why do the U.S and John Kerry spend so much time and money on this case? Kerry said at a press conference that they want a government in Baghdad «that is prepared to represent all of the people of Iraq, that is prepared to be inclusive and share power».

The U.S didn`t invade Iraq to stop and evil tyrant and spread democracy. There were no weapons of mass destructions, and all of the terrorists that had been in Afghanistan fled to Pakistan. Not Iraq. The U.S went to Iraq for oil.

Back then, the U.S oil production was falling, but now it is rising. From 1970 to 2008, oil production fell from 9,6 million barrels per day to just 5 million barrels per day. Michael Simmons cast doubt on the actual size of Saudi Arabia`s reserves in his book from 2005, so it was not only the U.S either. M. King Hubbard`s «Peak oil» theory and breakneck emerging market growth, explain even more what happened in Iraq.

Vice President Dick Cheney had previously been the CEO of Halliburton, and made about $40 billion from the Iraq war. All this makes it hard to belive that the U.S was not in Iraq for the oil. But, did the U.S get all the oil? Nope.

Iraq is the second largest producer in OPEC and the country`s oil production hit 3,25 million barrels per day last year. A level not seen since before 1990, but the U.S oil imports from Iraq are actually down.

The U.S imported 725,000 barrels per day from Iraq in 1999, but now it is only 340,000 barrels a day. So, if Iraq is producing more oil than it has in decades, where is all the oil going? The oil is going to China.

China`s crude imports from Iraq increased by 31% year-over-year to about 600,000 barrels per day in the first four months of 2014, and that`s twice as much as the U.S import from Iraq. Up from almost nothing a decade ago.

Iraq`s oil production is expected to reach 8 million barrels by 2035, and that`s not all: they forecast that 80% of Iraqi production would go to China. Some investors say that Baghdad to Beijing is the new Silk Road of the global oil trade.

China National Petroleum Corp (CNPC) has invested $4 billion in the Iraqi oil industry. They produced 299 million barrels from the country last year. Almost one-third of its overseas output. PetroChina and Sinopec have invested billions of dollars in Iraq as well, acquiring stakes in some of the country`s largest oil fields. So, why do the U.S and John Kerry spend so much time and money to try to stabilize Iraq?
The U.S came uninvited and the American people don`t want to be there, nor do the Iraqi people want the American people to be there. The U.S has sacrificed much so far; 4,500 dead American soldiers and about 120,000 dead Iraqi civilians. About $800 billion in upfront costs, with additional $1 trillion in military pensions, disability payments and debt service. Is it worth it?

Saddam could have stopped the mess in Iraq, but he is dead. The U.S killed him. Now, the Sunnis, the Shiite, and the Kurds can do it all alone. There is nothing America can do to bring two warring Islamic factions together or redeem its credibility. If someone should spend time and money on this mess, it should be China.

Reports today:
09:45 a.m EST Flash Manufacturing PMI
10:00 a.m EST Existing Home Sales

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Sell off on friday

A big drop for U.S tech stocks on friday. Nasdaq was down -2,60% on friday. S&P 500 -1,25% and the Dow -0,96%. Nikkei is also down today, together with the other Asian markets. Nikkei is down -1,69%.

Europe is also down today. Stoxx 50 is down -0,89%. FTSE 100 -0,71%. CAC 40 -0,72% and DAX -1,24%. At the same time, you can see the commodities trading down too. Gold is down -0,16%. Silver is down -0,33%. Crude oil (Brent) -0,95%, and Copper -0,13%.

Nadaq

(Nasdaq: Apris 4, 2014)

Many investors have talked about the valuations in the tech stocks for a while now, and many predicted a tech bubble was on the way. I wrote about it for some weeks ago, and I said Twitter was the most expensive stock in this universe.

52 Week high for Twitter is 74,73, and the stock traded down -2,07% on friday. Twitter is down about 50% from the top very soon. Marketers are embracing Facebook over Twitter, and they will rather go for Youtube and LinkedIn before Twitter.

Sometimes investors need to take some profit and friday was a great day for that. It seems like the U.S markets will open down today. I`m excited about the trading sessions, not only today, but for the rest of this week. Take a look at the dollar. It`s up!

Tech and biotech is so far the most popular sectors in 2014, but both of them slide now. Many tech stocks are trading down in Europe too. This is a great time for daytraders. I will follow the charts this week before I start my vacation on friday. Easter bunny is waiting.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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