This page has been archived and commenting is disabled.
Attack on Iran... or Market Noise? (Noise, Probably).
Options on Light Sweet Crude Oil Futures rank among the more obscure (and illiquid) instruments you can actually trade. Derivative^2's aren't exactly the sort of investment you would expect amateurs to trade (or even recognize), in fact. Actually, it's hard for even pros to find. (Try pulling it up on your Bloomberg if you don't already know the symbol). Why then has (have) someone(s) been accumulating November $100 calls (which expire in just over 30 days) in quite some size? Just a quick look at even incomplete volume data easily shows 70,000 calls changing hands over the last 30 days, half of them in the last two weeks and 12,595 on Wednesday. For comparison, calls for the same strike price in last month's series had 1/10th the volume in the same period and about 1/10th the open interest 30 days before expiration. Since oil was around $10/barrel cheaper at that point we looked at $90 calls too. Those showed about 1/5th the open interest 30 days before expiration.
Given the effect of time decay (theta) on the options, one wonders what buyers here are thinking. $100 WTI crude in 30 days with withering time-decay over the last week or so of that? The volume has been such to throw implied volatilities up to 120-150% on occasion, despite the fact that implied volatilities for December and thereafter seem to be sitting patiently around 40-50%. Then again, with such an illiquid option series, implied volatilities aren't hard to toss around from one extreme to another. Oddly, I haven't seen many puts change hands the last few days since I've been watching the issue. Nor has there been much activity in the later expirations. That makes this a pretty specific bet timing wise.
Goldman's October 13th price target for 3m WTI Crude is $85.00. Their 12m target is $94.00. "Smart money" (does Goldman count?) doesn't seem to have $100 aspirations for crude in the next few weeks (or the next 12 months). Does someone know something? Is someone betting on a crisis in the coming weeks? Is someone betting on a hike in Goldman's price target? An Isreali strike on Iran? Perhaps someone is hedging a rather large position elsewhere? Perhaps field production went down somewhere, or some other midstream transport issue has a producer short for November delivery- making the risk of a big price spike worth throwing a few million at overpriced calls on the verge of serious theta? But why not use plain futures then? Maybe we are seeing the unwind of a large short position in these instruments (dangerous as shorting calls like that would be). Or perhaps someone is just selling a bunch of overpriced volatility and hedging themselves elsewhere (which fails to explain the buyer, actually).
We have no idea, but it is wonderfully fun to speculate.
UPDATE: Reader "Mark," who apparently has noticed the activity, writes in to add this color:
Volatility has been crushed the past 2 days. The Z9 straddle has gone from $8.40 early yesterday to $7.50 now yet the bid in the Z9 100c persists. ATM vol in Z9 is 40.50%, 100c bid is 48.50%. Another 6k traded yesterday, bringing OI close to 80k.
[...]
No locals are doing conversions to collect interest (the fees alone for clearing all those options would way more than wipe out collecting interest at .5% for 20 days on $22 in premium). It is clearly someone buy-opening as OI is going higher and higher, curiously we haven't seen the buyer today even though he'd be able to buy a cheaper level than anytime this week.
»
- 10861 reads
- Printer-friendly version
- Send to friend
- advertisements -
With liquidity comes stupidity. If you flood the world with cheap money this is what happens.
hm. i would have to put my money on a smart hedge position, lets assume you were smart and bought at 35/bbl, it's now at 76/bbl Dec. delivery. Right now you can dump oil into the market, and get a pretty cheap deal on 100/bbl calls, effectively making you very profitable (at least through the year) even if oil does hit 100/bbl!
Look at futures, you should see the acc/dist has pretty much leveled off since it hit ~75 in the oct. delivery and hasn't received much buying interest down the chain either.
Keep it as simple as possible.
Yea this seems most likely. Someone is drunk on winnings and doesn't know where to put it, so they buy lotteries on a continuation play. It is still strange that they're striking 100 instead of a more reasonable 80 or 85...if they're were so smart and all.
i don't think it's really drunk on winnings. if you're in the oil market this would be a sensible hedge, offset some of the gains very inexpensively and if the price does rise then your call becomes more valuable. based on a 35/bbl point of entry oil would have to fall back to ~37/bbl to make this a loser.
80/85/bbl is much more expensive and would give up significantly more profits if it hangs out at 65-75 for the rest of the year. Clearly they aren't trying to use max leverage, they're managing this will minimal risk and max gain.
Again assuming they bought at 35, sold at 75 that's a 40 dollar bbl profit, buying 100 options gives up 25 dollars profit, but you're still up 20 bucks a barrel. Marginally that's almost 400% if it hits 100/bbl.
US or Israeli strike on Iran on or before june '10
Last 5 Trades (last update: Oct 16, 12:27:36 PM EDT) Trade this now!
Oct 16, 1:01:39 AM EDT 25 Lots @ 15.4 Oct 16, 1:01:39 AM EDT 2 Lots @ 15.5 Oct 16, 1:01:39 AM EDT 3 Lots @ 15.8 Oct 15, 12:20:15 AM EDT 3 Lots @ 16.3 Oct 15, 12:20:15 AM EDT 2 Lots @ 17
contract is worth $100 if triggered.
No.....! No......! That was me....
Rahm Emanuel
Dollar carry trade short paper and long tangibles.
Perhaps miscalculating deflation while calibrating
the odds on Iran
Not just retail buying as WSJ reports:
http://online.wsj.com/article/BT-CO-20091016-707479.html?mod=rss_Global_...
Big4 Merc Crude Options 10.4 to 8.6% long...
Regards,
http://www.jubileeprosperity.com/
If by betting you mean; knows that the attack will be in the next 30 days; that someone would be György Schwartz.
He's a US citizen now.
so ?
Cheeky, shame on you. How could you possibly suggest that a (naturalized) US citizen might do anything to harm his or her beloved country? My understanding is that good old George had 2 helpings of apple pie and kissed a baby before taking the US citizenship oath.
:>))
Here is my speculation.Are the economic war games afoot?
http://www.politico.com/news/stories/0409/21053.html
A preemptive strike is launched using derivatives and China counters with defaults and calling its gold.
http://www.gata.org/node/7743
http://www.marketwatch.com/story/hong-kong-recalls-gold-reserves-from-london-2009-09-03
Kissinger and Soros go to China and come back with a nudge nudge wink wink deal on devaluing the dollar. They come back and Soros places his bets, but the Chinese aren’t doing their part.
http://www.reuters.com/article/newsOne/idUSTRE59F07C20091016
A warning to the Chinese? –“Soros, who earned $1 billion in 1992 by betting against the British pound, said current currency arrangements are "fraught with danger."
So my question is the Chinese peg putting a floor in the dollar and interfering with government devaluation. And would you bet on oil going up as a devaluation hedge.
IMHO you have more truth here than you might think. I'm still formulating my ideas so I will not say much yet except to say that it's just too easy and convenient to say that the banksters have taken over the economic system and America.
The level of impunity is staggering, leading me to believe it's officially blessed at the highest levels. And not because the government officials are corrupt, though corruption could be a by product of the official blessing and considered an unfortunate side effect that is part of the cover.
Nuff said.
If you really think that Gyuri is buying you are dead wrong!
french magazine yesterday out with call that happening by end of year - suggesting clandestine specops bombing as opposed to outright runs,. Turkish and Syrian exercises this past week which excluded Israel - read somewhere that it gives Turkish plausible deniablity as the likely route for an attack up through the commercial corridor in formation behind a disguised tanker (sheer speculation) on top of rumors Saudi's gave flyover rights. Gladstone report should help the israeli rancor
Attack on Iran... or Market Noise? (Noise, Probably).
Or both. We all know that eventually this big bad market rally is going to roll over for whatever reason. And all those promises of economic recovery and green shoot failures will need to be explained away.
Any culture so well acclimated to false flag attacks as we Americans are knows that some forward planning has been done and the next stock market crash will need a handy dandy patsy to blame.
Why not Iran? Why not Israel? Why not my hang nail? It doesn't matter what the excuse is. It doesn't even need to pass the sniff test. It just needs to be plausible.
It simply needs to happen, at which time the MSM gears up and endlessly repeats the cover story. Abracadabra, another fall guy is created, the newly indoctrinated Obamamites are fired up and it's back to the fields for everyone.
Well said and right on.
America needs to divorce itself from it's relationship with the fucking jews or we will be forever dragged into Bernie Madoff ponzi schemes, Goldman Sachs trading robots stealing 401K's, and middle east wars.
Anyone wanna guess the percentage of jews on the front lines in the US military? I say yes invade Iran if you wish, but make sure all invading and front line troops are jews.
I guess we would never invade if that were the case.
I'd guess that even blatantly racist assholes are embarrassed by your ignorance & impunity.
If I were running ObfuscationOps Central that's exactly the kind of thing I would do...
It will end in a cloud of confusion when it does... it was so hilarious to see the G20 heads all unify to condemn Iran and forget about the economy incidentally... wonder why?
Thank you for this idea ... it makes so much sense ... the event will come upon us so fast that the speed and the magnitude of the drop will seem natural and there will be no 'investigation'.
Will there be a leak ahead of time?
Will it come over a weekend?
The brain power here at ZH should create an entire scenario and we will become the 'Kings of Conspiracy'
As soon as someone calls me conspiratorial I know they are full of shit because they would rather call me names then discuss facts. I know all the tricks used to deflect a discussion away from logic and science and into emotion and name calling.
I don't play those games. No need to when the truth is there for any person who is honestly asking questions to see. The goal of the name caller is to freeze the mind and frighten the person into not asking questions, using social peer pressure and embarrassment to stop them in their tracks.
If you would bother to do even a small amount of independent research, you will find many false flag attacks admitted to by the people involved or simply exposed by evidence. Def Sec Robert McNamara admitted before his death that the Gulf of Tonkin incident, used to push America deeply into Vietnam, was staged. This is the definition of a false flag attack. There are plenty more if you look.
Why are you so worried what ZH might be branded as? What do you think people are already trying to brand ZH as? That's a straw man argument and it doesn't work.
Been there, seen that type of cointelpro, doesn't matter.
Sorry Bro ... no name calling intended ... I do believe that this happens, the when and how are what I'm trying to get to.
Also 'Kings of (financial) Conspiracy' is great handle and something to aspire to.
Start with 9/11 and work backwards. The site below has over 900 Architects & Engineers who say something is fishy. They deal with facts and figures. They use logic and physics and only talk about those things that are straight forward.
They don't get into supposing this or that. They don't express opinion and they don't guess. They say this doesn't add up, this is why and we need a new investigation. Period.
http://www.ae911truth.org/
Zero Hedge is just not the place for this. Post it elsewhere please.
+1
It's always been my theory that you're allowed to posit any sort of possibility whatever, with evidence or not, as long as you make it like a question. For example, a good headline would be: "Rahm Emanuel, A Terrorist?"
LOL
That's not a question, that's a cold hard fact. Besides, it wouldn't satisfy the format required by Jeopardy. Please reformat as a proper question.
e.g. "How long would the terrorist Rahm Emanuel last before squealing like a pig from being water boarded in Guantanamo?"
My apologies to all pigs for the above comment.
I didn't know pigs could type.
But now I do.
If pigs can fly, they can type.
did you concluded that by observing your ability to write your comment, or did you conclude that by looking at what your friends are able to do ? You, like most spineless people i met in my life, are tough when things go your way, and when they dont, there goes all your manliness and everything that is left is a little girl afraid of the unknown. Log on and grow some balls before you start calling people pigs. Until you do, your garbage is just that, garbage.
or, "Did Glenn Beck rape and murder a young girl in 1990?"
http://answers.yahoo.com/question/index?qid=20090902071346AAP4ITu
Everybody knows he killed Vince Foster.
I forwarded this post to Mahmoud Ahmadinejad, but he said Barack Hussein had already had mentioned it to him.
I would guess the following:
* the trade has little to do with geopolitical speculation
* the trades are probably done by floor traders
I've seen this happen before in 2007 in the sugar market after the commodity's 2005 price spike. What happens after a huge spike (in this case, oil hit near $150 in 20008) there may still be a significant number of ITM puts that don't get excercised for some reason. Floor traders take advantage of the interest you can earn by selling more of these puts and then buying the calls to flatten out your position (the calls you get really cheap and are considered a "free" lotto ticket in case prices do spike). In the futures market, when options are exercised the futures contracts are assigned randomly. The risk in the trade is you may get exercised immediately and don't collect the interest on your put sales.
Anyway, that's my guess. This only works if there is a large open interest in $100 ITM puts.
forgot to add that you also have to sell the futures for a truly flat trade. They usually do this in one bundle.
Selling puts and buying calls doesn't flatten the position. They're both long plays.
(edit - never mind. I didn't see your follow-up)
It is impossible for me to imagine that such a secret will be known by anybody,if Israel is the one to attack. So that theory is out of the question. The French magazine report indicated a date of after Dec,so that also nulify the hypothesis. We are left with few options.May be GS is betting that they are going to pump up the oil a little bit,to try and ;ift the s&p,since the oil sector is the only one left that they can pump up if oil gets above $100.Remeber,there was a huge call on spy 100 strike back in Jul,when all the analyst where expecting a drop to the 820 level.
"It is impossible for me to imagine that such a secret will be known by anybody,if Israel is the one to attack. "
Are you kidding me? Wall Street insiders trade on such information all the time. GS IS the US Government. Do you not know about the Bear Stearns saga?
Anon, ya listen up now while GG does you a favor and explains the facts of life to ya...
No one left behind ZH style eh GG?
Will someone please put this guys training wheels back on. He's not ready to solo yet. Might never be for that matter. Either way, we don't want him hurting himself or any other ZH reader. Better safe than sorry.
Naive and so innocent, just like a child. Let's go back to the last major event and ask ourselves about Larry Silverstein (bought the center for nowhere near what he collected in insurance just before the event and reworked the insurance to profit from the event - in fact he posited that each plane hitting the two separate towers created two separate collectable events). We also were told by the news that there were many airline put options bought just before the event but we were never given additional information as to who it was. In your world, perhaps they are all just coincidents.
and don't forget the sudden " evacuation " of Ira Rennart and his family from their Hampton residence on the 10th of September by the official forces of the US military.
But...but...the 9/11 Commission said all that increased option activity was normal. Nothing at all to those increased put options on a lot of companies which had important offices in the twin towers, like insurance companies and brokerages.
Besides, the Commission said it's not important to actually follow the money when investigating terrorists. Don't want to actually stumble over any Americans who might be involved, right. Move along, nothing to see here.
Besides, we all know that the only examples of steel framed skyscrapers completely failing solely from fires happened on 9/11. That it has never happened before or after 9/11. What's the big deal?
In fact NIST, the official government agency tasked to investigate the collapses, said it really was fire that destroyed those two towers, that the damage from the two planes hitting them wasn't severe enough to weaken the 2 towers and bring them down. It was plain old office fires that did it. First time in history.
Boy, there were a LOT of first-time-in-history things happening on 9/11, wasn't there? What's up with that?
And what about that 47 story building in NYC completely collapsing at 5:20 PM straight down into it's own footprint. The Silverstein building, aka WTC 7? Just because it wasn't even hit by a plane and only had small isolated fires doesn't mean it couldn't completely collapse from fire, right.
Silly rabbit, just because it LOOKS like controlled demolition doesn't mean it is.
http://911research.wtc7.net/talks/wtc/videos.html
So many unanswered questions, so little time.
israel always makes money off of its false-flag ops.
A second derivative sh*ts like an elephant squared?
Marla,
No need to speculate with such audacity - its an obvious hedge. Someone is short the underlying and thus needs some calls just in case. Futures would be too much of a headache since you M2M every day too. And finally, if you're theta neutral at the beginning, you couldnt care how it ends.
Uh... how you can tell this is someone opening a long position on the calls, rather than an option writer selling OTM calls? And even if they're long on the calls, are you sure it's not a spread against other strikes or instruments?
This type of analysis seems pretty amateur.
RIF - Reading Is Fundamental
Marla, pick me. I want to do the next amateur analysis.
I passed the standardized moron test. Pick me. Pleeeasee.
:>))
+1
I don't like conspiracy theories much, but I do recall reading an essay on dollarcollapse.com (forgive me, can't remember author's name) whereby a rather well known analyst gave the US dollar 60 days "to live". If this is the case, the only thing that will have any value is - oil, gold (and if your extremist....ammunition, canned goods...lol). If the US dollar does have it's days numbered, perhaps the oil play is really a dollar play?
Are you thinking of Jim Sinclair? I know he has a dollar death-watch countdown going.
So is it that you don't like conspiracy theories at all or only the ones you disagree with?
Just askin'
Unless you're talking about Palestinian children armed with rocks, Israel doesn't have the balls to fight its own wars.
Isbumblbee; i like you, + 10000, and for those who junked this post, FU !!!
Why spend mine when I can spend your's?
yep, it was a well disguised penguin army that fought for them in 1949, 1957, 1967, 1974, etc. They train those in one of the millennia old secret Masson lodges down in Antarctica.
What sovereign nation on the planet would stand by and let anyone lob Qassam missiles into its cities, or blow up its civilians using suicide bomber pawns without a major response? If Cuba were to lob missiles into Miami, the US would make large parking lots out of a fair portion of Havana. Perhaps it's Abu Mazen and Khaled Meshaal who are the ones lacking the appropriate masculine hardware? They don't have the courage to do the deed themselves, so promises of pensions to suicide bombers' families and promises of 70 virgins in heaven will just have to suffice. There's courage for you.
Cheeky, I like you, but I call your 10000 and raise you. (Yeah, yeah, grab your flamethrower.)
Cheers,
Poker face
I trade crude options for a living. You are correct that there has been big buying interest in teeny upside calls in the last few days, but you have a few details wrong.
"accumulating November $100 calls"
The November options contract expired yesterday. These are Dec calls, which expire mid-Nov.
'The volume has been such to throw implied volatilities up to 120-150% on occasion, despite the fact that implied volatilities for December and thereafter seem to be sitting patiently around 40-50%."
This is completely wrong. The 100 calls traded for a long time to discount to the ATM, but with the buying interest they have spiked up to maybe 15 vols over the ATM. So maybe 60-65 vols. Whoever gave you that 120-150 number has no idea what they are talking about.
"The November options contract expired yesterday. These are Dec calls, which expire mid-Nov."
Ah yes, sorry. Futures Options contracts are generally referred to by the month of the expiration of the UNDERLYING, not the option. I did include a screenshot with the post so you can see the ticker- hopefully that avoided any confusion.
"This is completely wrong. The 100 calls traded for a long time to discount to the ATM, but with the buying interest they have spiked up to maybe 15 vols over the ATM. So maybe 60-65 vols. Whoever gave you that 120-150 number has no idea what they are talking about."
Actually, I think they were just using individual implied volatility calculations with less than perfect inputs. (Think or Swim and the like regularly report whacky ImpVol for this reason- particularly on large bid-ask spread, low volume options- likely when wild bid-asks on no volume show up). BBG smooths things out quite a bit better, and the numbers you cite are much closer to the mark there. Point remains... open interest in this particular option looks pretty whacky. It's fun to speculate as to why- even when that includes mundane and boring (to non-option gurus) theories- like the mid-stream production issue I mentioned.
If you're American and are referring to military action, it's "Iran".
If you're American and are referring to anything business-like, it's "East Turkey".
Or at least this is the running joke with the American counterparts of my friends in heavy manufacturing.
Once again, the best humor is based in observable fact.
Threat of mining the Straits of Hormuz would do it.
someone is definitely hedging. they most likely believe that the any further gains in the stock mrkt will due to the decrease of the dollar. So it seems they are going to go short or are protecting a short position in stocks. I myself have used the tactic this year.
Russia and Iran both hate that pesky Caspian Sea oil pipeline that bypasses them both. Any destabilization in that crazy part of the world could cause a shutdown, and Russia has already been chipping away at Georgia (Abkhaza & South Ossetia).
There is heavy speculation that this is part of the shield trade.
You do realize that that contract is trading at 89+, right?
Which contract would that be?
Marla, I am reminded of this...
In all fighting, the direct method may be used for joining battle, but indirect methods will be needed in order to secure victory. In battle, there are not more than two methods of attack - the direct and the indirect; yet these two in combination give rise to an endless series of maneuvers. The direct and the indirect lead on to each other in turn. It is like moving in a circle - you never come to an end. Who can exhaust the possibilities of their combination?
Sun Tzu
Andy is one smart guy - Lizzy
"Amateurs study strategy and tactics. Professionals study logistics." - A friend-of-a-friend.
If you cannot support your operations with the proper material then any plan devised is a waste of time. Every serious military university through their general officer programs study Sun Tzu.
Hey Tyler, would keep a permanent thread up on a few of the more interesting derivatives symbols so that I / we can keep on eye on them. Also any education on how to read these things would help the small army of laymen readers of your sight. Just a thought
Well, could you be more specific? What are you looking to track exactly?
How about the MS curve steepeners?
The direct tax on consumer spending continues as crude hits $78. Consumer confidence to take another dive as pump prices ramp up.
Let's suppose that you were a mutual fund manager, captive to a big bank kind of thing, and you ran an energy fund. Let's suppose you were really up on the period. Let's suppose the entity that wanted to sell the options was your house, and they chose this method to, let's say, repatriate excess profits, from the fund.
Too many suppositions, I suppose.
Ockham's razor -
Israel attacks Iran. Select few know early and have taken positions.
Israel has a decent track record going it alone, their survival depends on it, they have the balls to do it, they're feeling chilly from the current administration, and the time is right to do it.
Yes; except it does not.
Yep Israel is evil while EU & Arabs & Palestinians are peace loving people. EU population has lived in peace since at least 900's; Arabs ... since the early 700's.
The only ethnic cleansing which borders with genocide, that i can think of, is the one currently happening in Gaza. Also, the Geneva convention is only a piece of paper Israel uses to wipe it's ass while.Of course with full support of the Holy and Divine Government of the United States.
Yeah, GAZA is run by the Jewish state. It is occupied by the Jewish state as we speak. The Jewish state ran all of the Palestinians in there into Ghettos and limiting their food rations. It also forces them to work for free and periodically gases them.
Hence the Jewish state is evil and Palestinians are nice and peaceful. Palestinians adore Jews and wanted to live in peace with them since early 1900's. They have plenty of organizations calling for the peace with the Israel while absolutely all political wings and most citizens of Israel are calling for pushing the Palestinians into the sea.
p,s,
CB, I would absolutely love to see your description of how nice & peaceful you would be, if it was you who was born in Israel & run Israeli government. They are evil, I bet since you are not evil, be you in their shoes, you would open the border and give Palestinians unlimited ability to blow up your own citizens, fulfill any unreasonable claim and let the people who call for your distraction to run your government.
by the way, when Ethnic cleansing / Genocide do happen, the population growth usually goes down. you are smart enough to use the google to dig up the stats that prove your claims, aren't yo?
Ok, let's knock this off, yes?
can't say that I enjoyed writing it; so you wish is my command your highness.
p.s.
I doubt there will be an attack on Iran this year. This summer social unrest down there is a game changer. Unless of cause OIL goes down to $20.
While I am not an energy trader, my bet would be swaps are involved. Some bank/energy firm f. up by issuing promise of payment if oil is above 70, so the other side is doing their best to gun the market.
Again, I am not the expert on the above, so I might be a little off.
Long Live Israel.
http://www.youtube.com/watch?v=44HkjBDQz_k
Could it not be a bet against the dollar. So far out of the money as to be 'cheap' but betting on a dollar event a la Jim Sinclair's countdown clock?
Tyler,
Bro, it's better to hold this information until after the fact. It's the only way to get a remote chance of catching the banksters. Don't give it away until they have perpetrated the crime.
First of all, I'm not Tyler.
Second of all, we are in the business of disclosing, not withholding information.
+100
thank you for that!
Thank you dittos and amen
But how are they going to get there is what I wonder. I can't see us allowing them overflight of Iraq. Saudi Arabia is a route but that ain't happnin' either.
If Israel attacks Iran the dollar will surge. Saudi Arabia will easily make up for Iran's two million barrels a day. The stock market will tank, and oil will be down to $25. Lets not forget that after the first Gulf War, the price of oil collapsed. The fundamentals simply are not there. QE is already winding down, and in a pinch traders will liquidate their oil positions to make margin calls on other less liquid holdings. Not to mention the fact that the world is awash in stored oil right now. When the storage fees go up everybody will run for the doors at the same time. Personally, I think an Israeli attack on Iran will be the catalyst that takes the floor out from under the oil market - it will be the non-event that shows just how poor the fundamentals for oil really are....
Saudi Arabia will easily make up for Iran's two million barrels a day
How do you get the oil to market after Iran carries through on their threat to mine the Straits of Hormuz? The price of oil will go to the moon.
May I suggest you do some research on Saudi Arabia. They don't have any where near the reserves they claim, they are pumping at near full tilt, the water intrusion into their main wells is reaching an average of 50% with some as high as 80% and they have no reserve pumping capacity left that isn't essentially water with a little oil mixed in.
The great Saudi Arabia myth is that they have an unlimited supply of oil. They severly demaged many of their large producing fields in the 70's and 80's with uncontrolled wide open pumping and gross field mismanagement. They will probably leave 35-45% more of the oil underground as unrecoverable then they first projected in the 60's and 70's because of mismanagement
They have not had a super field discovery since the 70's and are desperate to find more oil. The only thing that has saved their butts over the past 10 years was new technology enabling them to clean out missed pockets that were previously too expensive or difficult to extract. Pockets left behind by their prior mismanagement. And new technology that is very expensive.
I could go on but you get the picture. The world will learn about Saudi Arabia in the next 10 years when they are again asked to increase production and instead they permanently decrease it.
Cognitive - Ultimately you're right, I've read all the peak oil theorists out there, and the case made by Yergin et al is extremely persuasive. However, isn't is possible that between recession and conservation we have simply got the numbers wrong? What percentage of the oil price is driven by speculators?
Also, at what point will resource constraints limit the use of crude oil? For example, a car requires at least 100 pounds of copper to build. When copper gets too expensive and the recession makes people poorer, car ownership may decline, along with the price of oil. What if we can make cars 50 % more fuel efficient within the decade? These are all trends which might mitigate Saudi peak oil...
The price of oil no longer has any relationship to the economy or with supply and demand. The world has been choking on oil for months, with all above ground storage completely full, super tankers full and at anchor and abandoned underground salt mines now being filled. The price is now linked to the dollar and everything else is secondary.
Yes, in a logical and reality based world, as supplies dried up, driving up price, alternatives would be found. But oil is a strategic commodity as well as a currency, something copper is not. Oil is unique for the time being and because of that it is manipulated and used as a weapon.
So the normal market forces don't apply here.
What I'm really saying is that I don't know how this will work out because all the cards aren't on the table.
to the other repliers to 101112 very sensible comment, I say, if I very rich and very powerful and had no morals or even long-term selfish concern for the world around me to a nice livable place....I would manipulate money and commodities, and energy/oil would be one of main targets.
I too believed all the peak oil hype, until I started seeing some footprints of really shady, shadow govt types behind this. Not that there aren't some real limits to how much cheap oil we can extract...but as most technology conspiracy people claim, there are many alternative energy possibilities, new technologies for getting oil and huge natural gas reserves are coming online with improved drilling techniques.
I know OPEC is not such a strong cartel, and they may be just be a much over-hyped as a market maker than the FED, but I do think oil is hugely manipulated, worse even than our stock market.
Many believe that the US and / or Israel will take action to stop Iran from acquiring a nuclear weapon. That said, I also believe that the Nobel Peace Prize was an attempt to put Obama in a box - difficult to turn around right after receiving it and go to war? Of course today PR spinsters just rename the conflict to sound heroic, like operation enduring freedom.
Iran just moved its reserves to Euros, Iraq did the same thing before being convinced to revert back to the greenback. With talk of the secret meeting to move off the US petro-dollars, it would probably only increase the likelihood of a superpower wanting to control that significant portion of the world's oil output and ensure the regions stability.
If the leadership of Iran would check their egos at the door and agree to not pursue enrichment, then they could avert the upcoming guaranteed strike. If Iran were to acquire nukes, then they would be the power house in the region and influence their neighbors.
Remember the story about 20 billion in gold and valuables being shipped into Turkey from Iran? That was most likely done to get their money out of Iran before a conflict.
Perhaps somebody is EXTREMELY short Oil here at $80/barrel. It's not out of the question to see oil drop during the winter months as it has done for 4 out of past 5 years.
Overheard at lunch (by traders in midtown): "no reason not to jam oil here" (followed by laughter from pals), "cause it's not like stocks have much more in 'em."
It's neither. It is the largest player in the world that no one knows about but definitely exists and dwarfes all the other big ones. Actually, you can see his fingerprints if you know where to look specially on the S&P . Anyway, if you look, you'll see that the it's not only the 100 strike which is heavily bought. It's every other 5 strikes ( 80 85 90 95 etc...). Doesn't need to hit 100 to make a killing especially if he buys the futures as well
oh no, ZH is really going down the drain... after having traded through 2 Iraq wars, all I can tell you for granted is that buying oil and gold might make you rich if you're already long and have your sell orders placed. Correct me if I'm wrong but I still cant see why exploding commodity prices should be good for the S&P. In a war case it will take the clever mind 2 mins to realize that a war will destroy any green shoots and hence any need for things like oil and gold, after all, it's not edible.
Has anyone mentioned yet that the Governor of the Bank of Israel was Ben Bernanke's thesis adviser? Am I the only one who thinks that's hilarious?
LOL
Andy sometimes you're too funny.
the crazy, not always so right "predictive linguistic" guys who predicted about a year before that we would have a financial collapse peaking around Oct 7 2008 (dead-on if you live in Iceland) have been warning for at least over 6 months about on Oct 25 2009 as an emotional date for Israel - Iran issue, something about an Israel mistake...
maybe just an odd coincidence...but never hurts to mention this stuff, such as odd trading happenings, publically...if nothing to it, we just forget our wrong musings, if something to it...then maybe those up to no good and trying to profit off it will not proceed due to some before-hand sunshine
This is an excellent article & piece of market analysis...exactly what I come to ZeroHedge for, very impressed to see this, thanks Marla.
ZH thanks for this heads up. It has been interesting how oil has been rising. Really for no good reason. This option activity may or may not be anything. Still.........
War and rumours of war are two different things. I can see far more reason for the rumours than the actual fighting. For one thing, Iran is the only thing Israel has to point fingers at and this can be a psychological necessity, given the amount of pressure they are under, but if they are really scared of Iran making the bomb(people can't even figure out how to refine their own gas!), they'd have to be similarly concerned about the fallout from starting a war. Then there is the US arms industry and defense establishment, which is far more interested in promoting defense spending than starting another war.
War and rumours of war are two different things. I can see far more reason for the rumours than the actual fighting. For one thing, Iran is the only thing Israel has to point fingers at and this can be a psychological necessity, given the amount of pressure they are under, but if they are really scared of Iran making the bomb(people can't even figure out how to refine their own gas!), they'd have to be similarly concerned about the fallout from starting a war. Then there is the US arms industry and defense establishment, which is far more interested in promoting defense spending than starting another war.
Absolutely sickening:
Roxana Tiron, "$400 per gallon gas to drive debate over cost of war in Afghanistan," The Hill, 15 October 2009:
"The Pentagon pays an average of $400 to put a gallon of fuel into a combat vehicle or aircraft in Afghanistan.
...In some places, Geiss said, analysts have estimated the fully burdened cost of fuel might even be as high as $1,000 per gallon.
...44 trucks and 220,000 gallons of fuel were lost due to attacks or other events while delivering fuel to Bagram Air Field in Afghanistan in June 2008 alone."
http://thehill.com/homenews/administration/63407-400gallon-gas-another-c...
RAG
Sorry, I think I missed the shocking part here.
"Fuel is expensive in a war zone."
Was that it?
STUNNING.
http://www.youtube.com/watch?v=6KDO_yCYcuU
WHERE ARE THE AIRCRAFT CARRIES???
That will tell us everything we need to know.
DBL
An aircraft carrier is a floating deathtrap these days.
There are 8-100 (depending on your source) Russian-made ship-to-ship cruise missiles in Iran. There is no demonstrated countermeasure for these things. The Russians figured out a long time ago that they could not outbuild the US or Japanese (3rd-biggest in the world) navies, so they set out to make truly bitchin' ship-killers. Google "super-cavitation".
An aircraft carrier near Iran is merely sabre-rattling for home consumption.
Actually, rather google "Sunburn missile"
http://en.wikipedia.org/wiki/SS-N-22
http://www.globalsecurity.org/military/world/russia/moskit.htm
Nasty little mach 3 "party stoppers" aren't they.
Thank you Jesus...
(Never thought I'd ever say that...)
The said Obama nuclear policy or whatever you need to call it changes nothing, really. It isn't an update on the START treaties and in effect it's essentially a rattle of the saber at North Korea or Iran or any states that may harbor or enable terrorists. Ahmadinejad has already been protesting.sting.