Tag Archives: Iran
Posted on 18. Jul, 2012 by Harvey Sax.
Israelis Killed In Bulgaria Blast As Netanyahu Blames IranBy Elizabeth Konstantinova and Calev Ben-David – Jul 18, 2012 1:43 PM MTFacebook ShareLinkedInGoogle +15 COMMENTSPrintQUEUEQSix people were killed and more than 30 injured in an blast on a bus carrying Israeli tourists in Bulgaria. Israeli Prime Minister Benjamin Netanyahu blamed Iran for the attack.Five people were killed in the explosion at the airport in Burgas, on the Black Sea coast, and one person died in hospital, the Foreign Ministry in Sofia said on its website today. Bulgarian authorities are working on the assumption that the attack was an act of terrorism, the ministry said.
Posted on 20. Apr, 2012 by Wilensky.
Watching SLB trade lower and lower is what I’m talking about. Watching HES and HAL trade into the red is what I’m talking about. Watching BAS get crushed is what I’m talking about. The market hates oil and oil service stocks. Period. Prices are high, these companies are making profits hand over fist, but demand for these companies simply isn’t there. Despite SLB’s conference call, fracking still offers a major opportunity for these companies. China is trying to sever their lifeline to coal, and shale drilling is the surgeon. Sure natural gas is a big black eye, but this world runs on OIL. How can the market be so blind? Or maybe how can the market’s memory be so short… Did we forget about the Middle East? One headline and oil is at $150 in a heartbeat. It’s just a matter of time..
Posted on 04. Apr, 2012 by Wilensky.
Other than the occasional headline, the Iran embargo is a distant memory. And oil markets seemed to forget that an increasing oil reserve is a direct result of preparing for such an embargo. Just because reserve levels happened to beat expectations (it’s not like analysts regularly and accurately deal with embargo situations anyways), is it reason for a 2% or more correction in USO? I doubt it.
Posted on 07. Mar, 2012 by Harvey Sax.
CHART OF THE DAY: How To Protect Your Money In A War With Iran, And An Oil Spike by Joe Weisenthal
One of the big fears for the market is obviously an oil spike, possibly caused by a war with Iran.Such an event would probably be bad for stocks if oil surged but given the market and economic momentum, people arent inclined to just bet against the market on the chance of this geopolitical event.So heres an idea from Barclays Sreekala Kochugovindan.
Posted on 01. Mar, 2012 by Wilensky.
If a falsified report that a Saudi pipeline can drive oil over $110 a barrel, just imagine the repercussions of a full Iran-Israel conflict. According to the report that was later confirmed “completely false” after US markets had just closed, a natural gas pipeline in the city of Awamiyah exploded resulting in numerous injuries and deaths. Thats right, natural gas drove up the price of crude simply on rumor. That should give you an idea of how volatile the Iran situation is on the markets, despite stepping out of the headlines momentarily. Considering we have close to two years supply of the commodity sitting in strategic reserves, it seems high oil prices are here to stay in the immediate term.. Or at least until election time.
Posted on 22. Feb, 2012 by Wilensky.
While Iran’s willingness to reopen talks with the International Atomic Energy Agency about their nuclear program was a surprise, it seems that the motion was mostly for show. Several rounds of discussions yielded no access to a military site in Parchin which is suspected to be a weapons development facility. There has been no agreement on further discussing the matter. Light crude is hovering close to $106 a barrel today, so much for Prince Alwaleed’s promise to keep oil under the $100 a barrel mark.
“The International Atomic Energy Agency has reported that it held a “disappointing” meeting with Iran this week over the country’s nuclear programme, with no agreement reached on any of the key issues under discussion. After a two-day meeting in Iran, IAEA officials returned to the UN watchdog’s headquarters in Vienna on Wednesday and indicated that talks with Iranian officials had made no progress.”
Posted on 19. Feb, 2012 by Harvey Sax.
Obama nears his nuclear moment By Edward Luce
At the start of Barack Obama’s term, few moments better crystallised America’s change of face than his “New Day” video address to the Iranian people. Ending with a salutation in Farsi, Mr Obama offered Iran a new era of “co-operation”. It followed from the promise in his inaugural address to “extend a hand if you are willing to unclench your fist”.
Posted on 14. Feb, 2012 by Wilensky.
As the Carrier Abraham Lincoln left the gulf Tuesday, it’s battle group contingent was on high alert. According to the AP:
The passage ended a Gulf mission that displayed Western naval power amid heightened tensions with Tehran, which has threatened to choke off vital oil shipping lanes.The Lincoln was the centerpiece of a flotilla that entered the Gulf last month along with British and French warships in a display of Western unity against Iranian threats. There was no immediate comment by Iran about the Lincoln’s departure. Iran’s Revolutionary Guard has said it plans its own naval exercises near the strait, the route for a fifth of the world’s oil supply. But Iran’s military has made no attempts to disrupt oil tanker traffic — which the U.S. and allies have said would bring a swift response.”
Along with the warships several US choppers provided support as an Iranian patrol plane accompanied by an unmanned drone flew overhead. Patrol boats were also spotted although they kept their distance, possibly due to rough conditions during the battle group’s crossing. According to ZeroHedge, it is unclear if the drones shadowing CVN-72 were the same that Iran with China’s help, reverse engineered after the US drone fell in the middle of Tehran and did not self-destruct.
Posted on 07. Feb, 2012 by Wilensky.
According to Saudi Prince Alwaleed bin Talal al Saud, the billionaire head of Kingdom Holding Co., Saudi Arabia is poised to limit the appreciation of oil to no greater than $100 a barrel.
“We can use our leverage, our excess capacity to be sure to pump more [oil] if needed so it will not impact the consumer countries while they’re getting out of their recessions slowly but surely,” the prince said.
As for Iran, he said it is important for the U.S. and other nations to put sanctions on the “renegade country” to force its government to negotiate. Issuing an ultimatum of war would push Iran to the “desperate move” of blocking the vital oil shipment waterway.
“I believe a solution is not impossible with them,” bin Talal said of Iran. “A dialog is the best way to do it.”
It seems that the House of Saud is willing to trade a guaranteed cap on oil price in order to protect the Strait of Hormuz, a shipping lane through which 20% of the world’s tanker transported oil passes. Although Alwaleed felt that if the Strait was closed by Iran, the US would have very little trouble opening it again. As the largest shareholder of Citigroup and a major investor in News Corp, Apple, and Twitter, Alwaleed has quite a bit of exposure to the US economy if the situation with Iran escalates.
Posted on 03. Feb, 2012 by Wilensky.
Despite our massive emergency oil reserves (see here), the IMF estimates a halt in Iran crude could produce a rather dramatic effect in the price of oil:
“If Iran halts exports to countries without offsets from other sources it would likely trigger an “initial” oil price jump of 20 to 30 percent, or about $20 to $30 a barrel, the IMF said in its first public comment on a possible Iranian oil supply disruption.”
“Financial sanctions against Tehran may be ‘tantamount to an oil embargo’ and would imply supply declines of about 1.5 million barrels per day from the world’s fifth-largest oil producer”
“That volume of supply disruption would be comparable to losses in output from Libya last year due to civil war that pushed oil prices over $100 a barrel. Iran exports about 2.6 million barrels per day of oil.”
Although we can’t predict the future, it’s relatively safe to say that any ban on Iranian oil would most likely be far from exhausting US reserves. Which brings to mind the slightly altered words of the late James Murphy, “headline risk is one hell of a drug…”
Posted on 31. Jan, 2012 by Wilensky.
Having already recently warned the US (Jan 3), Iran is certainly not going to appreciate the addition of a third Carrier Battle Group around the Strait of Hormuz which was announced yesterday on Navaltoday.com. Generally a Battle Group makes for a bit of a procession. Although it varies depending on the mission, the structure of a Group generally consists of: the aircraft carrier itself, two offensive guided-missle cruisers to engage land targets, two destroyers for defensive maneuvers against submarines and aircraft, a frigate to protect from submarine attacks, two submarines also for defensive purposes, and a supply ship to provide support for the group.
This new group will join the USS Abraham Lincoln with her cruiser and two destroyers, all of which were escorted into the Gulf of Persia by a couple of British and French warships on the 22 of January. The two groups are further backed by the USS Carl Vinson on the other side of the Strait of Hormuz. Historically, the US Navy tends to use only two battle groups when conducting joint strikes although a third is often on hand.
It certainly seems as if the US Navy is expecting backlash from the most recent sanctions placed on Iran, and the obvious response is an attempted closure of the Strait. While crude futures have traded down slightly the past few days, oil is definitely something to have on your radar in the upcoming weeks.
Posted on 26. Jan, 2012 by Wilensky.
Today’s rampant fluctuation in oil was a perfect example of how much political and headline risk from Iran surround the markets. While nothing fundamental has changed from our initial assessment of the Iran situation seen here, all it took was Iran reiterating they are pissed and the IEA emphasizing to the EU that reserves exist for a reason.
NEW YORK—Iran’s threat to immediately halt oil sales to the European Union pushed prices above $101 a barrel, but crude retreated after the International Energy Agency later said it could release strategic inventories if a supply emergency occurred. Light, sweet crude oil for March delivery rose 30 cents, or 0.3%, to settle at $99.70 a barrel on the New York Mercantile Exchange, after hitting a one-week high of $101.39. ICE Brent crude gained 98 cents, or 0.9%, to $110.79.
Posted on 24. Jan, 2012 by Wilensky.
We have a delicate balancing act at hand between the threat of an emerging nuclear power, our rapacious thirst for oil, and responsible diplomatic policy. The consternation in the air is palpable, bringing to mind Buffet’s famous words “Be fearful when others are greedy and greedy when others are fearful”. So how does one put such words of wisdom into an actionable trade idea? Since going long nuclear fallout seems short sighted, let’s look at how to take advantage of a potential event driven jump in the price of oil once we fully grasp the situation at hand.
At the mentioning of the country results in a harsh, metallic taste of uncertainty and fear in the back of your mouth when you consider the effects on your portfolio. Developing a perspective on the state of affairs is difficult, especially solely from sorting through headline after headline; from the motorcycle delivered assassination of nuclear scientist Mostafa Ahmadi Roshan on Wednesday near Iran’s main enrichment facility to Europe’s proposed boycott of Iranian crude, to the menacing threat of a barricade in the Strait of Hormuz.
Lets break things down and set the scene so we can take a more accurate look. We have two main catalysts; the increasing threat that Iran poses to the rest of the world and of course, oil. It was most recently reported that Iran’s nuclear program had passed the low enrichment rate of 3-5% and begun to reach the threshold of weapons grade uranium, breeching the 20% level which is sufficient enough for a crude yet effective nuclear weapon. The assassination of Roshan yesterday only supports this theory, suggesting the program had progressed far enough to merit a public killing regardless of the political fallout. While the nuclear threat from Iran doesn’t seem all that immediate (at least until they find another sucker to be Director), former CIA chief Michael Hayden still feels the country ” ..is the single greatest destabilizing element right now with regards to global security”.
Fear aside, this brings us to the second catalyst: oil. One fifth of the world’s oil passes through the 34 mile wide channel, accounting for 35% of all waterborne oil traffic.. an ideal conduit for a battered and beaten nation to draw in an unwavering audience.
Now Iran gets pushed around quite a bit, with the most recent abuse in the form of sanctions against all crude oil exported from the nation; starting what Iran has referred to as an “economic war” on the country’s largest export. A ten day long display of naval tactics in the Strait was just the beginning for Iran’s government, stating that “if sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz.” Responding in turn, the US Navy ordered a second Carrier Battle Group into the region, just to keep an eye on things (which must make China feel all warm and fuzzy inside).
So now that we have pieced together a relatively coherent picture of the different catalysts in the scenario that could lead to a spike in oil prices, lets take a look at how to best position for such an event.
1. In an effort to reduce variables in such a complex and politically driven scenario, a simple strategy is highly recommended for the average investor. One of the easiest and cheapest options to develop a position is through buying the corresponding ETF, although since these funds generally invest in near term futures contracts due to the difficulty of holding the physical asset there is potential for some tracking error on the part of the fund.
2. Another option that provides a more direct investment is to own the actual oil companies (SLB, HES, HAL, XOM, etc.) Although also relatively inexpensive in terms of trade costs, this strategy subjects you to the headline risk of the individual companies rather than limiting your exposure directly to the price of oil. This strategy also lacks a guarantee that the correlation between oil company and oil price will appreciate in line with each other.
3. Which brings us to a play more directly linked to the movement in the price of oil and involves less capital than option 1 and option 2: buying options on the futures contracts. Each contract is for 1,000 barrels and a $.01 move in the price per barrel equals a $10 move in contract price. The pricing of these options requires some understanding of both the futures markets and options strategies, so is not appropriate for the average investor.
While some sort of drama ensuing from the Middle East debacle seems imminent, there is no guarantee that events will play out as expected and oil prices will respond in turn. Buying stock in a solid, multi national company with a strong balance sheet and diversified portfolio of assets might be a safer play on the chance that Iran can agree to some sort of terms on their Nuclear development program.