Oil Sliding or Just Slipping? Fact or Fiction, Could China or Russia Wage War for Iran?
With no economic news on Wednesday, oil price movement and company specific news led the headlines. The Petroleum Status Report held a surprise for commodity traders, and had most oil shares giving back some recent gains. Shares of Occidental Petroleum (OXY) fell 3.4%, Nabors Industries (NBR) dropped 1.9%, Exxon Mobil (XOM) sank 3.5% and Halliburton (HAL) fell 2.8%. However, Nigeria is on strike and geopolitical concerns are as hot as ever, more specifically within Gaza where refugees are moving into Israel and Israeli rockets are moving into Gaza. So, Wall Street Greek believes this move will prove to be a short term slip rather than a longer slide.
Commodity Markets & Geopolitical Topics
Petroleum Status Report
Wednesday's report showed a greater than anticipated build in oil inventory, and the largest in quite some time. Some 6.9 million barrels were added to the stockpile. This surprise, in light of the very recent run up to $70, had oil backtracking on the day. Gasoline stocks also rose more than expected, despite capacity utilization that is still trailing historical seasonal levels. Apparently the build had a lot to do with increased imports, not usage.
You know, everybody points out that new refineries have not been added to the system in quite some time, but Barry Ritholtz noted Tuesday on Larry Kudlow's show that refineries have expanded operations. Here's where I would normally say, "barring an early hurricane to the Gulf, things should be fine," but Nigeria is on strike and is the driver behind the rise to $70. WTI crude fell about a 1% Wednesday, while brent crude sank some 2%. Gasoline RBOB futures fell about a quarter of a percentage point. Still, I think this was just a slide, because Nigeria is overhanging.
Everything near term depends on Nigeria and how the strike impacts production. If the strike is settled quickly, oil prices should deflate substantially. I cannot foresee Iran getting involved with the Israeli effort underway now in Gaza. It's just not worthwhile for Iran, unless it's planning a massive surprise attack of Iraq as well.
Let's play devil's advocate, shall we? You know, I believe that outside of agreeing to global demands regarding the fuel for its nuclear facilities, Iran's best option is to launch a massive surprise attack on Iraq and Kuwait. Sitting back and waiting to be bombed seems futile, because Iran's traditional military capabilities should be wiped out in a short swipe, this barring third party submarine intervention. In other words, if China or Russia were to intervene in Iran's favor, clearly a world balance altering move, we could lose an important battle. This would mark a drastic change in global politics, begin world war, and is not out of the realm of possibility. However, it is extremely unlikely. Time is taking us in that direction though, and words from Iran in months past make that clear. Evidence surfaced months ago, when Mahmoud Ahmadinejad made a statement that revealed a major world power was communicating to it something different than it was communicating to the world community. In other words, China or Russia is telling Iran, "don't worry, we won't let them bomb you," or, "we'll stand by you." I can't see Russia backing up those kinds of statements, but China? Or, what if it was a fleet of Iranian submarines, supplied and manned by Russians? Let's hope this is just good fiction. I have concern though, and you would have to be blind to believe Putin or China are your friends.
(disclosure)
Commodity Markets & Geopolitical Topics
Petroleum Status Report
Wednesday's report showed a greater than anticipated build in oil inventory, and the largest in quite some time. Some 6.9 million barrels were added to the stockpile. This surprise, in light of the very recent run up to $70, had oil backtracking on the day. Gasoline stocks also rose more than expected, despite capacity utilization that is still trailing historical seasonal levels. Apparently the build had a lot to do with increased imports, not usage.
You know, everybody points out that new refineries have not been added to the system in quite some time, but Barry Ritholtz noted Tuesday on Larry Kudlow's show that refineries have expanded operations. Here's where I would normally say, "barring an early hurricane to the Gulf, things should be fine," but Nigeria is on strike and is the driver behind the rise to $70. WTI crude fell about a 1% Wednesday, while brent crude sank some 2%. Gasoline RBOB futures fell about a quarter of a percentage point. Still, I think this was just a slide, because Nigeria is overhanging.
Everything near term depends on Nigeria and how the strike impacts production. If the strike is settled quickly, oil prices should deflate substantially. I cannot foresee Iran getting involved with the Israeli effort underway now in Gaza. It's just not worthwhile for Iran, unless it's planning a massive surprise attack of Iraq as well.
Let's play devil's advocate, shall we? You know, I believe that outside of agreeing to global demands regarding the fuel for its nuclear facilities, Iran's best option is to launch a massive surprise attack on Iraq and Kuwait. Sitting back and waiting to be bombed seems futile, because Iran's traditional military capabilities should be wiped out in a short swipe, this barring third party submarine intervention. In other words, if China or Russia were to intervene in Iran's favor, clearly a world balance altering move, we could lose an important battle. This would mark a drastic change in global politics, begin world war, and is not out of the realm of possibility. However, it is extremely unlikely. Time is taking us in that direction though, and words from Iran in months past make that clear. Evidence surfaced months ago, when Mahmoud Ahmadinejad made a statement that revealed a major world power was communicating to it something different than it was communicating to the world community. In other words, China or Russia is telling Iran, "don't worry, we won't let them bomb you," or, "we'll stand by you." I can't see Russia backing up those kinds of statements, but China? Or, what if it was a fleet of Iranian submarines, supplied and manned by Russians? Let's hope this is just good fiction. I have concern though, and you would have to be blind to believe Putin or China are your friends.
(disclosure)
posted by The Greek | 12:31 PM
3 Comments:
Don't you think the operations in Gaza that you made mention of is what has caused oil price to stay that high? Don't you think further penetration of Gaza by another country's army could also lead to a high oil price? What has Iran got to do with this? Why did the stock market sink so low just when North Korea agreed to talk to the US? Maybe the world's focus on the nuclear crap in America has nothing to do with our markets.
Now, I've had a lot of coffee today so forgive me for saying, "WHAT!?!"
The operations in Gaza have nothing to do with oil prices. No, Israel invading Gaza will not impact oil prices, unless Iran is foolish enough to do more than talk.
What Iran has to do with this is, Iran supports Hamas, seeks the destruction of Israel.
The market direction had nothing to do with the Korean deal. It's been totally economic data and perception driven, not geopolitical yet!
The world's focus on the "nuclear crap" has something to do with high oil and gasoline prices and in turn something to do with inflation and consumer softness, the economy and stocks!!!
Iran has nothing to do with current oil price. Excessive consumption in the US is one factor.....I see you always do all you could to bring Iran into the mix. This is exactly what encouraged GW to invade Iraq. Smart folks like you towed his line of falsely accusing Iraq of having WMDs. You all knew better but chose to go with the wholesale crap sold by GW.
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