USA To Overtake Saudi Arabia Oil Output |
News from the International Energy Agency’s annual World Energy Outlook
Monday is the projection that the USA will overtake Saudi Arabia in oil output
in less than a decade. The forecast comes as the U.S. has reversed its declining
oil production with domestic oil output from many oil companies. Just as the
U.S. kicked off the oil industry in Pennsylvania more than 100 years ago, it is
a pioneer once again, unleashing vast amounts of oil from fields such as the
Eagle Ford of Texas and the Bakken of North Dakota with newer techniques such as
horizontal drilling and hydraulic fracturing. The potential to deploy horizontal
drilling and hydraulic fracturing around the glob implies tremendous potential
to boost oil output. The same report from the IEA indicates fossil fuels
attracted about $523 billion in government subsidies in 2011, up by 30% from
2010. While the IEA projects renewable energy such as wind and solar will move
to the world’s second-largest source of power by 2015 however, they warn that a
major shift away from fossil fuels will not happen in the next 20 years.
Ahead of upcoming meetings with business leaders, civic leaders and bipartisan
leaders of the House and Senate at the White House with President Barack Obama
this week in efforts to avoid the 'fiscal cliff', U.S. stocks ended the trading
session mostly unchanged on Monday amidst light trading action. The meetings are
meant to prevent automatic spending cuts and tax hikes that could take effect on
the first of the new year. On Tuesday, President Obama will meet with labor
leaders; Wednesday the President will hold a news conference and will meet with
business leaders; Friday the President will meet with civic leaders and also, is
scheduled to meet with the bipartisan leaders of the House and Senate. All in an
effort to avoid the 'fiscal cliff'.
NYSE Euronext (NYX) reported an issue executing trades on the Big Board in 216
stocks shortly after Monday's opening bell. NYSE in an alert to traders at
9:39am ET reported that its equity market was experiencing an "issue" with one
of its engines that match up buy and sell orders. BATS Global Markets, an
exchange operator based in Lenexa, Kan., declared "self-help" against the NYSE
in the minutes after the opening bell rang on Wall Street which meant they,
along with exchange operators Nasdaq OMX Group Inc. (NDAQ) and Direct Edge
Holdings LLC, stopped sending orders to the NYSE. Exchanges can declare
"self-help" when another market is slow to respond to incoming orders or if the
flow of information to and from the exchange is disrupted. The NYSE reported to
traders at 11:18am ET that it had "completed its recovery" of the matching
engine and that all its trading systems then were "functioning normally."
Reportedly, U.K. market regulators have opened an investigation into trading
practices at foreign exchange brokerage FXCM Inc. (FXCM) that centered on
exchange rates offered to clients. According to a regulatory filing from FXCM,
the investigation by the U.K. Financial Services Authority began in September
and reported that the focus was on "past trade execution practices." "Although
we are in the process of complying with the FSA's requests, we have not been
formally notified whether or not the FSA intends to take any action against us
with respect to our trade execution practices," representatives for FXCM wrote
in the filing submitted Friday. The FSA investigation follows a similar probe by
U.S. regulators in 2011, in which the Commodity Futures Trading Commission
charged that FXCM failed to change the price a customer received on a currency
transaction if an exchange rate became more profitable for the investor while a
trade was in progress. According to the CFTC, FXCM did change the price if the
rates shifted in favor of FXCM. In August 2011, FXCM agreed to pay nearly $14.2
million to settle those charges. In Friday's filing, FXCM estimated that its
possible loss related to the FSA investigation as well as other claims or
litigation could be nearly $5 million, as of September 30.
The Chicago Board Options Exchange's Volatility Index (VIX) finished below its
long-term average in 82% of sessions this year, topping out at just 26.66 in
June. The VIX is known as the market's fear gauge because of the way it tends to
rise as stocks fall. During October, VIX futures hit a record number of
contracts traded striking the second consecutive month of new highs. According
to William Brodsky, Chairman and Chief Executive for CBOE Holdings Inc. (CBOE),
much of that growth has been driven by an increasing number of exchange-traded
products tied to the VIX. Brodsky said during the company's earnings call
November 1 that at the end of September, there were "more than 34 such
products." Through October, trading in VIX futures this year reached more than
18.6 million contracts, 76% higher than same period 2011. The VXX which is the
most popular volatility fund, has lost 74% of its value this year which means
that a $10,000 investment in the fund at the beginning of 2012 would only be
worth $2,616, now. The volatility funds, which are meant to act as a short-term
hedge against stock-market declines, constantly adjust or roll positions in VIX
futures, selling futures as they near expiration and buying longer-dated futures
contracts as a replacement. The rolling of VIX futures tends to erode the
products' value because, in normal-volatility environments, longer-dated futures
trade at a higher price than the nearer-dated contracts. This constant selling
of one product and buying of another increases the costs of maintaining the
product to pay for the changes, which weighs on the cost of the products. So
when markets are mostly calm, the mechanics behind how these products are
structured cause them to decline in value. For buy-and-hold investors looking
for a portfolio hedge, that can mean investments suffer. Over the past month,
the VIX has jumped 15% while the VXX, which is designed to loosely track the
VIX, has added only 5%.
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Nov 12, 2012