Here's the chart of USO, an ETF that tracks crude oil price.
Saudi's Day of Rage is tomorrow, Friday.
although the FT article from March 4th has put the number much lower at 225K.
Reliance on oil from #Libya as percentage of domestic needs:
Italy: 25%
Austria: 21%
France: 15%
UK: 8.5%
From AFP (3/8/2011):
TRIPOLI — Libyan oil output is down by more than two-thirds from 1.6 million barrels per day to just 500,000 amid the uprising against Moamer Kadhafi's regime, National Oil Corporation boss Shukri Ghanem said Wednesday.
"Of course, the production is down drastically, or it is only half a million a day down from 1.6 million a day," Ghanem, who is both chairman and CEO of the state-owned firm, told a news conference in the capital Tripoli.
"The foreign workers went back to their countries, the Libyans to their families, and of course oil production went down and oil exports went down," said Ghanem.
"We are concerned that the porduction goes down in a orderly manner rather than damage the installations... and so far we have succeeded."
Heavy fighting between rebels and regime loyalists on the battleground central part of Libya's Mediterranean coast has left a string of key oil pipelines and installations in flames.
Huge blazes were reported on Wednesday in the oil towns of Ras Lanuf and As-Sidra after air raids and heavy shelling.
But Ghanem insisted the As-Sidra explosion caused no damage to oil installations.
"Fortunately, the explosion today was in a small storage supply facility in Sidra... it has not affected the production," Ghanem said, adding: "It was diesel, it's not crude oil."
Ghanem also played down the impact of the rebel's capture of virtually all of the east, including key oil fields, during their more than three-week-old uprising.
"The whole industry is still working as one, the most important thing is the integrity of the industry and safety of the people," he said.
Financial Times, whose parent is partially owned by the Libyan Investment Authority, reports that despite the UN, EU, and US sanctions hundreds of millions of dollars from oil export continue to flow to Gaddafi's Libya.
From FT (3/4/2011) [emphasis is mine]:
Muammer Gaddafi’s regime is still benefiting from hundreds of millions of dollars in oil export revenues, even as western powers impose financial sanctions aimed at forcing Libya’s leader from power.
Payments for crude oil exports are finding their way back to Libya’s central bank and, potentially, into Col Gaddafi’s direct control, according to a senior western oil official and traders contacted by the Financial Times.
Oil officials and shipbrokers said that Libya exported about 570,000 barrels a day in the last week of February, when the unrest started, and shipped about 400,000 b/d this week. At current prices, the oil shipped over the two-week period is worth $770m.
.... UN and European sanctions do not target the Libyan central bank and US sanctions do not hit Libyan-owned groups incorporated outside the country.
US Treasury officials say that institutions of American origin cannot make payments to groups subject to Washington’s sanctions, such as the Libyan central bank, but can make deposits into a blocked interest-bearing account to be refunded to the Libyan people at a later date.
.... Col Gaddafi still controls Libya’s largest oil terminal, Es Sider, in the centre of the country. Argus, the energy reporting service, estimated that Libyan crude exports had fallen to about 225,000 b/d on Friday. If Libya is able to sustain exports at that level, which some industry executives and shipbrokers doubt, the country could earn nearly $200m a week.
Sanctions are there so that they know how to get around them. Much like TBTF Wall Street banks welcomed the Dodd-Frank bill on financial regulations so that they can figure out how to get around them.
Al Jazeera may soon need "Saudi Arabia Live Blog"...
Just reading tweets by Sultan Al Qassemi:
More chants in Qatif: "We vow that we won't forget our prisoners" "Sunni & Shia we won't sell our nation" Arabic Video http://bit.ly/f9JmHn
46 minutes ago via web
Other chants include "Mansiyoon - Mansiyoon" "We are forgotten". Qatif is the centre of the Saudi Shia minority population.
48 minutes ago via web
I'm watching internet uploaded videos of the protests in Qateef in #Saudi, chants of "Silmiya - Silmya" "Peaceful - Peaceful"
49 minutes ago via web
Robert Fisk thinks the "end game" in all these uprisings in NAME (Northern Africa, Middle East) is Saudi Arabia.
As I posted in my TA blog, someone bought a large amount of call options on oil ETF (USO) that will expire in July. I bought along with that person, just in case.
From RIA Novosti News (3/1/11):
Saudi Arabia has sent dozens of tanks to Bahrain, where anti-government protests continue for about two weeks, Egypt's Al-Masry Al-Youm newspaper said on Tuesday.
Eyewitnesses reported seeing "15 tank carriers carrying two tanks each heading towards Bahrain" along the 25-km King Fahd causeway, which links the small island nation of Bahrain to Saudi Arabia.
(There is no such news at Al Jazeera.)
So the likely timeline was:
Oil margins were hiked;
Oil plunged, taking other commodities including gold and silver with it;
Seeing that, equity traders speculated that Gaddafi must have been shot, in their effort to come up with the explanation for the oil drop before they heard about the margin hike;
But the momentum already triggered algo bots to go into "buy buy buy" mode.
ICE Hikes Oil Margins For Second Time In A Week
And now, for the real reason for the oil plunge: the ICE has just announced it is hiking oil margins for the second time this week, this time increasing both Brent and WTI margins. The new Brent scanning range is 5200 compared to 4850 before, while the Oil WTI 1st month contract is hiked from 600 to 900. We expect the NYMEX will follow suit on its own WTI contract any minute. As usual, we continue to patiently await the Globex to hike margin requirements on the ES. The most recent update of the ICE Brent Scanning range and Tiering can be found here.
With half of Libya's daily output is now off-line, and with some commotion in Saudi Arabia (the world 2nd largest producer) not to mention already tense Algeria, Nomura could prove right..
From Zero Hedge [emphasis is original]:
Waiting for a Saudi revolution before buying those $200 oil calls? It may be time to reevaluate: according to Nomura a halt in just Libyan and Algerian oil production (far more likely than the crisis spilling over to Saudi) would send oil to over $220/bbl. Specifically "the closest comparison to the current MENA unrest is the 1990-91 Gulf War. If Libya and Algeria were to halt oil production together, prices could peak above US$220/bbl and OPEC spare capacity will be reduced to 2.1mmbbl/d, similar to levels seen during the Gulf war and when prices hit US$147/bbl in 2008." Wouldn't a doubling in price lead to a major demand plunge as well? Yes it would "This could also result in a temporary demand destruction of some 2.0mmbbl/d globally." Also, since the Fed's free money was not flooding global market last time, $220 is just a lowball estimate: "We could be underestimating this as speculative activities were largely not present in 1990-91."
More observations from Nomura's Michael Lo:
In order to estimate the impact the current MENA crisis could have on oil supply and prices, we analysed past crises that rocked the region. There have been a few events that drove oil prices higher (from 30% to 130% per event), most of which were during the period in which OPEC controlled oil prices. However, we believe the closest comparison is the 1990-91 Gulf War as this is the only event outside of that period. During the seven months of Gulf War, prices jumped 130% as OPEC spare capacity was reduced to 1.8mmbbl/d while demand came off briefly by 1.7%. Similarly, today, if Libya and Algeria were to halt operations, OPEC spare capacity will also likely be drawn down to 2.1mmbbl/d, in our view, which could fuel higher oil prices.
We have identified three distinct stages of the Gulf war which led to changes in oil prices and we believe we are only at the initial stage of the three stage process for the current MENA unrest. During the initial stage of the Gulf war, prices moved up by 21%. This is comparable to what we have seen recently when oil price went up by 13% since the beginning of the MENA unrest. As we see further evidence of real supply disruption, we will be moving into Stage 2 of the event – during this stage of the Gulf war, prices moved to its peak (up 130%) within a period of two months. On the assumption that prices will move up by the same amount, we could see US$220/bbl should both Libya and Algeria halt their oil production. We could be underestimating this as speculative activities were largely not present in 1990-91.
Open interest in WTI futures contracts has risen 2.4% since the beginning of the MENA crisis in January this year. On the other hand, open interest in Brent future contracts has fallen 7.6% during the same period. This was primarily on back of the large WTI-Brent differential during the period, as WTI crude prices are being suppressed by Cushing storage and infrastructure issues while Brent crude price was lifted by supply outages in North Sea fields.
For more, go to the link. Zero Hedge has the full report of Nomura.
On a side note, there is NO BID on US dollars....
The US stock futures are extremely ugly, though Dow futures are not in triple digits yet.
From Bloomberg's page:
Ben and the Inkjets at the Fed have the work cut out for them tonight and tomorrow...
Officials denied the Independent's report (see my yesterday's post) that the Gulf states, along with China, Japan, Russia and France, will phase out the pricing of oil in US dollars over the next 9 years and substitute with the basket of currencies and gold.
Officials deny UK media report on move from dollar
(10/6/09 AP via Yahoo Finance)
"LONDON (AP) -- The dollar fell Tuesday towards year lows against the euro and the yen after a report that Arab states and other countries were contemplating an end to the U.S. currency's role in the pricing oil.
"The selling was stoked by an article in Britain's "Independent" newspaper that said secret meetings were taking place between Arab states, China, Russia, Japan and France, to end dollar dealings for oil and moving instead to a basket of currencies, including the euro, the yen and the Chinese yuan.
"Officials in several of the countries either denied talks or said they had no knowledge."
"Kuwait's oil minister, Sheik Ahmed Al Abdullah Al Sabah, said there have been no talks on the topic among Gulf oil ministers. "At our level, no," he said. "I didn't even dream about it."
"And the head of the United Arab Emirates' central bank, Sultan Nasser al-Suweidi, said the Gulf nation has no plans to stop pricing oil in dollars. "There has been no meeting ... whatsoever," he told The Associated Press, adding that the dollar "will continue as the price for oil.""
"At our level"? That's interesting.
The Independent's story could be false, although Robert Fisk is a highly respected journalist.
Regardless, U.S. dollar took the beating overnight in London, and the weakness continues in the U.S. forex market. The U.S. dollar index (DXY) now stands at 76.33 at 1:59 PM EST, recovering from the day's low at 76.103 after the London forex went offline at 12:00PM EST. Right now, only New York is open for forex trading.
We will find out how Sydney and Tokyo treat U.S. dollar when they come online at 5:00 PM EST and 7:00 PM EST respectively.
In the meantime, gold shot up $26 to a new high of $1,043. It's currently trading at $1,036, on the recovering US dollar.
Following up on my previous post, here's the article by Robert Fisk at U.K. Independent:
The demise of the dollar (Robert Fisk, 10/6/09 Independent)
"In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
"Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
"The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years."
Read the rest of the article by clicking on the link above.
That sudden jump in price of gold, silver, and natural gas in early September was indeed telling us something. Maybe.
Drudge Report headline (4:00pm PST):
ARAB STATES LAUNCH SECRET MOVES WITH CHINA, RUSSIA, FRANCE TO STOP USING DOLLAR FOR OIL TRADING... DEVELOPING...
Rick Santelli of CNBC apparently broke the news earlier, and I found the video (around 1:30 mark). Santelli is saying the UK's Independent will break the news tomorrow.
Not Likely, Many Traders Believe, according to CNBC.com.
"Since the low of $33.55 in February, US light, sweet crude has followed stocks in rallying on hopes of economic recovery. The price retreated a bit on Monday, but on Friday traded up $1.92 to settle at $58.63 a barrel, another high for the year.
"Even so, traders don't see oil rising much beyond $70 a barrel. They argue that with the economy posting only tepid signs of recovery, the dollar holding fairly strong and demand remaining relatively low, there seems to be little impetus for a rise back towards last summer's record-breaking highs."
They believe oil price of $60-65 per barrel is attainable even if the economic fundamentals are weak, but not likely above $70, and decidedly not like last summer when...
"Speculators who were running from the stock market and chasing a falling dollar and surging demand during peak driving season helped push oil to its $147 record ..."
If I recall last summer, traders and analysts were talking about "fundamental" reasons why oil was $147 and set to go even higher. So now it was the speculators who caused the spike?
It's worth keeping in mind that some of these same people also said last year oil would never fall below $70.
Anyone willing to bet against the majority? (Have you heard about "inflation"?)
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