Loans

Oil Crash 2016 Terrifies Banksters

Oil Barrels with Red Arrow isolated on white background. 3D rendergc2reddit-logoOff the keyboard of Michale Snyder

Follow us on Twitter @doomstead666
Friend us on Facebook

Published on The Economic Collapse on January 18, 2016

http://theeconomiccollapseblog.com/wp-content/uploads/2016/01/Running-Scared-Public-Domain.jpg

Discuss this article at the Energy Table inside the Diner

Last time around it was subprime mortgages, but this time it is oil that is playing a starring role in a global financial crisis.  Since the start of 2015, 42 North American oil companies have filed for bankruptcy, 130,000 good paying energy jobs have been lost in the United States, and at this point 50 percent of all energy junk bonds are “distressed” according to Standard & Poor’s.  As you will see below, some of the big banks have a tremendous amount of loan exposure to the energy industry, and now they are bracing for big losses.  And the longer the price of oil stays this low, the worse the carnage is going to get.

Today, the price of oil has been hovering around 29 dollars a barrel, and over the past 18 months the price of oil has fallen by more than 70 percent.  This is something that has many U.S. consumers very excited.  The average price of a gallon of gasoline nationally is just $1.89 at the moment, and on Monday it was selling for as low as 46 cents a gallon at one station in Michigan.

But this oil crash is nothing to cheer about as far as the big banks are concerned.  During the boom years, those banks gave out billions upon billions of dollars in loans to fund exceedingly expensive drilling projects all over the world.

Now those firms are dropping like flies, and the big banks could potentially be facing absolutely catastrophic losses.  The following examples come from CNN

For instance, Wells Fargo (WFC) is sitting on more than $17 billion in loans to the oil and gas sector. The bank is setting aside $1.2 billion in reserves to cover losses because of the “continued deterioration within the energy sector.”

JPMorgan Chase (JPM) is setting aside an extra $124 million to cover potential losses in its oil and gas loans. It warned that figure could rise to $750 million if oil prices unexpectedly stay at their current $30 level for the next 18 months.

Citigroup is another bank that also has a tremendous amount of exposure

Citigroup (C) built up loan loss reserves in the energy space by $300 million. The bank said the move reflects its view that “oil prices are likely to remain low for a longer period of time.”

If oil stays around $30 a barrel, Citi is bracing for about $600 million of energy credit losses in the first half of 2016. Citi said that figure could double to $1.2 billion if oil dropped to $25 a barrel and stayed there.

For the moment, these big banks are telling the public that the damage can be contained.

But didn’t they tell us the same thing about subprime mortgages in 2008?

We are already seeing bank stocks start to slide precipitously.  People are beginning to realize that these banks are dangerously exposed to a lot of really bad deals.

If the price of oil were to shoot back up above 50 dollars in very short order, the damage would probably be manageable.  Unfortunately, that does not appear likely to happen.  In fact, now that sanctions have been lifted on Iran, the Iranians are planning to flood the world with massive amounts of oil that they have been storing in tankers at sea

Iran has been carefully planning for its return from the economic penalty box by hoarding tons of oil in tankers at sea.

Now that the U.S. and European Union have lifted some sanctions on Iran, the OPEC country can begin selling its massive stockpile of oil.

The sale of this seaborne oil will allow Iran to get an immediate financial boost before it ramps up production. The onslaught of Iranian oil is coming at a terrible time for the global oil markets, which are already drowning in an epic supply glut.

Just the other day, I explained that some of the biggest banks in the world are now projecting that the price of oil could soon fall much, much lower.

Morgan Stanley says that it could go as low as 20 dollars a barrel, the Royal Bank of Scotland says that it could go as low as 16 dollars a barrel, and Standard Chartered says that it could go as low as 10 dollars a barrel.

But the truth is that the price of oil does not need to go down one penny more to have a catastrophic impact on global financial markets.  If it just stays right here, we will see an endless parade of layoffs, energy company bankruptcies  and debt defaults.  Without any change, junk bonds will continue to crash and financial institutions will continue to go down like dominoes.

We are already experiencing a major disaster.  Things are already so bad that some forms of low quality crude oil are literally selling for next to nothing.  The following comes from Bloomberg

Oil is so plentiful and cheap in the U.S. that at least one buyer says it would pay almost nothing to take a certain type of low-quality crude.

Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire, said it offered to pay $1.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a corrected list of prices posted on its website Monday. It had previously posted a price of -$0.50. The crude is down from $13.50 a barrel a year ago and $47.60 in January 2014.

While the near-zero price is due to the lack of pipeline capacity for a particular variety of ultra low quality crude, it underscores how dire things are in the U.S. oil patch.

A chart that I saw posted on Zero Hedge earlier today can help put all of this into perspective.  Whenever the price of oil falls really low relative to the price of gold, there is a major global crisis.  Right now an ounce of gold will purchase more oil than ever before, and many believe that this indicates that a new great crisis is upon us…

The number of barrels of oil that a single ounce of gold can buy has never, ever been higher.

Barrels Of Oil Per Ounce Of Gold

All over the planet, big banks are absolutely teeming with bad loans.  And to be honest, the big banks in the U.S. are probably in better shape than some of the major banks in Europe and Asia.  But once the dominoes start to fall, very few financial institutions are going to escape unscathed.

In the coming days I would expect to see more headlines like we just got out of Italy.  Apparently, Italian banks are nearing full meltdown mode, and short selling has been temporarily banned.  To me, it appears that we are just inches away from full-blown financial panic in Europe.

However, just like with the last financial crisis, you never quite know where the next “explosion” is going to happen next.

But one thing is for sure – the financial crisis that began during the second half of 2015 is raging out of control, and the pain that we have seen so far is just the beginning.

 

 

 

 

 

 

 

 

 

 

 

 

IMF Hit Men

Off the microphone of RE

Follow us on Twitter @doomstead666
Friend us on Facebook

Aired on the Doomstead Diner on June 17, 2014

logopodcast

Discuss this Rant at the Podcast Table inside the Diner

Who has the better Tan?

George Hamilton                              Christine LaGarde

http://images.buddytv.com/btv_2_100266621_1_434_593_0_/george-hamilton-phot.jpghttp://bindocelebrity.com/wp-content/uploads/2013/12/Christine-Lagarde-3.jpg

Snippet:

http://2.bp.blogspot.com/-ERKB4SSMDJM/Tc_6E_8KjbI/AAAAAAAABkk/GlWvUreWRBs/s1600/confessions-of-an-economic-hit-man.jpgNewz for today is that Christine LaGarde, winner of the George Hamilton award for Best Suntan and current head of the IMF can see the day coming where the IMF will move it’s headquarters to Beijing, because the IMF Charter has it they are supposed to set up their main Shop in whatever country is funding them with the most Funny Money. Apparently Christine is suffering a high degree of Sun Stroke and is trying to jawbone the Chinese into funding the IMF, which is basically dead broke with everybody else in this Kabuki.

The IMF is one of several institutions set up by the Illuminati in the aftermath of WWII to manage the flow of Funny Money out to the Little People of the World. You have the World Bank also, and then of course the Big Daddy of them all, the Bank for International Settlements in Basel Switzerland, better known as the “Central Bank of Central Banks”. These folks determine the quantity of money available, and who gets it. It is ALL debt money, everybody has to BORROW it, including the TBTF banks and Tycoons too. Then it gets pitched around in Markets which are always thoroughly manipulated, as on corporation battles another, one country battles another and one tycoon battles another in the great game of Capitalism, which in essence is gambling on debt OTHER people will get the bill for..

For the rest, LISTEN TO THE RANT

RE

Knarf plays the Doomer Blues

https://image.freepik.com/free-icon/musical-notes-symbols_318-29778.jpg

Support the Diner

Search the Diner

Surveys & Podcasts

NEW SURVEY

Renewable Energy

VISIT AND FOLLOW US ON DINER SOUNDCLOUD

" As a daily reader of all of the doomsday blogs, e.g. the Diner, Nature Bats Last, Zerohedge, Scribbler, etc… I must say that I most look forward to your “off the microphone” rants. Your analysis, insights, and conclusions are always logical, well supported, and clearly articulated – a trifecta not frequently achieved."- Joe D

Archives

Global Diners

View Full Diner Stats

Global Population Stats

Enter a Country Name for full Population & Demographic Statistics

Lake Mead Watch

http://si.wsj.net/public/resources/images/NA-BX686_LakeMe_G_20130816175615.jpg

loading

Inside the Diner

https://www.vox.com/2020/8/4/21354055/trump-axios-interview-jonathan-swan“They are dying. That’s true. It is what it is.” Trump’s Axios interview was a ...

Poor Moriarty.  So wrong, so very wrong.  REhttps://oilprice.com/Energy/Crude-Oil/US-Shale-Faces-Another-Round-Of-Bankruptcies.htmlU.S. Shale Faces Another Round Of BankruptciesBy Irina Slav - Aug 03, 2020, 6:00 PM ...

Donald Trump dumped $400 million into his clubs in Aberdeen and Turnberry. Now, lawmakers in Edinburgh want to investigate him for money laundering.In 2006, Donald Trump purchased a 1,400-acre swath of the old Menie Estate in Aberdeenshire, a r...

"I think we're doing very well. I think that we have done as well as any nation. If you really look, if you take a look at what's going on, especially now with all these flare ups and nations that they were talking about," President Trump told repor...

Recent Facebook Posts

No recent Facebook posts to show

Diner Twitter feed

Knarf’s Knewz

Diner Newz Feeds

  • Surly
  • Agelbert
  • Knarf
  • Golden Oxen
  • Frostbite Falls

Doomstead Diner Daily July 17The Diner Daily is av [...]

Doomstead Diner Daily July 16The Diner Daily is av [...]

The point being to wear down the "precariat [...]

Quote from: UnhingedBecauseLucid on March 18, 2019 [...]

CleanTechnicaSupport CleanTechnica’s work via dona [...]

QuoteThe FACT that the current incredibly STUPID e [...]

Quote from: K-Dog on February 24, 2020, 06:23:52 P [...]

I wonder how much these coins have been debased? [...]

Precious tip of the day.....Buy silver NOW  She [...]

Scientists have unlocked the power of gold atoms b [...]

Quote from: azozeo on August 14, 2019, 10:41:33 AM [...]

I am OUT of Jury Service!  I got summoned to be a [...]

Quote from: Eddie on May 16, 2020, 10:30:30 AMQuot [...]

Quote from: RE on May 16, 2020, 08:20:06 AMQuote f [...]

Quote from: RE on May 16, 2020, 08:20:06 AMQuote f [...]

Alternate Perspectives

  • Two Ice Floes
  • Jumping Jack Flash
  • From Filmers to Farmers

The Flim-Flam Men by Cognitive Dissonance   I suspect if average Joe or Jane were asked to identify [...]

The Coming War With China Re-posted from CaitlinJohnstone.com   (Have you noticed that (suddenly) Ch [...]

Papers Please! By Cognitive Dissonance     For those who may not know, Mrs. Cog and I live in the mo [...]

Lies, Damn Lies and Coronavirus Statistics By Cognitive Dissonance     “Never believe anything in po [...]

The Decline and Fall of Civil Society Chapter One By Cognitive Dissonance     From my perspective at [...]

Event Update For 2020-08-02http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2020-08-01http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

2020 - JUL - Spotlight StoriesCategory: Variety Pack2020-07-01 - Hundreds of elephants mysteriously dying, mostly around waterhole [...]

In other words, treat COVID-19 like a dry-run for the upcoming "big one" [...]

However don't expect strikes and yellow vests to fix underlying problems [...]

So how many more times are we going to hear that this is our last chance to take action in order to [...]

This is definitely not a bona fide post [...]

Daily Doom Photo

man-watching-tv

Sustainability

  • Peak Surfer
  • SUN
  • Transition Voice

The Great Pause Week 20: Coronation Part I"With the number of Covid patients closing in on 20 million, epidemiologists hope the virus has [...]

"Your future is a story you were told, like Santa Claus or the Tooth Fairy."Thirty years a [...]

The Great Pause Week 18: Midwinter Down Under"Our objectives are low-tech, anti-fragile, and human-centered. By using tools of permaculture [...]

The Great Pause Week 17: Toppling Mount Rushmore"We are being schooled in the deficiencies of human neurobiology."President Cobblepot and [...]

The Great Pause Week 16: Cash Bounties for Scalps"The word “redskin” has been coined to refer to these trophies."Paris, June 15, 1756. Anti [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

Visit SUN on Facebook Here [...]

What extinction crisis? Believe it or not, there are still climate science deniers out there. And th [...]

My new book, Abolish Oil Now, will talk about why the climate movement has failed and what we can do [...]

A new climate protest movement out of the UK has taken Europe by storm and made governments sit down [...]

The success of Apollo 11 flipped the American public from skeptics to fans. The climate movement nee [...]

Today's movement to abolish fossil fuels can learn from two different paths that the British an [...]

Top Commentariats

  • Our Finite World
  • Economic Undertow

In reply to Norman Pagett. Lydia is correct and Norman doesn't have the grace to grace her comm [...]

In reply to Duncan Idaho. As I said, you've all be ingesting, imbibing and inhaling too much ju [...]

In reply to Very Far Frank. I can smell it too. I try to hold my nose but even so the pong is disgus [...]

In reply to Erdles. Was on monument metals website last night with Silver at about $24.00 an ounce.. [...]

In reply to Harry McGibbs. Strange framing: "lose 60% of their benefit". .when it was a te [...]

Nothing to see here. Move along! Lol. https://www.foxnews.com/opinion/biden-vice-president-pick-dith [...]

Steve seeing as how this is reante's fourth in a row, lemme know if I'm posting up too muc [...]

Hey Steve what do you think if the idea that the 1K/mo digital UBI for US citizens 18 and older (plu [...]

Who was it who used to argue here years ago about how much fat could be cut from the system? Was it [...]

Independent to me means non-commercial. They may sell half or full beefs and five or ten ton of hay [...]

RE Economics

Going Cashless

Off the keyboard of RE Follow us on Twitter @doomstead666...

Simplifying the Final Countdown

Off the keyboard of RE Follow us on Twitter @doomstead666...

Bond Market Collapse and the Banning of Cash

Off the microphone of RE Follow us on Twitter @doomstead666...

Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

Off the Keyboard of RE Follow us on Twitter @doomstead666...

Kurrency Kollapse: To Print or Not To Print?

Off the microphone of RE Follow us on Twitter @doomstead666...

SWISSIE CAPITULATION!

Off the microphone of RE Follow us on Twitter @doomstead666...

Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

Off the keyboard of RE Follow us on Twitter @doomstead666...

Merry Doomy Christmas

Off the keyboard of RE Follow us on Twitter @doomstead666...

Peak Customers: The Final Liquidation Sale

Off the keyboard of RE Follow us on Twitter @doomstead666...

Collapse Fiction

Useful Links

Technical Journals

This study was designed to identify trends in maximum, minimum, and average air temperatures in the [...]

Cultural sites are particularly important to Indigenous peoples, their identity, cosmology and socio [...]

Globally, subtropical circulation in the lower troposphere is characterized by anticyclones over the [...]

Numerical models are being used for the simulation of recent climate conditions as well as future pr [...]