Money Matters: Firstline Securities Blog

PDVSA – An update

4 November 2016

Hi everyone,

In an earlier blog entry in this series (“Nightmares Aplenty – The Continuing Saga of PDVSA and Venezuela “) we discussed the recent attempts by PDVSA and the government of Venezuela to restructure the debt of PDVSA in the face of sustained low oil and gas prices. The original entry in this blog series can be found online at the following location:

In this blog entry, we look at the latest events in the great PDVSA bond swap

Firstline Team

The great PDVSA Bond Swap – a little recap

In September 2016 PDVSA announced the launch of a $7 billion bond swap to alleviate mounting financial pressure on PDVSA – and by extension the Maduro regime in Venezuela – as it stares down the barrel of multi-billion-dollar debt repayments falling due over the next 14 months.

The proposed bond swap covers notes issued by PDVSA that fall due in April 2017 and November 2017 and would allow holders in those notes to trade them in for new notes with maturity dates in 2020. The logic behind the swap is PDVSA is banking on oil prices recovering in the period to 2020 from the low prices experienced since June 2014.

Initially the swap was priced at a one-to-one ratio but an improved offer was made by PDVSA once it became clear that investors had little appetite for a straight 1:1 swap. The amended terms offered granted an additional $170 in new 2020 bonds for every $1,000 in April bonds, and an additional $220 for each $1,000 in November bonds.

Wanting at least 50% of 2017 bond holders to swap but falling short of target

Under the original terms the PDVSA bond swap offer was only valid if the holders of at least 50% of the April and November bonds agreed to the swap. This was because PDVSA was facing a critical problem with over $11 billion in bond repayments falling due by the end of 2017. In dollar terms the target was to swap at least $5.325 billion of the 2017 notes for new 2020 notes to buy PDVSA and Venezuela time.

On the 24th October 2016 PDVSA announced that creditors holding $2.8 billion of the 2017 bonds have agreed to extend maturities by swapping 2017 debt for new 2020 bonds.  The number of bonds tendered equates to around 39% of the 2017 notes eligible for the swap. This is well short of the intended target of 50%. To complete the exchange PDVSA will issue $3.4 billion in new debt.

Has PDVSA dodged the bullet, or is still staring down the barrel? 

By exchanging 2017 bonds for new debt with annual payments through 2020, PDVSA will reduce bond outlays that would have totalled $3.05 billion by more than $900 million. Whether this is enough to save PDVSA from default remains to be seen. Looking purely at dollars and cents, PDVSA still stares down the barrel of $6.1 billion in principal payments due by the end of 2017. For extra comfort – or if you prefer a “margin of error” – PDVSA, Venezuela (and probably bond holders) need oil prices to rise, and they need them to rise quickly.

PDVSA may have dodged the bullet, but it is still too early to say whether the company has escaped default.

Do ratings matter anymore to PDVSA bond holders?

One of the most interesting facets of the bond swap concerns the position of the rating agencies.

Two of the major rating companies – S&P Global Ratings, and Moody’s Investor Services – announced that they might consider the proposed swap as “distressed” effectively classifying it as a default. There is little evidence that this has had any impact on existing bonds holders or the proposed swap. One reason for this is that PDVSA, at least in terms of bonds, has always been considered “high risk” by investors.

The savviest of bond holders would have seen the writing on the wall once it became clear that the fall in oil prices was likely to be sustained over the medium term. To that extent ratings of PDVSA, or opinions on its credit worthiness have become less important, while return (and the perceived return) on bonds has become king. Risk is still a factor, but the 2020 bond is well secured and the risk are well known.

Why this bond swap comes at a heavy cost to both PDVSA and Venezuela

The great PDVSA bond swap has come at a heavy cost to both PDVSA and Venezuela.

Apart from having to “sweeten the pot” from the terms of the original issue to roughly 1.2 times the face value of the 2017 bonds, and apart from having to extend the deadline four times because investor interest could not be stimulated sufficiently, Venezuela has effectively placed in hoc arguably it most attractive overseas asset – Citgo Petroleum Corp.

While the Oil Minister, Mr. Eulogio Del Pino has touted the swap as a “victory for the Fatherland” this is not necessarily so. Venezuela has bought some time, but there is a still a real possibility that PDVSA will default on its bonds obligations. The story of PDVSA -its persistent repeating nightmare- will therefore continue for some time.

Why the bond swap should be viewed by investors as a positive sign

We shouldn’t close the door on PDVSA, at least for this blog entry, without saying something positive. PDVSA has duly settled the $1 billion 5.125% bond that just matured October 28, 2016. Arguably the bond swap should be viewed by investors as a positive sign if only because the overwhelming signal from Caracas is that Venezuela has not and does not want to default on its obligations at any cost. Willingness to pay is a material factor to be considered by any bond investor and rating agency.

Venezuela – the ship that just keeps sinking

Against the backdrop of the PDVSA bond swap key economic data coming out of Venezuela remains far from pretty. Officially the government maintains exchange controls that sell one US dollar for 10 bolivars (for the importation of priority goods) and 659 bolivars for items deemed less important.

On the Black Market – seen by many as key benchmark indicator of the health of the country as a whole – the bolivar weakened significantly in the week to 31st October 2016 reaching an unofficial rate of 1,501 bolivars per dollar compared with 1,222 bolivars per dollar a week earlier.

Venezuela is sinking but not without hope. Chinese and Russian investments in the oilpatch and  possibly the construction of an LNG plant across the water from Trinidad to be fed by the Dragon field could stabilize the outlook materially. The PDVSA bond swap buys time but other factors need to change and they need to change quickly.

Closing thoughts – time to consider your investing strategies
Firstline Securities Limited offers comprehensive coverage of local and international markets with a bias for the energy sector. Firstline offers a number of unique opportunities to put surplus cash to work either as your asset manager or investment advisor. Please contact us for more details at or at 868.628.1175, we can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.


Nightmares Aplenty – The Continuing Saga of PDVSA and Venezuela

19 October 2016


Hi everyone,
As we approach Divali and the Christmas season, if ever a reminder was needed that we are living in the most challenging and interesting of times – and that collectively as a nation, T&T has a lot to be grateful for – we take a look at the situation in Venezuela and consider PDVSA’s proposed bond swap.
By the way, how well do you know your country?
Firstline Team

Nightmares Aplenty – The Continuing Saga of PDVSA and Venezuela


Petroleos de Venezuela SA (PDVSA)PDVSA is the Venezuelan state owned oil and natural gas company. It undertakes activities in production, refining, and exportation of oil, as well as the exploration and production of natural gas.

Since PDVSA was founded on the 1st January 1976 – when the Venezuelan oil industry was nationalised – PDVSA has dominated the oil industry of Venezuela. As a nation Venezuela is currently the world’s fifth largest exporter of oil and its proven hydro-carbon reserves are the largest in the world.


PDVSA and the Venezuelan Government – Running on Empty

The funds generated by PDVSA have traditionally been used by the Venezuelan government to fund its social development projects. Because Venezuela is so heavily reliant on revenue from the oil and gas sector such a reliance has always been fine when prices have been close to or over $100 dollars per barrel.

In June 2014 the price of oil per barrel was $115. At the time of writing of this blog entry, the price of Brent Crude stands at $51.42 per barrel. For most of the intervening period since June 2014, oil prices have been at least 70% lower than the high recorded in June 2014. Of greater importance to both PDVSA and Venezuela, the oil price per barrel has been consistently below or close to PDVSA’s cost of production.

In the most literal of terms – PDVSA has been running out of money and consequently the government has been for some time attempting to “run on empty”.


What running on empty really means

The Venezuelan economy and its public finances have been decimated by the collapse in oil prices. The government – starved of cash – has struggled to find sufficient hard currency to pay for the importation of basic necessities including badly needed medicines, and of more importance to bond holders, it now seems it will struggle without action to meet its debt payments

Looking at just the numbers presents a frightening picture. The price of Venezuela’s crude oil fell to a 13 year low of $21.63 in January after a period of four years where it had been close to $100 per barrel. It has since recovered to a price in the vicinity of $44 dollars but $44 is a long way from $100.

Measuring these prices against the average cost to produce a barrel of oil or gas equivalent in Venezuela in 2016 highlights the problem both PDVSA and the government face. Venezuela is a high cost per barrel producer with an average cost of US$27.62 per barrel. With oil prices in the vicinity of $50 that doesn’t leave much profit to build or sustain a socialist economy.


The average cost of production of oil or gas equivalents in 2016

Based on the last available comparative data (March 2016) the average cost to produce a barrel of oil or gas equivalent in 2016 can be represented by the following information.

Of the major producers Venezuela sits high up on the table in terms of the cost to produce a barrel with only the United Kingdom, Brazil, and Nigeria having higher costs per barrel. Venezuela’s cost of production is over three times higher than the country with the lowest cost per barrel – Saudi Arabia – who on average extract at an average cost of just under $9 per barrel.

Read more…

The Credit Union – In Evolution

17 October 2016


For more than 68 years, credit unions in Trinidad and Tobago have been serving the under-served elements of the population, who hitherto had no access to ownership of their own institution, no access to credit, no opportunity to serve on a Board of Directors and to chart their own path. What credit unions brought to this section of the population was the opportunity to be part of an organization which encouraged ideals of democracy, social consciousness and human relations.



If one were to trace the evolution of credit unions in Trinidad and Tobago, many would recall familiarity with the concept of “sou sou” which had its genesis in Rotating Credit Associations, which are incidentally also  known as the “Poor Man’s Bank”. Several parties assert that the birth of credit societies worldwide occurred in the 1800s with the first being established in Germany, spreading to the west and other parts of the world in the 1900s.

There are other pieces of evidence in the literary sphere which point to the embryonic form of credit societies in many parts of the world. Known as Rotating Credit Associations (RCAs), several authors have provided definitions for these RCAs.

Read more…

The 2017 National Budget of the Republic of Trinidad and Tobago

13 October 2016

Shaping a better future: A blueprint for Transformation and Growth – Part Two

On the 30th September 2016 the Minister of Finance, the Honourable Mr. Colm Imbert delivered the second national budget of the current PNM administration.

In this second blog entry on the 2017 budget we look at some of the additional items mentioned by the Honourable Minister of Finance.

The medium term goal – where we are all heading

The central tenet of the 2017 national budget of Trinidad and Tobago is the continuation of the adjustment process started in the first budget of the new PNM administration and the mid-year review.

In addition, the government intends to accelerate its public sector investment programme, and enhance and improve its collaboration with the private sector (particularly in the field of capital projects and construction) in order to stimulate economic recovery, diversification away from the reliance on oil and gas, and a move away from the culture of dependency and entitlement that is considered by the government to be pervasive throughout society.

The government has set specific targets to be achieved by 2020. These include:

  • A balanced budget (meaning the eradication of an annual budget deficit) by 2020
  • Limiting the level of public sector debt to no more than 65% of Gross Domestic Product (GDP)
  • Reducing Trinidad and Tobago’s dependence on energy revenues
  • Containing government expenditures through the elimination of waste and corruption
  • Redirecting expenditure away from subsidies and discretionary transfers and towards spending on essential economic infrastructure

Read more…

The 2017 National Budget of the Republic of Trinidad and Tobago

10 October 2016

 The 2017 National Budget of the Republic of Trinidad and Tobago

Shaping a better future: A blueprint for Transformation and Growth

On the 30th September 2016 the Minister of Finance, the Honourable Mr. Colm Imbert delivered the second national budget of the current PNM administration.

It’s not all a story of “doom and gloom” – together we aspire, together we achieve

As a nation we have a lot to be thankful for. The abundance of oil and gas reserves – which may be a blessing or a curse depending on your own viewpoint – provides Trinidad and Tobago with advantages that other nations in our region simply don’t enjoy and are reasonably jealous of. Even though we have all suffered the twin effects of the impact of the financial collapse in 2007 and depressed commodity prices since 2014, there is a lot to be thankful for, and – so it seems – some light at the end of the tunnel.

Our country’s economic vital signs continue to be strong. Our debt levels measured against GDP, our unemployment rates, the fact we still have a heritage and stabilisation fund, our import cover at just over 10 months remain healthy especially when we measure them against our peers in the region who rely on tourism and are not blessed (or cursed) with the type and level of natural resources that we control and the world continues to demand.

The fact that our recent international US$ 1billion bond issue was so heavily over-subscribed should tell us something. If the world has confidence in us, then we should have confidence in ourselves.

And the light at the end of the tunnel?

OPEC’s recent decision to cut output should help to support and lift oil prices to more familiar and comfortable levels for producers.

If we didn’t know it before we know it now. We are not nor have we ever been alone in our struggle. Even the mighty Saudi Arabia can suffer the effects of sustained lower energy prices.

So it seems – in the end, everyone hurt.











Read more…

Brexit Watch – from the “European” Perspective

3 October 2016


Brexit Watch – from the “European” Perspective


Britain in the eyes of a Frenchman

You don’t have to be a Rocket Scientist to identify that the English are different.

As an Englishman I am the first to admit it. We simply don’t walk, talk, interact, consume, love, hate, or think like “Europeans”.

As a nation, our focus and our heart is not and has never been “European”. Historically our power and influence in the world was not made, or for that matter maintained in Europe, but derived from pillage, plunder, colonialism, and a Naval force that was second to none. Many things have changed especially in the last 50 years – we no longer have an Empire, we have tempered (somewhat) our tendency to pillage and plunder, and we no longer dominate the seas. All that has remained consistent is that we are still not in any sense of the word “European”.

It is fair to say that the rest of Europe don’t always get this. Many look at the English with bemusement and a wry shake of the head. One European who did “get” the English was the French President Charles De Gaulle.

In 1963 De Gaulle commented (at the time he was exercising France’s veto effectively rejecting the UK’s application to join the European Economic Community):

“England in effect is insular. She is maritime. She is linked through he interactions, her market and her supply lines to the most diverse and often the most distant countries; she has, in all her doings, very marked and very original habits and traditions.”

In other words, it isn’t just the English Channel that separates the United Kingdom from the rest of mainland Europe. In the simplest of terms British DNA has never been “European”. Read more…

Brexit Watch – much ado about nothing?

27 September 2016

Good afternoon Everyone. 

As part of a regular series delivered from our UK based intermediary we look at the latest developments in respect of Brexit. Although not as sexy as Brad and Angelina’s divorce, the severing of links and ties between Britain and Europe promises to be challenging and is likely to run and run…

Also we have attached also LATAM and Caribbean sovereign indicative levels here for your review. Please contact us with any interest.

Call us at 1 868 628 1175 to discuss further or email
Have a good week everyone!

Firstline Team

Brexit Watch – much ado about nothing?

Image result for brexit images

Brexit Britain – is it really a new dawn?

On the 23rd June 2016 Britain voted by a margin of 52% to 48% to leave the European Union.Given that we are now nearing the end of September, readers of this blog might be surprised to find that we still don’t know what Brexit will actually entail in detail, nor do we have any clear indication what Britain’s path to Brexit will actually mean.

There aren’t any clues in the latest developments – at least in so far as they relate to key economic data and statistics. Not much has happened and not much is expected to happen for the rest of the year in respect of Brexit.

Much ado about nothing then?

The economy – little evidence that confidence has been dented

Prior to the June Brexit vote most economists predicted an immediate and severe negative shock on the UK economy in the event that the leave campaign secured victory.

At the time of writing of this blog entry there is little evidence that Brexit has had a negative impact at all, save for a persistent weakening of the pound against most major currencies.

Consumer Spending – a measure of confidence and the mood of the country?

Consumer spending has been rising for the past three years, and in July was up 5.9% on the figure recorded in July 2015. Overall, UK consumers made 168 million purchases on credit cards in July 2016, an amount that was higher than the number of transactions recorded in June, above the comparative figure for July 2015, and higher than the average of the previous six months.

The economy – a little case of exchange rate inflation

The consumer prices index rose by 0.6% in July. This moderate increase can be attributed to higher fuel prices as these are denominated on international markets in US dollars. The pound has weakened against most of the major currencies including the US dollar as a result of the Brexit vote (see below).

Britain’s Manufacturing continues to rebound

A recently released Markit/CIPS survey suggests that Britain’s manufacturing sector rebounded strongly in August. Underlining the data in this survey, the Office for National Statistics reported that Britain’s industrial output grew at its fastest rate for over 17 years in the period between April to June 2016.

Little impact on the rest of Europe?
There is evidence to suggest that the rest of Europe is quickly getting over the shock of the Brexit vote. According to the same Markit Survey, Eurozone economic activity reached its highest level in August (measured against the previous seven months).
Is Britain really gearing-up for Brexit?

David Cameron, who had led the campaign to remain, resigned the day after the referendum and has been replaced by Mrs. Theresa May as Prime Minister.

Mrs. May, who also supported the remain campaign, has said that Britain will not trigger Article 50 before 2017. Some have interpreted this to mean that the new PM continues to harbour reservations in respect of Brexit, but the new PM has gone on record a number of times to state that “Brexit means Brexit” and that the will of the majority must be respected. May has met some of the EU leaders including Germany’s Angela Merkel, and the French President Francois Hollande, but the formal negotiations on the UK departure from the EU have yet to start. For completeness, EU leaders have reiterated their original position that negotiations cannot start until Britain triggers Article 50 of the Lisbon Treaty.

Beyond this, Mrs. May’s new Cabinet includes “Brexiters” in key strategic positions. Boris Johnson currently holds office as Foreign Secretary, while David Davis has been appointed as Secretary of State for Brexit, and Liam Fox as the International Trade Secretary. All of these positions are key to a “Post-Brexit” future.

No clear definition or consensus on what Britain wants from Brexit

Mrs. May’s government have yet to set out in detail what the UK wants to achieve from the whole of the Brexit negotiation process. This is not surprising. There is little consensus in her government or the country for that matter. The path to Brexit is littered with hurdles, the largest being the issue of immigration. Many in Mrs. May’s administration want Britain to have total control over her borders, while others accept that continued access to Europe’s market would have to come at the cost of continued free movement of people from the rest of Europe into Britain.

Immigration remains a key sticking point that may continue to cause deep divisions in Mrs. May’s administration as well as the country as a whole. Ultimately immigration may prove to be the wall that simply cannot be scaled.

What has happened to interest rates?

The Bank of England’s approach to the Brexit vote strongly suggests that a plan had been designed by the Bank of England to deal with the expected impact of a leave vote. Accordingly, the Bank of England has cut interest rates from 0.5% to 0.25% (the first reduction in interest rates since 2009). Interest rates in the UK now stand at a record low.

The Bank of England has also announced a significant extension of its quantitative easing programme – the extension amounting to an additional £70 billion. A £100 billion scheme has also been announced to ensure that Bank’s pass on the low interest rates to households and businesses respectively.

The Pound has plunged and shows little inclination to recover lost ground
Image result for images of pound sterling money
The day after the referendum the pound plunged dramatically as did the stock market. While the stock market has recovered the same cannot be said for the pound.As a result of the economic uncertainty and concerns over Britain’s future relationship with the rest of Europe, as well as the impact of the Bank of England’s drop in interest rates, the pound continues to remain depressed measured against pre-Brexit vote levels.

At the time of writing of this blog entry the pound is now worth $1.30. A year ago it was worth $1.57, a fall in percentage terms of 17%.  Against the Euro the pound is now worth 1.17 euros. A year ago it was worth 1.35 euros. This represents a fall of 13%.

The rise of Hate Crime

According to data released by the Police reported hate crime (illegal acts perpetrated against a person based on their race or creed) rose 57% in the four days immediately following the referendum. In the period between the 16th and the 30th June 2016, 3,219 incidents of hate crime were reported to the Police. Measured against the same period in 2015, this represents a rise of 37%.

The impact on Trade

Britain has for many years run a trade deficit with the rest of the world and Europe. This means that annually Britain imports more goods than it exports. In the month of the referendum, Britain’s trade deficit widened to £5.1 billion with the level of imports hitting a new high.

The continued weakness of the pound may help Britain’s exporters to cut some of this deficit as the price of Britain’s exports will now be comparatively cheaper. But there is also the other side of the coin to look at. There is evidence of increased inflationary pressure as the price of imports (including imported raw materials) have risen. Data in respect of this should be released in October.

The position in respect of employment

In the run-up to the referendum UK unemployment fell by 52,000 to 1.64 million. This represents an unemployment level of 4.9%. New data will not be available until October so it is difficult to assess the impact of the vote on jobs.

Although the Market survey mentioned above suggested that the jobs market suffered a dramatic slowdown in July as a result of the Brexit vote, when we look at announcements from some of the larger employers the position is mixed.

One of Britain’s largest banks, Lloyds, has accelerated planned job cuts releasing another 3,000 positions. Offsetting this, Japans SoftBank is in the process of acquiring the UK smartphone microchip manufacturer ARM Holdings for £24 billion, and its transition plan for post-acquisition involves the creation of additional positions that would double the workforce from its existing level of 4,000 people. In addition, the pharmaceutical company GlaxoSmithKline is investing an additional £275 million in the UK, while the fast food brand McDonalds has announced plans that would involve the creation of an additional 5,000 jobs.

Not all prospective employers are deterred by Brexit.

The world has not ended – so far

The fall in value of the pound and rise in hate crime aside, there is little evidence to suggest that Britain has so far been negatively impacted by the Brexit vote. This is perhaps not surprising as the formal process of leaving – the triggering of Article 50 – has not started. As the months unfold this may change. Suffice to say that so far the world has not ended, but we do live in the most challenging of times.

Closing thoughts – time to consider your investing strategies
Firstline Securities Limited offers comprehensive coverage of local and international markets with a bias for the energy sector. Firstline offers a number of unique opportunities to put surplus cash to work either as your asset manager or investment advisor. Please contact us for more details at or at 868.628.1175, we can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.

Read more…

Crude Oil Pricing Primer

14 September 2016


Good Morning Everyone. 

Whenever I view the 7 o’clock news on the local TV channels, the news presenter on each station will mention the day’s oil price. But, on any given day you will realise that each price mentioned is different. I suspect some viewers may not understand why the prices reported are not the same.  So this piece attempts to explain why they are different.
Have a good week everyone!
Firstline Team

Crude Oil Pricing Primer

Crude Oil Pricing 101

Image result for crude oil liquid

The “markets action” segments of the 7:00 pm news on the local channels TV6 CCN, CNC3 and CTV each presents a crude oil price and each value is different from the other! Ever wonder why? Which is correct? Do the viewership understand why each is different? How many crude oil prices are there really?

Let’s attempt to bring some clarity here.

The reality is at any one point in time there literally are hundreds of crude oil prices.

The crude oil market has a “physical‟ dimension and a “financial” dimension to it.

Physical Dimension

The physical dimension should anchor prices in oil market fundamentals: crude oil is produced, consumed and stored at various locations worldwide; vary in chemical nature and widely traded with millions of barrels being bought and sold every day at prices agreed by transacting parties. These prices, referred to as spot prices, should reflect existing supply-demand and quality considerations.

Crude oil is not a homogenous commodity; each one has its own characteristic chemical composition. So to price each, market participants have since 1988 adopted the market-related pricing approach. The pricing system permits crude oil with different qualities and characteristics, which have a bearing on refining yields derived from such, to be priced usually at a discount or at a premium to marker or reference prices, often referred to as benchmarks.

These differentials are adjusted periodically to reflect differences in the quality of crudes as well as the relative demand and supply of the various types of crudes.

At the heart of formulae pricing is the identification of the price of key “physical‟ benchmarks, such as West Texas Intermediate (WTI), Dated Brent and Dubai-Oman. The benchmark crudes are a central feature of the oil pricing system and are used by oil companies and traders to price cargoes under long term contracts or in spot market transactions; by futures exchanges for the settlement of their financial contracts; by banks and companies for the settlement of derivative instruments such as swap contracts; and by governments for taxation purposes.

These physical benchmarks with relatively low volumes of production such as WTI, Brent, and Dubai set the price for markets with higher volumes of production elsewhere in the world.

Financial Dimension
Image result for crude oil
In the last two decades or so, many financial layers (paper markets) have emerged around crude oil benchmarks. They include the futures, options, swaps and forward market (in WTI, Brent and Dubai). Some of the instruments such as futures and options are traded on regulated exchanges such as ICE and CME Group while other instruments, such as swaps, options and forward contracts, are traded bilaterally over the counter (OTC). Nevertheless, these financial layers are highly interlinked. Over the years, these markets have grown in terms of size, liquidity, sophistication and have attracted a diverse set of players both physical and financial. These markets have become central for market participants wishing to hedge their risk and to bet on oil price movements. Equally important, these financial layers have become central to the oil price process.

Futures Primer

futures contract is a legal agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument for a price agreed upon today (the forward price) with delivery and payment occurring at a future point, the delivery date.

Futures contract trades in months before the contract expires. No contracts exist when trading begins and no contracts would exist if no one was interested in trading. But as soon as a buyer finds a seller, a contract is created. All the buyer and seller recognise is that a commodity will be available at some time in the future and they want to agree on a price now. Amazingly though, the process of contract creation can go on indefinitely as long as buyers find sellers and vice versa. In fact the number of contracts can often be larger than the actual supply of the commodity that exists. Buying a futures (going long) involves the possibility of accepting delivery. Selling a futures (going short) involves either the possibility of making a delivery or liquidating a long position.

The obvious question is: if there is only so much of a commodity to go around and if the number of contracts exceeds the available commodity supply, how are the contracts filled? Interesting, as the delivery month nears (first nearby, delivery or prompt contract), the number of contracts tend to decrease naturally. The speculators will be offsetting, leaving the physical commodity traders to deal.

Those contracts remaining in the prompt month at expiry will be settled either through delivery or through offset. Since a contract is eliminated either when a delivery is actually made, when a long is liquidated, or when a short covered, all contracts are eliminated, one way or the other, when trading in the delivery month ceases.

At contract expiry the physical and futures prices converge. One finds if the supply of the commodity is greater than the amount totalled up in all the contracts, that the prices tend to drop because supply exceeds demand. Speculative longs’ will be aggressively selling (offsetting) positions to avoid the risk of taking delivery.

On the other hand, if the physical commodity supply is in short supply and the amount available is less than that totalled up in all contracts, prices will tend to rise as speculative shorts’ are aggressively buying (covering) to exit their short position to avoid the risk of buy back from the longs at prices higher than anticipated..

As of today’s date September 12th, the prompt NYMEX WTI crude oil contract being traded is for October delivery. This contract will expire on September 20th and thereafter the contract for November 2016 delivery, which is the 2nd nearby, becomes the prompt, 1st nearby or front month contract.

Some specifics of NYMEX WTI Crude Oil Contracts

  1. Contract volume –  1,000 barrels WTI crude oil
  2. Price quotes –  US $ and cents per barrel
  3. Listed Contracts – Crude oil futures are listed 9 years forward using the following listing schedule: consecutive months are listed for the current year and the next five years; in addition, the June and December contract months are listed beyond the sixth year.
  4. Front Month Settlement Methodology –  The front month settles to the weighted average price of all trades that are executed between 14:28:00 and 14:30:00 ET, the settlement period, rounded to the nearest cent.

So which Crude Oil Prices the local TV Stations present nightly?

CCN TV6 – Presents the previous day’s WTI prompt (1st nearby) futures settlement price;

CNC 3 – Presents the day’s prompt WTI futures settlement price; and

CTV – Presents the day’s Brent prompt futures settlement price

Closing thoughts – time to consider your investing strategies

Firstline Securities Limited offers comprehensive coverage of local and international markets with a bias for the energy sector. Firstline offers a number of unique opportunities to put surplus cash to work either as your asset manager or investment advisor. Please contact us for more details at or at 868.628.1175, we can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.

Mr. Phillip Lewis
Executive Manager – Business Development
Firstline Securities Limited


12 September 2016


What is a ‘Smurf’

Unfortunately, in money laundering the term ‘Smurf’ does not refer to the fictional colony of small, blue humanoids who live in mushroom-shaped houses in the forest.

A smurf, in the real word, is a slang term for a money launderer, or one who seeks to evade monitoring authorities by breaking up a transaction involving a large amount of money into smaller transactions below the reporting threshold into the financial systems. For example, a smurf deposits illegally gained money into bank accounts for transfer in the near future.

One method smurfs use is what is known as ‘cuckoo smurfing. The perpetrators of this money laundering typology seek to transfer wealth through the bank accounts of innocent third parties.

The term originated in Europe because of similarities between this typology and the activities of the cuckoo bird. Cuckoo birds lay their eggs in the nests of other species of birds which then unwittingly take care of the eggs believing them to be their own.


Example of Smurfing

Cuckoo smurfing is one way criminals move money internationally. For example, say a country A criminal owes a country B criminal $8,750, and a country B company owes a supplier $9,000 based in country A. The company based in B goes to its Bank and deposits $8,750 with instructions to transfer the money to the supplier’s bank in A. Country B’s banker, working with the criminal in A, instructs the criminal to deposit $8,750 in the supplier’s bank account in country A. Country B’s banker then transfers $8,750 from the merchant’s account in country B to the criminal’s account based in country B. Both the merchant in country B and the supplier in country A do not know the funds were never directly transferred; all they know is the merchant paid $8,750 and the supplier received $8,750.


There are four key steps in this process:

 Step 1

A legitimate customer deposits funds to transfer into another customer’s bank account most likely in a foreign country with a remitter.

Step 2

Unknown to the customer, the remitter is part of a wider criminal syndicate involved in laundering illicit funds via the financial system. The criminal remitter, who may be supported by local and foreign criminal elements, coordinates and allocates which portion of the illegitimate funds transfers match the details of the legitimate funds transfers.

Step 3

The criminal deposits illicit cash from crime syndicates into the bank account of the customer awaiting the transfer from regional / overseas. The cash is usually deposited in small amounts to avoid detection under transaction threshold reporting requirements. After an account balance check, the customer believes that the overseas transfer has been completed as legitimately arranged.

Step 4

The criminal accesses the legitimate money that was initially deposited with the remitter. The illicit funds have now been successfully laundered – the criminal owes nothing but a commission to the money launderer for their work.

This is a well organised and structured mechanical system, which is highly sophisticated and a technologically advanced operation to successfully operate a cuckoo smurfing syndicate.


Typical characteristics are:

  1. Innocent customer seeking to transfer funds from or to overseas accounts.
  2. Or a customer seeking to transfer funds into their own account, or
  3. An innocent customer overseas seeking to transfer funds to another customer locally
  4. A criminal remitter located overseas
  5. A complicit, local-based criminal seeking to transfer funds overseas
  6. Organiser or coordinator with the resources and contacts
  7. Affiliates and other parties assisting/ working with the organiser or coordinator who make third party deposits into the customer’s account.

Bank staff in particular should be alert to third parties making structured, or otherwise unusual, cash deposits into third party accounts. The essential weakness being exploited by cuckoo smurfing is the lack of identification required of persons depositing funds into third party accounts.



We cannot assume anything these days, it’s our money and our responsibility. You need to be aware of what is in your account, always question strange transactions. Ensure the information on your bank statements are correct and are transparent.


Closing thoughts – time to consider your investing strategies

 Firstline Securities Limited offers comprehensive coverage of local and international markets with a bias for the energy sector. Firstline offers a number of unique opportunities to put surplus cash to work either as your asset manager or investment advisor. Please contact us for more details at or at 868.628.1175, we can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.



What a “President Clinton” will mean for the Caribbean

30 August 2016

What a “President Clinton” will mean for the Caribbean


Image result for hiliary clinton



 The advantage (or disadvantage) of past performance

One of the advantages that “President Clinton” has over “President Trump” is that “President Clinton” can at least point to her past performance as the first Secretary of State in President Obama’s administration and to her performance as a Senator from the State of New York.

This contrasts significantly to Donald Trump who has no experience of holding political office, but significant experience in running a large property development business.

Whether this proves to be an advantage or disadvantage to Clinton – well only time will tell. Read more…

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