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26 March 2016

Press review 26-03-2016 - It looks like it, it smells like it, but dare not to say it

Some might have taken the acknowledgement of war by François Holland after the attacks on Paris last November as a coup of drama by an unpopular President. Unfortunately, such is not the case, and it is not just France that is at war, the whole European Union is. Destroying the Union is effectively one of Daesh's goals, the motive behind its multiple attacks last Tuesday in Brussels. It is therefore capital to understand the rise of the Front National in France, the UKIP in Britain, the Alternatif fur Deutschland in Germany or the Golden Dawn in Greece as fulfilments of this goal. As Catholics mourn and celebrate the death and resurrection of Jesus Christ, it is perhaps time to remember the philosophical foundations laid 2&nbsp000 years ago that still support much of the European identity today. Bending to hate and fear is simply loosing this war.

"Oil peaked in 2015" is becoming a recurrent claim. This time however, it was not issued by Ron Patterson or Euan Mearns, it is claimed by a major mainstream media outlet. Making reference to a report issued by Rystad Energy, Bloomberg lays down a clear picture: world petroleum extraction is to diminish slightly this year, decline over 1 Mb/d in 2017 and 2018 and this trend should accelerate afterwards. They just do not dare to say it, but it is all out there in the open for every one to see.

Is this it? I usually prefer a word of caution, considering the geo-political hurdles hanging on major petroleum exporting regions such as Lybia, Iraq and Iran. Peak Oil is a secular event, not exactly fitting the frenetic rhythm of the always on-line modern way of life. But after more than a decade studying this subject, this is indeed the first time I feel this civilisation changing moment could actually be behind us.

19 March 2016

Press review 19-03-2016 - The next phase of the cycle

The Brent index continued its rally this week, albeit in slightly less volatile sessions. The past four weeks the price of petroleum crept up 30%, a movement unimaginable just a decade ago. The futures curve remains in contango, but it is visibly flattening in the short term.

The petroleum market endures the supply destruction phase. The focus remains naturally on producing countries and companies and their financial owes. However, as Economics text books teach, the kind of dramatic market movements lived the past 18 months tend to spur reactions from the demand side. Petroleum consumption is steadily swelling, particularly in Asia. The stage is being set for the next phase in the market cycle.

13 March 2016

Press review 13-03-2016 - Farewell Ron

Brent returned back above 40 $/b after three straight months below the historical figure that market the end of "cheap oil" back in 2004. After two volatile sessions Monday and Tuesday, the index found some sort of normality in the reminder of the week. The cries for negative prices are no longer heard. A turning point? Perhaps, as the news of declining extracted volumes multiply.

Undisturbed by market idiosyncrasies, China presses on with its energy transition. The figures on alternative electricity capacity installations are staggering, with Wind, Solar, Nuclear and Hydro all well into GW territory. It is a dramatic transformation unfolding in front of our eyes, completely at odds with the stance of European governments and institutions like the IPCC.

Throughout the next decade I expect similar transformations to take place in other regions of Asia, Africa and South America, where energy cost and security resound louder than in Europe.

05 March 2016

Press review 05-03-2016 - The death of an icon

Brent continued the rally it initiated last week to end this week at the highest price since last December. Commodities rallied accross the board, with metals such as zinc, copper and gold leading the charge. The big news of the week however, was the death of Chesapeake founder Aubrey McClendon. The iconic company that lead the rush to source rock fossil fuels is now headless, and just one day after McClendon was indicted in a case of land leasing manipulation.

Rumours have been around since the begining of February of an imminient bankruptcy of Chesapeake. The company has reassured investors that it can repay about 500 million dollars in bonds due throughout March, using available cash and further credit instruments. However, the company is also struggling to meet short term collateral requirements consequence of the recent downgrades imposed by the almighty rating agencies. Chesapeake was already forced to come up with 200 million dollars in cash the past few weeks, and could soon be asked for an additional 700 million dollars.

It is against this financial and judicial backdrop that McClendown dies, in what is increasingly perceived as a suicide act. This is perhaps a good example of what Ugo Bardi terms the Seneca Cliff.