With oil prices continuing to defy gravity it is a clear case of an irresistable force exerting pressure on an immovable object as Tuesday’s market witnessed fresh record highs. The cause of this frenzy is currently blamed on several convienient but in reality contrived factors as listed.
THE WEAKENING US DOLLAR.
Oil is priced in US dollars, historically a declining dollar indicated softening prices. not so any more in this age of hedge funds and derivatives,(smoke and mirrors in St Day speak ). Now oil futures purchased in US dollars are seen as an attractive hedge against the weakening currency and are a major price driver. Fine for the barrow boys and trick cyclists that dream up increasingly damaging ways of putting bread on their tables but not so good for end users facing recession brought about by these market manipulations.
POTENTIAL PRODUCTION CUTS.
OPEC are rumoured to be considering production cuts at their next meeting on 05/03/08 (St Pirans day in Cornwall) its an each way bet for steady as she goes or cut and be damned but enough for the barrow boys to agonise over as they scan the horizon for further opportunities. As the northern hemisphere moves towards summer demand tends to slacken anyway. Significantly gasoline stocks are healthy which bodes well for the start of the US driving season.
NIGERIA.
The Niger Delta is a major crude source and has over a period suffered political unrest and regular production disruption, this is likely to continue and is a fact of life which has not had a major impact on overall supplies.
KURDISH UNREST.
Turkeys recent action against Kurdish rebels in Northern Iraq, like Nigeria, has had no tangible impact on supply overall but is nonetheless an heaven sent opportunity for speculators to feed the rumour mill to their short term advantage.
EXXON-MOBIL vs PRESIDENT CHAVEZ.
The real winners here are the corporate lawyers as Venezuelan assets are frozen pending the outcome of this clash of momumental ego’s. If the taps do get turned off no oil will be lost in the long term in spite of a potential short term hiatus. This does not prevent this issue being paraded as a market driver and acquiring a disproportionate significance.
FOG ON THE HOUSTON SHIP CANAL.
This snippet of utter twaddle was recently cited as being responsible for giving analysts the vapours resulting in the start of this present price spike. The fog bank was probably caused by the head of steam building over at Exxon-Mobil Corporate HQ as corporate suits prepared to financially zap President Chavez after he threatened to turn off Exxon-Mobils tap.
WHAT IF THE BALOON REALLY GOES UP?
The present costly turmoil in World energy markets has occured without the impetus of major conflict or insurrection, being driven by rumour and hysteria which appears to be largely contrived and masterfully managed. It should be clearly noted that no oilfields are ablaze, the Middle East, whilst still a powder keg, is as stable as can be hoped and no end consumer is without supply (given their ability to pay). The present bull run has coincided with the financial firestorm brought about by the US sub prime mortgage crisis, itself engendered by imprudence and eye watering greed. Having acquired crispy fingers from that little lot assorted investment banks, speculators and outright chancers appear to have descended en mass into the energy markets which they seem to view as ripe for their particular brand of exploitation. As repeatedly stated present price levels are in reality unsustainable long term given relative stability. The financial and inflationary presssure building will contain demand at or below present levels. As western economies falter the effects will dampen India and China, that said the malign effects of a world slowdown are unlikely to be a short lived phenomena.
FACT-PRESENTLY THE “BARROW BOYS” HAVE THE DOWNSTREAM OIL SECTOR BY OUR COLLECTIVE GONADS AND THE GRIP IS TIGHTENING!
