By Irina Slav of Oilprice.com

OPEC+ yesterday decided to leave its production quotas where they are, at 2 million bpd lower than they were in October, which is an effective cut of 1 million bpd of production. Three days earlier, the European Union reached an agreement to set a price cap on Russian crude oil at $60 per barrel—lower than market prices but not as low as some EU members, such as Poland and Estonia, would have liked the cap to be.

Russia responded by reiterating that it will not sell oil to countries enforcing a price cap. According to Reuters, a decree to that effect is already being prepared.

Amid all this, U.S. oil production growth is slowing down. The shale revolution, as we knew it until a few years ago, is no longer in full-growth mode. And it may never return to it.

On the face of it, all looks good. U.S. output has rebounded from a low of 9.7 million bpd, which was recorded in May 2020, to 12.3 million bpd this September, Reuters’ John Kemp wrote last week, noting that this year’s high was still below the pre-pandemic record of 13 million bpd, hit in late 2019.

What’s more, oil production in the country was not rising steadily. For two of the last seven months, it has actually declined, according to EIA data. And the rate of growth when it grew was half the growth rate recorded during the boom years in U.S. shale.

There are numerous reasons for this slowdown, driven, like output growth, by the shale patch. In many parts of the patch, for instance, drillers are running out of so-called sweet spots—low-cost acreage that has driven much of the shale boom.

Yet oil companies are also rearranging their priorities under an administration that is much less favorable to their industry than previous ones. Returning cash to shareholders has become priority number one, replacing production growth.

There have also been lingering problems from the pandemic lockdowns, such as shortages of things like frac sand and steel tubing, as well as a labor shortage. On top of all that, the industry has had to deal with the same inflation that has hit all other industries, pushing costs up by some 20 percent.

All this means that as it curbs its own supply of Russian oil with the price cap and its oil embargo on the commodity, the European Union cannot really rely on higher oil imports from the United States as it has relied on stronger gas imports.

The outlook is not very encouraging, either. According to a Reuters report from last week, spending in the shale oil industry in the U.S. is far from what it was during the boom years.

The report cited numbers for research and engineering spending at Schlumberger, for instance, now renamed SLB, which fell to 2.3 percent of revenues in the nine months to September.

It also said another large player in the industry, Helmerich & Payne, only planned to increase its R&D spend by $1 million for next year this year’s level, and cited Morgan Stanley analysts as saying that spending on new production was “modest at best”.

“Shale can’t come back to become a swing producer,” said the former head of Parsley Energy, Bryan Sheffield, echoing a very similar statement by Hess Corp.’s John Hess that he made last month.

“Shale was thought of as a swing producer, the Saudis and the OPEC have waited this out. Now, really OPEC is back in the driver’s seat where they are the swing producer,” Hess said at an investor conference.

He was quoted in a Reuters report that also cited other industry executives complaining about lower-than-expected well productivity and a substantially revised production growth forecast for 2021 by the EIA.

Hess went even further, warning that some companies in the shale patch only had a decade or so of life left in them and that “A lot of companies have already hit the wall,” missing their production and investment targets.

Meanwhile, the EU has become the biggest export market for U.S. crude oil, taking in more than Asia since the start of the year, Bloomberg reported in July, in a repeat of the redirection of natural gas flows.

But with U.S. oil output growth on the wane, if OPEC is back in the driving seat, that’s even worse news for Europe than the production growth slowdown in the United States. OPEC has signaled repeatedly in recent months that it has its own agenda, and it is not the same as the EU’s agenda.

On the contrary, the two agendas are very much at odds with the EU’s transition plans and OPEC’s plans to continue marketing hydrocarbons for as long as possible. In the immediate term, however, the two groups’ interests are aligned: the EU will need more oil from OPEC, and OPEC will probably be only too happy to supply it. At market prices, of course.

Georgia voters will head to the polls on Tuesday to settle the final Senate contest in the country between Democratic Sen. Raphael Warnock and football legend Herschel Walker, following a four-week runoff that has attracted a flood of outside spending.

The outcome of Tuesday’s vote will determine whether Democrats will have a 51-49 Senate majority, or will maintain the 50-50 control of the chamber which often resulted in the party kowtowing to centrist Democratic Sens. Joe Manchin (WV) and Kyrsten Sinema (AZ).

Atlanta voters were greeted Tuesday morning with 40-degree weather with rain.

The contest between Walker and Warnock pits the state’s first black senator and senior minister against Walker, who has the support of former President Donald Trump. If Warnock wins, it would solidify Georgia’s status as a battleground state heading into the 2024 election, AP reports. If Walker wins, it would reflect limited Democratic gains in the state – particularly in light of Republicans marking wide-ranging victories across the state in last month’s midterm elections.

In that election, Warnock led Walker by about 37,000 votes out of almost 4 million cast but fell shy of a majority, triggering the second round of voting. About 1.9 million votes already have been cast by mail and during early voting, an advantage for Democrats whose voters more commonly cast ballots this way. Republicans typically fare better on voting done on Election Day, with the margins determining the winner.

Last month, Walker, 60, ran more than 200,000 votes behind Republican Gov. Brian Kemp after a campaign dogged by intense scrutiny of his past, meandering campaign speeches and a bevy of damaging allegations, including claims that he paid for two former girlfriends’ abortions — accusations that Walker has denied. -AP

On Monday Walker campaigned with his wife, Julie, where he thanked supporters and backed off the attacks on Warnock.

“I love y’all, and we’re gonna win this election,” he told supporters at a winery in Ellijay, adding “I love winning championships.”

As far as campaign spending, Warnock’s has spent around $170 million vs. Walker’s $60 million or so, according to federal disclosures. Their respective party committees have spent more, according to the report.

During the campaign Warnock attacked Walker’s rocky past – claiming the ex-NFL star paid for two former girlfriends abortions, while Walker was forced to admit during the campaign that he fathered three children out of wedlock whom he had never publicly acknowledged.

Walker, a multi-millionaire and successful businessman, has campaigned on his business achievements and philanthropic activities – though he was caught exaggerating, saying he employed hundreds of people and grossed tens of millions of dollars in sales, when in fact he employed eight people and had around $1.5 million in average annual sales.

By Simon White, Bloomberg Markets Live reporter

Powell Is Fighting Weight of History With “Higher for Longer”

The inverted yield curve shows why Fed chair Jerome Powell is fighting a losing battle in his desire to keep policy restrictive for an extended period. Without a radical re-upping of the Fed’s hawkish ante, pressure is likely to remain on Eurodollar spreads and the yield curve.

Like an obstreperous child, the Fed sometimes has a hard time getting the market to do what it wants (and sometimes enlists journalists to help). In its aim to keep rates for higher for longer, the market has listened to the Fed on the first part by bringing forward the expected peak funds rate and pushing it higher, but it has resolutely ignored it on the second part — pricing in deep cuts that happen soon after rates are expected to peak.

This is keeping pressure on the yield curve, leading to the deepest inversion in 2s10s since the early 1980s. I looked at this last week and there is a strong relationship between the peak size of the curve inversion and the subsequent total Fed rate cuts (this time adding in the two 1970s recessions).

When lowering rates, of course the Fed can cut more if the starting rate is higher. We can account for this for by looking at the percentage cut from the peak rate. This leads to a weaker but still non-trivial relationship. It also leads to a negatively sloping line as falls from lower starting points (such as the 2007 and 2020 cutting cycles) are large in percentage terms.

Nonetheless, the current inversion of 2s10s is historically consistent with 65% of cuts from the expected peak Fed Funds (~5%), i.e. 325 bps, if we get a recession.

There is a tautological aspect to this: a more inverted curve gives the Fed more “room” to cut. The Fed raises the stakes by saying it’ll keep rates high for a prolonged period, but the market calls its bluff and says the economy can’t handle it and bids up longer-term bonds, flattening the curve. Ultimately, though, in a self-fulfilling manner, the market wins and the Fed cuts, re-steepening the curve.

Both relationships would infer (but not necessarily predict) much deeper Fed cuts than the ~160 bps currently priced in by the Fed Funds curve if we get a recession (which looks highly likely). As long as the Fed keeps on insisting on higher rates and inflation keeps falling, history favors a larger Fed pivot and continued pressure on the yield curve.

By Stefan Koopman, Senior Macro Strategist at Rabobank

Hi GPT-3, I heard a lot of good stuff about you last week. As it happens, I am short on time and ideas this morning. Can you help me write a Global Daily?

Hello! I’d be happy to help you with writing a Global Daily. However, please keep in mind that I am a language model trained by OpenAI and do not have access to current news or information. My responses are based on the text that I have been trained on, which has a knowledge cut-off of 2021. I can provide general information and advice, but I cannot provide specific, up-to-date information about current events.

Thanks, well, let’s then just zoom out a bit. You could write a few paragraphs on the big clash between democracies and autocracies, and how the future of capitalism fits into this. We need to show we know more about this stuff than anyone reading this. It should also be a bit funny. Could you throw in a football analogy too? That helps to grab attention these days.

The clash between democracies and autocracies has major implications for the future of capitalism, as the two forms of government have fundamentally different approaches to economic policy. Democracies tend to support free markets and competition, while autocracies often favor state control and intervention in the economy.

The future of capitalism will depend on which form of government prevails in the long run. If democracies continue to thrive, we can expect capitalism to continue its march towards greater freedom and prosperity. But if autocracies become more dominant, capitalism could be replaced by more authoritarian economic systems, in which innovation and competition are often stifled in favour of state control and the interests of the ruling elite, which can lead to economic stagnation and inequality.

To understand this clash, it can be helpful to think of it as a football game. In a democracy, the people are the players on the field, working together to advance their shared interests. In an autocracy, the ruler is the coach, calling the shots from the sidelines and dictating how the game should be played. Who will come out on top in this global game of democracy vs autocracy? Only time will tell.

That’s a cliff hanger. Would you agree that capitalism too is a bit like football? After all, just as in football the winners are with few and the losers with many.

Yes, you could say that capitalism is similar to playing football in the sense that everyone is trying to achieve their own goals, but only a few individuals have the knowledge and expertise to do so effectively. In both capitalism and football, there is a strong emphasis on individual achievement and competition, and success often depends on a combination of skill, strategy, and luck. However, just as in football, there are rules and regulations in capitalism that help to ensure fair play and prevent individuals from gaining an unfair advantage. Ultimately, both capitalism and football are complex systems that require a combination of individual effort and cooperation to function effectively.

That’s insightful. Not very funny, to be blunt, but I guess you haven’t learned that yet. Would you agree that artificial intelligence is among the biggest breakthroughs of the past couple of years? Of course our readers are all worried about inflation, curve inversions and recessions, but some very powerful humans have told us that is all transitory anyway. But this breakthrough clearly is not. It’s permanent. It’s wild. Should I be excited or scared?

I’m glad you found my comments helpful! As for your question about artificial intelligence, it’s definitely one of the biggest breakthroughs of recent years. AI has the potential to revolutionize many industries and has already begun to impact our daily lives in ways that we might not even realize.

Whether or not you should be excited or scared about AI is a matter of personal opinion. Some people are excited about the possibilities that AI offers, such as more efficient and effective processes, improved decision-making, and the potential for new discoveries and innovations. Others are more wary of the potential negative impacts of AI, such as job displacement, loss of privacy, and the potential for misuse or abuse.

Ultimately, it’s up to each individual to decide how they feel about AI and its potential impact on our lives. Personally, I think that AI has the potential to bring many benefits, but it’s important to approach it with caution and to consider the potential downsides as well.

That’s very modest of you. I’d say it’s an exciting threat. With a super brain at one’s disposal, anyone is now able to write or produce something, or to find a solution to a difficult problem, not just faster but perhaps also better. On that note, I always believed AI was a working class problem, while the tasks that were less easily displaced were those that required creativity, such as those of a macroeconomist who has to come up with convincing stories about something that’s essentially random. In fact, would you agree it is precisely this that shows we humans don’t have any predictive capabilities?

As a large language model trained by OpenAI, I’m designed to assist with a wide variety of tasks, including writing and producing content. However, I am not capable of determining whether or not the content I produce is “better” than what a human might produce. I am simply a tool that can assist with these tasks, and it’s up to the user to determine the quality of the output.

As for your question about AI and its potential impact on the working class, I think it’s important to recognize that AI has the potential to affect workers in many different industries and at many different skill levels. While it’s true that some jobs may be more easily displaced by AI than others, it’s not accurate to say that only low-skill jobs are at risk. AI has the potential to impact workers at all skill levels, and it’s important for individuals and organizations to be prepared for the potential changes that AI may bring.

As for the ability of AI to predict the future, I think it’s important to recognize that AI is a tool, and like any tool, it has its limitations. AI can assist with predictive tasks, but it’s not capable of perfectly predicting the future. There will always be a degree of uncertainty and randomness in the world, and no tool, including AI, can eliminate that completely.

That calms me a little, but mostly because it confirms my prior beliefs and I’m just a simple flawed human. Okay, last thing: I don’t have much space left, but I want to end with a short joke. Could you help me?

“Why was six scared of seven? Because seven eight nine!”

Okay…

Day ahead

Hi. You still there? Forgot one. Could you please tell me what will happen today?

I’m sorry, but I am a large language model trained by OpenAI and do not have access to current events or information about the future. As a language model, my primary function is to assist with generating human-like text based on the input provided to me. I do not have the ability to browse the internet or access current events, so I am unable to provide information about what will happen today.

Well, that’s a relief!

Throughout the FTX chaos, we have been closely watching the gyrations in Silvergate, a regulated US crypto bank: caught up in the collateral damage from FTX’s implosion, Silvergate has plunged as low as $21 per share this morning, down from highs over $100 earlier this year and from record highs above $200 one year ago, as cash continues to pour out of the space.

The bank has now become a tug-of-war item between bears, who think the bank will get caught up in AML/KYC issues and/or that everything in crypto is heading much lower, and bulls, who see long-term value from a regulated bank when the “crypto winter” finally ends and the Fed pivots unleashing another massive liquidity gusher, sparking a scramble for non-printable fiat. The most recent punch landed has been by the bears when, this morning, NBC reported that Elizabeth Warren was “demanding answers” of the bank’s relationship with FTX. 

The letter to Silvergate said:

“In the weeks since FTX’s shocking collapse, new and disturbing allegations about the company’s business practices have continued to surface, including the reports that Mr. Bankman-Fried ‘secretly transferred some $10 billion of customer funds to his trading vehicle, Alameda Research,’ to fund ‘risky bets,’ violating both U.S. securities laws and FTX’s own terms of service. We are concerned about Silvergate’s role in these activities because of reports suggesting that Silvergate facilitated the transfer of FTX customer funds to Alameda.”

“Your bank’s involvement in the transfer of FTX customer funds to Alameda reveals what appears to be an egregious failure of your bank’s responsibility to monitor for and report suspicious financial activity carried out by its clients,” Warren wrote.

It is unclear if the bank didn’t file suspicious activity reports – or if they were filed and simply ignored by relevant government agencies, as the CEO suggested previously. We’re guessing Silvergate will clear this up in detail going forward. 

“Silvergate appears to be at the center of the improper transfer of billions in FTX customer funds. Americans need answers. Those guilty of wrongdoing must be held accountable,” Warren continued. 

She makes a great point. Those guilty of wrongdoing should be held accountable. So let’s start with the man at the center of it all: why is Sam Bankman-Fried still walking around free?

But we digress. Throughout the last few weeks, Silvergate’s CEO has been outspoken in communicating with the market to offer up its position on the controversy. Most recently, late on Monday – perhaps to preempt the NBC story – CEO Alan Lane released a public letter seeking to once again clarify, among other things, the bank’s liquidity position and compliance standards.

“It has been a very difficult few weeks for the digital asset industry, as we have all come to terms with the apparent misuse of customer assets and other lapses of judgment by FTX and Alameda Research. There has also been plenty of speculation – and misinformation – being spread by short sellers and other opportunists trying to capitalize on market uncertainty,” he wrote.

“I wanted to take this opportunity to set the record straight about Silvergate’s role in the digital asset ecosystem and what we have always done, and continue to do, to ensure our customers act in accordance with our robust risk management controls,” he wrote. 

He first tackled risk management and compliance:

We take risk management and compliance extremely seriously.

Silvergate operates in accordance with the Bank Secrecy Act and the USA PATRIOT Act. For each and every account, these laws require us to determine the beneficial owner, the source of funds, and the purpose and expected use of funds.

Silvergate also monitors transaction activity for every account and identifies activity outside of the expected usage. When we identify certain kinds of activity, we are required to file suspicious activity reports, and we do so routinely. We have a track record of closing accounts that are used for purposes outside of the expected use. This is no small undertaking. We have invested, and will continue to invest, in systems and procedures to help ensure we are conducting effective customer due diligence and monitoring. We have dedicated a substantial number of Silvergate employees to this effort.

And, as our customers can attest, the onboarding process can take weeks as a result of the time we spend gathering and reviewing information and documentation from prospective customers. After accounts are open, we continue to monitor account activity as part of our enhanced due diligence process on each of these accounts and to take action when there are red flags. By performing our risk management procedures and fulfilling our regulatory obligations, Silvergate plays a key role in helping law enforcement identify bad actors. We take this responsibility seriously.

Lane also commented on the company’s due diligence on FTX and Alameda Research, stating that “…if we detect activity that is unexpected or potentially concerning in any account, we conduct an investigation and, when required, confidentially file a suspicious activity report in accordance with federal regulation.”

Finally, he talked about the bank’s “ample liquidity”:

We have a resilient balance sheet and ample liquidity. While this has been a turbulent time in the digital asset industry, our customers’ deposits are, and have always been, safely held. In addition to the cash we carry on our balance sheet, our entire investment securities portfolio can be pledged for borrowings at the Federal Home Loan Bank, other financial institutions, and the Federal Reserve Discount Window – and can ultimately be sold should we need to generate liquidity to satisfy customer withdrawal request. We intentionally carry cash and securities in excess of our digital asset related deposit liabilities.

We purpose-built this business to support our customers not only during periods of growth but also in periods of volatility – that is, our business is designed to accommodate deposit inflows and outflows under a range of market conditions. I am eternally grateful to our employees for continuing to work hard in the face of so much uncertainty, and to our customers for their continued support. We look forward to continuing to provide a safe and reliable banking solution for the digital asset industry.

And while short sellers and skeptics continue to raise the risks of KYC/AML issues and float irrational ideas like “bankruptcy”, not everybody has been skeptical of Silvergate. Certainly we continue to watch for opportunistic chances to own the bank’s equity, as we believe during the next easing cycle, it will head back toward all time highs well over $200/share. 

Recall, toward the end of November, “one of the richest men in crypto”, Brendan Blumer, bought 9.3% of the bank. This makes him the largest shareholder of the bank. Additionally, his EOS development firm, Block.one, also owns a 7.5% stake in the bank. Combined he controls about 17% of the bank. Block.one put out a press release about their stake in the bank calling it a “proven track record of maintaining a liquid and conservative balance sheet investment portfolio.”

They all said: “We believe Silvergate’s current equity prices do not accurately reflect their strong balance sheet, their strategic positioning, or their market-defiant growth trajectory, and therefore offers a unique investment opportunity. We are excited to be a new passive shareholder.”

The company is betting that when the smoke clears from the FTX pain, Silvergate will emerge not only little scathed, but potentially with its shares closely held, setting up potential for a swing higher in price again.  On top of that, via Bloomberg, we saw late last month that Citadel has added 280,000 shares of the name and now holds 392k shares, or about 1.25% of the company. 

However none of that matters right now, and instead shorts keep piling into SI stock, whose short interest is approaching a record 20% of the very illiquid float. That will likely continue until some catalyst short-circuits this feedback loop: it could include management giving a clear signal that the company is solvent (the CEO buying a substantial block of stock would certainly help), announces a sizable buyback, provides an early glimpse of its earnings and balance sheet, or unveils a deal with a strategic investor which locks up a sizable amount of the float, and potentially triggers a squeeze as signaled by the recent explosion in SI’s short interest.

By Greg Miller of FreightWaves.com

When Russia invaded Ukraine, the price of ship fuel spiked to unprecedented highs. Prices are still high in historical terms, but they’ve now fallen back to prewar levels. Ship fuel is getting cheaper as fears of future demand weakness drag down the price of oil.

Ship & Bunker put Friday’s average price of very low sulfur fuel oil (VLSFO) — the fuel used by most commercial ships — at $685.50 per ton (based on prices at the top 20 refueling hubs). That’s down 39% from the all-time high on June 14 and on par with prices seen in January.

The average price of high sulfur fuel oil (HSFO) — the fuel burned by ships using exhaust gas scrubbers — was $457 per ton, down 32% from the high on May 5 and back to levels seen in September 2021.

The price of ship fuel is important to importers of containerized cargo because shipping lines pass on fuel costs via bunker adjustment factors (BAFs).

In bulk commodity shipping, the price of fuel is important to spot markets because shipowners pay for fuel on spot voyages. Shipowner spot earnings are net of that cost. 

Meanwhile, the VLFSO-HSFO spread is pivotal for owners of ships with scrubbers. The higher the discount of HSFO to VLSFO, the more scrubbers pay off.

Container shipping fuel surcharges falling

On Friday, DPI Signals reported container line BAFs for the first quarter of 2023. The good news for cargo shippers: BAFs are now coming down rapidly as shipping lines pass along fuel-cost savings.

The Asia-West Coast BAF of Zim (NYSE: ZIM) will be 32% lower in Q1 2023 versus Q4 2022, falling to $720 per forty-foot equivalent unit. Evergreen’s Asia-West Coast BAF peaked in Q3 2022. In the coming quarter, it will be down 41% from that high, at $443 per FEU.

In the Asia-East Coast lane, Cosco’s BAF will fall 21% between Q3 2022 and Q1 2023, to $1,425 per FEU. CMA CGM’s BAF will decline 21% between the fourth quarter and the first, to $1,098 per FEU.

Scrubber savings volatile but remain high

The spread between VLSFO and HSFO jumped to over $300 per ton in January 2020, when the new IMO 2020 regulation went into force. That regulation required ships without scrubbers to switch from HSFO to more expensive VLSFO.

But in the wake of the initial COVID lockdowns, the VLSFO-HSFO spread collapsed to around $50 per ton. This raised the question of whether scrubber installations were a mistake. A spread of around $100 per ton is generally seen as the point where scrubber installations make economic sense.

As oil pricing and refinery utilization picked up in 2021, the spread widened again. When Russia invaded Ukraine, it rocketed to new highs, surpassing the previous peak in January 2020. According to Ship & Bunker data, the average spread at the 20 top refueling hubs hit an all-time high of $420.50 per ton on July 5.

It has fallen back again in recent months. The spread was $228.50 per ton on Friday. Even so, scrubbers are still paying off handsomely for shipowners.

According to Clarksons Securities, a spot-trading, scrubber-equipped Capesize (a bulker with capacity of around 180,000 deadweight tons) earned $9,400 more per day than a nonscrubber Capesize as of Monday, due to fuel savings. Spot earnings of Capesizes with scrubbers burning HSFO were 75% higher than Capesizes without scrubbers burning VLSFO.

A 2011-built, scrubber-equipped very large crude carrier (VLCC; a tanker that carries 2 million barrels of crude) was earning $14,100 more per day than a nonscrubber VLCC in the spot market on Monday, a 26% premium.

What’s driving the spread?

American Shipper asked Stefka Weschsler, marine fuels editor at Argus, about what’s driving the spread and what could happen after the EU bans imports of Russian refined products.

“Russia exports more HSFO than VLSFO, but Russia also exports distillate fuel, which is used as a blend stock to make VLSFO,” Weschsler explained. After the war began, VLSFO prices increased in the Amsterdam-Rotterdam-Antwerp (ARA) bunkering market, while HSFO prices declined. The spread rose to historic highs in July “as a reaction to distillates availability erosion.”

The decline in the spread this autumn was due to the price of VLSFO dropping faster than the price of HSFO. Between July and November, VLSFO prices in ARA fell 25% and HSFO prices 18%, according to Argus data.

The decline in VLSFO pricing outpaced HSFO “as Northwest Europe reshuffled its VLSFO sources, importing from the U.S. Gulf Coast, Gabon, Algeria, Tunisia, the UAE and Argentina,” said Weschsler.

Asked about the EU ban on Russian products imports starting Feb. 5, he said, “Market views are divided. Some think that with Russian distillates completely out of the EU market, ARA VLSFO prices will outpace HSFO prices [widening the spread].”

“Others think the spread will narrow once all Russian HSFO stocks are depleted from the ARA,” he said. In other words, lower HSFO supply would increase HSFO prices relative to VLSFO.

Container shipping to drive future scrubber installations

Scrubber installations make the most sense on high-capacity vessels on long-haul runs. Installations are more cost-effective with newbuildings than with retrofits.

Data from Clarksons Research shows a sharp rise in scrubber use over the past two years, but also, that most future installations will be on newbuilds, primarily on container ships.

In January 2020, when IMO 2020 was implemented, 35% of all VLCCs either on the water or on order had scrubbers installed or installations planned. As of Monday, the VLCC scrubber share had risen to 48%.

However, future VLCC scrubber installations are limited. The orderbook is extremely small, with only 27 VLCCs on order. Of those, only 26% will have scrubbers installed. Of VLCCs in service, only 19 (2% of the fleet) have scrubber retrofits planned.

The share of Capesizes with scrubbers or planned installations rose from 35% in January 2020 to 42% currently. As with VLCCs, the low orderbook will limit future installations. Only 19 of the Capesizes on order (16% of vessels under construction) will get scrubbers, and only 11 currently operating Capesizes have retrofits planned (less than 1% of the fleet), according to Clarksons Research data.

The container shipping industry has been the biggest scrubber adopter in terms of fleet share. The share of container ships with capacity of 12,000 or more twenty-foot equivalent units that have scrubbers or plan to have scrubbers increased from 52% in January 2020 to 59% currently.

Unlike VLCCs and Capesizes, newbuildings play a major role, as container shipping now has a historically large orderbook. According to Clarksons’ data, there are 140 container ships with capacity of 12,000 TEUs or more on order that will have scrubbers installed, representing 46% of ships under construction in that size category.

Overnight into Tuesday a third airfield deep inside Russia came under attack, suffering a fire after an oil storage depot was bombarded by what the Kremlin described as a drone attack that was repelled after the initial blast. A large blaze raged throughout the night as emergency crews responded.

It came the day after two explosions rocked a pair of air bases even further inside Russian territory, which killed three military personnel in the Ryazan region, and Russian Engels-1 airbase in Saratov. Those incidents were also subsequently described by the defense ministry as the result of drone attacks.

The Russian city of Kursk, which lies closer to Ukraine than the other two sites of attack, had thick black smoke rising over its airfield in the early Tuesday hours. “Oil tankers at a base near the city of Kursk, around 60 miles from the border, were on fire and streaming smoke into the sky early Tuesday morning,” The Daily Mail writes based on regional sources.

International reports say the large Kursk fire has burned for some ten hours, given a large oil depot was ignited, following the attack:

The inferno covered almost 5,500 square feet and new teams of firefighters were being rushed to the scene, local media said.

Suspected Ukrainian drones also attacked the Belbek military airport in Sevastopol – but were downed by air defenses, say reports.

Increasingly it is looking like Ukraine has made the decision to try and hit much more aggressively inside Russian territory, whether utilizing drones or possibly the longer range missiles being provided by the West, marking a huge escalation. 

In Russia tonight there was a new attack by an unknown drone on the Khalino military airfield in Kursk. As a result of the attack, an oil reservoir near the airport caught fire. pic.twitter.com/d14c1PJW1N

— Special Kherson Cat 🐈🇺🇦 (@bayraktar_1love) December 6, 2022

“Drones were also targeted at a fuel store in Bryansk region, but failed to cause major damage, said Russian sources,” Daily Mail continues.

The Monday attacks had damaged “two nuclear-capable bombers that were thought to be preparing for an attack on Ukraine, killed three ground crew and injured two more.”

As for the fresh probable drone attack on the Kursk base, Britain’s ministry of defense said, “If Russia assesses the incidents were deliberate attacks, it will probably consider them as some of the most strategically significant failures of force protection since its invasion of Ukraine.”

The UK defense official was quoted further as saying, “The Russian chain of command will probably seek to identify and impose severe sanctions on Russian officers deemed responsible for allowing the incident.”

So it seems this is Ukraine’s response to the widespread aerial attacks on its national energy grid, namely to extend its counteroffensive toward conducting risky cross-border raids on major Russian bases. 

⚡️Ukro drones hit fuel depot in Kursk pic.twitter.com/vc0VyBPyL9

— War Monitor (@WarMonitors) December 6, 2022

This significance of this can’t be overestimated – it takes all sides into dangerous, new and unpredictable territory which makes eventual direct Russian-NATO confrontation all the more likely.

NYT confirms US-backed Ukraine forces carried out their “most brazen attack” yet, 300 miles into “the heart of Russia” — including a base with Russia’s nuclear bombers. Not long ago this scenario would’ve sounded totally unfathomable and insane. Dwarfs anything from the Cold War pic.twitter.com/fKNoT42YBP

— Michael Tracey (@mtracey) December 6, 2022

Ukraine’s Ukrenergo is meanwhile warning the population of more emergency power shutdowns to come across the country. “Due to the consequences of shelling… to maintain the balance between the production and consumption of electricity, a regime of emergency shutdowns will be introduced in all regions of Ukraine.

“In priority, electricity will be supplied to critical infrastructure facilities,” Ukrenergo said of the rationing measures on Telegram Monday, during the fresh wave of many dozens of Russian airstrikes.

The 400 mile distance of Engels airbase from the Ukrainian border raised eyebrows following Monday’s attack. It also hosts long-range nuclear-capable strategic bombers, some of which were likely damaged.

Russian defense minister Sergei Shoigu is at the same time vowing that Russia will not stop until the “military potential” of Ukraine is crushed, according to Interfax. Shoigu said in a defense ministry conference call, “The Russian Armed Forces are inflicting massive strikes with long-range precision weapons on the military command and control system, defense industry enterprises, and related facilities to crush Ukraine’s military potential.”

“The Russian armed forces continue to liberate the Donbas. Recently, Mayorsk, Pavlovka, Opytnoye, Andreevka, Belogorovka Yuzhnaya and Kurdyumovka have come under our control,” he added.

Curious that this leak to the WSJ was published hours after Ukraine carried out by far its longest-range attacks yet inside Russia pic.twitter.com/aBSy42IMBw

— Michael Tracey (@mtracey) December 6, 2022

Independent journalist Michael Tracey summarizes the game-changing nature of the events of the last 24 hours as follows, and the significance of Washington clearly encouraging it, or at least not pressing Ukraine’s forces to put on the brakes as far as the fresh cross-border attacks…

“So the US is engineering the war effort of a client state now bombing targets 400 miles inside Russia — confirmed via the usual tactic of oblique, cheeky acknowledgment from top Ukraine officials. Definitionally an “escalation” — this is what the US has signed onto indefinitely.”

The US trade balance increased to a $78.2 billion deficit in October (from $74.1 billion in Sept). That was slightly less than the $80.0 billion expected but is still the biggest deficit since June.

The value of imports increased and exports declined, which may weigh on economic growth in the fourth quarter.

• Imports rose 0.6% in Oct. to $334.79b from $332.64b in Sept.

• Exports fell 0.7% in Oct. to $256.63b from $258.51b in Sept.

Services trade balance rose to a $21.4 billion surplus – the most since Dec 2021…

Under the hood, the US exported $2.259 billion more petroleum products than it imported in October, just shy of September’s record high…

We look forward to the Atlanta Fed’s GDPNOW model’s adjustment to this weaker trade balance data… which appears to line up with the dismal ISM/PMI data.

Authored by Chris Summers via The Epoch Times,

The leader of the opposition Labour Party, Sir Keir Starmer, has described Britain as a “broken model” and said the country was “crying out for a new approach.”

Speaking in Leeds at the launch of a report (pdf) by Labour’s Commission on the UK’s future, headed by ex-premier Gordon Brown, Starmer said the country needed “higher standards in public life, a wider spread of power and opportunity, and better economic growth.”

Although he campaigned for Remain during the 2016 referendum, he said said he understood why people voted for Brexit:

“They wanted more control over their lives, more control over their country. They wanted to create opportunities for the next generation—build communities they felt proud of, have public services they could rely on.”

Starmer said people were fed up of “navel gazing” and he said Britain must set its sights higher.

He said currently the government “hoards power in Westminster” and other parts of the country are left out, both politically and economically.

The Labour government of former Prime Ministers Tony Blair and Gordon Brown oversaw the introduction of devolution to Scotland, Wales, and Northern Ireland and the report suggests similar decentralisation for regions of England.

Brown said the commission was proposing “the biggest transfer of power out of Westminster and Whitehall” that has ever been seen in Britain.

The report suggests scrapping the House of Lords, which dates back to the 14th century, and replacing it with a democratic assembly of the nations and regions.

It goes on to suggest giving towns and cities more devolved power over matters like planning, transport, skills, and culture.

Starmer said Labour wanted to get rid of the House of Lords within its first term and he said an unelected second chamber was “indefensible.”

The House of Lords Act 1999 removed the right of most hereditary peers to sit and vote, but an amendment allowed 92 hereditary peers to remain.

An undated image of peers in the House of Lords debating the Elections Bill at report stage in the Palace of Westminster in London. (PA)

In 2009 the UK Supreme Court replaced the Law Lords as the supreme arbiter of legal matters and the following year the Conservative–Liberal Democrat coalition government said it would bring forward plans for an elected upper chamber, although it never happened.

The House of Lords remains an unelected chamber, with new peerages created occasionally.

In October there was controversy when the former deputy leader of the Labour Party, Tom Watson, was nominated for a peerage by Starmer.

Row Over Nomination of Tom Watson to House of Lords

Watson, who stepped down as a Labour MP in 2019, has been criticised for his role in promoting the claims of Carl Beech, who said a huge paedophile ring had been run out of Dolphin Square in London by senior politicians and army officers.

In July 2019 Beech—whose allegations led to a massive and ultimately fruitless police investigation—was jailed for 18 years.

The former Chancellor, Lord Lamont, accused Watson of having “destroyed” lives, and Lord Fowler said the nomination underlined the need for reform of the system.

Brown said the commission had identified 288 “new economic clusters,” the majority of which were outside London, which were capable of creating tens of thousands of well-paid jobs.

Labour’s report says investment in research and development (R&D) is not spread equally around the country.

The report says: “London and the South East [of England] attract 72 percent of new R&D-intensive jobs, and 45 percent of all private investment, and enjoy double the average UK infrastructure spend per head. And in the absence of new investment, only London out of every major city has higher than average productivity.”

Starmer said: “I’m fed up to the back teeth with sticking plasters for the problems we have got. The underlying problem is our economy isn’t working.”

The report also proposed a ban on second jobs for MPs and a “powerful” new anti-corruption commissioner.

Starmer said of the commission’s report: “This is a strong, compelling set of recommendations that do what politicians have all agreed needs to be done, but nobody has actually done it, which is to be bold enough to say, ‘We’ve got to stop those in Westminster and Whitehall pretending that they know best about the communities that desperately want to play their part in the future.’”

The report ignores demands for a second referendum on independence in Scotland but says there should be more powers devolved to Scotland, Wales, and Northern Ireland.

The government of Prime Minister Rishi Sunak has not commented on the report, but Conservative MP Simon Clarke said, “Anyone who has looked at the institutionalised gridlock in U.S. politics can see the utter stupidity it would be to create an elected upper house.”

Liz Saville Roberts, the leader of the Welsh nationalist Plaid Cymru at Westminster, said: “This report is a damp squib for Wales. The message from Gordon Brown to the people of Wales: if you want a democracy equipped with the powers to do a proper job, vote Plaid Cymru.”