AuthorTopic: Oil Price Crash: Who Cooda Node?  (Read 172813 times)

Offline JRM

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1020 on: April 21, 2020, 09:27:48 AM »
Eddie, you say the worst will be a loss of low-level jobs. That may be so, but at what proportion? And why would that not ripple through the "high level jobs" world as well?

Low-level jobs are a huge portion of the USA economy, for example. If these people have essentially no disposable income, that crashes a LOT of "high-level jobs".  Big fish depend on littler fish, which depend on yet littler fish.

I think the economy is going to slide down much further than you seem to think.

We'll have to look back at this post again in a few weeks and months. Don't forget!
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline Eddie

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1021 on: April 21, 2020, 09:42:30 AM »
Eddie, you say the worst will be a loss of low-level jobs. That may be so, but at what proportion? And why would that not ripple through the "high level jobs" world as well?

Low-level jobs are a huge portion of the USA economy, for example. If these people have essentially no disposable income, that crashes a LOT of "high-level jobs".  Big fish depend on littler fish, which depend on yet littler fish.

I think the economy is going to slide down much further than you seem to think.

We'll have to look back at this post again in a few weeks and months. Don't forget!

71% of jobs are service sector....most of those are relatively low paying....so it' a  LOT of people.

157 million working Americans these days...

Of those  maybe 15% work for some level of government....they get paid most of the time, no matter what the economy does.

Another 15% are self-employed, like me.....most of those will take a big hit.

I don't think the effect will be small. But it does have to do with how soon we can effectively manage the disease. Looks like we will finally be ramped up for testing sometime this summer....which is good. I look for this year to be a real struggle for yours truly.

All those numbers come from different sources....so that should not be construed as accounting for all jobs. But service sector jobs dominate the economy.
« Last Edit: April 21, 2020, 09:46:26 AM by Eddie »
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Offline monsta666

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1022 on: April 21, 2020, 09:53:14 AM »
So what's it like to live with significant -- or worse -- deflation? What will this mean for those of us who are neither bankers nor oilmen? What are the implications for the guy who works at the pizza restaurant or the garden nursery?

The short general summary:

Deflation = Great for savers, bad for investors and terrible for borrowers
Inflation = Great for borrowers, good for investors and bad for savers

The longer description:

In a deflationary environment the value of goods and services will go down or in other words your spending power increases. This is great for people with savings as not only can they buy things at cheaper prices but the value of their savings increases over time. This sounds great but the disadvantage, and this is looking at this from an marcoeconomic standpoint, is deflation acts a major disincentive for people to spend as deflation creates the situation that it pays to save now, spend later. Not only that but businesses have less incentive to invest as there is insufficient demand to justify investment. Over time that leads to less innovation and the country becoming less competitive to others in the global economy.

Finally for those that are indebted this period will be financially very distressing as not only is the value of debt higher but the value of assets held behind the debt is lower so this will lead to situations where your mortgage is underwater, business owners who previously borrow significantly for capital investment will now struggle as there is less demand or the value of their assets is less than what they had predicted. It should be noted that prior to this pandemic the level of consumer, business, corporate and government debt has never been higher making it even more challenging to service this debt. Companies are therefore more likely to file for bankruptcy and if companies do go bankrupt this leads to further deflation as money is taken out of the system.

If deflation is sustained for a certain length of time then it is possible deflation becomes entrenched and it becomes very difficult to get out of this "deflation trap". The classic case of a deflation trap is the economy of Japan post 1990 and previous to that the great depression. This type of scenario can last many years if extraordinary measures are not taken by the government in fact the whole major field of Keynesian economics was created in order to prevent the woes of the great depression. Governments and the central banks will do everything in their power to prevent this scenario from happening so expect quantitive easing to infinity. Long term deflation would be the death knell for the banking sector and by the extension the global economy. Remember all your talk about supply chain breakdown? That all happens very quickly under major deflation.   

Most people are more familiar with inflation and whilst the consumer HATES inflation due to reduced spending power it does have some uses for big businesses and governments. First of all since the value of money is reduced through inflation it also means the cost of debts decline which makes loans easier to service. In addition inflation does cause wages of workers to decline in real terms which makes it a far easier route to reduce staff wages as you can do that by simply not raising their wages over time. Inflation is also good for governemnts as cheaper borrowing encourages investment and discourages people from simply hoarding money in their bank accounts and using it to spend money or in the case of businesses invest that money in the greater economy. Off course those advantages really only apply at low level inflation so governments generally shoot for 2-3% annual inflation.

If inflation goes out of control then it will create too much social disruption as people can no longer afford goods or services. One thing to bear in mind is that often people will argue that hyperinflation is inevitable if governments start doing QE or even naked money printing but this only occurs if there are no deflationary forces occuring. A big reason we did not get massive inflation in the financial crisis is a lot of that money was simply not entering the greater economy as that money was used for buybacks and inflating the stock market. Not the general economy. Also another big reason is a lot of companies went out of businesses during that time. In the pandemic I believe the loss of businesses will be even greater than the financial crisis of 2008. This means that even if the government gave out $2 trillion to people and businesses you may not get inflation if the amount of losses in companies exceeds $2 trillion in the general economy. The stimulas will merely stop massive deflation. Not saying that is a given but it is a very possible scenario and when inflationists make arguments about hyperinflation they tend to discount the effect that failed businesses/personal bankrupticies will have in bringing down inflation. Any expunged debt is money out of the system which means more spending power for the money that is left. For hyperinflation to take off the inflationary forces have to be far greater to deflationary.

Offline Eddie

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1023 on: April 21, 2020, 09:59:42 AM »
Well said, as usual.

Deflation is good for cash savers and gold bugs...not so much for anyone with investments...even if you're not leveraged, the nominal value of nearly everything falls....including real estate,

Because of uncertainties around money, many who would have been cash savers in the last generation have chosen (as I have..and other people you know) to invest in tangible assets. I do consider those people (many of them, anyway) to be savers.
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Offline JRM

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1024 on: April 21, 2020, 10:40:06 AM »
Okay, so more businesses are going to fail / close in these weeks and months than did during the GFC (https://en.wikipedia.org/wiki/Financial_crisis_of_2007–08).  This I also believe.

Simultaneously, "low level jobs" (and not just those directly related to the newly closed businesses) will be lost in vast numbers, or a substantial percentage of all jobs. Thus mass unemployment to a very great extent. Thus a lot less money in the hands of a huge proportion of the population. 

And I want to say: And there will be no way to patch this up or bring back the growth economy. What are we going to do? Build big dams and other public works like we did in the WPA days? https://www.history.com/topics/great-depression/works-progress-administration

We've got too many fucking dams as it is! We don't need any more roads or canals. We sure as hell don't need to build a colony on Mars!
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline Eddie

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1025 on: April 21, 2020, 10:50:04 AM »
Okay, so more businesses are going to fail / close in these weeks and months than did during the GFC (https://en.wikipedia.org/wiki/Financial_crisis_of_2007–08).  This I also believe.

Simultaneously, "low level jobs" (and not just those directly related to the newly closed businesses) will be lost in vast numbers, or a substantial percentage of all jobs. Thus mass unemployment to a very great extent. Thus a lot less money in the hands of a huge proportion of the population. 

And I want to say: And there will be no way to patch this up or bring back the growth economy. What are we going to do? Build big dams and other public works like we did in the WPA days? https://www.history.com/topics/great-depression/works-progress-administration

We've got too many fucking dams as it is! We don't need any more roads or canals. We sure as hell don't need to build a colony on Mars!

If Trump wins again there will be lots of shovel jobs...building THE WALL. Soon to be required to prevent filthy immigrants from spreading disease (never mind it looks like COVID is flowing the other way...from us to them. #sarcasm.

Seriously...there is a large contingent of conservative people who are turning against Trump now...because he FAILED to build the wall. I guess they'd be happy if they could elect a fascist who took over the government completely so this could happen.

There will no doubt be many make-work job programs that when examined closely will turn out to just be conduit schemes designed to put government money into the pockets of the ruling class...meaning those in Congress and their families and business connections (and donors).

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Offline JRM

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1026 on: April 21, 2020, 10:59:05 AM »
One way or another, then, we're looking at the future as a fucking shitstorm.

We Haven't Even Seen The Beginning of the Political Troubles Yet.

The wall was and is pure irrationality, any way you slice it. It could not possibly achieve its ostensible purpose for reasons obvious to any sane, reasonable, in formed person. AND -- and this is no small thing! -- it is and would be an ecological CATASTROPHE. Any portion of that wall now in existence should be demolished immediately BECAUSE IT IS AN ECOLOGICAL CATASTROPHE.

Sane, reasonable people are not going to just sit on their hands as assholes with zero sense attempt to impose their will on us! No we will not.

My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline Eddie

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Re: Oil Price Crash: Who Cooda Node?
« Reply #1027 on: April 21, 2020, 11:16:44 AM »
One way or another, then, we're looking at the future as a fucking shitstorm.

We Haven't Even Seen The Beginning of the Political Troubles Yet.

The wall was and is pure irrationality, any way you slice it. It could not possibly achieve its ostensible purpose for reasons obvious to any sane, reasonable, in formed person. AND -- and this is no small thing! -- it is and would be an ecological CATASTROPHE. Any portion of that wall now in existence should be demolished immediately BECAUSE IT IS AN ECOLOGICAL CATASTROPHE.

Sane, reasonable people are not going to just sit on their hands as assholes with zero sense attempt to impose their will on us! No we will not.


I've been saying that for more than forty years. So far they have oppressed and repressed (and taxed) me to no fucking end.

I have said for years that I do expect the pendulum to swing hard in the opposite direction. Toward more of  a welfare state to keep the plebes from engaging in food riots. This will not solve many problems, imho. The real problems are structural and endemic and resistant to being fixed by people with a ten second attention span.

Only political reform can make America great again.....things like term limits and an end to dark money in politics....without that the pols can do anything they want and get away with it.  They can call it democratic socialism...if corporations are involved, regular people get screwed.

Medicare for All sounds good, for instance....... Unless you are a provider depending on Medicare to pay you. From that perspective it looks less appetizing. That's why I always say we need single payer. Most people don't know the difference. It's a big one.
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🛢️ Stocks fall for a second day, S&P 500 off 3%, oil drops below $12
« Reply #1028 on: April 21, 2020, 01:25:31 PM »
Pretty soon they will have to pay YOU to pump gas into your tank!

RE

https://www.cnbc.com/2020/04/21/stock-market-today-live.html

Stock market live updates: Stocks fall for a second day, S&P 500 off 3%, oil drops below $12
Published Tue, Apr 21 20207:22 AM EDTUpdated Moments Ago

Fred Imber    @foimbert
Thomas Franck    @tomwfranck
Pippa Stevens    @PippaStevens13


A man wearing a mask walks by the New York Stock Exchange (NYSE) on March 17, 2020 at Wall Street in New York City.
Johannes Eisele | AFP | Getty Images

Stocks came under pressure again as an unprecedented rout in oil prices deepened. The West Texas Intermediate contract for June delivery tumbled below $12 as demand evaporates. Investors also looked to a wave of corporate earnings to gauge the impact of the coronavirus pandemic. Here’s what’s happening:

This is a live blog. Check back for updates.
4:01 pm: Dow closes more than 600 points lower, S&P 500 off 3%

Stocks fell for a second day as the collapse in oil prices deepened. The Dow dropped about 630 points, dragged down by Merck & Co. and Boeing. The S&P 500 retreated about 3%%, bringing the week-to-date losses to 4.8%. The Nasdaq Composite dropped 3.4% as Amazon took a breather from its strong rally. — Li
20200421 SP500 looking for a bottom
3:20 pm: US lawmakers strike deal on $484 billion relief package for small business

Senate Democrats and Republicans on Tuesday agreed on another large relief package to support small businesses dealing with the economic fallout from Covid-19. The bipartisan agreement will provide $320 billion in additional funding for the Paycheck Protection Program, according to Senate Majority Leader Mitch McConnell. The PPP ran out of money last week as millions of small business owners flocked to apply for the prior $350 billion in taxpayer-backed, low-interest loans from the Small Business Administration. — Franck
2:57 pm: Support for energy would come from existing programs, Brouillette says

U.S. Energy Secretary Dan Brouillette said on Tuesday afternoon that any financial support for energy companies amid falling oil prices would likely come from existing programs and not be a separate fund.“Having access to what Congress has already passed is the most logical step forward,” Brouillette said on “Power Lunch.“Brouillette also said he will be working with Congress to see if it is possible to expand the U.S. strategic oil reserve. President Donald Trump said in a tweet earlier Tuesday that “we will never let the great U.S. Oil & Gas Industry down.” — Pound
2:55 pm: Final hour of trading: Dow heads for 2-day loss of more than 1,000 points

With roughly one hour left in the trading session, the Dow was headed for a two-day decline of more than 1,000 points as a historic decline in oil dented investor sentiment. The 30-stock average traded 587 points lower on Tuesday, or 2.5%, after dropping 592 points in the previous session. The S&P 500 slid 2.8% while the Nasdaq Composite traded 3.1% lower. —Imbert
2:48 pm: Oil settles below $12 per barrel

West Texas Intermediate crude futures for June delivery dropped 43% to settle at $11.57 per barrel. Earlier it fell more than 60% to trade under $7 per barrel. The May contract settled at $10.01 per barrel. On Monday it fell below zero for the first time in history. However, as contracts approach expiration, trading volume is typically thin. – Stevens, Li
2:31 pm: Investors of all kinds buying into market rally, BofA says

Data compiled by BofA Securities strategists showed investors of all kinds — retail, hedge funds and institutions — have been net buyers of equities since the market hit a low on March 23. Overall, hedge funds have added $1.7 billion in stocks since March 23 while institutions have increased their equity exposure by $1.624 billion. Retail investors have added $447 million in stocks. The S&P 500 has rallied more than 25% since late March as investors weigh the possibility of a peak in new coronavirus cases along with unprecedented stimulus from the Federal Reserve and U.S. lawmakers. —Imbert, Bloom
2:16 pm: Walmart ekes out small gains

Shares of Walmart climbed 0.6% in afternoon trading, one of the only two stocks in the green in the Dow Jones Industrial Average. The retailer hit a 52-week high on Monday as it continues to benefit from consumers stalking up on staples amid the pandemic. The stock has risen 10% this year. — Li
2:14 pm: NYSE decliners lead advancers 6-1

About six stocks declined at the New York Stock Exchange for every advancer as market sentiment was dented once again by a historic plunge in oil prices. Overall, about 2,500 NYSE-listed stocks rose while 407 traded lower, FactSet data shows. —Imbert
2:05 pm: Amazon and Microsoft each worth twice as much as the entire S&P 500 energy sector

The total market cap for the S&P 500 energy sector is roughly half that of tech giants Microsoft and Amazon as crude prices get decimated in historic fashion. Around 2 p.m., the energy sector’s total market cap was about $633 billion. Microsoft’s market value is about $1.3 billion while Amazon is worth roughly $1.2 billion. —Imbert, Francolla
1:51 pm: Oil prices extend massive declines

West Texas Intermediate crude futures for June delivery, which is the more actively traded contract and therefore a better indication of how Wall Street views the price of oil, slipped 62% to $7.75 per barrel. Meanwhile, the May contract expiring Tuesday, climbed 123% to $8.60 per barrel. — Li
1:40 pm: WTI for May delivery rises ahead of contract expiration

West Texas Intermediate tied to May delivery rebounded to trade higher on Tuesday, one day after plunging into negative territory for the first time in history. The contract, which expires today, rose to $8.50 less than an hour before the settle. The more actively traded June contract, on the other hand, plunged 46% to trade at $11.02. Traders fear that as storage fills, there will be nowhere to store oil. – Stevens
12:53 pm: Stocks making the biggest moves midday:  Occidental Petroleum, Beyond Meat and Hertz Global

OneOk, ConocoPhillips, Occidental, Pioneer Natural Resources — Energy stocks struggled Tuesday as oil futures for June fell sharply. OneOK was one of the worst performing stocks in the S&P 500, plunging nearly 8%, after being downgraded to neutral from buy by Goldman Sachs. Occidental Petroleum fell 5.2%, while Pioneer Natural Resources slid 3% and ConocoPhillips lost 2.7%.

Beyond Meat — Shares of the alternative meat company popped nearly 6% on news that Starbucks will debut Beyond Meat products on its menu in China. The partnership with the world’s largest coffee chain marks Beyond’s entry into the Chinese market.

Hertz Global — Shares of the global car rental company sank 7% after it said it has laid off about 10,000 employees in North America to cut costs and offset the impact Covid-19 is having on its sales. The company said in a government filing that it has “experienced increased rental cancellations and declining forward bookings.”

Click here to read more about midday movers. — Fitzgerald
12:50 pm: Oracle, Salesforce drop after IBM warns of software headwinds

Shares of Salesforce and Oracle fell more than the broader market on Tuesday after tech giant IBM said it saw headwinds in its software segment in the first quarter because of Covid-19. IBM Chief Financial Officer James Kavanaugh said in an earnings call that the company had been on track to meet first-quarter estimates through February but a “pause” in client spending in March pressured performance. That was “most pronounced in our software business,” he said, “where the vast majority of transactions typically closed in the last two weeks of the quarter.” The so-called sympathy trade at Oracle and Salesforce, which also generate significant revenues via software and tech support, sent the equities down 4.4% and 7.9% respectively. — Franck
12:25 pm: Wall Street analysts preview Netflix earnings

Wall Street analysts expect big things from Netflix when the streaming giant reports earnings Tuesday afternoon. ”We expect Netflix to report 1Q results well above guidance, with over 10mn net subscriber additions, and provide initial guidance for 2Q ahead of FactSet Consensus, even accounting for management conservatism,” Goldman Sachs said in a note to clients. Other analysts agreed that Netflix will be well-positioned after Covid-19 as well. “In our view, the current environment may also pull forward adoption curves in markets where Netflix is currently underpenetrated, which would result in a benefit to Netflix with a duration beyond 1H:20, in our view,” Stifel said. — Bloom
12:20 pm: JPMorgan’s Kolanovic, who called market turn, says investors should bet on sunshine killing virus

Investors can count on warmer weather to curb the coronavirus pandemic and the market will reclaim its record highs by early next year, according to Marko Kolanovic, JPMorgan’s global head of macro quantitative and derivatives strategy. The strategist said Tuesday that a study published by the Department of Homeland Security Science and Technology links virus stability to sunlight, temperature and humidity. “The most striking finding in the document is that sunlight destroys the virus very quickly, within ~2 minutes,” Kolanovic said in a note Tuesday. “This may make sunlight exposure the most important factor to consider for a limited reopening of the economy, i.e., specific businesses and activities.” — Li
11:51 am: Markets at midday: Wall Street under pressure for a second day as oil rout continues

The major stock averages were headed for another day of steep losses by midday trading as a historic drop in crude prices continued to hamstring market sentiment. The Dow dropped more than 700 points, about 3%. The S&P 500 fell 3.3% while the Nasdaq traded about 4% lower. A further decline in the price of oil for June delivery in noontime trading weighed on stocks halfway through the session. Oil futures for June delivery sank 37% to $12.80 a barrel. — Imbert, Franck

11:23 am: Software stocks under pressure

The tech-software ETF IGV is down more than 4%, on pace for its worst day since April 1 when it lost 4.75%. IGV was led to the downside by Alteryx, Salesforce, Fortinet and Workday, which are all down 7% so far Tuesday. —Francolla
11:16 am: Amazon, Netflix in the red as rally pauses

Shares of Amazon and Netflix fell 4% and 1.7%, respectively, as the tech duo’s strong comeback took a breather. Tuesday’s decline marked the second down day in seven for both companies. Amazon and Netflix rallied 17% and 29%, respectively, in the past month as they benefit from a surge in demand amid nationwide shutdowns during the coronavirus pandemic. — Li
10:54 am: Large publicly traded companies dip into small-business funds

The U.S. government has allocated at least $243.4 million of the Small Business Administration’s Paycheck Protection Program $349 billion in funding to large, publicly traded companies, Morgan Stanley research shows. The PPP was designed to help the nation’s smallest, mom-and-pop shops keep employees on payroll and prevent mass layoffs across the country amid the coronavirus pandemic. But Morgan Stanley found that several of the companies that have received aid have market values well in excess of $100 million, including DMC Global ($405 million), Wave Life Sciences ($286 million) and Fiesta Restaurant Group ($189 million). — Franck
10:51 am: Trump directs Mnuchin, Energy secretary to create plan to support oil, gas industries

President Donald Trump ordered Energy Secretary Dan Brouillette and Treasury Secretary Steven Mnuchin on Tuesday to put together a plan to get funding to the struggling U.S. oil and gas industries as a historic sell-off in crude continued. “I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!” Trump tweeted Tuesday morning.— Li
10:04 am: US Oil Fund, popular ETF trading under ticker USO, plunges 20% after brief halt

Trading in the United States Oil Fund, a popular exchange-traded security that tracks the price of oil, was briefly halted Tuesday before the opening bell. When it resumed trading, it plunged 20%. The halt came after USCF, the manager of the USO fund, said it was temporarily suspending the issuance of so-called creation baskets. — Stevens
9:57 am: IBM falls 5% on quarterly revenue decline

Shares of IBM dropped more than 5% in morning trading after the company reported a 3.4% decline in revenue in the first quarter from a year earlier. It also withdrew full-year guidance given the uncertainty around the coronavirus pandemic. Three months ago, the company had forecast growth in revenue, earnings on an adjusted basis. — Li
9:54 am:  Analysts see stocks like Amazon and Walmart continuing to benefit from the coronavirus pandemic 

    Oppenheimer raised its price target on Walmart to $145 from $125.
    Jefferies raised its price target on Amazon to $2,800 from $2,300.
    UBS downgraded Chewy to neutral from buy.
    Susquehanna upgraded Southwest to positive from neutral.
    Guggenheim upgraded O’Reilly Automotive to buy from neutral.
    UBS downgraded Eli Lily to neutral from buy.
    Argus initiated Lyft as buy.

CNBC Pro subscribers can read more here. — Bloom
9:31 am: Dow drops more than 500 points at the open

Stocks opened with steep losses on Tuesday as the ongoing oil collapse weighed on sentiment. The Dow Jones Industrial Average fell more than 500 points, while the S&P 500 dipped 1.7%. The tech-heavy Nasdaq Composite is down 1.2% at the open, lifted by Amazon and Netflix. — Li
8:56 am: Schumer says he believes Senate will pass small business bill Tuesday

Sen. Chuck Schumer said Tuesday that he believes the Senate will pass an additional relief bill for small businesses later in the day. He said he spoke “well past midnight” with House Speaker Nancy Pelosi, White House chief of staff Mark Meadows and Treasury Secretary Steven Mnuchin, and that they “came to an agreement on just about every issue.” The government has been under pressure to replenish a fund allocated to small businesses as part of a Paycheck Protection Program program created by the $2.2 trillion relief bill. Those funds, which totaled $349 billion, ran out last week. – Lauren Hirsch
8:22 am: Dollar index hits highest level since April 8 as investors seek safety

The dollar surged on Monday as investors rushed into safe haven asset amid a plunge in oil prices. The dollar index hit a high of 100.374, its highest level since April 8 when the index hit a high of 100.43. —Fitzgerald, Francolla
8:10 am: U.S.10-year yield falls to lowest level in more than a month

The U.S. 10-year Treasury yield hit a low of 0.567% on Tuesday, hitting its lowest level since March 10. Investors piled into bonds amid growing concerns over the global economy while crude and equity futures tumbled. —Imbert
8:08 am: Kyle Bass warns against oil ETFs

Hayman Capital Management CIO Kyle Bass again warned about exchange traded funds that track oil prices. Bass asked on Twitter if the funds could trade in negative territory if oil futures further along the curve follow the May contract below $0. “If I were a major counterparty after yesterday’s session, I would demand more than 100% collateral,” Bass said. The United States Oil Fund, the largest oil ETF, fell roughly 18% on Tuesday. Bass said Monday on CNBC’s “Closing Bell” that retail investors should stay away from these funds and that he had short positions against some of them. — Pound

7:55 am: Oil futures fall as May contract stays negative

After the futures contract for the front month of West Texas International fell below zero on Monday, contracts for June dropped sharply in early trading on Tuesday. The WTI contract for June fell more than 23% to $15.57 per barrel, while internationaly benchmark crude dropped nearly 19% to $20.77 per barrel. The WTI futures contract for May, which fell into negative territory on Monday, was trading at negative $4 per barrel on Tuesday morning. The contract expires later on Tuesday. —Pound
7:50 am: Oil traders have never seen ‘insane’ market like this before, fear more declines to negative prices

The oil market is facing uncharted territory as the drop-off in demand, caused by the coronavirus pandemic, combined with rapidly filling storage, sent prices plunging into negative territory for the first time in history on Monday. And with only guesswork as to when stay-at-home ordinances might be lifted and when crude demand might pick up, traders warn that oil could continue to trade at extremely depressed levels. “If we have not recovered from COVID in July so that enough driving has come back and storage is full, then the price of crude oil is going to be zero,” RBN Energy’s Rusty Braziel told CNBC. He called Monday’s trading activity “insane,” and said that in his more than 40 years of trading he had “never seen anything like this.” On Monday, West Texas Intermediate crude for May delivery fell more than 100% to settle at negative $37.63 per barrel, meaning people would effectively pay to have the oil taken off their hands. —Stevens
7:42 am: South Korean won drops on report North Korea’s Kim Jong Un is seriously ill

The South Korean won dropped nearly 1% against the U.S. dollar after unconfirmed reports said North Korean leader Kim Jong Un was seriously ill. CNN reported Tuesday, citing unnamed U.S. officials, that Washington was “monitoring intelligence” that Kim is in “grave danger after a surgery.” Daily NK, a South Korean media outlet, said Kim was receiving treatment after undergoing a cardiovascular procedure on April 12. To be sure, Reuters reported, citing two government sources, that Kim was not gravely ill. —Imbert, Huang
7:40 am: IBM down 5% after company returns to revenue decline in first quarter

IBM fell more than 5% in premarket trading after the company reported first-quarter results that showed a return to revenue declines amid the Covid-19 outbreak. Sales decreased 3.4% on an annualized basis in the first quarter as the company tried to revamp its operations so that employees to work remotely. One quarter ago, the company ended a streak of five consecutive quarters of falling revenues. It also withdrew full-year guidance given the uncertainty the of the coronavirus. —Franck
7:16 am: Stock futures fall as historic oil decline continues

Wall Street headed for another lower open on Tuesday as oil’s historic decline showed no signs of ebbing. Dow Jones Industrial Average futures traded more than 400 points lower, or 1.8%. S&P 500 and Nasdaq 100 futures slid 1.4% and 0.8%, respectively. The May WTI contract was deep in negative territory, but more concerning for oil traders was the decline in later-month contracts. The June oil contract traded 18% lower at $16.67 per barrel. The sharp losses in oil raised more concern about the state of the global economy as the coronavirus pandemic ravages the economic outlook. —Imbert

With reporting from Yun Li, Gina Francolla, Eustance Huang, Michael Bloom and Jesse Pound.
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Offline JRM

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How much is a barrel of oil worth? - Richard Heinberg
« Reply #1029 on: April 21, 2020, 03:30:57 PM »
How much is a barrel of oil worth?
Richard Heinberg
https://www.resilience.org/stories/2020-04-21/how-much-is-a-barrel-of-oil-worth/
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline RE

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🛢️ Oil's record-setting plunge spreads as June contracts fall 36%
« Reply #1030 on: April 22, 2020, 12:17:05 AM »
https://markets.businessinsider.com/news/stocks/oil-price-wti-positive-after-historic-negative-prices-2020-4-1029111142

Oil's record-setting plunge spreads as June contracts fall 36%
Shalini Nagarajan
Apr. 21, 2020, 05:51 AM


    Crude oil for May delivery emerged from negative territory on Tuesday, a day after hitting its lowest-ever level.
    WTI crude oil futures expiring in May traded as low as -$16.74 a barrel on Tuesday before flipping positive. The contract settled at $10.01 a barrel.
    Overall selling pressure seeped into WTI crude contracts for June, which fell as much as 68%, to $6.50 a barrel. Brent crude slid 23%, to $19.80.
    Oil demand has evaporated in recent weeks, partly thanks to the shutdowns caused by the coronavirus pandemic.
    "We're not dealing with demand destruction at this point, we're facing demand disappearance," one analyst said.
    Follow the price of oil live at Markets Insider.

Crude oil for May delivery emerged from negative territory on Tuesday, a day after hitting its lowest-ever level.

West Texas Intermediate oil futures expiring in May traded as low as -$16.74 a barrel on Tuesday, still up from Monday's close of -$37.63. The contract reversed losses midday, settling at $10.01 a barrel.

Still, overall selling pressure seeped into WTI crude contracts for June, which fell as much as 68%, to $6.50 a barrel. Brent crude slid 23%, to $19.80.

Oil's price dropping into negative territory means that major producers now have to pay buyers to take oil off their hands. This reflects the evaporation of demand in markets amid the coronavirus pandemic and the lack of storage space in the US for oil.

Tuesday is the final day of trading for WTI's May futures contracts, meaning anyone holding a contract afterward is obliged to take delivery of the physical product. With little storage available, traders scrambled to offload their contracts, leading to the historic plunge.

Read more: The price of US crude oil just went negative for the first time. Here's what that really means and why it's not free to fill up your car.

The price of oil has continued to slide even after OPEC and its allies agreed to the biggest-ever production cut — one intended to backstop prices. Investors remain unconvinced that the cuts can offset cratering demand for the commodity as the coronavirus pandemic keeps society from operating normally.

WTI crude for May delivery has traded at large discounts to longer-dated contracts. That dynamic is playing out amid worry that a key storage hub in Cushing, Oklahoma, is nearing capacity, according to Bloomberg.

'We're facing demand disappearance'

Analysts were quick to comment on the historical significance of Monday's moves, with one describing the unprecedented price drop as a "wake-up call" for markets.

"Yesterday was a wake-up call and investors would be remiss to ignore that low oil means lower inflation, higher defaults, lower growth and more political instability as less petrodollars circulate in the system," Gregory Perdon, a chief investment officer at Arbuthnot Latham, said in a note.

Read more: GOLDMAN SACHS: Buy these 21 stocks that are beating their peers by paying down debt amid an unprecedented plunge in cash spending

Carl Larry, a performance director at Refinitiv, pegged the volley to a supply imbalance.

"The piling up of floating storage. The lack of OPEC+ production cuts in time. Texas producers hoping for relief with a state proposal for cuts," Larry said. "The answer was too simple to use supply. This move happened too fast and went too far to rely on simple fundamentals."

"Oil prices are at these low levels because of a complete stoppage to demand," he said. "We're not dealing with demand destruction at this point, we're facing demand disappearance."

Read more: Experts at Boyar Research lay out the Warren Buffett-inspired investing approach that's helped them crush the market over 7 years — and offer 4 stock picks for a coronavirus-battered market
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Offline Surly1

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Is It Worth It to Buy a Used Tanker and Fill It With Cheap Oil? An Investigation
If you have millions of dollars just laying around, we have got the deal for you!


Apr 21 2020, 12:48pm
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IMAGE: FLICKR/BERNARD SPRAGG. NZ

In yet another example of the world economy shell game coming to a hard stop amid the coronavirus pandemic, oil is incredibly cheap as demand plummets and speculators panic sell and even pay others to store it in a desperate bid to never actually possess the barrels they bought on paper.

This situation reveals both the absurdity and fragility of how the world is currently organized, but, given that during previous oil gluts traders stored oil in old tankers, it also made me wonder: Would it be worth it for a random guy like me to buy a used oil tanker and fill it with cheap oil to make a profit later? Since that idea isn't any more absurd than continuing to pump oil out of the Earth in the first place, let's take an exploratory and incomplete (possibly incompetent) dive into the economics of storing oil:

The ship

There seem to be a decent number of oil tankers for sale in the world right now, judging by the listings from Horizon Ship Brokers, which is sort of like Craigslist but for multi-million dollar industrial ships.

While most prices are available upon request, listed prices tend to run from $10 to $20 million USD, and the ships run the gamut in terms of their capacity. The ideal ship for this plan needs to hit a balance of affordability and ample capacity, given, ahem, the current uncertainties in the oil market. Yes.

For the price and capacity, the best deal available now is a 274 metre-long Suezmax crude oil tanker for $17 million. The Suezmax was built in 2000 by Daewoo Heavy Industries, is currently somewhere in Africa, and has a capacity of 159,057 DWT, or dead weight tons. As its name implies, the Suezmax is the largest a ship can possibly be to transit the Suez Canal while full of oil.

tanker
THE SUEZMAX. IMAGE: HORIZON SHIP BROKERS

The ship's DWT doesn't tell you the whole story about how much oil it could hold, though, since it includes personnel and equipment. The actual amount of oil the ship can carry will depend on what type it is, as well, but the Suezmax has ample room and the price is certainly right. Caveat: The ship is listed "AS IS," which means you should be a smart ship consumer and kick the hull in a couple random spots and grunt "A-yup" a few times.

The oil

With a ship secured, we're set up to store a lot of oil at sea. But how much, and what kind, and, well, how?

A commodity trader told editor-in-chief Jason Koebler that the buying part is actually pretty easy: pay an accredited trader to trade on your behalf and purchase oil contracts. Crucially, those monthly contracts must expire so you can take physical possession of the oil. This is what commodity traders are desperately trying to avoid now by panic selling and crashing the price, but it is exactly what we want. If we were to buy oil at the "spot" price (thereby receiving it immediately), it would cost us quite a bit more: roughly $22 per barrel. Let us rather exploit the Vegas bookie-like nature of the oil market. Futures for West Texas Intermediate (WTI) oil were in the negatives this morning and are currently $5 per barrel.

According to the U.S. Energy Information Administration, a back-of-envelope calculation for a ship's capacity in barrels is to take 90 percent of its DWT and convert it into barrels per metric ton, adjusted for the weight of the type of oil being transported. The available DWT for cargo for our Suezmax is then roughly 143,151 metric tons.

There are a few different types of crude oil, organized by how light or heavy they are, and how sweet (low toxicity) or sour (high toxicity). A light, sweet crude such as WTI is what we want in order to get the most bang for our buck. WTI futures are dirt cheap as well, which is good for us, because everything is nonsense!

Using an online converter, we can plug in the API gravity (weight) of WTI—39.6 degrees—and the available DWT, to get a barrel figure: 1,088,741, or just over one million barrels' worth of sweet, light, Texas crude. To get all of that, via futures, it would cost us $5 million right now, or even less if we were smarter (we are not smarter).

If you were very smart and perceptive, and bought in at the market’s lowest point yesterday ($-37.63), you would have been paid $40,969,323.83 to take the oil. That means you would have made enough to have bought the tanker and would have had roughly $24 million left over to figure out the logistics of getting all of the oil from Oklahoma onto the boat. Unfortunately we did not do this, and neither did you, and the moment has passed.

Did we make money?

Obviously, right now, oil is basically worthless. So, even if this plan was pulled off perfectly, in the current moment you'd end up with a ship full of oil and millions less in your bank account, but not much else.

But hey, let's do the math! According to the U.S. Department of Energy, crude oil is typically stored in salt domes due to cost savings. Storing crude this way costs roughly $3.50 per barrel in capital costs, whereas storing it in above-ground tanks costs $15 to $18 per barrel. Our ship cost $17 million, and it can hold about a million barrels, and so taking just the up-front cost of the ship into account, storage would cost us about $17 per barrel. Not great, but not horrible.

Now, to break even we will have to somehow sell the oil for more than the cost to store it and buy it, a combined $23 per barrel in costs. I won't pretend to be able to prognosticate about oil prices in the future (frankly the whole thing is stupid), but let's assume that WTI futures return to January 2020 levels: roughly $55 per barrel.

Hot damn, we've more than doubled our money for a profit of $32 per barrel, or a total of $34,839,712 in profits.

So, it turns out that if you have $23 million laying around, a ton of contacts in the oil industry, and a hound's nose for profit during a crisis, congratulations, you're the worst person in the world! Also, you can probably make some money storing oil and selling it later.

This rough math is definitely missing a lot of factors (cost of crew and maintenance, fees, and other expenses), but the point isn't that you could actually make money if you bought a rusty oil tanker. The point is that the world we've built on pumping oil incessantly and trading it on markets is absurd and capitalism is uniquely incapable of properly administering goods in a crisis, or any other time. It's the same reason why farmers are destroying crops and dumping milk while people go hungry, and why I'm considering buying an oil tanker.

"...reprehensible lying communist..."

Offline RE

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🛢️ The Worst Is Yet To Come For Oil Prices
« Reply #1032 on: April 23, 2020, 05:49:33 AM »
https://oilprice.com/Energy/Crude-Oil/The-Worst-Is-Yet-To-Come-For-Oil-Prices.html

The Worst Is Yet To Come For Oil Prices
By Nick Cunningham - Apr 21, 2020, 7:00 PM CDT


Dashing hopes for some oil producers who may have thought negative prices were a weird quirk, the June WTI contract fell sharply on Tuesday.

During intraday trading June contracts collapsed by more than 45 percent, falling close to $11 per barrel. The selloff demonstrated that the ruinous supply glut is not going away, and that the meltdown for the May contract was not just a bizarre anomaly, but representative of an acute state of oversupply in North America.

In fact, there could be a rerun of negative prices in a month’s time, according to several analysts. “We believe prices are likely to remain at basement levels in the short-term with further shut-ins forthcoming - expect late-May to bring similar price movements as the June contract rolls over,” Raymond James wrote in a note on Tuesday.

The malaise bled over into Brent prices, which collapsed below $20 per barrel by midday Tuesday, down more than 25 percent.

While forecasts have suggested that U.S. oil production could fall by 1 or 2 or 3 million barrels per day (mb/d) by the end of 2021, depending on who you ask, the lack of storage and collapsing prices means that shut ins could begin to mount very quickly. “[T]he physical reality of a still massively oversupplied oil market will likely exert downward pressure on the June WTI contract,” Goldman Sachs analysts wrote on Tuesday. “But with ultimately a finite amount of storage left to fill, production will soon need to fall sizeably to bring the market into balance, finally setting the stage for higher prices once demand gradually recovers.”

Premium: Oil Storage Nears Its Limit

“This inflection will play out in a matter of weeks, not months, with the market likely forced to balance before June,” Goldman analysts warned. In other words, the U.S. oil industry could lose several million barrels per day in the next few weeks in what Goldman analysts called a “violent rebalancing.”

The crisis for the industry has entered a new phase, which will surely provoke more twists and turns. The Trump administration, flailing about, is trying to come up with ways to bailout the industry. On Monday, President Trump suggested that he would consider halting imports of oil from Saudi Arabia (“We’ll look at it”), while also reiterating his plan to fill up the strategic petroleum reserve with 75 million barrels of oil.

On Tuesday, he tweeted that he ordered the Secretaries of Energy and Treasury to come up with a rescue plan.

Also on Tuesday, the Texas Railroad Commission punted on the idea of mandating production cuts. Two of the three commissioners were uneasy with the idea of voting on the proposal. Ryan Sitton, the one commissioner in favor of requiring a 20 percent cut in the state’s production, argued that not voting was itself a decision, allowing the market to mete out production cuts in a disorderly fashion. “I don’t believe that inaction on our part is acceptable,” Sitton said.

Premium: The Oil Sector That Will Suffer The Most

Meanwhile, there are other ideas for government intervention. The oil and gas industry is lobbying the Federal Reserve to loosen its $600 billion lending facility to allow drillers to use funds to repay debt, according to Reuters.

In addition, the “Treasury [Department] could guarantee loans to distressed firms in return for equity stakes or senior debt, and Washington could use its voting shares to compel shut-ins (i.e., as part of a bargain with OPEC+),” ClearView Energy Partners wrote in a note to clients.

While the oil market drowns in oversupply, there also seems to be a glut of unusual policy responses coming from Washington aimed at bailing out the industry.

But in the face of demand destruction on the order of 25 to 30 million barrels per day (mb/d), there is very little that the U.S. government can do to head off steep production losses and bankruptcies.

By Nick Cunningham of Oilprice.com
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Offline RE

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🛢️ Saudi Supertankers Stranded As Oil Price War Backfires
« Reply #1033 on: April 23, 2020, 04:47:41 PM »
https://oilprice.com/Energy/Crude-Oil/Saudi-Supertankers-Stranded-As-Oil-Price-War-Backfires.html

Saudi Supertankers Stranded As Oil Price War Backfires
By Tsvetana Paraskova - Apr 22, 2020, 12:00 PM CDT


Saudi Arabia has made good on its early-March promise to flood the world with oil, but with demand collapsing and storage filling fast, the world’s top oil exporter must now keep its unsold crude on supertankers at sea as no one is rushing to take delivery of oil they can’t process or store.

Around the world, at least one in every ten very large crude carriers (VLCCs)--each capable of holding 2 million barrels of oil--currently acts as a floating storage, oil officials from Saudi Arabia told The Wall Street Journal this week. Many of the supertankers carry Saudi crude, and some of it is not sold yet.

As buying interest in the oil industry is currently only focused on available storage capacity, not on crude oil, the early Saudi plan to go after its rivals’ market shares with aggressive price discounts and a fleet of more oil is backfiring while a large part of the world is under lockdown, refiners slash run rates, and storage fills up. 

At the same time, the highest number of Saudi oil shipments in years are making their way to the United States this month, threatening to make an already dire situation in the U.S. oil industry even worse.

The tankers were loaded before OPEC+ struck a new agreement to take 9.7 million bpd off the market in May and June when Saudi Arabia had embarked on an aggressive price war for market share after the previous OPEC+ deal collapsed in early March.

However, three weeks later, the world demands anything but more oil—demand is crashing by 30 million barrels per day (bpd), and even the new production reduction agreement can’t do anything to erase the glut in April and the coming weeks.

“The fact is buyers don’t have storage so regardless of whatever level of output you want, there won’t be storage for it,” a senior Saudi Aramco executive told the Journal, adding that the Kingdom may have to shut part of its own production because there simply isn’t demand for crude oil. 

By Tsvetana Paraskova for Oilprice.com
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Offline RE

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🛢️ Oil plunges 25%, extending recent losses as storage fills
« Reply #1034 on: April 28, 2020, 01:33:54 AM »
Can U spell D-E-F-L-A-T-I-ON?

RE

https://www.cnbc.com/2020/04/27/oil-news-crude-wti-brent-prices-today.html

Oil plunges 25%, extending recent losses as storage fills
Published Mon, Apr 27 20208:29 AM EDTUpdated Moments Ago
Pippa Stevens   @PippaStevens13

Oil tankers line up off for miles off the coast of California

U.S. oil prices plunged nearly 25% on Monday on fears that worldwide storage will soon fill as the coronavirus pandemic continues to roil demand.

West Texas Intermediate for June delivery fell 24.56%, or $4.16, to settle at $12.78 per barrel, after earlier trading as low as $11.88. International benchmark Brent crude fell 6.76% to settle at $19.99. Each contract is coming off its eighth week of losses in nine weeks.

WTI for July delivery fell more than 14% to $18.18 while the August contract slipped more than 9% to $21.50, suggesting the Street doesn’t see a meaningful recovery in the next few months.

“The market knows that the storage problem remains and we are on a calculated path to reach tank tops in weeks,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy. “Actions are needed now as the problem stopped being theoretical and far away. The storage clock is ticking for producers and we are approaching the final countdown if no further action is taken.”

WTI, the U.S. benchmark, has fallen more than Brent as traders eye the quickly filling tanks at Cushing, Oklahoma, which is the nation’s largest storage facility apart from the Strategic Petroleum Reserve. It’s also where the contract is priced. U.S. stockpiles rose by 15 million barrels to 518.6 million barrels for the week ending April 17, according to the U.S. Energy Information Administration.

At closely watched Cushing, oil in storage rose by about 10% in a week to 59.7 million barrels, about 25 million barrels shy of its capacity.

With prices at such depressed levels — WTI and Brent have dropped 72% and 68% this year, respectively — producers are struggling to breakeven. On Sunday, Houston-based Diamond Offshore Drilling filed for bankruptcy protection, and analysts say that more bankruptcies could be coming.

Prices were also pressured after the United States Oil Fund, which trades under the ticker ‘USO’ and is popular with retail investors, said it would sell all of its contracts for June delivery beginning Monday, in favor of longer-term contracts.
VIDEO02:05
Oil cuts ‘simply not enough’ for ‘overwhelming decline’ in global demand: Bernstein

Last Monday WTI plunged into negative territory for the first time in history as holders of the contract for May delivery — which was set to expire the next day — scrambled to sell their contract. But with oil demand not expected to recover anytime soon, and with nowhere to store oil, there was no buyer on the other side. In the end, the contract holders had to pay to have it taken off their hands.

And traders are saying the same fate could befall the June contract as it approaches expiration on May 19.

“Will we hit -$100/bbl next month?” Mizuho analyst Paul Sankey wrote in a note to clients last week, to which he answered, “quite possibly.” “The physical reality of oil is that it is difficult to handle, volatile, potentially polluting, and actually useless without a refinery,” he added.

Earlier in April, OPEC and its oil-producing allies agreed to a historic production cut that would take 9.7 million barrels per day of production offline beginning this Friday. A number of U.S. producers, including Exxon and Chevron, have also said they will scale back, but investors fear that the cuts simply won’t be fast enough. In addition to being costly, shutting in wells can also take time.

Citi’s Michael Hsueh said prices won’t rebound until there’s a meaningful recovery in demand.

“We would need to see a recovery in oil product demand in the end user markets, for example motorists, airlines and manufacturers, as countries cautiously relax epidemic mitigation efforts possibly as soon as May, but more so in June,” he said Friday in a note to clients.

“We would need to see a normalisation of oil inventory from abnormally high levels, since oil refiners will choose to drawdown inventory in the first instance, before resuming a normal pace of buying,” he added.

- CNBC’s Michael Bloom and Patti Domm contributed reporting.
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