LIbya: Part 2 - Eastern Libya Battles

Khalifa Haftar’s Libyan National Army (LNA) was surprised when the oil ports at Es Sider and Ras Lanuf were attacked by the Benghazi Defence Brigades (BDB). The LNA was forced to retreat, but counter-attacked. Via Reuters, it didn't take long from the LNA to gain back control:

The head of Libya’s National Oil Corporation (NOC) confirmed on Friday (June 22) that Khalifa Haftar’s Libyan National Army (LNA) had regained control of the key oil ports of Ras Lanuf and Es Sider, and said he hoped operations would resume in the “next couple of days”. 

LIbya: Part 1 - Eastern Libya Battles

Khalifa Haftar returned to Libya in late April after his health emergency that caused rumors to erupt. Via Reuters, his Libyan National Army (LNA) is now near total control of the city of Derna.  Derna is a city about 290 kilometers (180 miles) east of Benghazi. Like Benghazi, it is also a coaster city. According to the article, there are only about 50 opposition fighters left in the city.

The article has the following summary of those fighting the LNA:

The LNA says the Derna Protection Force (DPF), the coalition that has held Derna until now and ousted Islamic State from the city in 2015, is fighting with extremists linked to al Qaeda, who have used car bombings and harbored foreign fighters. Haftar’s opponents in the city deny having associations with jihadists, saying they are fighting to preserve their independence and counter military rule.

So it looks like Derna went from being controlled by ISIS to being controlled by al Qaeda and is now on the verge of being controlled by the LNA. This city has gone through a lot.

LA Unified School District: Financial Crisis Ahead?

Via CALmatters we have an interesting look at a potential financial crisis at LAUSD.

Why would we have a crisis when there is currently a $548 million surplus?

But in coming years, school officials project growth in employee pension and healthcare costs will eclipse the change in revenue. By 2020, projections show a $408-million shortfall. And that doesn’t account for some employees’ recently won pay raises or the impact of an increasingly likely economic recession.

Yep, here we go again, state pensions are likely to cause issues in the future. Of course, per the article, everyone knew this in 2014, but no moves have been made yet to correct for this future disaster, which is now only a couple years away. As per the article, districts prior to 2014 contributed 8% of their payroll to pensions. By 2020, that goes to 19%. That's more than a double. And read that last sentence, the $408 million shortfall doesn't take into account the 3% pay raise that was given to some employees.

Tesla: Speculation on cash burn and Model 3 costs

To me, one huge interest of mine in terms of Tesla is looking into their cash burn and if they can actually become cash flow positive in the near future. I came across two articles that look at this topic from two different angles.

The first angle is how much does a Model 3 cost to build. Via Quartz German engineers estimate that the cost is $28,000. Some interesting facts from the story:

1. The engineers were working on behalf of the German auto industry. This, to me, implies that all the German automakers view Tesla as a serious threat.

Cambridge University: Repeating a BP study

Researches from Cambridge University along with researchers from Radbound University, the Open University, Macau University and Cambridge Econometrics posted a study that argued that we could find ourselves in a "Carbon Bubble." If I'm readying the abstract correctly, they appear to be pinpointing 2035 as the year the bubble bursts.

Though the link only provides the highlights, I'm not sure the basics are any different from these two BP articles (here and here.) BP's basic argument is that we could be approaching a point where we go from a "shift in paradigm from an age of (perceived) scarcity to an age of abundance." BP also argues we will hit peak demand around 2035 and that 30% of all car kilometers in 2040 will be done via electric vehicles.

OPEC Oil Production for May

Reuters has a report on how OPEC is dealing with output.

First, OPEC is supposed to cut by 1.2 million bpd associated with the 2017 agreement.

Second, output fell to a 13-month low in May.

Third, I found this interesting, "Compliance slipped to 163 percent of agreed cuts in May from 166 percent in April, the survey found, meaning they are still cutting far more than agreed." Compliance slipped vs April, but production still hit a 13-month low. Is the production cuts based on a monthly target -- I suppose it probably is as oil needs probably differ by month.

Oil: OPEC/Russia -- not so fast on oil production increases (Part 2)

This post discusses the five year average inventory that is part of the calculus when discussing increasing production by OPEC/Russia. I also note concerns about a lack of capital investments.

If you click on this IEA link, they have a graph comparing the five year average inventory vs. the actual stock. In 2016, actual stock was 400 million barrels above the average. Now they're basically flat. Of course, the current five year average takes into account the 2016 inventory, but it is still a dramatic turn-around for oil inventory to now be below the average.

Perhaps another way to look at things is on an absolute basis due to the fact that the five year average is distorted by the 2016 figures. YCharts shows that OECD (Organisation for Economic Co-operation and Development) inventory hit a high of around 4.7 billion in July 2016. It is currently estimated at 4.4 billion. It hit a low of around 4.2 billion in December 2013. In prior blog posts, I mentioned that estimates are for inventory to decline by 1.3 million barrels per day. If that holds, we could get back to 2013 inventory levels by the end of this year. That would indicate much higher oil prices. Of course, that low level would also be distorted by the fact that OPEC/Russia are holding 1.8 million barrels off the market (as well the fact that Venezuela is having a crisis that is causing their output to decline dramatically).

Oil: OPEC/Russia -- not so fast on oil production increases (Part 1)

I previously wrote that when oil prices started dropping, oil traders were ignoring a key word called "gradual." On Wednesday, May 30th, oil prices turned back up after a Reuters article:

The deal could be extended to achieve its objectives of keeping a balanced oil market, the source said, adding that, when needed, any rise in output would be “in a gradual and deliberate fashion.” . . . The source said any decision to increase output in June would coincide with anticipated higher demand in the second half of the year.

Bloomberg had this interesting point:

Though they’re not always enforced, OPEC’s rules do require policy changes be approved by all members -- many of which would lose out in this case. Outside the Arab members in the Persian Gulf, most countries aren’t able to boost supplies and would face lower revenue if prices slide further.