Sunday, March 19, 2017

Oil Prices Drop On Rise In U.S. Drilling

By Henning Gloystein
Reuters
March 20, 2017

Oil prices fell on Monday as rising U.S. drilling activity and steady supplies from OPEC countries despite touted production cuts pressured already-bloated markets.

Prices for benchmark Brent crude futures were 29 cents, or 0.56 percent, at $51.47 per barrel.

U.S. West Texas Intermediate (WTI) crude futures were down 38 cents, or 0.78 percent, at $48.40 a barrel.

Traders said that prices came under pressure from rising U.S. drilling and ongoing high supplies by the Organization of the Petroleum Exporting Countries (OPEC) despite its pledge to cut output by almost 1.8 million barrels per day (bpd) together with some other producers like Russia.

"There is good, strong momentum to the downside," futures brokerage CMC Markets said in a note on Monday.

U.S. drillers added 14 oil rigs in the week to March 17, bringing the total count up to 631, the most since September 2015, energy services firm Baker Hughes Inc said on Friday, extending a recovery that is expected to boost shale production by the most in six-months in April.

As a result, U.S. oil output has risen to over 9.1 million bpd from below 8.5 million bpd in June last year.

Reacting to the ongoing glut in markets, financial oil traders cut their net long U.S. crude futures and options positions in the week to March 14, the third consecutive cut, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

"This unwinding of position is both a cause and reflection of the big fall in crude oil prices when the cracks in the OPEC/non-OPEC deal emerged and when it seems like it became evident shale oil is back and the new swing player," said Greg McKenna, chief market strategist at brokerage AxiTrader.

Defying rising sentiment that oil markets remain oversupplied, some analysts say markets will tighten soon, arguing that the OPEC-led cuts will only start to bite from April, just as demand picks up as refineries return from current maintenance outages.

"The cuts in OPEC production from the start of 2017 should start to show up between mid-March (now) and mid-April. Over the coming weeks we expect a sharp reduction in imports and increase in refining runs which should lead to impressive crude inventory draws," analysts at AB Bernstein said on Monday in a note to clients.

"The combination of falling imports and stronger crude runs should lead to substantial inventory cuts over the coming months," they said.


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Bullish Bets On Crude Cut By Most Ever As Price Falls Below $50

Money managers’ WTI net-long position slips to 3-month low; Wagers on a further price drop doubled as U.S. output mounts.


By Jessica Summers
Bloomberg
March 20, 2017

The exodus of oil-price optimists has begun.

Money managers cut bets on rising West Texas Intermediate crude by a record amount during the week ended March 14, while wagers on a further price drop doubled as oil remained below $50 a barrel.

"It’s sort of a negative feedback loop, where money managers were selling because the price was falling, and the price was falling in part because money managers were selling,” said Tim Evans, an analyst at Citi Futures Perspective in New York, in a telephone interview.

Bets on rising WTI crude during the report week were reduced by the most on record in data going back to 2006, the U.S. Commodity Futures Trading Commission announced Friday. The cuts came as prices tumbled below $50 a barrel for the first time this year, and anxious executives discussed rising U.S. rig counts at an industry meeting in Houston.



On Friday, oil settled at $48.78 a barrel on the New York Mercantile Exchange, up 29 cents for the week. Saudi Arabia and Russia sent mixed messages as the week ended on the future of the production cuts agreed to by the Organization of Petroleum Exporting Countries and 11 other nations for the first half of the year.

Saudi Arabia is ready to extend the cuts into the second half if supplies stay above the five-year average, Energy Minister Khalid Al-Falih said on Bloomberg Television. Russian Energy Minister Alexander Novak countered it was too early to discuss an extension. An OPEC panel is scheduled to meet this month to review compliance with the current deal.

‘Room To Grow’


“If you make it through this next OPEC compliance meeting and we don’t have further jawboning by the Saudis and Russia, or more compliance, I think that you have room to grow on the short side, which is worrisome,” Brent Belote, founder of Cayler Capital LLC, which manages $5 million in oil-related assets, said by telephone.

During the week ended March 14, hedge funds decreased their net-long position, or the difference between bets on a price increase and wagers on a decline, by 23 percent to 288,774, the largest decline on record and the lowest level since December. WTI tumbled 10 percent during the period. Longs fell 8.9 percent to the lowest level since early January, and shorts doubled from the prior week to the highest since November.

Producers and merchants increased their short positions, or bets on lower prices, to 739,736 futures and options during the report week, the highest level in a month.



The U.S. benchmark slipped below $50 a barrel on March 9 as oil executives gathered in Houston for the annual CERAWeek by IHS Markit conference.

Industry players at the meeting aired their concerns that growing U.S. output may thwart OPEC’s efforts to trim stockpiles and raise prices, an idea underpinned by U.S. government data released during the week showing inventories at record high levels. Many shale producers view $50 as a benchmark price for profitability.

Bets On OPEC

“The rise to record inventory levels in the U.S. is a challenge to the idea that the market has already fully rebalanced and that the downside risk is negligible," Evans said.

There’s still hope OPEC will continue its efforts to reduce the global glut. Deutsche Bank AG Thursday predicted OPEC will extend the cuts not only through the end of this year, but also through the end of 2018. Citigroup Inc. said OPEC’s output cuts aimed at easing the glut are “real” and already are cleaning up the market.

“We’re close to the $49 mark, not too far from $50,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. “It seems like there are a lot of people who still have faith in OPEC delivering the kind of cuts that would allow prices to increase.”


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Medicaid Is Out Of Control. Here’s How To Fix It.

By Robert J. Samuelson
The Washington Post
March 20, 2017

It’s time to take control of Medicaid before it takes control of us. Unless we act — and there is little evidence that we will — Medicaid increasingly becomes another mechanism by which government skews spending toward the old and away from the young. In the raging debate over the Affordable Care Act (Obamacare), this is a subject that neither Republicans nor Democrats dare touch. It’s an ominous omission that obscures the overhaul Medicaid really needs.

Medicaid is the sleeping giant of U.S. health care. Created in 1965, it provides health insurance for the very poor. Here are some basic Medicaid facts:

● It is the nation’s largest health insurance program by beneficiaries, with 68 million recipients compared with Medicare’s 55 million. (Medicare provides insurance for the 65 and over population.)

● Medicaid’s costs are shared between the federal government (roughly 60 percent) and state governments (40 percent). In 2015, Medicaid spending totaled $545 billion compared with Medicare’s $646 billion, reports the Kaiser Family Foundation.

● Although the Obamacare debate has focused on private insurance subsidized through health exchanges, the expansion of Medicaid — adopting more liberal eligibility requirements — resulted in the largest gain of insurance coverage, about 11 million people.

But the most significant Medicaid fact is this: Although three-quarters of Medicaid recipients are either children or young adults, they account for only one-third of costs. The elderly and disabled constitute the other one-quarter of recipients, but they represent two-thirds of costs.

How could this be? Doesn’t Medicare — not Medicaid — cover the elderly and disabled? Well, yes, but there’s a giant omission: nursing home and other long-term care. Medicaid covers these for the poor elderly and disabled.

Here’s where the past and future collide. As the population ages, the people needing long-term care will soar. From 2015 to 2030, the number of Americans 85 and older will rise about 50 percent to 9 million, projects the Census Bureau. Many will end up in nursing homes, with high costs. The average health costs of Americans 85 and over are 2.5 times greater than for people 65 to 74, says the Center on Budget and Policy Priorities, a research and advocacy group for the poor.

At the federal level, spending on the elderly — mainly for Social Security, Medicare and Medicaid — is already crowding out nonelderly spending, as the Trump administration’s 2018 budget shows. Now pressures are tightening on states.

Because they pay 40 percent of Medicaid, its escalating costs compete directly with state and local services — schools, roads, police, parks, sanitation — and lower taxes. Medicaid’s “entitlement” nature means that anyone who qualifies for support must get it. By contrast, schools and other state services get what seems affordable. Slowly, Medicaid is usurping state priorities. Medicaid now claims nearly one-fifth of states’ general revenues, reports Robin Rudowitz of the Kaiser Family Foundation. Under present law, the squeeze will worsen.

Fortunately, there’s a sensible solution to this problem. It isn’t to gut care for the elderly. Instead, we should transfer Medicaid’s long-term care to the federal government, which would pay all costs, probably by merging with Medicare. In return, the states would assume all Medicaid’s costs for children and younger adults, give up some or all of their federal aid for K-12 schools and, if needed, trim other federal grants to ensure financial neutrality.

At the outset, there would be no obvious winner. For every dollar of higher federal spending on long-term care, there would be a dollar offset in lower spending on medical care for children and younger adults plus less generous federal grants. But over time, this swap of responsibilities would make sense for everyone. It would concentrate oversight for the young at the state and local levels while aid to the elderly and disabled would be firmly lodged at the federal level.

Consider. For states, spending would no longer be tied to demographic trends — an aging society — they can’t change. Controlling schools and a child-centered Medicaid, they would be in the best position to fight child poverty, which is arguably the nation’s most serious social problem. The rising costs of long-term care, a national problem, would not handcuff them.

As for the federal government, it would control all major programs for the elderly and disabled. The present splintering is undesirable. It means that a fifth of Medicare recipients are so-called “dual eligibles,” belonging also to Medicaid. This raises costs and complicates caregiving. If benefits for the elderly are to be cut (say, by raising eligibility ages), that job is best done if the federal government can choose from all programs for the old.

Unfortunately, there is little support for this sort of swap. Commentators (including this reporter) periodically propose it and praise its benefits. But national politicians seem uninterested. They prefer instead to bleed the states.



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Uber President Jeff Jones Quits, Deepening Turmoil

By Heather Somerville
Reuters
March 20, 2017

Ride services company Uber Technologies Inc [UBER.UL] has been thrust deeper into turmoil with the departure of company president Jeff Jones, a marketing expert hired to help soften its often abrasive image.

Jones quit less than seven months after joining the San Francisco company, an Uber spokesman said on Sunday.

The reason for his departure was not immediately clear, but Jones' role was put into question after Uber earlier this month launched a search for a chief operating officer to help run the company alongside Chief Executive Travis Kalanick.

Jones had been performing some of those COO responsibilities. He joined Uber from Target Corp (TGT.N), where he was chief marketing officer and is credited with modernizing the retailer's brand.

"We want to thank Jeff for his six months at the company and wish him all the best," an Uber spokesman said in an emailed statement.

Jones is the latest in a string of high-level executives to leave the company. Last month, engineering executive Amit Singhal was asked to resign due to a sexual harassment allegation stemming from his previous job at Alphabet Inc's (GOOGL.O) Google. Earlier this month, Ed Baker, Uber's vice president of product and growth, and Charlie Miller, Uber's famed security researcher, departed.

Technology news site Recode first reported Jones' departure on Sunday.

Uber, while it has long had a reputation as an aggressive and unapologetic startup, has been battered with multiple controversies over the last several weeks that have put Kalanick's leadership capabilities and the company's future into question.

A former Uber employee last month published a blog post describing a workplace where sexual harassment was common and went unpunished. The blog post prompted an internal investigation that is being led by former U.S. Attorney General Eric Holder.

Then, Bloomberg released a video that showed Kalanick berating an Uber driver who had complained about cuts to rates paid to drivers, resulting in Kalanick making a public apology.

And earlier this month Uber confirmed it had used a secret technology program dubbed "Greyball," which effectively changes the app view for specific riders, to evade authorities in cities where the service has been banned. Uber has since prohibited the use of Greyball to target local regulators.

Uber is also facing a lawsuit from Alphabet Inc's self-driving car division that accuses it of stealing designs for autonomous car technology known as Lidar. Uber has said the claims are false.

Jones joined Uber in August and was widely expected to be Kalanick's No. 2. Jones was tasked with overseeing the bulk of Uber's global operations, including leading the ride-hailing program, running local Uber services in every city, marketing and customer service, and working with drivers.

The Independent Drivers Guild, an organization that advocates for Uber drivers, on Sunday was critical that Jones "has left the company without making a single improvement to help drivers struggling to make a living," said Ryan Price, executive director of the guild.


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