Hello Pezz, <<I never have a long term opinion but as stated that one makes a lotta sense. When it turns into the short term I will rethink>>
I am following up on this initial response of mine Message 19037330
June 16th, 2003
Hello Pezz, Recommendation: buy oil, purchase natural gas, hoard gold (the one true money that rules over all fiat cash), borrow Yen (since government talks about taxing cash), short USD (since government intends to do 2:1 split), believe in Canada (relatively affordable socialist economy selling real stuff), own emerging markets (everything has a right price), and get ready to short the mother of all bear markets.
At this juncture, traversing the US market is like riding in a quantum spaceship travelling close to the speed of light, as the measuring standard is being messed with, all financial instruments look long, at the same unnatural time.
I do not know the trigger for the upcoming kaboom, but can always distrust the usual suspects.
Just for example, the US action in Iran may, at this stage, simply be a reaction.
The US plans for the region may or may not be workable in the long run (if it intends to remake the map or reform the governance), may or may not be manageable in the short time (pacifications, house-to-house searches), but in the mean time the US must put down what is still a low-temperature guerrilla fight in north/west Sunni Iraq before Iran manages to organize the south/east Shiite Iraqis to mutiny. Shoulder fired rockets, rocket propelled grenades, discontent population without utilities, Saddam on the loose, Iran going nuclear, observing Russians, interfering French, twin deficits, rising government take, globalization caused productivity increase that is leading to more unemployment, and perpetual occupation of a faraway land is a potent and possibly toxic mix.
The oil pipe to Turkey has already been damaged, and will continue to be disrupted. Anyone helping to fix the pipes will be a target.
At some point, the fear of no oil from Iraq, less oil from Iran (due either to UN-sanctioned, or US-unilateral embargo), and a restive Saudi Arabia may panic the market already edgy about energy supply/pricing, especially as the Venezuelan situation is as it was, ready to deteriorate at no moment’s notice.
Chugs, Jay
with this ...
economist.com
Strikes, sabotage and a nervous world economy
Jul 7th 2003
From The Economist Global Agenda
The oil price has been surprisingly strong, topping $30 a barrel in recent days. Because of widespread looting and sabotage, Iraq has yet to resume exports. And if a general strike in oil-rich Nigeria continues much longer, prices could go even higher
MANY of those who advocated war in Iraq argued that it would be a relatively cheap exercise. After all, Iraq sits on the world’s second-biggest oil reserves after Saudi Arabia; even before the war, the country was thought to have a production capacity of 3m barrels per day (bpd). All the conquering coalition troops would have to do is fix up the creaking or damaged oil wells and refineries, and Iraq would soon start paying for itself. Unfortunately, things haven’t turned out that way. Thanks to some astute forward planning (and the advance deployment of special forces), there was very little wartime damage to Iraq’s oil fields. Since the war, though, disgruntled supporters of Saddam Hussein have sabotaged oil fields and pipelines. So Iraq has yet to export any oil produced since the war, a state of affairs that has buoyed the oil price. Now a general strike in Nigeria, triggered by a jump in the cost of petrol, threatens that country’s 2m bpd output. Some oil experts now think the oil price, currently bobbing around the $30 mark, could climb as high as $35 if the strike, already in its second week, continues. None of this is good news for the fragile world economy.
After the first Gulf war, departing Iraqi troops torched Kuwaiti oil wells—an act of vandalism for which the country is still paying reparations. This time, the American-led forces planned carefully to try to prevent sabotage of Iraq’s oil fields. In addition, they enlisted the help of private oil companies to ensure that any repairs would be carried out quickly. This strategy was largely successful. However, since Saddam was toppled in April, those elements opposed to the coalition’s occupation of Iraq have found oil installations and pipelines an easy target. American troops patrolling Saddam’s central Iraqi heartland have enough trouble guarding themselves, let alone protecting thousands of miles of exposed pipeline in barren desert.
Oil officials in Iraq are now careful about issuing any production and export targets, having already missed several. The official goal is to get production up to 1.5m bpd by the middle of July—that is, to half the pre-war production capacity of 3m bpd (and actual production of 2.5m bpd). Officials were scrambling over the weekend to repair the Iraq-Turkey pipeline in order to restore exports from the northern oil fields near the Kurdish region. The giant Kirkuk oil field is pumping 500,000 bpd, compared with 850,000 before the war. Iraq’s oil-marketing organisation left Kirkuk production out of its second sales tender, issued last week, in a sign that the central administration lacks confidence about how soon the pipeline can be restored.
Before the war in Iraq, a general strike in Venezuela, a key exporter of oil to the United States, contributed to keeping prices high. Now it is Nigeria’s turn. On Friday July 4th, the oil prices dipped slightly amid rising hopes that talks between union leaders and Nigeria’s president, Olusegun Obasanjo, would lead to a resolution; and last week, Shell, the biggest oil producer in Nigeria, insisted that the strike had had no effect on production or exports. On Sunday, however, the union leaders rejected a government offer to reduce the price of petrol from 40 naira (31 cents) a litre to 35 naira. The unions say they will stay on strike until the price is lowered to 32 naira. Since Mr Obasanjo is distracted by the conflict in neighbouring Liberia, where he is trying to broker peace talks, and by President George Bush’s African visit this week, a deal may take some time. On Monday, mobs lit fires on the main streets of Lagos, Nigeria’s biggest city, and turned back motorists.
The slower-than-expected recovery of production in Iraq and the prospect of disruption in Nigeria come against a backdrop of unexpectedly tight supplies in America, the world’s biggest consumer of oil. The shortage appears to be limited to the west coast, but is enough to jangle nerves in an already-jumpy market. Some traders now think it would take only two more weeks of disruption in Nigeria to add another $5 to the price of a barrel. While he is in Africa, Mr Bush will no doubt be urging Mr Obasanjo to strike a deal with the unions as quickly as possible. |
