Energy report:Temps chill as geopolitics heat up

Oh, the weather outside is frightful and the Iranians are less than delightful. The Iraqis are telling them to go, let it snow, let it snow, let it snow. Oil shows no signs of stopping, but the supply should get us dropping. The temperatures are way down low, let it snow, let it snow. Let it snow.

Oil is rising as the East gets buried in snow, snow and more snow. Weather and geo-politics are supporting oil even in the face of overwhelming supply and a glut of spare production capacity. While the temperatures are dropping, here in the U.S. the geo-political tensions are heating up.

Oil rallied on reports that Iranian troops took over an inactive Iraqi oil field. The Iranian military seem to be playing takeover hokey pokey. You put you left flank in, you pull your troops back out, you but your right flank in, and you shake it all about. The New York Times reports that Iranian soldiers who had been occupying part of a disputed Iraqi oil field had withdrawn, ending the three-day standoff. Still Labeed Abawi, Iraq’s deputy foreign affairs minister, said some Iranian troops remained in Iraq. “They withdrew from the field, but they are not completely out of Iraqi territory”.

This of course has the market worried. The big question is what are the Iranians thinking? What are they ever thinking or do they think at all? This border dispute comes at a very sensitive time as the world is getting ready to lay the hammer down on the country with sanctions because they lied about their nuclear ambitions. They lied about their missiles and they lied to their own people about who won the Iranian election. With civil unrest rising up in the country they may start a skirmish with Iraq to try to divert attention from the fact that it has been the Iranian leaders that led the country’s economy down a path that will offer more pain to the Iranian citizens.

The New York Times also reported that Iraq said it had halted oil exports from a major pipeline in the northern part of the country after it was damaged in an attack. The pipeline carries about 450,000 barrels of oil a day, most from the area around Kirkuk, to the Turkish port of Ceyhan.

That is not the only unrest we have in the world of oil. Nigeria: MEND The Movement for the Emancipation of the Nigerian Delta is back with a pipeline explosion over the weekend. This kind of thing is why Shell wants to get out of Nigeria. The Wall Street Journal is reporting that Royal Dutch Shell PLC is seeking buyers for 10 of its Nigerian onshore oil-production assets following years of militant attacks on its facilities that have squeezed the company's profit. The WSJ says that the oil fields have a market value of $4 billion to $5 billion and represent proven oil reserves of about 100 million barrels. The Anglo-Dutch company, for decades Nigeria's biggest foreign oil operator by production, is looking to dispose of the blocks in the first and second quarter.

It is the last trading day for January crude. The February crude oil major resistance is $76.50. We would like to sell rallies with stops above this area. The concern of course taking a position over the holiday period with the Iran/Iraq situation that may heat up again. We are having more attacks in Nigeria as well. And we have to remember that this is the season of Russian and Ukraine gas disputes though there is no sign at this point of that developing.

The bottom line is holiday thinned markets can be treacherous and you have to be wary about your short positions. Still barring any major development we should see oil start to fall. We still like the ranges on the products.

Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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