Why Oil Prices Could Continue To Fall - OilPrice.com

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By Editorial Dept - Sep 30, 2022, 7:00 AM CDT

Thursday’s, trading in WTI futures was crazy, even by the standards of oil’s somewhat volatile nature. One of the things that makes oil attractive to traders is that while there is that short-term volatility, it usually comes within a discernible long-term trend that is based on fundamental conditions. Thursday’s trading, however, reflected conflicting fundamental conditions and we saw the kind of price action that frequently marks a shift in long-term direction. That, and the common view amongst analysts that oil goes higher before too long, may make it seem that we are about to reverse and move higher. I disagree.

The intraday chart for Thursday shows three moves of a couple of bucks or more, up, then down, then back up again within a period of less than twelve hours. And, as I took this snapshot at 2:50 pm EST, it looks like a move back up may be starting. As I said, crazy, right? It is, however, understandable, because oil is being pushed around by some conflicting forces.

The move up in the wee hours of the morning came as OPEC suggested that they will consider some output cuts at their next meeting. That just highlighted the fact that, even as oil prices have fallen quite dramatically from their highs, supply has remained tight. The prospect of reducing that supply to what is at best a balanced market based on current consumption resulted in an understandable run up.

Then, just before US markets got fully underway, there was…

Thursday’s, trading in WTI futures was crazy, even by the standards of oil’s somewhat volatile nature. One of the things that makes oil attractive to traders is that while there is that short-term volatility, it usually comes within a discernible long-term trend that is based on fundamental conditions. Thursday’s trading, however, reflected conflicting fundamental conditions and we saw the kind of price action that frequently marks a shift in long-term direction. That, and the common view amongst analysts that oil goes higher before too long, may make it seem that we are about to reverse and move higher. I disagree.

The intraday chart for Thursday shows three moves of a couple of bucks or more, up, then down, then back up again within a period of less than twelve hours. And, as I took this snapshot at 2:50 pm EST, it looks like a move back up may be starting. As I said, crazy, right? It is, however, understandable, because oil is being pushed around by some conflicting forces.

The move up in the wee hours of the morning came as OPEC suggested that they will consider some output cuts at their next meeting. That just highlighted the fact that, even as oil prices have fallen quite dramatically from their highs, supply has remained tight. The prospect of reducing that supply to what is at best a balanced market based on current consumption resulted in an understandable run up.

Then, just before US markets got fully underway, there was a mixed bag of data that hinted once again at economic problems.

For a start, weekly jobless claims were lower than expected. That is usually a good thing, but in the current environment it was seen by traders as evidence that despite continued rate hikes, the Fed is still struggling to control inflation. That view was then reinforced by revisions to Q2 numbers that confirmed a negative print on GDP and showed the Fed’s favorite inflation measure, core PCE still rising at an alarming rate. So, all the hope of the Fed reversing course, just as the Bank of England did on Wednesday, disappeared, and they seem set to keep raising rates despite two consecutive quarters of shrinking GDP. That raises the specter of stagflation, economic stagnation, and inflation at the same time. Then, during the trading day, attention came back to supply, then the demand issues took over again as US stocks collapsed, etc., etc.

You can see the problem. The supply and demand side of the pricing equation are sending completely different signals, with traders caught in the middle and unsure what to do. Over the last few days, I have heard several analysts from big Wall Street firms give their opinions on crude and they all seem to be saying the same thing: that the volatility will pass and, when it does, supply restrictions will force WTI higher again, probably back up above $100.

Taking a step back and looking at a longer-term chart, however, we are still in a discernible trend, and for good reason.

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Oil Prices On Track For First Quarterly Loss Since 2020 - OilPrice.com

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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By Irina Slav - Sep 30, 2022, 1:38 AM CDT

• Oil prices are on course for their first quarterly loss since 2020, with recession fears driving prices down to an eight-month low last week.
• There is some upside potential for oil prices heading into the fourth quarter, with OPEC+ considering a significant production cut to support prices.
• The EU embargo on maritime Russian oil imports will enter into effect in December, adding to supply tightness and potentially countering demand destruction.

Fears of a global recession have caused crude oil prices to fall for most of the quarter that ends today and they are likely to book their first quarterly decline since 2020, according to Bloomberg.

“Oil’s poor quarter is clearly a reflection of an oil market that is losing its tightness as global recession risks surge,” Ed Moya, senior market analyst at Oanda, told Bloomberg. “Energy traders clearly expect drastic action by OPEC+.”

"Amid so much uncertainty, seesaw trade may be common over the next week, unless we get more clarity from OPEC+ sources on the likely size of any adjustment and what it means for previous missed quotas," another senior oil analyst from Oanda told Reuters.

For the fourth quarter, it seems there’s some upside potential for prices, coming from OPEC. First, reports earlier this week suggested Russia would propose a production cut of 1 million bpd. Then later reports said several large producers in the OPEC+ group had started discussing cuts.

While a production cut from OPEC+ would serve to counter economic pessimism, the effect might not be sustained because OPEC+ is already producing much below its own target: the figure for August was lower than targets by more than 3 million bpd.

In other words, whatever the official production targets are, actual production tends to be much lower, effectively making targets meaningless. The tightness of global oil supply that OPEC officials have been warning about, however, remains very real and about to get potentially more severe after the EU embargo on maritime Russian oil imports enters into effect in December.

Physical demand destruction appears to be the only way to temper prices and a soaring U.S. dollar has done a lot to achieve that, albeit probably inadvertently. Earlier this month, oil prices slumped to the lowest in eight months as the greenback jumped to a two-decade high fuelling stronger recession fears.

By Irina Slav for Oilprice.com

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EU countries approve energy windfall levies, turn to gas price cap - Reuters

• EU approves energy windfall profit levies
• Countries eye gas price caps as their next move
• States split over how to contain sky-high prices

BRUSSELS, Sept 30 (Reuters) - European Union countries agreed on Friday to impose emergency levies on energy firms' windfall profits, and began talks on their next move to tackle Europe's energy crunch - possibly a bloc-wide gas price cap.

Ministers from the 27 EU member countries met in Brussels on Friday, where they approved measures proposed earlier this month to contain an energy price surge that is stoking record-high inflation and threatening a recession.

The package includes a levy on fossil fuel companies' surplus profits made this year or next, another levy on excess revenues low-cost power producers make from soaring electricity costs, and a mandatory 5% cut in electricity use during peak price periods.

With the deal done, countries began talks on Friday morning on the EU's next move to contain the price crunch, which many countries want to be a broad gas price cap, though others - most notably Germany - remain opposed.

"All these temporary measures are very well, but in order to find the solution to help our citizens in this energy crisis, we need to cap the gas price," Croatian economy minister Davor Filipovic said on his arrival at Friday's meeting.

Fifteen countries, including France, Italy and Poland, this week asked Brussels to propose a price cap on all wholesale gas transactions to contain inflation.

The cap should be set at a level that is "high and flexible enough to allow Europe to attract the required resources", Belgium, Greece, Poland and Italy said in a note explaining their proposal seen by Reuters on Thursday.

The countries disputed the Commission's claim that a broad gas price cap would require "significant financial resources" to finance emergency gas purchases should market prices break the EU's cap.

Belgian energy minister Tinne Van der Straeten said only 2 billion euros ($1.96 billion) would be required, as most European imports fall under long-term contracts or arrive by pipeline with no easy alternative buyers.

That would be a fraction of the 140 billion euros the EU expects its windfall profit levies on energy firms to raise.

But Germany, Austria, the Netherlands and others warn broad gas price caps could leave countries struggling to buy gas if they cannot compete with buyers in price-competitive global markets.

A diplomat from one EU country said the idea posed "risks to security of supply" as Europe heads into a winter with tight energy supplies after Russia slashed gas flows to Europe in retaliation for Western sanctions against Moscow for invading Ukraine.

The European Commission has also raised doubts and suggested the EU instead move ahead with narrower price caps, targeting Russian gas alone, or specifically gas used for power generation.

"We have to offer a price cap for all Russian gas," EU energy policy chief Kadri Simson said.

Brussels suggested that idea earlier this month, but it hit resistance from central and eastern European countries worried Moscow would retaliate by cutting off the remaining gas it still sends to them.

By introducing EU-wide measures Brussels hopes to overlay governments' uneven national approaches to the energy crunch, which have seen richer EU countries far outspend poorer ones in handing out cash to ailing companies and consumers struggling with bills.

Germany, Europe's biggest economy, set out a 200 billion euro package on Thursday to tackle soaring energy costs, including a gas price brake.

Luxembourg energy minister Claude Turmes urged Brussels to change EU state aid rules to stop the "insane" spending race between countries.

"That's the next frontier, to get more solidarity and to stop this infighting," Turmes said.

($1 = 1.0182 euros)

Reporting by Kate Abnett and Gabriela Baczynska; Additional reporting by Philip Blenkinsop, Bart Meijer and John Chalmers; Editing by Jan Harvey

Our Standards: The Thomson Reuters Trust Principles.

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FACTBOX: G7, EU keep markets guessing over price cap on Russian oil - S&P Global

Highlights

US-led move designed to hit prices, not supply of Russia's vital oil exports

Control of global tanker insurance key to enforcing price cap

EU still discussing adoption of price cap into existing Russian oil sanctions

As the G7 group of rich nations continues to hammer out the fine print for a price cap mechanism on Russian crude and products exports, oil markets and shippers have been left guessing how and when the measures will be structured, implemented, monitored and enforced.

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Designed to keep Russian oil flowing into global markets while curbing Moscow's ability to fund its war in Ukraine, the US hopes the price cap will be agreed upon at least a month before the EU's sanctions kick in on Dec. 5 and Feb. 5 for crude and products, respectively. As envisaged, the price cap would prohibit shippers, insurers and insurance brokers in compliant countries from providing services to oil buyers in other countries trading Russian oil above a specified price level.

"The US-proposed price cap continues to gain momentum," Paul Sheldon, chief geopolitical adviser at S&P Global Commodity Insights, said. "Our reference case assumes a complicated enforcement process and the need for Russia to willingly sell into the cap would mute the desired impact of keeping more oil on the market, at least initially."

The following is a roundup of the key market movements and implications for the price cap plans so far:

Prices

The value of Russia's flagship Urals export-grade crude took a tumble in the wake of the Ukraine war, hitting record lows of $40/b below physical Dated Brent, as many Western buyers shunned Moscow's oil. But the discounts for Urals began to shrink sharply in August as global supplies tightened and China and India stepped up imports of cheap Russian oil. The falling spread for Russian crude propped up Moscow's oil revenues even as benchmark oil prices slipped back from June highs. Some market watchers see the renewed impetus for the G7 price cap initiative as a direct response to the narrowing discounts for Russian crude.

• The US has said it doesn't expect or need key importers such China, India and Turkey to join the G7 price cap but hopes the impact of the mechanism on trade flows and its use as bargaining leverage to negotiate cheaper Russian oil will depress the value of Russian crudes globally.
• Indeed, the Urals crude discount to Dated Brent stood at $23.19/b Sept. 27, according to S&P Global Platts data, after widening by $3/b from a postwar low of $19.05/b Aug. 25.

US Treasury officials have said the proposal aims to set three separate price caps for imports of Russian crude and higher and lower value oil products such as jet and fuel oil.

• According to US officials, the yet-to-be-decided price caps will be set between the marginal cost of production for Russian oil and pre-pandemic prices for Russian oil in the global market in order to incentivize Russia to continue producing and exporting.
• Seven out of 11 major Asian refiners and trading companies surveyed by S&P Global Commodity Insights anticipated the cap for Russian crude to be around $48/b-$55/b.
• Several Southeast Asian refiners, including Pertamina, have said they are tempted to buy Far East Russian sweet crudes, including ESPO and Sokol, but it will depend on Russia's willingness to accept the price cap.
• Many Asian buyers, especially in India and China, have been snapping up Russian cargoes due to sharp discounts, and tanker rates out of Russia remain at elevated levels.
• The dirty Black Sea-to-Far East shipping route for a 135,000-mt cargo remained more than double prewar levels at $43.70/mt Sept. 27, as assessed by Platts.

Trade flows

Before the war, 60% of European imports of diesel came from Russia, a dependency that rises to 70% for Northwest Europe, while in the Mediterranean 25% of diesel imports were coming from Russia, according to tanker tracking data provider Kpler. Russia's seaborne oil exports fell 6% to a new post-Ukraine war low in the first half of September, according to Kpler. As Russian volumes fall ahead of sanctions, growing US imports mean the US is set to become Europe's biggest supplier of oil in the coming months.

• The G7 estimates that about 95% of the global oil tanker fleet is covered by shipping insurers in G7 countries, namely Canada, France, Germany, Italy, Japan, the UK and the US.
• Shipping insurance providers in all EU member states are also expected implement the cap when finalized.
• Russia has said it will not sell any oil or products to countries imposing the price cap mechanism on its exports.
• Some analysts fear Russia could retaliate further by shutting in swaths of its production to trigger higher global oil prices.
• Most market watchers, however, believe Russia will be able to maintain oil revenues and not jeopardize its global oil market share.

Some oil supply losses from Russia are seen as likely even if the EU reworks its existing sanctions to incorporate the price cap mechanism before year-end.

• S&P Global Commodity Insights forecasts Russian disruptions peaking at 1.5 million b/d in Q1 2023 due to the EU import bans, which could be tempered by the price cap.
• Goldman Sachs estimates that the world can expect to lose about 1 million b/d of Russian supply versus prewar levels due to incomplete redirection to alternative non-NATO buyers under a price cap.

Oil importers, refiners and traders looking to buy Russian crudes after December will find it difficult to access G7 finance and insurance services. Europe is heavily reliant on Russian oil, meaning it will take time to diversify supply, but new dynamics are emerging.

• Europe's imports of seaborne Russian crude stood some 1 million b/d below prewar levels at just under 1 million b/d in the first half of September, according to Kpler data.
• The EU has said it is looking to incorporate the G7 price caps into its existing sanctions on Russian oil imports due to kick in from Dec. 5. The trade bloc requires unanimous support from all 27 members to implement the price cap.
• If approved, the EU would need to create an exception to its ban on services for Russian seaborne oil, thereby prohibiting Russian oil imports unless the oil is purchased at or below the price cap.
• "Even so, several headwinds would persist," Sheldon said. "These include opaque pricing for many transactions, confusion over implementation and enforcement details, and the need for Russia to willingly engage under Western-induced constraints. However, if the alternative is shuttered production, the US does not shift to secondary sanctions threats, and the cap is set as high as a reported $60/b, over time Russia and some remaining buyers may choose to utilize the option to receive Western shipping services under the 'price exception' policy."

Infrastructure

With the main leverage of the price cap directed at the provision of tanker shipping insurance in compliant countries, market watchers expect some buyers of Russian crude to use a growing source of alternative insurance services offered in Russia and China.

• Russia's ability to sidestep the price cap by using domestic or non-G7-regulated shipping and tanker insurance from countries not imposing the price cap, however, is seen as limited due to a shortage of spare tanker capacity.
• The Druzhba pipeline -- which transported up to 1 million b/d of Russian Urals crude to Central Europe before the war -- remains a supply route for Russian oil to some European refiners. Ukraine ships Russian oil to Slovakia, Hungary and the Czech Republic via the southern leg of the Druzhba line.
• But flows via the route will dwindle further by year-end as Germany cuts off imports to comply with EU sanctions.
• Germany and Poland are preparing to end their imports through the northern Druzhba route by end-2022 despite sanctions exemption for pipeline flows.
• Some 300,000 b/d of remaining Russian crude could continue flowing to landlocked Hungary, Slovakia and the Czech Republic, which are exempt from the ban.
• Bulgaria, which imports Russian crude via the Black Sea to supply the Lukoil-owned, 190,000 b/d Neftokhim refinery in Burgas, is allowed to buy Russian crude for another two years until December 2024.
• These remaining Russian flows to the EU, however, could still be subject to price caps if the EU adopts the G7 proposal.

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EU countries to back energy windfall levies, lock horns over gas price cap - Reuters

BRUSSELS, Sept 30 (Reuters) - European Union countries meet on Friday to approve emergency levies on energy firms' windfall profits and launch talks on their next move to tackle Europe's energy crunch - possibly, a gas price cap.

Energy ministers from the 27 EU member countries are negotiating measures proposed by Brussels last week to attempt to contain an energy price surge that is stoking record-high inflation and threatening a recession.

They include a levy on fossil fuel companies' surplus profits made in 2022 or 2023, another levy on excess revenues that low-cost power producers make from soaring electricity costs, and a mandatory 5% cut in electricity use during peak price periods.

Diplomats from several countries were confident ministers would approve the package on Friday.

Then, the ministers will turn their attention to the EU's next move to contain the price crunch - which many countries have said should be a broad gas price cap, while others - most notably, Germany - remain opposed.

"On the price cap, there is nothing near a consensus," a diplomat from one EU country said.

Fifteen countries, including France, Italy and Poland, this week asked Brussels to propose a price cap on all wholesale gas transactions, to contain inflation.

Europe should cap gas prices at a level that is "high and flexible enough to allow Europe to attract the required resources", Belgium, Greece, Poland and Italy said in a note explaining their proposal, seen by Reuters late on Thursday.

Opponents include Germany and the Netherlands, who say capping gas prices could leave countries struggling to attract supplies, if they cannot compete with buyers in price-competitive global markets for gas cargoes this winter.

A diplomat from one EU country said the idea had "significant weaknesses and risks to security of supply" as Europe heads into a winter with scarce energy to spare, after Russia has slashed gas flows to Europe in retaliation for Western sanctions against Moscow for invading Ukraine.

The European Commission has also raised doubts, and suggested the EU instead move ahead with more limited versions of a price cap.

A wholesale gas price cap would require "significant financial resources" and could work only if a new entity was launched to allocate and ship scarce fuel supplies between states, the Commission said in a paper published on Thursday.

Rather, EU countries should consider capping the price of Russian gas, or launching an EU price cap specifically on gas used for power generation, it said.

The Commission suggested a Russian gas price cap earlier this month, but shelved the idea after resistance from central and eastern European countries worried Moscow would retaliate by cutting off the remaining gas it still sends to them.

Belgian energy minister Tinne Van der Straeten said countries in favour of price caps would step up their efforts to find a proposal more EU countries could support.

"We will take further steps with Germany, with Austria, with all those countries that today still have reservations," she said on Thursday.

She added only up to 2 billion euros would be needed to finance emergency gas purchases should prices break the EU's cap as most European imports fall under long-term contracts and/or arrive by pipelines with no easy alternative buyers.

That, she said, fades compared to sums being spent by EU countries individually now on helping their consumers weather runaway prices.

Berlin on Thursday set out a 200 billion euro ($194 billion) "defensive shield", including a gas price brake and a cut in sales tax for the fuel, to protect companies and households in Germany from the impact of soaring energy prices.

Reporting by Kate Abnett, Gabriela Baczynska; additional reporting by Philip Blenkinsop, Bart Meijer; Editing by Toby Chopra

Our Standards: The Thomson Reuters Trust Principles.

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EU set to adopt windfall levy, but no deal on gas price cap - ABC News

BRUSSELS -- European Union energy ministers were set Friday to adopt a package of measures including a windfall levy on profits by fossil fuel companies, but a deal on capping gas prices remained off the table.

With energy prices skyrocketing across Europe since the Russian invasion of Ukraine, EU member countries have been negotiating proposals from the European Commission that the bloc’s executive arm said could help raise $140 billion to help people and businesses hit by the crunch.

Several diplomats who spoke ahead of Friday’s meeting expressed confidence a deal will be approved on a levy on surplus profits made in 2022 by companies producing or refining oil, gas and coal. Under the deal, these companies will be asked to give back a share of their profits above the average of the past four years, according to officials at France's energy ministry.

The two other main elements of the plan are a temporary cap on the revenues of low-cost electricity generators such as wind, solar and nuclear companies, as well as an obligation for the 27 EU countries to reduce electricity consumption by at least 5% during peak price hours.

Estonian Economic Affairs and Infrastructure Minister Riina Sikkut said that “the most promising measure to actually bring down the average price is still the reduction of peak consumption.”

Sikkut underlined that any hardship this winter will be nothing compared with the price being paid by Ukrainians. “We can’t forget that we are in a situation of war. Ukrainians are paying with their lives, so we temporarily may pay higher bills or prices in the food store,” she said.

The measures, however, will not have an immediate effect on the gas prices that have been running wild as Russia reduced its supplies.

“This is just the first part of the puzzle and an immediate patch,” said Czech Industry and Trade Minister Jozef Sikela, who chaired the meeting in Brussels. “We must not stop here; we are in an energy war with Russia; the winter is coming. We need to act now... Now means now. Now is not in a week and definitely not in a month.”

A group of 15 member countries has urged the European Commission — the EU’s executive arm — to propose a cap on the price of wholesale gas as soon as possible to help households and businesses struggling to make ends meet.

“The price cap that has been requested since the beginning by an ever increasing number of member states is the one measure that will help every member state to mitigate the inflationary pressure, manage expectations and provide a framework in case of potential supply disruptions, and limit the extra profits in the sector," they said.

The proposal will be discussed during Friday’s meeting but has yet to gather unanimous support, with Germany notably blocking.

The European Commission has warned in an analysis that such a cap could weaken the bloc's ability to secure gas supplies on the global market. But it is open to the idea of introducing a price cap on Russian gas to mitigate the impact of the crisis while negotiating a lower gas price with other suppliers.

“We are negotiating with our reliable suppliers of pipeline gas. If this doesn’t bring results, then a price cap is possible. Russia is not a reliable partner. In fact, it is at the origin of the problem," said Kadri Simson, the EU commissioner for energy. “I strongly believe we need a price cap on all Russian gas imports, at a level that still makes it attractive for them to export to Europe.”

According to the European Commission, Russian gas supplies to the EU declined by 37% between January and August this year.

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No Need For Russian Crude Price Cap; Markets Will Do It Themselves. - Forbes

The looming EU ban on Russian crude imports, a deepening global economic contraction, and simple logistics costs will dramatically limit Russia’s oil revenues.

EU Officials have enough to do without attempting to garner support for a price cap on Russian crude oil, and one isn’t necessary anyway. If the threatened ban on EU imports of Russian crude oil takes effect on December 5, Russia will be forced to sell its oil to customers well beyond the geographic borders of the Eurozone, which means it will have to offer deep discounts to buyers in order to accommodate for higher shipping costs, and the loss of current Eurozone customers.

In addition, global crude oil prices will likely fall this winter as the global economy contracts. Ironically, the global economic collapse instigated by Russia’s attempt to hurt Europe via a natural gas embargo will turn out to be the foremost contributor to Russia’s loss of crude oil revenues. Said contraction is pretty much inevitable due to the ongoing deterioration and perhaps eventual near total loss of German (and other European) industrial production capacity due to energy cost and availability constraints. All of this, of course, has been precipitated by Russia’s natural gas embargo and, more recently, the subsequent complete loss of any ability of gas to flow via Nord Stream pipelines under the Baltic Sea.

Russian crude oil ordinarily sells for a deep discount to many of the world’s major crude oil benchmark prices because of both quality and transportation logistics; in its newfound role as a pariah seller of crude oil Russia will have to discount its crude oil prices even further in order to keep both volumes and revenues up. As the price of global crude oil benchmarks falls with economic activity and lower oil demand, the normally discounted price of Russian crude oil will fall along with them. Russian crude oil revenues will naturally drop precipitously under this scenario.

Ultimately, the success or failure of the West’s goal of squeezing Russian oil revenues will key upon the discipline of EU members to buy or not to buy embargoed Russian crude oil, not upon the implementation of artificial price caps. Price caps are nearly impossible to implement and are much more difficult to enforce than an outright purchasing ban. EU members will find alternate sources of crude oil; and Russia will be forced to scour the far corners of the earth to sell its oil, resulting in much higher shipping costs, more difficult logistical challenges, and less oil revenues overall.

Global markets of all kinds are facing more than enough challenges right now; interventions of any kind should be actions of last resort, if they happen at all. A price cap on Russian crude oil is not necessary and is a waste of valuable time and energy for EU officials who have more urgent things to do with their time. The free market system will cap, and actually reduce the price of Russian crude oil all by itself.

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Genetics and high demand increase the price of hunting dogs - Dakota News Now

ABERDEEN, S.D. (Dakota News Now) - Pheasant hunting season is just around the corner, and while the price of fuel and ammo has risen with inflation, so has the price of a hunting dog.

John Luttrell owns Luttrell Kennels in Clark, South Dakota. He has bred and trained hunting dogs for 27 years, and he says he’ seen the price jump in that time.

”Obviously the price has changed also. We’re getting up into the $1,000 to $2,000 range for a high-quality puppy. Some of the the more smaller breeds that are a little bit more rare, you’re going to even pay more than that,” said Luttrell.

One of the reasons the price of dogs has changed is because the science of breeding has too, which helps Luttrell produce a higher-quality pup.

”The genetic tests that are available now, it’s crazy how many different diseases we can eliminate by doing genetic tests and breeding smart,” said Luttrell.

The demand for dogs also rose when the pandemic began, and dog owners had more time to spend at home with a new four-legged friend.

”During COVID, the demand was so high, even lower-quality puppies were getting that kind of money. Now, the lower-quality puppies are not getting that kind of money anymore, but the high-quality puppies, you’re still getting what you paid for,” said Luttrell.

More demand for dogs resulted in more demand for training, and Luttrell is booked out for months.

”Demand is certainly up. We’ve been full further out than we’ve ever been before for the last three years,” said Luttrell.

The demand and the cost of supplies led Luttrell to increase the price of his training services too.

”There’s a higher demand for that, and yes, we have increased our prices, but diesel fuel is more expensive, ammo is more expensive, dog food is more expensive, and we have to do it because our costs are up. Insurance is up. Everything is up,” said Luttrell.

Hunting season brings in big bucks for the South Dakota tourism industry. A key part of that is accommodating to the dogs the hunters want to bring.

Casey Weismantel, the Executive Director of the Aberdeen Convention and Visitors Bureau, says he values accommodating to hunters and their dogs, as he would want the same for his dog Luna.

”We have hunters that we talk to that will not travel unless their dog can stay in the hotel. Luckily, all the hotels in Aberdeen are dog-friendly, but I agree with them. I don’t want go unless I can bring Luna with me and I can enjoy the experience through her eyes,” said Weismantel.

To celebrate the hunting dogs that put in work during hunting season, the Aberdeen Convention and Visitors Bureau held a ‘Pup’ Crawl social. Community members were encouraged to bring their dogs to Malchow Plaza Thursday evening for a free-will donation event that benefitted the Aberdeen Area Humane Society and Pet Rescue League.

Copyright 2022 KSFY. All rights reserved.

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Oil Prices Could Be Set For Another Sharp Rise - OilPrice.com

David Messler

Mr. Messler is an oilfield veteran, recently retired from a major service company. During his thirty-eight year career he worked on six-continents in field and…

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By David Messler - Sep 28, 2022, 7:00 PM CDT

• Oil prices have tumbled below the $80 mark for the first time since January.
• Bearish catalysts have been weighing on oil markets, but bullish news is beginning to trickle in.
• Some analysts are predicting that oil prices could climb back up to $100 in the coming months.

It's been a rough couple of weeks in the energy market. As potential energy company investors, we are not sorry to see the back of last week in particular. That's the understatement of the year. Pretty near every negative sentiment-Recession, Fed tightening, Dollar strength, China demand, Inventory builds, or what amounts to the entire oil price Closet of Anxieties, came to pass this week. Oil-WTI took a tumble below $80 for the first time since Jan 11th of this year, closing Friday below its 200-day moving average of $89.00.This move has WTI nearing an important psychological level in the lower $ 70s, past which producers will sharply curtail capex to raise prices. 

In this article, I will argue that the selling is overdone and neglects one basic truth about the oil market. It is under-supplied, and it is only the SPR releases that have been masking that fact. We are on the verge of an energy calamity that will begin to manifest itself in the coming months. As the economy of the world begins to accelerate in 2023, the era of energy insecurity will begin. The important takeaway is that there is nothing that can be done to prevent this “train from barreling into the station.” A recent NY Times article put it succinctly-

“That’s because there’s just no extra supply out there today at all. There’s a very little extra supply that the Saudis and the Emiratis can put on the market. And that’s about it. We’ve used the strategic petroleum reserve, and that’s coming to an end in the next several months. There’s just no extra cushion in the oil market right now.”

How did we get here?

The short answer is that for the period since 2014, producers have been disincentivized to explore for or sanction the mega-project that was the mainstay of the 2000-2013 era.

The graph above is telling us that for a lot of reasons-low oil prices for much of the period, governmental preferences shifting to alternative energy and discouraging production of “fossil fuels,” and capital restraint by producers globally that we have under-invested in upstream supply by hundreds of billions. 

Longer term, we are confident that oil prices will rebound, probably toward the end of the year, as the SPR releases that have put excess oil on the market come to a halt. The graph above, compiled from SP Global and Worldometer tells a compelling story. Every year approximately 80 mm new people join the nearly 7.9 bn folks already here, all needing (but not always having) energy to power their lives. In six years from 2014 to 2020 spending on new upstream sources fell by 55%, while the world’s population rose by ~8%. The math doesn’t work. 

The oil market is undersupplied as the EIA graph below shows. Since March when the government announced the SPR releases to bring down domestic gas prices, inventories have risen about 15 mm barrels. If you back out the 172 mm barrels withdrawn from the SPR over this time, inventories would have shrunk to ~248 mm bbls. That may sound like a lot, but in reality with our ~19 mm BOD habit, it’s a ~13-day supply. Less than 2-weeks!

Not only are inventories being artificially inflated by SPR releases, the productivity of new wells as reported in the EIA-Drilling Productivity Report is on the decline. This is an admittedly simplistic measure as it just takes active rigs at a given point, and divides into new well production as reported by various sources-usually state regulatory agencies. The fact the yardstick is done in 4th grade arithmetic without sophisticated modeling, doesn’t mean it’s not instructive. It does reveal an undeniable trend in new well production. Across every key basin with the exception of the North Dakota and New Mexico basins, there is a pronounced decline in spite of steady growth in the rig count for most of this year.

Reading it carefully a case can be made that the Drilled but Uncompleted well-DUC, count withdrawal that occurred from mid-2021 through January of this year was largely responsible for gains in production registered so far this year. There is certainly an observable trend that well performance in the shale basins began to fall off as DUCs declined.

This is true regardless of the underlying reason, which I have postulated in the past could be due to exhaustion of premium drilling inventory. This has been documented several times recently in widely read publications that include the Wall Street Journal. Here and here.

The data from the DPR is confirmed by information compiled from the EIA 914-monthly report. Only in North Dakota and in the Gulf of Mexico-GoM, do we see a gain from May to June. In the case of the GoM Murphy Oil’s, (NYSE:MUR) Kings Quay production contributed about 80K BOPD, and BP’s Herschel provided another 20K BOEPD, toward the 179K BOEPD shown for the month.

Higher drilling costs are also beginning to impact profitability as was noted in an even more recent WSJ article. What this means is that maintaining or increasing production will come under a sharper lens as margins compress, and operator’s balance sheet priorities come into play. Almost without exception shale drillers have told us that their priorities are returning capital to shareholders through special dividends and share buybacks, paying down debt, and holding production to low single digit growth. If oil prices hover in the $70’s for any time, expect cuts in operating budgets which will show up in the rig count soon.

The takeaway from this section is that U.S. production will rise to 12.6 mm BOEPD in 2023 as the EIA suggests in this month’s edition of the STEO, isn’t very high. Current trends are heading in the other direction, and the catalysts for a reversal of course are just not present. The current weakness in oil prices has producers sharpening their budgetary knives. Inflation is eating at already tight budgets, and nature itself may intervene with poorer quality rock than was available in the past.

Is any help coming from OPEC?

OPEC and its sometime collaborator when interests align, Russia have fallen short of producing up to full quota levels by a significant amount. Some reports have this shortfall at more than 3 mm BOPD at present. In fact the CEO of Aramco made a widely read pronouncement earlier this month that the world was on the precipice of an energy shock of massive proportions.

“But when the global economy recovers, we can expect demand to rebound further, eliminating the little spare oil production capacity out there. And by the time the world wakes up to these blind spots, it may be too late to change course.” 

The Dallas Fed put out a report documenting the OPEC shortfall as well that points to key source of underperformance at the feet of none-other than Saudi Arabia. It only runs through February of this year, but shows clearly the Kingdom of Saudi Arabia producing about 1.2 mm BOPD below quota.

To put a cap on this discussion of whether the Kingdom can dig deep and come up with more oil when the world needs it, we have commentary from the defacto Saudi leader himself, Prince Mohammed bin Salmon, also known as MbS-

“The kingdom will do its part in this regard, as it announced an increase in its production capacity to 13 million barrels per day, after which the kingdom will not have any additional capacity to increase production,” he said in a wide-ranging speech.”

Related: Central Asia Grapples With Influx Of Russians Fleeing Conscription

In his address the Prince noted that it would not be able to reach the 13 mm BOPD capacity level until 2027. This should knock on the head any notion that OPEC or its primary member, Saudi Arabia can turn a valve and add significantly to world oil supplies any time soon.

Your takeaway

No one can predict what the oil market will do over the short haul of the next few months. There are so many factors, many of which we noted in the opening paragraphs of this article, that it’s impossible to say when this selling pressure will be relieved. My best guess it will happen with a massive inventory draw when the SPR releases finally cease.

Perhaps it could be a Fed pivot. These interest rate hikes are crushing consumers and driving adjustable rate mortgages and HELOC payments higher every month. At some point the Fed will pause if history is any judge. A stock market that’s declined 50% in a few months, hundreds of thousands of people without work, inflation in the double-digits…will all demand it. That will spark an intense rally in oil prices in my view.

Or it may be something else entirely in the scope of things I’ve highlighted or an outlier I missed. What I can confidently say is when market sentiment shifts, we are in for a sharp surge in oil prices. It will be led by a crushing demand globally for oil and gas, the steady supply of which is increasingly in doubt.

By David Messler for Oilprice.com

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Mr. Messler is an oilfield veteran, recently retired from a major service company. During his thirty-eight year career he worked on six-continents in field and…

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Opinion | FOMO Helped Drive Up Housing Prices in the Pandemic. What Can We Expect Next? - The New York Times

Existing home prices in the United States soared 45 percent from December 2019 to June 2022, when Covid emerged and then gripped the nation. That rate of increase over such a short interval had never happened in the history of the U.S. national home price index, dating back to 1987, which the economist Karl Case and I first developed.

Now that growth in the index has started falling on a month-to-month basis, with the annual growth rate down from 18.1 percent in the year ending in June 2022 to 15.8 percent in the year ending July. This may seem a small drop, but it is important to note because it’s the largest deceleration in the history of the index and comes in the face of strong momentum in home prices. It leads one to consider whether the forces behind that 45 percent increase are going to continue.

It is not enough to say that the Federal Reserve caused the boom when it lowered interest rates dramatically in 2020 in response to the pandemic.But home prices have historically not been well explained by the actions of the Fed alone. The Fed’s raising of interest rates recently certainly works in lowering home prices, but not with any certainty.

The remote-work revolution prompted by the pandemic, as people seek bigger houses with home offices, seems to be a steady new reality. But it cannot fully explain this pandemic increase. If home price increases so dramatically reflected this change in demand, then commercial office price indexes should have declined since 2019. But the CoStar U.S. Equal Weighted Commercial Repeat Sales Indices for Offices, which measures commercial real estate prices in the United States, has continued upward roughly on trend since 2019.

So why would home prices skyrocket at a time when we were in a panic over our health? To answer that question, we need to consider how human psychology reacts to challenging events such as pandemics and how their narratives focus our attention.

One has to remember that the market for single-family homes is still an amateur market, with mostly inexperienced buyers and sellers who are doing more in their lives than just researching the real estate market. An uptick in first-time home buying (involving the least experienced buyers) during the pandemic reveals how certain features of the way we live and work today have been changing for some time and are now influencing our decision making.

So what went on in buyers’ minds during the pandemic?

The Bureau of Labor Statistics’ American Time Use Survey shows some of these important changes. The survey, conducted annually since 2003 by the Census Bureau, asks a random sample of Americans to keep time-use diaries. The average time per day spent socializing and communicating has been in a long decline. It dropped to 0.57 hours per day in 2021 from 0.64 hours per day in 2019 and 0.78 hours per day in 2003.

This decline in time spent socializing and communicating has been replaced by time spent on computers. The average time per day spent playing games and using computers for leisure has shown an uptrend, to 0.56 hours per day in 2021 from 0.43 hours in 2019 and 0.29 hours in 2003. The efforts by so many to avoid an infection that killed more than one million Americans left us relatively isolated and dependent on electronic media for human interaction.

Those isolated by the pandemic found a fantastic and sped-up world online. Real estate sites like Zillow, which gives snapshots of housing prices and market movement, became increasingly popular, as did the marketing of nonfungible tokens on the metaverse, where real estate has gone virtual. What has resulted is the gamification of speculative markets and the growth of gamelike investing sites like Robinhood.

This period was also one of other stresses. The spectacle of the invasion of the Capitol on Jan. 6, 2021, the intensified quarrel between left and right, and the Russian invasion of Ukraine on Feb. 24, 2022, with all of its brutality, plus the rash of forest fires and talk of nuclear war, no doubt left many unsettled.

In very general terms, since 2019, shares of the U.S. population experiencing depression or anxiety tripled and quadrupled, according to the National Center for Health Statistics, a U.S. government agency, and the American Psychological Association. It seems likely that many people would seek solace by making life-bending changes. Fulfilling a dream of a new home takes a lot of work but may be a comforting undertaking that can put new structure into people’s lives.

This social dislocation was happening as long-term interest rates in the United States reached record lows in the summer of 2020, helping to push up housing prices, and buyers felt psychological time pressure to lock in those rates with a 30-year mortgage.

The economists Graham Loomes and Robert Sugden found in 1982 that such decision making often involved a painful fear of future regret for failing to take advantage of present-day opportunities. (They called it, not surprisingly, the “regret theory.”) In other words, the fear of regret itself can play a significant role in motivating a person to act — or not to act.

The shorthand for this today is FOMO — fear of missing out, whose earliest popularity can be traced to at least 2011 when it referred to envy of others’ success on social media. The popularity of FOMO has grown enormously since then. Some of us economists believe FOMO is commonplace and are interpreting markets from this perspective. The Dallas Fed noted this year, for instance, that “higher house prices may have fueled a fear-of-missing-out wave of exuberance involving new investors and more aggressive speculation among existing investors.”

In my recent survey work with Anne K. Thompson, a research analyst at M.I.T.’s Center for Real Estate, we discovered that U.S. home buyers’ long-term expectations for home price growth were not particularly high in the Covid-19 period — indeed, not anything like the highs in the price boom before the Great Recession of over a decade ago. The result in that recession was a bubble that pushed prices up and up until they collapsed. The mood seems different since 2020: not one of irrational exuberance but of fear, and now worry, that the boom has passed.

FOMO has been alive and well. It is a deep-seated emotion that may have no logical connection with any extreme forecasts. Most people stay in their purchased homes for many years. Their identities, their sense of meaning, their love tend to be all tied up in their home. No wonder that FOMO may be triggered by the thought, at a time of stress, that we may have just missed a once-in-a-lifetime opportunity to afford the dream house.

So what should those of us do who are thinking about buying a house? One has to reflect on the swirl of emotions that affect many of us these days and recognize their legitimacy but not overreact to the high prices. Take a long time to search for a dream house even as mortgage rates are going up and don’t forget that real inflation-corrected prices may be substantially lower after this wave of FOMO and other factors promoting high home prices during the pandemic weaken with time.

I think that real (inflation adjusted) home prices will likely be a lot lower in a few years, but this is not certain. After real home prices peaked in December 2005, they fell 36 percent by February 2012. But it took over six years to drop that much, and real prices then shot up 77 percent from February 2012 to June 2022.

If you think you are in love today with a house, one could well argue that acquiring it right now makes sense. But this is clear only if in your heart you are really in love with it.

Robert J. Shiller is an emeritus professor of economics at Yale. He was awarded the Nobel Memorial Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013 for their empirical analysis of asset prices.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.

Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.

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EU tells countries gas price cap would come with risks - Reuters

BRUSSELS, Sept 28 (Reuters) - The European Commission has warned EU countries that a broad cap on gas prices could be complex to launch and pose risks to energy security, amid calls from countries for Brussels to step in to tame high fuel prices.

The Commission shared a document with countries on Wednesday, analysing various options the EU could consider to curb high gas prices, after 15 of the bloc's 27 member states this week urged the EU to propose a cap on gas prices.

The document, seen by Reuters, said a wholesale price cap for exchange transactions - covering both liquefied natural gas and pipeline supplies - could disrupt flows of fuel between EU countries.

That's because price signals would no longer help drive flows to regions where demand is high or supply scarce, the Commission said. It suggested such a price cap could only work if a new entity was launched to allocate and ship scarce fuel supplies between states.

The EU would also need "significant financial resources" to ensure countries could keep attracting gas supplies from competitive global markets where other buyers may be willing to pay prices above the EU cap, the Commission said. It did not specify where such resources could come from.

A broad wholesale gas price cap would pose a bigger "risk of triggering supply disruptions" from foreign suppliers than a cap on just pipeline deliveries, it added.

The Commission analysed other options to tackle the energy crunch, including more limited gas price caps.

The EU could cap the price of Russian gas imports, or cap the price of gas used to generate electricity as a way to tame high power prices, the document said.

The Commission recommended the EU negotiate with "reliable" suppliers to reduce prices and said joint gas buying could also help countries fairly share extra supplies.

EU countries disagree on whether a broad gas price cap would ease the supply crunch and energy price surge caused by Russia slashing supplies to Europe.

France, Italy, Poland and 12 other countries urged Brussels on Tuesday to propose a wholesale gas price cap to help rein in surging inflation. Germany, the Netherlands and Denmark are among those opposed.

Discussions on possible gas price caps will continue at a Friday meeting of EU energy ministers, who are also set to approve a package of measures proposed by Brussels last week, including windfall profit taxes on energy firms.

Reporting by Kate Abnett; Editing by Charlotte Van Campenhout and David Evans

Our Standards: The Thomson Reuters Trust Principles.

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Africa Food Prices Are Soaring Amid High Import Reliance - International Monetary Fund

[unable to retrieve full-text content]

Africa Food Prices Are Soaring Amid High Import Reliance  International Monetary Fund

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AAA: Hurricane Ian partly to blame for gas price spike in Kentucky - WKYT

LEXINGTON, Ky. (WKYT) - If gas hasn’t increased where you live, chances are it will.

Reports out of Richmond say some gas stations have increased 30 cents. AAA says it’s because of an oil refinery fire in Ohio, plus Hurricane Ian.

We talked to Tony Evola, who is from Naples, Florida and was stopping in Lexington to fill up.

“Gas prices here in Kentucky is a little higher. Tennessee and Georgia is lower. I don’t understand why the price is this high,” Evola said.

Evola is heading to Michigan to visit his sick mother and to escape Hurricane Ian.

“This storm is bad, so it’s going to affect a lot of people, probably the gas price,” Evola said.

Some are shocked by the overnight increase, which was an 11-cent jump in Lexington.

“That’s insane. I think a lot of people are going to be upset about that,” consumer Keri Derby said.

Lori Weaver Hawkins with AAA says the state average is $3.29, a five-cent overnight increase. We saw prices Tuesday afternoon in Lexington that were 20 cents higher than the state average.

Reports out of Florida say BP and Chevron have cut offshore production due to the hurricane.

“The worry is, whenever you get active hurricanes like that, the worry is that it could affect the gulf area,” Weaver Hawkins said.

Weaver Hawkins says there are ways you can save money as gas prices increase.

“Make sure your vehicle maintenance is up to date, number one, because that’ll give you to get best gas mileage that you could possibly get,” Weaver Hawkins said.

She said check your tire pressure and take advantage of rewards programs at gas stations.

Copyright 2022 WKYT. All rights reserved.

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Home-Price Deceleration Is Fastest on Record as US Market Cools - Bloomberg

[unable to retrieve full-text content]

1. Home-Price Deceleration Is Fastest on Record as US Market Cools  Bloomberg
2. US home price growth cooled in July at fastest pace since 1980s  Fox Business
3. Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index  CNBC
4. U.S. home prices fell in July, as mortgage rates approach 7%  MarketWatch
5. View Full Coverage on Google News

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Why Natural Gas Prices Quadrupled In Two Years - Forbes

Oil prices steady on prospect of balancing supply after steep selloff - CNBC

An aerial view of Phillips 66 oil refinery is seen in Linden, New Jersey.

Anadolu Agency | Getty Images

Oil rose Tuesday from a nine-month low a day earlier, supported by supply curbs in the U.S. Gulf of Mexico ahead of Hurricane Ian and a slight softening in the U.S. dollar.

Analyst expectations that the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, may take action to stem the drop in prices by cutting supply also lent support. OPEC+ meets to set policy on Oct. 5.

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Brent crude rose $1.01, or 1.2%, to $85.07 a barrel. On Monday it fell as low as $83.65, the lowest since January. U.S. West Texas Intermediate (WTI) crude was up 71 cents, or 0.9%, at $77.42.

Crude soared in early 2022, with Brent coming close to its all-time high of $147 in March after Russia invaded Ukraine, adding to supply concerns. Worries about recession, high interest rates and dollar strength have since weighed.

"Oil is currently under the influence of financial forces," said Tamas Varga of oil broker PVM. "In the meantime, relief rallies, like the one this morning caused by Hurricane Ian in the U.S. Gulf, are viewed as temporary phenomena."

A lull in the strength of the U.S. dollar, which earlier hit a 20-year high, provided some support. A strong dollar makes crude more expensive for buyer using other currencies and tends to weigh on risk assets.

Supply cuts were back in focus on Tuesday lending some support. BP and Chevron said on Monday they shut production at offshore platforms in the Gulf of Mexico as Hurricane Ian approached the region.

The price drop has raised speculation that OPEC+ could intervene. Iraq's oil minister on Monday said the group was monitoring prices and didn't want a sharp increase or a collapse.

"Only a production cut by OPEC+ can break the negative momentum in the short run," said Giovanni Staunovo and Wayne Gordon of Swiss bank UBS.

In focus also on Tuesday will be the latest U.S. inventory reports, which analysts expect will show a 300,000-barrel increase in crude stocks. The American Petroleum Institute's report is out at 2030 GMT.

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