Deck The Barrels!
Deck the halls with barrels of oil fa, la, la, la, la, la, la, la, la. 'Tis the season for embargoes fa, la, la, la, la, la, la, la, la. Then we look to a Europe bail out fa, la, la, la, la, la, la, la, la. Forget that rising Saudi production, fa, la, la, la, la, la, la, la, la.
Now you know why we have been singing, “I'll be long for Christmas" and "you better not pout and you better not cry, you better be long I’m telling you why." It is because the bullish stars are all coming into alignment. Once again the oil market looks to end another year with a bang as the reasons to be long keep piling up.
First there is the backdrop of the most serious tensions with Iran that we have seen in many years. Iran’s storming of the British Embassy failed to win any sympathy from other members of Europe and they are still considering an oil embargo. At first it looked like Europe thought the Idea of an Iranian oil embargo might harm them more than the Iranians and the trade thought the idea was off the table. Well they can’t think that anymore after Bloomberg News reported that European Union Energy Commissioner Guenther Oettinger said he thinks there is a consensus in the bloc to ban Iranian oil imports. The EU should agree on the ban and then bring in other countries such as Russia and the U.S. He didn’t specify when the EU would implement a ban.” My bet is after winter. Iran of course is warning of dire consequences if Europe chooses not to buy their politically tainted oil. They are predicting that oil could soar to $250 a barrel if the embargo is in force, showing that the Iranian leadership is as delusional as ever.
Of course the Russia, who is the Iranian’s bad behavior enabler, say it will not go along with an embargo. Reuters News reports that, “Banning Iranian oil sales would be a political move and Russia does not believe energy supplies should be used to exert pressure.” Russia's energy minister Sergei Shmatko said, "It is quite obvious that this decision is based on some political motivation ... In these situations we try to be as neutral as possible." He is right; the political motivation is Iran’s contempt for international law, the sanctity of foreign embassies and their total disregard for human rights.
The rising Iranian risk is offsetting the exciting news that Saudi Arabia is pumping the most oil they have in many years, coming in at around 10 million barrels of oil per day! Take that peak freaks. Bloomberg News said, "Ali al-Naimi said in an interview in Durban, South Africa, that this month if needed, the country’s oil minister said that the country produced 10 million and 40 barrels in November because according to Al-Naimi that’s what the customers wanted." Of course it is not what the other OPEC members wanted and could add to tension at the next OPEC meeting. Assuming there could be more tension after it was revealed that the Iranian government tried to plot to kill the Saudi ambassador to the US. Just one big happy OPEC family!
Oil of course went on another wild ride after S&P decided that the downgrade warning of most of Europe wasn’t enough to shake up the markets. They forgot to mention, like oh by the way, we could lower the long-term credit rating on EFSF by one or two notches if we were to lower the "AAA" sovereign ratings of any Eurozone country that is currently on CreditWatch, or one or more of EFSF’s guarantor members. In other words the European Financial Stability Facility may lose its top credit rating if any of its guarantors have their own debt grade lowered, Standard & Poor’s said. That might have been nice to know yesterday.