Topic: Collapse of crude oil prices - page 7. (Read 1608 times)

Oil prices are doomed. Saudis and Russians are using this economic crisis to kill USA shale oil producers. They will succeed at its plan.

Contrarian betting against ZH's agenda is probably the only thing more profitable thing, I doubt even buying BTC at 1 cent would match that.

Let's talk about the oil industry.

But how come it doesnt matter to oil industry in the long run? Surely the industry way to big and it can easily overcome the losses they are recurring right now. But lets just consider the current scenario heading up for over few months since pandemic is severe and we have no antidote for it.

Considering use of crude oil in making the fuel, there is no rocket launch, no airplane taking off, no cars/trucks/bikes running for next few months and thus kings barrels are just waste with zero demand. This can rupture the shares for oil industry pretty badly I guess.

I guess that's one way to describe a $3.34 billion shortfall.

A Big Four auditor also signed off on their books 6 months ago, which just goes to show how easy it is to hide major frauds even at audited public companies. Crashes and liquidity crises often bring major insolvencies like this to a head. That's what happened here. At $60/barrel they were able to keep the fraud going, but not at these prices.

And how is that the most important takeaway? Whether there is fraud underlying a bankruptcy doesn't make any difference.

Even a broken clock is right twice a day. You don't have to pay attention to ZH.

The issue is the systemic risk the oil industry poses to banks.

Considering use of crude oil in making the fuel, there is no rocket launch, no airplane taking off, no cars/trucks/bikes running for next few months and thus kings barrels are just waste with zero demand. This can rupture the shares for oil industry pretty badly I guess.

The oil crisis began a month ago when Russia refused to go along with cuts promoted by Saudi Arabia and other OPEC producers. In response, Saudi Arabia said it would increase production by three million barrels a day and flood the market. Oil prices and global stock markets fell sharply on the news.

You left out the most important paragraph in the Bloomberg article:


So, this crisis was just the last drop in a 1000 gallon barrel.

I really thought that the situation in the oil industry was pretty bad, but now seeing that ZH is again going full throttle about another disaster I'm thinking nothing will happen.

So, this crisis was just the last drop in a 1000 gallon barrel.

I really thought that the situation in the oil industry was pretty bad, but now seeing that ZH is again going full throttle about another disaster I'm thinking nothing will happen. Contrarian betting against ZH's agenda is probably the only thing more profitable thing, I doubt even buying BTC at 1 cent would match that.

Let's talk about the oil industry.

That's where an economic crisis for oil companies snowballs into a financial crisis for banks. This may be the first domino to fall in that respect. A massive Singapore oil trading firm just went bankrupt, leaving its creditors (banks) with a $3.34 billion shortfall!

Omitted Losses
The son, also known as Evan Lim, said he was unaware of the reason for losses suffered over some years and his father had instructed Hin Leong’s finance department to omit them from its financial statements, according to his affidavit.
In his own affidavit seen by Bloomberg, the father also said he ordered that the losses be omitted and that the company hasn’t been making profits in the last few years, contrary to its financial statements.

Unfortunately, the positive and negative effects are not symmetric, and they do not cancel out. Those who get hurt by the price decline are likely to file for bankruptcies, and that may create a chain of cascading events: adverse events get amplified. If there is a wave of corporate default and bankruptcies, it will reverberate through the entire economy through inter-linkages in the financial sector and supply-chain.

The downfall of Hin Leong Trading (Pte) Ltd., one of the biggest and most secretive forces in the world of physical fuel-oil trading, shows the depth of the fallout from the dramatic drop in oil prices so far this year as a consequence of the Saudi-Russia price war and the coronavirus pandemic.

Lim Chee Meng, the only son of Lim Oon Kuin, said the company also sold some of the million of barrels of refined products it had used as collateral to secure loans from its banks, according to the people, citing an April 17 email sent by the shipping affiliate of Hin Leong, notifying recipient parties of proposed moratorium proceedings.

As a result, the company faces a significant shortfall between the oil stocks it held and the inventories pledged to its banks. That potentially means huge losses for the banks which provided the merchant with billions in loans as the collateral they thought they have as a guarantee isn’t there.

Hin Leong told its creditors this month that total liabilities reached $4.05 billion as of early April, while assets were just $714 million, leaving a hole of at least $3.34 billion, according to screenshots of the presentation to a group of bankers seen by Bloomberg News.

The balance sheet of the company showed no equity at all as of April 9, 2020, and warned that “figures obtained from the company are subject to verification”.

The latest accounts of Hin Leong Trading, for the financial year ending October 31, 2019, were audited by Deloitte & Touche LLP. The auditor didn’t flag any problems, according to people familiar with the matter.

Last week, before we know the extent of the company's financial debacle - and fraud - we concludes that "it is unclear what will happen to the Singapore commodity trading giant if it is unable to find banks that will backstop its operations." Well, we now know - game over - which makes the second part of our forecast especially applicable: "should the firm become insolvent, the downstream cascade for companies in the Pacific Rim could be devastating."