The oil market was trying to put the situation in Cyprus behind itself. While the Parliament put off the vote and kicked the can down the road, traders tried to justify the return of confidence in the market to the fact that Cypriot economy is as a small as a small city and doesn't really matter in the whole scheme of things. The truth is the larger impact of what happens here could impact the markets for months on end. The prospect of the so-called "stability levy" of 6.75% on all bank deposits of less than €100,000 (£87,000) and 9.9% for those above €100,000 is raising questions where will it end. As to the size of Cyprus and those downplaying the significance may be the same folks that told you not to worry about the turmoil in the housing market because it was just "sub-prime” or that Greece was not a market mover because of its size.
Reuters is reporting that the Cypriot parliament is going to reject the tax on bank deposits, raising fears of a bank collapse and possible withdrawal from the Eurozone. While the market seems OK with the possibility to charge a retroactive tax on bank deposits, it is raising the question whether or not any assets anywhere are safe at any time.
When it comes to Cyprus, one of the problems is that it is widely known that their banks have been used by Russia to launder money. Of course this has made Vladimir Putin very testy. The EU is balking at bailing out the Russian mafia which makes raiding deposits a bit more tenable. Yet the precedent that it sets might destroy confidence in banks around Europe and the world.
Cyprus has been the wild-west when it comes to lending and its banks. The Guardian reports, "Cyprus has faced two big problems. The first is that its banks went on a lending spree during the good times – by 2011, they had made loans worth more than eight times the country's national output. Even Britain, the most spectacular example of a big developed country that allowed an overblown banking sector to threaten the entire economy, did not go quite that far. The second problem was the close links between Cyprus and Greece, a country gripped by a brutal slump that has seen the size of the economy shrink by 20% in four years. Cypriot banks had made loans to Greece worth 160% of GDP and the losses on that high levels of exposure have been raising rapidly.”
Natural gas flew on cold weather and record demand. Power generators reluctance to switch back to coal my signal that record demand will continue in the near year. The projection by the EIA that demand for gas will fall by 7% is being blown out of the water as demand will obviously be stronger. The natural gas demands will hit another record high this year and for production to keep up prices has to be a little stronger.