And now for the important paper stories for today:

Early Tuesday morning trading from Europe/Asia

1. Stocks mixed on major Asian bourses  / the  yen falls  to 118.77

1b Chinese yuan vs USA dollar/ yuan slightly weakens  to 6.2551
2 Nikkei down 17.68 or 0.10%

3. Europe stocks mixed  // USA dollar index up to 93.91/

3b Japan 10 year yield huge rise to .42%/ (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.77/everybody watching the huge support levels of 117.20 and that level acting as a catapult for the markets. Poor Japanese auction causes the yield to rise

3c Nikkei now  above 17,000/

3e The USA/Yen rate still  below the 120 barrier this morning/
3fOil: WTI 53.13 Brent: 62.12 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold down /yen down;

3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion

Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP

3i Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)

3j Oil rises this morning for  WTI  and Brent

3k  The EU and Greece fail to come to an agreement/

3l  Greek 10 year bond yield :9.55% (down 10 basis points in yield)

3m Gold at $1221.50. dollars/ Silver: $16.75

3n USA vs Russian rouble:  ( Russian rouble  up 3/4 roubles per dollar in value)  62.42!!!!!!

3 0  oil  into the 53 dollar handle for WTI and 62 handle for Brent

3p  ECB removes Greek sovereign collateral in their investment strategy (on Feb 11). This leaves only ELA funding for the next two weeks. Maximum allowed 60 billion euros for this funding. They also limit the amount of treasuries that Greek can issue.  Greece rejects any more EU funds and thus rejects the European ultimatum to accept this funding!!

the ECB raised the limit on ELA for Greece to 65 billion Euros by raising the amount of treasury bills that can be purchased to 20 billion euros.

3Q  SNB (Swiss National Bank) still intervening again driving down the SF/window dressing/Swiss rumours of intervention to keep the  soft peg at 1.05 Swiss Francs/euro and major support for the Euro.

3r inflation in the UK area lowest in quite some time at .3%

3s   German confidence ZEW high.

3t Battles rage on in Ukrainian city of Debaltseve.  Ceasefire ignored.

4. USA 10 yr treasury bond at 2.04% early this morning. Thirty year rate well below 3%  (2.65%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid

(courtesy zero hedge)/your early morning trading from Asia and Europe)

Futures Rebound On Collapse In Greek Negotiations, After Europe’s Largest Derivatives Exchange Breaks

There was a brief period this morning when market prices were almost determined by non-central banks. Almost.Because shortly before the European market open, atechnical failure on the Eurex exchange – Europe’s largest derivatives market – prevented trading in euro-area bond futures the day after Greek debt talks collapsed. Derivatives which, as a reminder, are no longer used for hedging but to directly “generate alpha” and to trade risk with massive leverage.

Initially, traders were unhappy, “it’s  concerning to those wanting to trade given the geopolitical concerns surrounding Greece” said one. “Very unfortunate day to experience problems” added another.” But the real reason for today’s unexpected market shut down was to avoid early indiscriminate selling of course, following yesterday latest Greek fiasco.

And sure enough, after initially seeing significant downward pressure expressed mostly by the EURUSD, which nobody could capitalize on of course courtesy of the broken Eurex, risk both in Europe and the US has since rebounded courtesy of the ECB, SNB and BIS, led by the EURUSD (because a Grexit threat which according to Commerzbank has been raised from 25% to 50% is bullish for the artificial currency), which is now at yesterday’s pre-negotiations highs, and US futures are about to go green.

Aside from market “glitches”, which are now to be expected every time there is a less than “priced to perfection” development, focus for the European open largely resided in yesterday’s breakdown in talks between Greece and the Eurogroup after Greek officials rejected a draft proposal which sought to increase the flexibility of the existing bailout programme and extend it by 6 months. This latest update subsequently led to a relatively pessimistic open for Europe, with index futures and Bunds eventually opening lower and higher respectively after a delayed start to Eurex trade. Furthermore, in terms of Greek assets, Greek bonds opened lower with Greek 3y’s higher by 176bps to 18.7%, ASE down 4%, Greek banking index down 8.6%, however the ASE pared its losses throughout the European morning, with the Greek banking index residing in positive territory (+3%) as the market anticipates an eventual deal. Of note, JPM suggest outflows of EUR 2bln per week which if continues means there will be no deposits for Greek banks to lend from. This means Greek banks could stop lending in 14 weeks.

Nonetheless, as the session progressed, European equities managed to pull away from their worst levels with Bunds coming off their best levels in a pullback of yesterday’s price action, with a bulk of the move taking place before yesterday’s Eurex close. Furthermore, one thing to bear in mind is that Greek Finance Minister Varoufakis said there will undoubtedly be an agreement on debt discussions and will do everything that is necessary to secure an agreement over the next few days.

Asian markets traded mixed amid dampened risk appetite after yesterday’s Eurogroup and Greek bailout crunch meeting reached an impasse. Nonetheless, the Hang Seng (+0.25%) and Shanghai Comp (+0.76%) outperformed, the latter poised for the best pre-holiday rally since 2007, ahead of the week-long Lunar New Year holiday. Elsewhere, the Nikkei 225 (-0.1%) finished relatively flat just shy of the 18,000 level after recovering earlier losses bolstered by late JPY weakness.

In FX markets, AUD has managed to hold on to its gains after the RBA’s Feb 3rd meeting minutes, which were perceived to be less dovish-than-expected. The central bank failed to provide a clear guidance on its future rate path and largely reiterated comments previously seen. Markets are now pricing a 56% chance of the RBA cutting rates by 25bps in March vs. 74% chance before the release of the minutes. From a data perspective, the main release so far has been that of UK CPI with both the Y/Y and M/M printing a record low (Y/Y 0.3% vs Exp. 0.4%, M/M -0.9% vs Exp. -0.8%). Nonetheless, GBP actually saw a bout of strength following the release, given the inflation levels were very much in-fitting with the findings of the BoE’s QIR.

Elsewhere, EUR saw some broad-based strength after EUR/GBP tripped stops through 0.7400 to the upside heading into the UK CPI report, while German and Euro-zone ZEW data failed to impact EUR, but did see Bunds continue to edge below 159.00.

In the commodity complex, gold and silver weakened overnight as prices halted a 3-day consecutive advance, with buying from China expected to dwindle heading into the week-long Lunar New Year holiday. Copper traded relatively range-bound with prices managing to eke out mild gains as stimulus hopes for China increased following more poor data from the world’s largest copper consumer which showed property prices fell by 5.1%, its largest decline on record.

In energy markets, WTI and Brent crude futures have traded in the green throughout the session underpinned by a weak USD and weekend comments from Kuwait oil minister who suggested oil will continue to recover in H2.

Summary: European shares rise from intraday lows to trade little changed with the travel & leisure and tech sectors underperforming and basic resources, oil & gas outperforming.  Talks between Greece and its creditors ended abruptly Monday night, Greece rejected European proposals to stick to the existing terms of its bailout. U.K. inflation slows more than forecast to record low. Chinese new-home prices recorded biggest y/y decline ever. European car sales growth accelerated in January. Indonesia unexpectedly cuts rate. The Swedish and German markets are the worst-performing larger bourses, the Italian the best. The euro is stronger against the dollar. Japanese 10yr bond yields fall; Greek yields increase. Commodities gain, with silver, zinc underperforming and natural gas outperforming. U.S. Empire manufacturing, NAHB housing market index,  mortgage delinquencies, mortgage foreclosures due later.

Market Wrap

• S&P 500 futures down 0.2% to 2089.6
• Stoxx 600 little changed at 376.4
• US 10Yr yield down 2bps to 2.03%
• German 10Yr yield up 1bps to 0.34%
• MSCI Asia Pacific down 0.1% to 143.3
• Gold spot down 0.7% to $1222.8/oz
• Eurostoxx 50 -0.5%, FTSE 100 +0.3%, CAC 40 -0.4%, DAX -0.6%, IBEX -0.4%, FTSEMIB +0.3%, SMI -0%
• Asian stocks little changed with the Shanghai Composite outperforming and the ASX underperforming.
• MSCI Asia Pacific down 0.1% to 143.3
• Nikkei 225 down 0.1%, Hang Seng up 0.2%, Kospi up 0.2%, Shanghai Composite up 0.8%, ASX down 0.5%
• Euro up 0.32% to $1.1391
• Dollar Index down 0.1% to 94.11
• Italian 10Yr yield down 3bps to 1.64%
• Spanish 10Yr yield up 1bps to 1.59%
• French 10Yr yield little changed at 0.66%
• S&P GSCI Index up 0.3% to 427.4
• Brent Futures up 1.1% to $62.1/bbl, WTI Futures up 0.9% to $53.2/bbl
• LME 3m Copper down 0.8% to $5705/MT
• LME 3m Nickel down 1.2% to $14430/MT
• Wheat futures up 1.6% to 537.8 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

• European markets retrace some of yesterday’s Greek/Eurogroup sell-off despite yesterday’s breakdown in talks
• UK CPI saw both the Y/Y and M/M printing a record low, however GBP actually saw a bout of strength following the release given the levels were in-fitting with the findings of the BoE’s QIR
• Looking ahead, there is US Empire Manufacturing (1330GMT/0730CST), speakers in the form of ECB’s Noyer (Soft Dove), Fed’s Plosser (Non-Voter, Hawk) and BoE’s Haldane (Neutral)
• Treasuries steady as Greece edged closer to a euro exit after region’s finance ministers said there will be no more talks on financial support unless the Greek government requests an extension of its existing bailout program.
• The standoff between Greece and its creditors risks triggering a simultaneous cash and credit crunch, which could drive the country out of the euro area
• Draghi’s plan to jolt the euro zone out of its economic malaise by buying EU1.1t ($1.3t) of bonds may be hamstrung even before it starts amid a dearth of new supply and a lack of willing sellers
• Britain’s inflation rate fell more than forecast to a record-low 0.3% as food and fuel prices plunged
• German investor confidence as measured by the ZEW Center rose to 53 in February, a one-year high, from 48.4 in January
• A cease-fire in eastern Ukraine is being ignored in the strategic transport hub of Debaltseve, where raging battles risk undermining a fragile peace accord sealed after all-night talks last week in Belarus
• Thousands of people marched through Copenhagen in freezing winds to remember the victims of a weekend shooting that police say may have been an attempt to copy the massacre at Charlie Hebdo in Paris
• A federal judge in Texas has ordered a halt, at least temporarily, to Obama’s executive actions on immigration, siding with Texas and 25 other states that filed a lawsuit opposing the initiatives: NYT
• Sovereign yields mixed; Greece 10Y yield surges ~55bps to 10.21%. Asian stocks gain, European stocks and U.S. equity-index futures mostly lower. Brent and WTI higher, gold and copper decline

US Event Calendar

• 8:30am: Empire Manufacturing, Feb., est. 8.50 (prior 9.95)
• 10:00am: NAHB Housing Market Index, Feb., est. 58 (prior 57)
• 4:00pm: Net Long-term TIC Flows, Dec. (prior $33.5b)
  • Total Net TIC Flows. Dec. (prior -$6.3b)
• Mortgage Foreclosures, 4Q (prior 2.39%)
• Mortgage Delinquencies, 4Q (prior 5.85%)
• 12:45pm: Fed’s Plosser speaks in Philadelphia

DB’s Jim Reid as traditional concludes the overnight event summary

Perhaps it was never going to be quite close enough to one minute to midnight for an agreement as the two sides held their ground and talks therefore collapsed. The Eurogroup continues to insist on Greece applying for an extension to their existing programme whereas Greece wants a bridge loan ahead of a new deal as they view the current one as having failed.

So where are we left? If there is going to be an extension to the program beyond expiry on 28th February then it has to be agreed by the end of this week to allow ratification by various member state parliaments. There’s been talk of another Eurogroup meeting that could be held on Friday but one side would have to back down and listening to the Eurogroup President Dijsselbloem one would think it would have to be Greece. An alternative would be for Greece to apply for a fresh ESM loan post Feb 28th but as Mark Wall pointed out last night, the conditionality would likely be every bit as tough and may meet resistance from member states given its a new loan not an extension of an existing one.

Comments from Greek finance minister Varoufakis after talks ended suggested that Greece would be prepared to extend the current programme so long as the terms are satisfactory. Speaking shortly after, Varoufakis was quoted as saying on Reuters that ‘I have no doubt that, within the next 48 hours Europe is going to come together and we shall find the phrasing that is necessary so that we can submit it and move on to do the real work that is necessary’. Greek press Ekathimerini reported meanwhile that Varoufakis had earlier in the day been happy to sign a communiqué provided by the EC and Monetary Affairs Commissioner Moscovici which allowed for a four-month loan agreement in return for certain conditions, however this statement was later changed in the Eurogroup to an extension of the current program which Varoufakis then rejected. At this point Dijsselbloem then halted the meetings and put the pressure on the Greek side to come forward with a proposal ahead of a possible Friday meeting.

DB’s resident expert George Saravelos suggests the conditions of any extension or new deal are becoming clearer. We know that specific conditions will be mandatory either way through a commitment to fulfill financial obligations, a commitment to not take unilateral actions and a commitment to conclude the programme. In return Greece would be granted ‘flexibility’ potentially around the fiscal path and structural reforms. George also notes that the program conclusion on the 28th February is not the point of no return, but the soonest of when Greek banks are no longer able to access additional ELA at the ECB or when the Greek government runs out of financing. Ultimately George still believes we still have the same three step process for Greece in firstly requesting for a new program, secondly negotiating the substance and thirdly passing this through parliament. The difference now is that time pressure has only increased after yesterday’s outcome. George’s report is attached below for those interested.

In terms of the market reaction post meeting, having traded some +0.2% firmer in the lead up to yesterday’s meeting, the Euro dropped around -0.8% – as headlines started to filter through the wires – to trade at an intraday low of -0.6% versus the Dollar. The currency did pare back some of the losses however but is still -0.5% below the pre-meeting levels at $1.136 as we go to print. The broader risk off tone lent support to Bunds last night with the 10y yield dropping to 0.334% having earlier traded closer to 0.35% pre-meeting. S&P 500 futures this morning are trading some -0.4% softer and 10yr US Treasury yields are 4bps lower. Asian bourses however are generally mixed. The Nikkei (-0.04%) and ASX (-0.52%) are lower although the Hang Seng (+0.24%) and Shanghai Composite (+0.80%) are firmer as we go to print. China property market data continued to be weak but some saw small signs of stabilisation in the data even as prices continued to fall. Chinese markets are closed for a week of holiday as of tomorrow.

Back to markets yesterday, with the US closed for a public holiday the focus was on Europe although in reality it was a fairly subdued trading session with the market somewhat on hold in the lead up to the meeting. Sentiment was lower leading up to the meeting and not helped by pessimistic comments by German finance minister Schaeuble in the lead up. The Stoxx 600 closed -0.14% whilst the DAX (-0.37%) and CAC (-0.16%) finished lower. Greek equities meanwhile finished 3.83% lower and 3y yields widened 175bps. Data took a backseat to the Greece events as the Euro-area reported a larger than expected trade surplus (€23.3bn vs. €19bn expected). In terms of oil, brent (-0.2%) meanwhile was more or less unchanged.

Elsewhere, conflict in the Ukraine appears to be continuing with the first reported deaths announced yesterday since the ceasefire officially commenced. Reuters reported that pro-Russian rebels encircled Ukrainian government forces with Kiev saying that they would not pull back heavy guns whilst a truce is being negotiated. Russian equities yesterday closed -2.04% weaker although Ukrainian equities (+0.96%) closed higher.

It’s a busier day data-wise today. Starting in Europe we kick off with inflation data in the UK. The ZEW survey for Germany and the Euro-area will also be of focus this morning. With markets open again in the US, we get the NAHB housing market index for February along with the NY Fed Empire manufacturing reading. The Fed’s Plosser will also be due to speak today, specifically on monetary policy.

end

Sunday night;  Japanese yen slides again after disappointing GDP

again. He is not getting the required wage gains;

(courtesy zero hedge/Sunday night)-

It appears “hope” is a strategy in Japan. With business spending (capex grew at a mere 0.1%) and private consumption (+0.3% – which Amari defined as “solid private demand supporting economic recovery”) both coming in considerably below estimates, Japanese GDP QoQ SAAR grew at+2.2% (missing expectations of 3.7%) but real GDP growth was negative for the 3rd quarter in a row. Of course the GDP deflator grew at 2.3%, beating expectations, is desperately clung to by Japan’s economy minster Amari as evidence of the end of deflation in Japan.

Real GDP growth negative for 3rd quarter in a row…

Japanese GDP Deflator surged (again) to 2.3% – its largest on record… (since 1995)

And on th eback of that load of crap… Japan’s Economy Minister Amari said the following:

• *AMARI: DEFLATOR SHOWS CONDITIONS FAVORABLE FOR DEFLATION EXIT
• *AMARI: JOB, INCOME CONDITIONS MAY CONTINUE TO IMPROVE
• *AMARI: HOPES FOR WAGE INCREASES AGAIN THIS YEAR

But

• *AMARI: CONSUMER SENTIMENT HAS IMPROVED CONSIDERABLY

Which – as far as we remember – sentiment never actually spent any money… actions speak louder than surveys…

• *AMARI: CONDITIONS FOR ECONOMIC UPTURN ARE FORMING

Oh yes they are… any year now..

end

Baltic Dry Index at an all time low of 522.  The huge Chinese COSCO shipping company disassembles 8 ships.

Monday night

China’s COSCO Dis-Assembles 8 Ships Amid Glut As Baltic Dry Hits Another Record Low

You know things are bad in the ship-building business when… amid considerably larger than expected losses,China’s COSCO announced that it has dis-assembled 8 vessels in January alone (including 3 bulk carriers) and will be decommissioning and disposing of them as it awaits a “more conducive” environment. It appears that is not coming anytime soon, as The Baltic Dry Index just hit 522 – a new all-time low (down a stunning 53 of the last 55 days).

As COSCO explains in its HKSE Statement:

The board of directors (the “Board”) of the Company wishes to inform the shareholders of the Company (the “Shareholders”) and potential investors that the Group had disassembled eight vessels (collectively, the “Vessels”), including five container vessels (Hutuo He, Xinhui He, Zhaoqing He, Yangjiang He and Yongding He) and three bulk carriers (Peng Jie, Peng Nian and Peng Cai) from 1 January 2015 to 31 January 2015.

 

The Vessels, with the aggregate capacity of 257,657 deadweight tons, were disposed of as scrapped vessels to different purchasers, all of which are independent third parties of the Company, at a total consideration of approximately RMB82.2 million. According to the unaudited financial results of the Company for the month ended 31 January 2015, realized losses incurred from the disassembly of the Vessels amounted to approximately RMB182.24 million.

As a result of the decommissioning of the Vessels, the average age of vessels owned by COSCON and COSCO Bulk has decreased, while the oil saving level and overall environmental friendliness of the vessels have improved. The Board considers that the decommissioning of the Vessels is conducive to enhancing the overall operational competitiveness of the shipping fleet of the Company and is in the interest of the Company and the Shareholders as a whole.

*  *  *

The future doesn’t exactly look hopeful…

Remember what is key here is that The Baltic Dry Index – unlike so much of our modern world – is not financialized… in other words, it has not become bastardized by the daily needs of algo-high-freaks and central planners ability to provide margin-buffering liquidity to any and all positions… The Baltic Dry is ‘real’, it is the world economy’s “red pill” for want of a better analogy when all around we see the “blue pill” manipulated markets (and data) and the blissful ignorance of illusion.

end

Sunday night

South Korea’s largest shipbuilder reports a 3 billion loss as shipping rates falter badly.  Again the Baltic Dry Index falters to 530.

World’s Largest Shipbuilder Reports $3 Billion Loss As Baltic Dry Index Hits New Record-er Low

“Some Shipping Folks Are Sinking…” South Korea’s Hyundai Heavy Industries, the world’s largest shipbuilder, has reported operating loss of KRW 3.25 trillion in 2014, or about USD $2.96 billion. The operating loss in 2014 is compared to a profit of KRW 802 billion in 2013.

As GCaptain blog reports,

In the fourth quarter, South Korea’s Hyundai Heavy Industries’ revenues were up 11.6 % from the previous quarter to KRW 13.8641 trillion thanks to increased working days, receipt of change orders from clients and the progress of mega-sized EPC projects in offshore and onshore businesses, the company reported.

 

However, in year-over-year (YoY) terms, HHI witnessed a slight drop of 6.5 % in revenues as low oil prices hurt the refinery business, according to HHI.

Mal-investment-driven excess supply, debt-saturated inequality-driven demand shrinkage, or both?

At 530, The Baltic Dry Index is at fresh record-erer lows…

It appears some folks were over-building a little…

Charts: Bloomberg

end

The Chinese economy is faltering badly.  Today Chinese home prices suffer with the biggest annual drop ever:

(courtesy zero hedge)

Chinese Home Prices Suffer Biggest Annual Drop Ever: Why This Matters

While the world’s attention is glued to events in Greece, the real action continues to evolve quietly thousands of kilometers east, in China, where the near record surge in new loans remains unable to offset the dramatic slowdownin shadow banking issuance. And while China’s bubble-chasing, animal spirits have recently reoriented themselves from real estate to the stock market, it is the real estate that holds the bulk of China’s wealth. The problem here is that as China reported overnight, new-home prices in the world’s most populous country just recorded their biggest annual decline ever!

On a sequential basis, housing prices in the primary market fell 0.4% mom in January, more than the 0.3% decline in December. 64 out of 70 cities monitored by China’s National Bureau of Statistics (NBS) saw housing prices fall from the previous month (vs. 67 out of 70 cities in December). The largest month-over-month price fall came from Quanzhou, a lower tier city in Fujian province.

Broken down by Goldman, on a year-over-year, population-weighted basis, housing prices were down -5.0% (vs. -4.3% yoy in December). Hangzhou continued to be the city with the largest price correction, with the yoy housing price down 10.1%, vs. 9.9% in December.

What’s worse, is that the tepid dead-cat bounce seen in the past few months has once again ended and is now headed lower yet again.

In other words, the beneficial impact of the recent surge in credit creation and excess liquidity has already faded when it comes to primary Chinese wealth assets because recall that while in the US 28% of household wealth is in real estate, with the remainder in financial assets in China it is the opposite:

… and as we noted previously, China is now rapidly becoming like the US, where any excess liquidity is flowing direct into the P/E expanding stock bubble instead, in turn leading to a collapse in the M2 which as we noted recently just tumbled to the lowest reading on record as China joins every other nation whose conventional monetary pipeline has become clogged as a result of chasing stock market bubbles.

Monday:  The Eurogroup meeting abruptly ended..many were dazed and did not know what happened:

First the official discussion of the abrupt ending of the meeting;

(courtesy zero hedge)

Eurogroup Meeting Over – Talks Have Broken Down; Risk Slides After Greece Says “Won’t Take Orders On Bailout” – Live Feed

UPDATE: *EU FINANCE MINISTERS’ TALKS WITH GREECE OVER FOR TODAY, GREECE SAYS WON’T TAKE ORDERS ON BAILOUT

EU President Jeroen Dijsselbloem to explain just how far apart they are now…

http://europa.eu/!Kq38bW

*  *  *

Dijsselbloem headlines:

• *DIJSSELBLOEM SAYS MINISTERS WERE DISAPPOINTED BY WEEKEND TALKS
• *DIJSSELBLOEM SAYS BEST WOULD BE EXTENSION FOR GREEK PROGRAM
• *DIJSSELBLOEM SAYS EXTENSION WOULD ALLOW FLEXIBILITY FOR GREECE
• *DIJSSELBLOEM SAYS EXTENSION WOULD INVOLVE COMMITMENTS
• *DIJSSELBLOEM SAYS WOULD NEED AGREEMENT TO ROLL BACK MEASURES
• *DIJSSELBLOEM SAYS WE STAND READY TO CONTINUE DISCUSSIONS
• *DIJSSELBLOEM SAYS IT’S UP TO GREECE TO DECIDE ON EXTENSION
• *DIJSSELBLOEM SAYS COULD BE EXTRA EUROGROUP ON FRIDAY
• *DIJSSELBLOEM SAYS WE HAVE THIS WEEK, BUT THAT’S ABOUT IT

So the 10-day ultimatum was just extended by 40%? Clearly The EU is worried.

*  *  *

Well that didn’t last long. It seems – just as earlier in the week – the ability for either side in this Euro-system death match game of chicken to find any common ground to even start negotiations remains lost:

• GREEK GOVT OFFICIAL SAYS THAT “IN THESE CIRCUMSTANCES, THERE CANNOT BE A DEAL TODAY”
• EUROGROUP DISCUSSED “UNREASONABLE”, “UNACCEPTABLE” DRAFT TEXT INSISTING ON EXTENDING BAILOUT

Full statement (and rejected phrase) (h/t @EdConwaySky)

*  *  *

The reaction…

*  *  *

EURUSD is tumbling and S&P Futures are falling fast.

and Greek Bank Bonds had been hinting at problems all day…

Further comments:

• *GREEK GOVT OFFICIAL SAYS NO AGREEMENT POSSIBLE AT EUROGROUP
• *GREEK GOVT OFFICIAL SAYS EU PROPOSALS `ABSURD,’ `UNACCEPTABLE’

Greek govt official says in e-mailed note that Eurogroup Chairman Jeroen Dijsselbloem’s proposals for the country to observe its existing bailout commitments are “absurd,” “unacceptable.”

As Reuters reports,

A Greek government official said that a draft text presented to euro zone finance ministers meeting in Brussels on Monday spoke of Greece extending its current bailout package and as such was “unreasonable” and would not be accepted.

 

Without specifying who put forward the text to the meeting chaired by Dutch Finance Minister Jeroen Dijsselbloem, the official said: “Some people’s insistence on the Greek government implementing the bailout is unreasonable and cannot be accepted.

 

“Those who keep returning to this issue are wasting their time. Under such circumstances, there cannot be a deal today.”

*  *  *

So this is the next key event:

Over in Frankfurt, the ECB Governing Council will meet on Wednesday.

 

Close attention will be paid to any decision the governors take on Greece and its lenders’ access to central-bank liquidity. Already, Greek banks, which have been hurt by an outflow of deposits due to the country’s political and financial uncertainty over the last two months, can no longer use their government’s bonds to get liquidity from the ECB, depending instead on more expensive emergency funding from their own central bank.

But of course that still leaves the uncomfortable post-Eurogroup press conference and statement which we suspect will be even more uncomfortable than last week’s for Dijsselbloem.

Zee Germans are not happy and, as KeepTalkingGreece reports, are now suggesting Tsipras replace varoufakis at the negotiating table…

An SPD politician from Merkels’ social-democrat coalition suggested s that Prime Minister Alexis Tsipras should replaces Finance Minister Yanis Varoufakis as he apparently creates lots of confusion, German politicians cannot understand.

 

SPD executive board member, Joachim Poß, wrote in an e-mail for his party colleagues:

 

“Greek Finance Minister Varoufakis has best demonstrated with his performance  until now, that he is not up to the demands of such an office. In the interest of the Greek people and in view of the difficult situation, Prime Minister Tsipras should consider to replace Mr Varoufakis with a political experienced, realistic-efficient person.” (Handelsblatt)

 

I suppose Varoufakis is an overwhelming challenge for some petty-minded politicians. He is much more than they can take. Or they just want a Yes-Man.

*  *  *

end

Monday:

Yanis V in his press conference explains that he was ready to sign a document handed to him prior to the meeting..but the document was changed..I wonder who changed the document???

Following the reported withdrawal of what Greece deemed as an acceptable draft document to move forward – replaced by an “absurd, unacceptable” draft by EU President Dijsselbloem – it appears the Germans are none too happy. A senior lawmaker from Angela Merkel’s Christian Union bloc has demanded that following this ‘rejection’ of the Eurogroup’s plan, all payments to Greece should be immediately stopped.

As Bloomberg reports,

Hans Michelbach, a senior lawmaker from Chancellor Angela Merkel’s Christian Union bloc in parliament, says in e-mailed statement that EU needs to react to Greece’s rejection of euro area’s proposal.

• Payments must be immediately stopped and money kept as collateral to secure Greek debt payments
• Talks’ breakdown forces ECB to halt any aid
• Athens let last deadline lapse,national parliaments now won’t have enough time to approve any solution found at later stage

*  *  *

The rift is clearly deepening on both sides…

After Conducting Navy Drills In East Mediterranean, Russia Puts Airborne Troops In Volgograd On Alert

While the latest Ukraine “ceasefire” is all but dead following such headlines as:

• Kiev security forces open fire on DPR, LPR republics’ positions – Basurin
• Fighting Strains Ukraine Truce; Russia Criticizes EU Blacklist
• Battle rages for town where Ukraine rebels reject ceasefire

… perhaps a better question is what just what is Russia doing in the East Mediterranean (as in close by to both Greece and Cyprus) where as Interfax reported earlier, the Russian navy conducted tests. Bloomberg adds that the “Russian Navy vessels fire artillery rounds at sea, air training targets as part of tests in eastern part of Mediterranean, Interfax reports, citing statement by Defense Ministry.”

This happens hours after Interfax also reported that the Russian Air Force conducted a practice bombing drill in the south of Russia, in which about 10 airplanes took part.

And finally, moments ago, Interfax (and Bloomberg) made it a trifecta when it reported that

• RUSSIA PUTS AIRBORNE TROOPS ON ALERT IN VOLGOGRAD REGION: IFX
• ASSAULT LANDING UNIT OF AIRBORNE TROOPS ALERTED IN VOLGOGRAD REGION

As a reminder, Volgograd is about 150 miles east of Ukraine.

As a further reminder, over the weekend German Der Spiegel warned, citing former Russian Foreign Minister Igor Ivanov “Now the threat of a war is higher than during the Cold War.” Perhaps events such as these further escalating into an out of control cascade is precisely what he was referring to.

end

The truce fails.  The town of Debaltseve is surrounded.  Three hundred Ukrainian soldiers surrender.

(courtesy zero hedge)

Ukraine “Truce” Fails: Withdrawal Deadline Passes, Debaltseve Situation Deteriorating

UPDATE: *POROSHENKO SAYS UN MUST NOT ALLOW FULL-SCALE WAR IN EUROPE

As the game of chicken between Greece and the Eurogroup hots up, it appears another – potentially far more deadly – is escalating in Ukraine as neither side is willing to follow through on the terms of the Minsk Summit peace deal – removing heavy weaponry from the frontlines – as a key deadline passes without agreement.As The Guardian reports, The Ukrainian military have stated that “as soon as the militants cease fire, the Ukrainian side will begin to withdraw heavy weaponry from the frontline,” and the pro-Russian separatists proclaim, “We do not have the right [to stop fighting for Debaltseve],” adding that as far as the truce,“we have everything ready for a mutual withdrawal. We will not do anything unilaterally – that would make our soldiers targets.”

As The Guardian reports, and Interfax confirms, the situation in Debaltseve is deteriorating…

Kiev on Tuesday reported artillery strikes overnight around the key transportation hub of Debaltseve while the situation in the rest of the conflict zone appeared to be calm.

 

An Associated Press reporter heard sustained shelling around Debaltseve – where government troops are encircled – on Tuesday morning, some coming from Grad rocket launchers.

 

A senior rebel representative told Reuters that the separatists cannot “morally” stop fighting for control of the town.

 

Denis Pushilin also said rebels could not withdraw heavy weaponry, as set out in the deal, unless Ukrainian forces did so as well.

 

“We do not have the right [to stop fighting for Debaltseve]. It’s even a moral thing. It’s internal territory,”Pushilin said in the rebel stronghold of Donetsk.

 

“We have to respond to fire, to work on destroying the enemy’s fighting positions.”

 

Asked about plans to carry out the agreement to withdraw big guns, he said: “We are ready at any time, we have everything ready for a mutual withdrawal. We will not do anything unilaterally – that would make our soldiers targets.”

As AP reports, Russia-backed rebels in eastern Ukraine claimed Tuesday to have taken the key transportation hub of Debaltseve as both parties faced a deadline to start pulling back heavy weapons from the front line.

Fierce fighting on Tuesday appeared to be focused on Debaltseve, a government-held town surrounded by rebel forces that both sides claim to be on their side of the cease-fire line. The issue was not resolved under a cease-fire agreement negotiated last week by the leaders of Ukraine, Russia, Germany and France.

 

Separatist leaders said in remarks carried by the rebel mouthpiece Donetsk News Agency on Tuesday afternoon that their forces have pushed the Ukrainian army out of Debaltseve, gaining control over most of the town.

 

…

 

Rupert Colville, spokesman for the U.N. High Commissioner for Human Rights, told a briefing in Geneva on Tuesday that the UN is “alarmed” by reports of continued shelling in the areas and have not yet been able to get reliable information on the casualties there and the wellbeing of civilians.

 

“It is unclear how many civilians are still there,” he said. “We are particularly concerned about the civilians trapped in the area – we believe there may be a few thousand hiding in cellars, struggling to get food, water and other basic necessities.”

• *DONETSK REBELS SAY HUNDREDS OF GOVT SOLDIERS SURRENDERED: IFX
• *POROSHENKO TOLD MERKEL EU MUST RESPOND TO REBEL, RUSSIA ACTIONS

As the following AP clip shows, there are no signs of Ukraine weapons withdrawal at all…

As The Guardian reports, neither side is willing to move first…

Ukrainian government troops and Russia-backed rebels failed to start pulling back heavy weaponry from the frontline in eastern Ukraine on Tuesday as a deadline to do so passed.

 

Under a ceasefire agreement negotiated by the leaders of Ukrae, Russia, Germany and France last week, the warring sides were to begin withdrawing heavy weapons from the front line on Tuesday.

 

Anatoliy Stelmakh, a Ukrainian military spokesman, said in televised comments early on Tuesday that the separatists continued to attack their positions overnight and that the pullout hinged on the ceasefire being fully observed.

 

“As soon as the militants cease fire, the Ukrainian side will begin to withdraw heavy weaponry from the frontline,” he said.

*  *  *

So despite the market’s kneejerk exuberance last week, it seems the Minsk Summit peace deal is about as effective as the last peace deal… time for more sanctions and costs…

• *POROSHENKO CALLS FOR `TOUGH’ EU REACTION TO DEBALTSEVE ATTACKS

end

Putin responds>>>>

(courtesy zero hedge)

“Optimistic” Putin Says US Already Supplying Arms To Ukraine

Vladimir Putin says he is “more optimist than pessimist” on Ukraine, but warns that there will be “no end to war if Kiev believes in a military solution.” Noting that he believes there has been an “overall decrease” in military activity, he notes that Debaltseve was “possible to forecast,” and then proclaims:

• *PUTIN SAYS U.S. ARMS ALREADY BEING SUPPLIED TO UKRAINE

Of course, we already have “YouTube” proof of American military presence in Ukraine (which for Washington would have been good enough to wage war) but Putin offers no specific proof and adds rather pointedly that “most Ukraine troops want no part of fractricidal war.”

Putin was speaking at a press conference with Hungary’s President Orban, and added:

• *PUTIN SAYS HOPEFUL BOTH SIDES IN UKRAINE TO COMPLY WITH ACCORDS
• *PUTIN SEES OVERALL DECREASE IN MILITARY ACTIVITY IN UKRAINE
• *PUTIN SAYS HE’S MORE OF AN OPTIMIST THAN PESSIMIST ON UKRAINE
• *PUTIN: KEY GOAL TO SAVE LIVES OF PEOPLE TRAPPED IN DEBALTSEVE
• *PUTIN SAYS MOST UKRAINE TROOPS WANT NO PART IN FRATRICIDAL WAR

adding that

• *PUTIN SAYS DEBALTSEVE STANDOFF WAS POSSIBLE TO FORECAST

And here’s why – because Debaltseve is really just a front guard staging point:

And finally:

• *PUTIN SAYS U.S. ARMS ALREADY BEING SUPPLIED TO UKRAINE

*  *  *

One wonders how Merkel will respond if Putin shows her proof?

end

Chris Martenson does a terrific job analyzing the true nature of the conflict between the Ukrainians and the rebels:

(courtesy Chris Martenson/Peak Prosperity)

The US’ Suicidal Strategy On Ukraine

Submitted by Chris Martenson via Peak Prosperity,

end

Dr Roberts weighs in on the latest Minsk peace deal and he also believes that the ceasefire will not last

(courtesy Paul Craig Roberts)

The Minsk Peace Deal: Farce Or Sellout?

Submitted by Paul Craig Roberts,

Judging by the report on RT I conclude that the Ukraine peace deal worked out in Minsk by Putin, Merkel, Hollande, and Poroshenko has little chance of success.

As Washington is not a partner to the Minsk peace deal, how can there be peace when Washington has made policy decisions to escalate the conflict and to use the conflict as a proxy war between the US and Russia?

The Minsk agreement makes no reference to the announcement by Lt. Gen. Ben Hodges, commander of US Army Europe, that Washington is sending a battalion of US troops to Ukraine to train Ukrainian forces how to fight against Russian and rebel forces. The training is scheduled to begin in March, about two weeks from now. Gen. Hodges says that it is very important to recognize that the Donetsk and Luhansk forces “are not separatists, these are proxies for President Putin.”

How is there a peace deal when Washington has plans underway to send arms and training to the US puppet government in Kiev?

Looking at the deal itself, it is set up to fail. The only parties to the deal who had to sign it are the leaders of the Donetsk and Lugansk break-away republics. The other signers to the Minsk deal are an OSCE representative which is the European group that is supposed to monitor the withdrawal of heavy weapons by both sides, a former Ukrainian president Viktor Kuchma, and the Russian ambassador in Kiev. Neither the German chancellor nor the French, Ukrainian, and Russian presidents who brokered the deal had to sign it.

In other words, the governments of Germany, France, Ukraine, and Russia do not appear to be empowered or required to enforce the agreement. According to RT, “the declaration was not meant to be signed by the leaders, German foreign minister Frank-Walter Steinmeier said.”

The terms of the agreement depend on actions of the Ukrainian parliament and prime minister, neither of which are under Poroshenko’s control, and Poroshenko himself is a figurehead under Washington’s control. Moreover, the Ukrainian military does not control the Nazi militias. As Washington and the right-wing elements in Ukraine want conflict with Russia, peace cannot be forthcoming.

The agreement is nothing but a list of expectations that have no chance of occurring.

One expectation is that Ukraine and the republics will negotiate terms for future local elections in the provinces that will bring them back under Ukraine’s legal control. The day after the local elections, but prior to the constitutional reform that provides the regions with autonomy, Kiev takes control of the borders with Ukraine and between the provinces. I read this as the total sell-out of the Donetsk and Lugansk republics. Apparently, that is the way the leaders of the republics see it as well, as Putin had to twist their arms in order to get their signatures to the agreement.

 

Another expectation is that Ukraine will adopt legislation on self-governance that would be acceptable to the republics and declare a general amnesty for the republics’ leaders and military forces.

 

Negotiations between Kiev and the autonomous areas are to take place that restore Kiev’s taxation of the autonomous areas and the provision of social payments and banking services to the autonomous areas.

 

After a comprehensive constitutional reform in Ukraine guaranteeing acceptable (and undefined) autonomy to the republics, Kiev will take control over the provinces’ borders with Russia.

 

By the end of 2015 Kiev will implement comprehensive constitutional reform that decentralizes the Ukrainian political system and provides privileges of autonomy to the Donetsk and Lugansk regions.

 

Both Putin and Poroshenko are both reported as stating that the main thing achieved is a ceasefire starting on February 15.

 

The ceasefire is of no benefit to the Donetsk and Lugansk republics as they are prevailing in the conflict. Moreover, the deal requires the republics’ forces to give up territory and to pull back to the borders of last September and to eject fighters from France and other countries who have come to the aid of the break-away republics. In other words, the agreement erases all of Kiev’s losses from the conflict that Kiev initiated.

All of the risks of the agreement are imposed on the break-away republics and on Putin. The provinces are required to give up all their gains while Washington trains and arms Ukrainian forces to attack the provinces. The republics have to give up their security and trust Kiev long before Kiev votes, assuming it ever does, autonomy for the republics.

Moreover, if the one-sided terms of the Minsk agreement result in failure, Putin and the republics will be blamed.

Why would Putin make such a deal and force it on the republics? If the deal becomes a Russian sell-out of the republics, it will hurt Putin’s nationalist support within Russia and make it easier for Washington to weaken Putin and perhaps achieve regime change. It looks more like a surrender than a fair deal.

Perhaps Putin’s strategy is to give away every advantage in the expectation that the deal will fail, and the Russian government can say “we gave away the store and the deal still failed.”

Washington’s coup in Kiev and the attack on the Russian-speaking Ukrainians in the east and south is part of Washington’s strategy to reassert its uni-power position.Russia’s independent foreign policy and Russia’s growing economic and political relationships with Europe became problems for Washington. Washington is using Ukraine to attack and to demonize Russia and its leader and to break-up Russia’s economic and political relations with Europe. That is what the sanctions are about. A peace deal in Ukraine on any terms other than Washington’s is unacceptable to Washington. The only acceptable deal is a deal that is a defeat for Russia.

It is difficult to avoid the conclusion that the Russian government made a strategic mistake when it did not accept the requests of the break-away provinces to be united with Russia. The people in the Donetsk and Lugansk provinces favored unification with the same massive majorities that the people in Crimea showed. If the provinces had been united with Russia, it would have been the end of the conflict. Neither Ukraine nor Washington is going to attack Russian territory.

By failing to end the conflict by unification, Putin set himself up as the punching bag for Western propaganda. The consequence is that over the many months during which the conflict has been needlessly drawn out, Putin has had his image and reputation in the West destroyed. He is the “new Hitler.” He is “scheming to restore the Soviet Empire.” “Russia ranks with ebola and the Islamist State as the three greatest threats.” “RT is a terrorist organization like Boco Haram and the Islamist State.” And so on and on. This CNN interview with Obama conducted by Washington’s presstitute Fareed Zakaria shows the image of Putin based entirely on lies that rules in the West.

Putin could be no more demonized even if the Russian military had invaded Ukraine, conquered it, and reincorporated Ukraine in Russia of which Ukraine was part for centuries prior to the Soviet collapse and Ukraine’s separation from Russia at Washington’s insistence.

The Russian government might want to carefully consider whether Moscow is helping Washington to achieve another victory in Ukraine.

end

Oil related stories

oil rig count is not sufficient to slow USA oil production:

(courtesy Goldman Sachs)

“The Rig Count Decline Is Not Sufficient To Slow US Production” Goldman Warns

While so much has been made of the considerable decline in US rig counts as the driver behind the recent price bounce in oil, Goldman Sachs’ Damien Courvalin pours cold water all over that narrative as he explains that the rig count decline is still not sufficient, in our view, to achieve the slowdown in US production growth required to balance the oil market. Worse yet, he concludes, with the producer hedging that has occurred over the past weeks and the recent wave of equity issuance, the risk that the US production slowdown will be delayed is high, meaning oil prices will need to remain lower in the coming quarters in order for the announced capex guidance and rig reduction to materialize into sufficiently lower production growth.

Via Goldman Sachs,

Current rig count implies US production growth of 600 kb/d yoy by 4Q15

US rig count continues to decline The decline in the US oil rig count continued last week with 84 rigs down, comprising 52 horizontal rigs, 18 vertical rigs and 14 directional rigs. Like the prior week, the Permian basin oil posted another significant decline in horizontal rigs, with large cuts in the counties with the highest well productivity. While the momentum in the US rig count cuts suggests that the US rebalancing is on track, recent comments by E&Ps suggest that these indiscriminant rig cuts reflect an initial focus on cost cutting rather than asset optimization (high grading), providing limited information on the future path of the rig count.

Expanding our analysis to the Niobrara

We expand our analysis to include the horizontal rigs of the Niobrara oil play . This allows us to capture 83% of US production growth, vs. 76% with the three big shale plays previously (Permian, Bakken and Eagle Ford). This larger universe further captures 70% of US horizontal oil rigs.

Current US rig count implies US 4Q15 production up 600 kb/d yoy

Applying the methodology that we introduced last week, the current US horizontal rig count implies that US oil production growth from these four major shale plays will reach 600 kb/d yoy by 4Q15, under our assumption of continued trend growth productivity gains at the well and rig level.

Rig Counts’ Snapshot

Bottom-up Approach: Mapping US production back to the county level

In order to quantify the impact of the oil rig count decline, we decompose oil production from the four shale plays considered (Permian, Eagle Ford, Bakken and Niobrara) at the county level, separating the contribution of well and rig performance. We identify for each of the 99 counties (47 in Permian, 15 in Eagle Ford and 18 in Bakken, 19 in Niobrara) the recent rig productivity (wells drilled per rig per month) and well productivity (well production per month) and use the February 13 county level rig count to estimate production from these oil plays. This bottom-up approach matches the EIA’s measure of production relatively well for the Big 3 and Niobrara shale plays. Our county sample still captures 85% of the production growth of these four plays, and ultimately 83% of the US Lower 48 oil production growth in 2014 (Exhibits 5 & 6). We therefore find this bottom-up production breakdown of these four shale plays as a useful barometer to future US production growth.

Caveats: While our analysis does not include vertical rigs, its low count and the corresponding low productivity wells leave us comfortable in leaving them aside for now. We also do not take into account the backlog of uncompleted wells for now, with this likely to have a significantly larger impact and would bring US oil production growth above our estimates.

Which leaves 2 scenarios – one static well and rig productivity and one trend well and productivity growth… both slowing down the decline in production growth

*  *  *

The Bottom Line – It’s Still not enough

The rig count decline is still not sufficient, in our view, to achieve the slowdown in US production growth required to balance the oil market. The flexibility in cutting non-contracted rigs and associated cost deflation along with the producer hedging that has occurred over the past weeks and the recent wave of equity issuance raise the risk that the US production slowdown will be delayed. As a result, we reiterate our view that oil prices need to remain lower in the coming quarters in order for the announced capex guidance and rig reduction to materialize into sufficiently lower production growth.

end

(courtesy Michael Snyder)

Why The Price Of Oil Is More Likely To Fall To 20 Rather Than Rise To 80

Submitted by Michael Snyder via The Economic Collapse blog,

This is just the beginning of the oil crisis.  Over the past couple of weeks, the price of U.S. oil has rallied back above 50 dollars a barrel.  In fact, as I write this, it is sitting at $52.93.  But this rally will not last.  In fact, analysts at the big banks are warning that we could soon see U.S. oil hit the $20 mark.  The reason for this is that the production of oil globally is still way above the current level of demand.  Things have gotten so bad that millions of barrels of oil are being stored at sea as companies wait for the price of oil to go back up.

But the price is not going to go back up any time soon.  Even though rigs are being shut down in the United States at the fastest pace since the last financial crisis, oil production continues to go up.  In fact, last week more oil was produced in the U.S. than at any time since the 1970s.  This is really bad news for the economy, because the price of oil is already at a catastrophically low level for the global financial system.  If the price of oil stays at this level for the rest of the year, we are going to see a whole bunch of energy companies fail, billions of dollars of debt issued by energy companies could go bad, andtrillions of dollars of derivatives related to the energy industry could implode.  In other words, this is a recipe for a financial meltdown, and the longer the price of oil stays at this level (or lower), the more damage it is going to do.

The way things stand, there is simply just way too much oil sitting out there.  And anyone that has taken Economics 101 knows that when supply far exceeds demand, prices go down…

Oil prices have gotten crushed for the last six months. The extent to which that was caused by an excess of supply or by a slowdown in demand has big implications for where prices will head next. People wishing for a big rebound may not want to read farther.

 

Goldman Sachs released an intriguing analysis on Wednesday that shows what many already suspected: The big culprit in the oil crash has been an abundance of oil flooding the market. A massive supply shock in the second half of last year accounted for most of the decline. In December and January, slowing demand contributed to the continued sell-off.

At this point so much oil has already been stored up that companies are running out of places to put in all.  Just consider the words of Goldman Sachs executiveGary Cohn…

“I think the oil market is trying to figure out an equilibrium price. The danger here, as we try and find an equilibrium price, at some point we may end up in a situation where storage capacity gets very, very limited. We may have too much physical oil for the available storage in certain locations. And it may be a locational issue.”

 

“And you may just see lots of oil in certain locations around the world where oil will have to price to such a cheap discount vis-a-vis the forward price that you make second tier, and third tier and fourth tier storage available.”

 

[…] “You could see the price fall relatively quickly to make that storage work in the market.”

The market for oil has fundamentally changed, and that means that the price of oil is not going to go back to where it used to be.  In fact, Goldman Sachs economist Sven Jari Stehn says that we are probably heading for permanently lower prices…

The big take-away: “[T]he decline in oil has been driven by an oversupplied global oil market,” wrote Goldman economist Sven Jari Stehn. As a result, “the new equilibrium price of oil will likely be much lower than over the past decade.”

So how low could prices ultimately go?

As I mentioned above, some analysts are throwing around $20 as a target number…

The recent surge in oil prices is just a “head-fake,” and oil as cheap as $20 a barrel may soon be on the way, Citigroup said in a report on Monday as it lowered its forecast for crude.

 

Despite global declines in spending that have driven up oil prices in recent weeks, oil production in the U.S. is still rising, wrote Edward Morse, Citigroup’s global head of commodity research. Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia. The market is oversupplied, and storage tanks are topping out.

 

A pullback in production isn’t likely until the third quarter, Morse said. In the meantime, West Texas Intermediate Crude, which currently trades at around $52 a barrel, could fall to the $20 range “for a while,” according to the report.

Keep in mind that the price of oil is already low enough to be a total nightmare for the global financial system if it stays here for the rest of 2015.

If we go down to $20 and stay there, a global financial meltdown is virtually guaranteed.

Meanwhile, the “fracking boom” in the United States that generated so many jobs, so much investment and so much economic activity is now turning into a “fracking bust”…

The fracking-for-oil boom started in 2005, collapsed by 60% during the Financial Crisis when money ran out, but got going in earnest after the Fed had begun spreading its newly created money around the land. From the trough in May 2009 to its peak in October 2014, rigs drilling for oil soared from 180 to 1,609: multiplied by a factor of 9 in five years! And oil production soared, to reach 9.2 million barrels a day in January.

It was a great run, but now it is over.

In the months ahead, the trickle of good paying oil industry jobs that are being lost right now is going to turn into a flood.

And this boom was funded with lots and lots of really cheap money from Wall Street.  I like how Wolf Richter described this in a recent article…

That’s what real booms look like. They’re fed by limitless low-cost money – exuberant investors that buy the riskiest IPOs, junk bonds, leveraged loans, and CLOs usually indirectly without knowing it via their bond funds, stock funds, leveraged-loan funds, by being part of a public pension system that invests in private equity firms that invest in the boom…. You get the idea.

As all of this bad paper unwinds, a lot of people are going to lose an extraordinary amount of money.

Don’t get caught with your pants down.  You will want your money to be well away from the energy industry long before this thing collapses.

And of course in so many ways what we are facing right now if very reminiscent of 2008.  So many of the same patterns that have played out just prior to previous financial crashes are happening once again.  Right now, oil rigs are shutting down at a pace that is almost unprecedented.  The only time in recent memory that we have seen anything like this was just before the financial crisis in the fall of 2008.  Here is more from Wolf Richter…

In the latest reporting week, drillers idled another 84 rigs, the second biggest weekly cut ever, after idling 83 and 94 rigs in the two prior weeks. Only 1056 rigs are still drilling for oil, down 443 for the seven reporting weeks so far this year and down 553 – or 34%! – from the peak in October.

 

Never before has the rig count plunged this fast this far:

 

 

What if the fracking bust, on a percentage basis, does what it did during the Financial Crisis when the oil rig count collapsed by 60% from peak to trough? It would take the rig count down to 642!

But even though rigs are shutting down like crazy, U.S. production of oil has continued to rise…

Rig counts have long been used to help predict future oil and gas production. In the past week drillers idled 98 rigs, marking the 10th consecutive decline. The total U.S. rig count is down 30 percent since October, an unprecedented retreat. The theory goes that when oil rigs decline, fewer wells are drilled, less new oil is discovered, and oil production slows.

 

But production isn’t slowing yet. In fact, last week the U.S. pumped more crude than at any time since the 1970s. “The headline U.S. oil rig count offers little insight into the outlook for U.S. oil production growth,” Goldman Sachs analyst Damien Courvalin wrote in a Feb. 10 report.

Look, it should be obvious to anyone with even a basic knowledge of economics that the stage is being set for a massive financial meltdown.

This is just the kind of thing that can plunge us into a deflationary depression.  And when you combine this with the ongoing problems in Europe and in Asia, it is easy to see that a “perfect storm” is brewing on the horizon.

Sadly, a lot of people out there will choose not to believe until the day the crisis arrives.

By then, it will be too late to do anything about it.

end

The NIKKEI: Tuesday morning : down 17.68 or.10%

Trading from Europe and Asia:
1. Europe stocks mixed

2/ Asian bourses mixed    … Chinese bourses: Hang Sang in the green ,Shanghai in the green,  Australia in the red: /Nikkei (Japan) red/India’s Sensex in the green/

Gold very early morning trading: $1221.50

silver:$16.75

Early Tuesday morning USA 10 year bond yield: 2.04% !!!  up 3  in basis points from Friday night/ (getting ominous)

USA dollar index early Tuesday morning: 93.92  down 29 cents from Friday’s close.

This ends the early morning numbers.

And now for your closing numbers for Tuesday:

Closing Portuguese 10 year bond yield: 2.36% down 2 in basis points from Friday

Closing Japanese 10 year bond yield: .40% !!! down 2 in basis points from Friday and this is worth watching

Your closing Spanish 10 year government bond,  Tuesday up 6 in basis points in yield from Friday night.

Spanish 10 year bond yield: 1.61% !!!!!!

Your Tuesday closing Italian 10 year bond yield: 1.67% up 6 in basis points from Friday:

trading 6 basis points higher than Spain.

IMPORTANT CURRENCY CLOSES FOR TODAY

Closing currency crosses for Friday night/USA dollar index/USA 10 yr bond:

Euro/USA: 1.1416  up .0084

USA/Japan: 119.30 down .815

Great Britain/USA: 1.5361 up .0007

USA/Canada: 1.2382 down .0033

The euro rose quite a bit  this afternoon despite the negative news on the Greece crisis and the continual war raging in the Ukraine  (the ceasefire announced for Sunday has been violated).  It was up by 84 basis  points finishing the day well above  the 1.14 level to 1.1416. The yen was well down in the afternoon, and it was down  by closing  to the tune of 82 basis points and closing well above  the 119 cross at 119.30. The British pound gained a little  ground during the afternoon session and was up on  the day closing at 1.5361. The Canadian dollar was up again today due to the higher oil price.  It closed at 1.2382 to the USA dollar

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are  causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front will no doubt produce many dead bodies. The last asset still rising are the stock exchanges.

Your closing 10 yr USA bond yield: 2.15 up 10 in basis points from Friday

(very ominous)

Your closing USA dollar index: 94.07 down 13 cents on the day.

European and Dow Jones stock index closes:

England FTSE  up 41.08 points or 0.60%

Paris CAC up 2.04 or 0.04%

German Dax down  27.61 or 0.25%

Spain’s Ibex up  8.50 or 0.08%

Italian FTSE-MIB up 100.41 or 0.47%

The Dow: up 2823. or 0.16%

Nasdaq; down 1.57 or 0.03%

OIL: WTI 53.06 !!!!!!!

Brent: 62.15!!!!

Closing USA/Russian rouble cross: 62.43 up  3/4  roubles per dollar on the day.

closing UKrainian UAH:  (hryvnia)  26.40 UAH to the dollar.

Since November the currency has lost half its value.

And now for your more important USA economic stories for today:

Your New York trading for today:

(courtesy zero hedge)

Stocks Close At Record Highs; Shrug Off Schaeuble Shocker

When even CNBC is playing ‘our’ song… you just know that “everything is awesome”

Early European hours saw US equity futures leap gazelle-like as JPY momo (cough BoJ after their miracle bid stick-save in JGBs earlier in the evening) lifted them on no news… then crappy US data… more Greek asset weakness… Europe flat… and the US Open – BTFAAPL!!!… liftathon… Greek news – Awesome – oh wait that’s no news at all! – forget it BTFATH!!!! and that’s how we reached 2100 in the S&P 500…

From the moment when Greek Talks Failed yesterday…

From Friday’s close, a miraculous meltup in th elast minute or two dragged everything green…

…ensuring magically that the S&P 500 closes perfectly at 2100!! Are you fucking kidding me?

Who needs a VIX smash when you can manipulate the shit out of AAPL at will…

Builders and Banks did well (despite crap NAHB sentiment), Utes and Discretionary lagged… Healthcare won overall as Biotechs just bubbled further…

All About USDJPY and the BOJ manipulating the shit out of it (via Gold/GOFO, JPY)

Credit markets dumped this afternoon

Bonds were monkey-hammered… an early safety bid was eviscerated as 30Y yields ripped from -5bps at 2.60 to +8bps at 2.72% – a 13bps intraday swing… but note as Schaeuble poured cold water on the hope, bonds started to rally…

Year-To-Date, Treasury yields have round-tripped…now all buty 2Y is higher on the year

The USDollar is now unchanged from Friday – given back all of its gains from yesterday on EUR weakness as EURUSD rallied back into the green on the week. JPY was notable under performer…

Despite the USD weakness today, gold and silver were unceremoniously dumped to prove that “everything is awesome”… Copper also dipper but Crude – after early weakness went entirely algo-plectic – soaring once again into the NYMEX close…

The machines – and thus the central banks – are back in charge of oil… the volume in Silver and Crude during the early carnage suggests this was either total and utter manipulation or a forced close…

*  *  *

So to summarize: Earnings expectations continue to plunge to 10-month lows… US Macro data is a disaster (worst in world since start of year) at 11-month lows… Ukraine’s cease-fire is not working… The Greek-EU drama has NOT changed as Greece’s request to extend loan with no commitments will be screamed at by Schaeuble “nein nein nein”… Energy stocks are trading at a 28x dot-com-esque multiple… and stocks are at record highs…

Charts: Bloomberg

end

The West coast backlog continues to worsen:

(courtesy Noel Randewich/Reuters)

Freighter backlog worsens outside major West Coast ports

BY NOEL RANDEWICH

Cranes and containers are seen at the Ports of Los Angeles and Long Beach, California February 6, 2015 in this aerial image.

CREDIT: REUTERS/BOB RIHA JR

(Reuters) – Growing numbers of freighters were backed up around the two busiest U.S. cargo hubs on Sunday because of a dispute between shipping companies and dockworkers that has led to a partial shutdown of ports along the West Coast.

With cargo delays rippling through the U.S. economy, Japanese carmaker Honda Motor Co Ltd said it planned to slow production at some of its North American plants starting on Monday because of a lack of parts from Asia.

Under pressure to address the months-long strife, President Barack Obamaon Saturday dispatched U.S. Labor Secretary Tom Perez to California to help broker an agreement.

By Sunday morning, 34 container ships, tankers and other cargo vessels were waiting to dock at the ports of Los Angeles and Long Beach, California, up from 32 on Saturday, said Lee Peterson, a spokesman for the port of Long Beach.

Cargo ships waiting at anchor and unable to load their goods were visible from highways and beaches for miles along the coast, an unusual spectacle, he said.

Those delays have slowed deliveries of a wide range of goods, from agricultural produce to housewares and apparel, leading retailers to pressure Obama to intervene.

Honda, which had already resorted to transporting some parts by airplane, said it would adjust production at plants making models including the Civic, CR-V, Accord and Acura.

“This is a fluid situation due to the uncertainty of the situation at the West Coast ports,” spokesman Mark Morrison told Reuters by email. “At this time, we do not have a sufficient supply of several critical parts to keep the production lines running smoothly and efficiently.”

The Obama administration’s move to send Perez came after shippers vowed to prevent the loading and unloading of freight through Monday from container ships at the 29 ports, barring a settlement in talks with the dock workers’ union.

The shipping companies said they were unwilling to pay union workers higher wages for weekend shifts and the Presidents’ Day holiday on Monday while productivity declined and cargo backups reached the point of near gridlock, after months of chronic congestion in freight traffic.

The Department of Labor is working on Perez’s schedule, spokeswoman Xochitl Hinojosa said on Sunday.

“The secretary will meet with the parties to urge them to resolve their dispute quickly at the bargaining table,” she said.

On Friday, negotiators for the union representing 20,000 dockworkers at the ports and management’s bargaining agent, the Pacific Maritime Association, agreed to a federal mediator’s request for a 48-hour news blackout. The two sides held a bargaining session on Thursday that marked their first face-to-face meeting in nearly a week.

(Additional reporting by Jeff Mason in Rancho Mirage, Calif.; Editing by Stephen Powell, Nick Zieminski and Peter Cooney)