Shilling: Oil Is Still Heading to $10 a Barrel

Gary Shilling writing at Bloomberg View:

Back in February 2015, the price of West Texas Intermediate stood at about $52 per barrel, half of its 2014 peak. I argued then that a renewed decline was coming that could drive it below $20, a scenario regarded by oil bulls as unthinkable.

But prices did fall further, dropping all the way to a low of $26 in February. Since then, crude rallied to spend several weeks flirting with $50 per barrel, a level not seen since last year.

But it won't last; I’m sticking to my call for prices to decline anew to $10 to $20 per barrel...

But the world continues to be awash in crude, and American frackers have replaced the Organization of Petroleum Exporting Countries as the world’s swing producers.

The once-feared oil cartel is, to my mind, pretty much finished as an effective price enforcer.

Even OPEC’s leader, Saudi Arabia, is acknowledging the new reality by quashing recent attempts to freeze output, borrowing from banks and preparing to sell a stake in its Aramco oil company as it tries to find new sources of non-oil revenue...

The price at which major producers chicken out and slash production isn’t determined by the prices needed to balance the budgets of oil producing nations, which are as high as $208 per barrel in Libya and as low as $52 per barrel in Kuwait. Nor is it the "full cycle" or average cost of production that includes drilling costs, overheads, pipelines, etc.

In a price war, the chicken-out point is the price that equals the marginal cost of producing oil from an established well.

Once fracking operations are set up and staffed, leases paid for, drilling underway and pipelines laid, the marginal cost of shale oil for efficient producers in the Permian Basin in Texas is about $10 to $20 per barrel and even lower in the Persian Gulf.

Furthermore, fracking costs continue to fall as productivity improves.

The number of drilling rigs operating in the U.S. continues to drop. But the rigs taken offline are mostly old vertical drillers that drill only one hole per platform, while horizontal rigs -- able to drill 20 to 30 wells per platform like the spokes of a wheel -- increasingly dominate. So output per working rig is accelerating....
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Link: http://www.bloomberg.com/view/articles/2016-06-28/why-oil-is-still-headed-as-low-as-10-a-barrel

Is Kevin Love the "new" David Lee?

Just asking. Warriors at Cavs; game 4, NBA Finals.    PB
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From ESPN.com:


...At first glance, that has almost nothing to do with Love. LeBron lets Barnes go, Irving is slow to switch onto him and Barnes obliterates Irving on the block as if he isn't there.

But that breakdown is actually all about Love, even though Love did nothing horribly wrong. Check out Love in the right corner at the start of the play: He's stuck on Klay Thompson. That is the hangover effect of a Golden State defensive switch on the other end that left Thompson guarding Love.


The Warriors love to do that: screw up the matchups, get a stop and make your head spin in transition as you try to snap back into your preferred assignments.

LeBron reads Love on Thompson as a crisis, makes a unilateral decision to switch onto Thompson and expects Love to reciprocate by sliding onto Barnes. Love doesn't reciprocate, and there is nothing worse in this life than unrequited Love. Barnes springs open and finally bullies Irving.

One bit of fretting -- Oh god, Kevin is on Klay! -- triggered a chain of events that tore apart Cleveland's defense in about two seconds. Love's specific limitations compound the anxiety.

He's slow-footed and he has never shaken the maddening habit of admiring his own jumpers while his man leaks out ahead of him. That crap is fatal against the Warriors....
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Link: http://espn.go.com/nba/story/_/id/16097908/2016-nba-finals-cleveland-cavaliers-bring-kevin-love-bench

AP: US hiring grinds to a near-halt; many stop looking for work

From the Associated Press online:

U.S. hiring slowed to a near-standstill in May, sowing doubts about the economy's health and complicating the Federal Reserve's efforts to raise interest rates.

While unemployment slid from 5 percent to 4.7 percent, the lowest since November 2007, the rate fell for a troubling reason: Nearly a half-million jobless Americans stopped looking for work and so were no longer counted as unemployed.

Employers added just 38,000 jobs in May, the fewest in over five years.

Less-educated workers bore the brunt of the hiring slump, with a quarter-million high-school dropouts losing their jobs in May.

That has perpetuated a long-term trend toward a two-tiered job market, with college-educated adults more likely to be employed and earning steady raises.
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Link: http://hosted.ap.org/dynamic/stories/U/US_ECONOMY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2016-06-03-15-38-20

U2 - U3 - U6 ... What are U looking for?

U2 sings: I still haven't found what I'm looking for...


U3 says: Official Unemployment Rate is 4.7%


U6 says: Real Unemployment Rate is 9.7%   How can this be?  Why is the Real Number more than twice as much as the Official Number?


From the Wall Street Journal Online:


The standard measure [U3] of unemployment only includes people who are actively looking for work. Broader measures of unemployment and underemployment have also declined in recent years.


These measures include discouraged and marginally attached workers who would like to work but have given up searching for employment.


The broadest measure [U6] of underemployment was unchanged at 9.7% this month. This measure includes workers who have given up searching and also part-time workers who would prefer to work full time.
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Link: http://blogs.wsj.com/economics/2016/06/03/the-may-jobs-report-in-12-charts-2/
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See the numbers yourself: http://www.bls.gov/news.release/empsit.t15.htm

DO YOU WANT FRIES WITH YOUR JOB?

From VisualCapitalist.com:

Link: http://www.visualcapitalist.com/do-you-want-fries-with-that-jobs-chart/