Coal Remains The Winner

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

Rate Hike Likely

The Labor Department on Thursday reported that unemployment claims rose to 225,000 in the latest week from a revised 216,000 in the previous week. Continuing unemployment claims increased to 1.710 million in the latest week from a revised 1.669 million in the previous week. Interestingly, continuing unemployment claims have been steadily rising since October.

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However, unemployment claims are still too low to impact Fed policy, so a February 1st key interest rate hike remains likely due to rising Treasury bond yields this week.

Circumventing Sanctions

Russia on Tuesday officially banned the sales of crude oil and petroleum products to the G7 countries that imposed a $60 per barrel price cap on Russian crude oil. Hungary and other landlocked European Union (EU) nations are requesting exemptions from the G7 price caps on Russian crude oil.

Overall, the G7 versus Russia continues to get very interesting. The bottom line is price caps tend to fail, but in the interim, Russia’s ban on selling crude oil to the G7 will likely help to push crude oil prices higher.

Interestingly, the Financial Times reported that Western Insurance companies are still covering crude oil shipments to China, India, and Turkey through December. However, under the G7 price cap agreement, Western insurers and logistics companies are only supposed to work with Russia if the buyers of crude oil are paying less than $60 per barrel.

According to Kpler, a freight data and analytics company, from December 5th through December 25th, six tankers with Russian crude oil were headed to China, nine to India and one to Turkey that were covered by Western insurance companies.

Clearly, the implementation of the G7 $60 per barrel price cap, plus the ban on Western insurers and logistics companies, is not being fully enforced. Over time, sanctions and price caps tend to fail and Russia is a master of circumventing Western sanctions and price caps.

Coal is Winning

The International Energy Agency (IEA) said that coal consumption is due to hit an all-time record in 2022, due somewhat to the fact that Germany reactivated many of its closed coal plants, plus all the new coal plants in China and India.

During the first two weeks of December, Germany’s coal consumption rose 49% compared to a year ago. Interestingly, the IEA also said that neither hydrogen nor batteries were ready to be deployed at scale. An acute battery shortage due to the transition to EVs means that large battery storage facilities remain cost prohibitive, even though some battery storage facilities are being added in California.

The real problem that Germany and many other European counties have are record high electricity rates, so there is no desire at this time to increase electric rates further with expensive batteries or alternative solutions, so coal remains the winner.

Coffee Beans

The 2018 release of The Grinch is the Christmas-themed movie that won the hearts of most viewers around the globe – with a gross of $512.9 million in just four years. Home Alone, the Christmas classic from 1990, is the runner-up in the ranking, having brought in $476.7 million internationally. Source: Statista. See the full story here.