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Big O and the IEA - WTF?
I’m surprised by the move by the President and the IEA. What’s this about?
Is it about the price of oil?
Before the announcement WTI was sitting around 95. That’s a solid $20
lower than it’s peak eight weeks ago. Why would Obama & IEA act
today? A very big price adjustment has already been made. If the
circumstances were different and the price of WTI was through $120 I
might have agreed to this. But why make a splashy show now when no show
is required?
There is more to this than meets the eye is my conclusion.
Is this really about Libyan production?
On a global basis I don’t think this sells. Japan’s slowdown offsets
most of the Libya loss. Anyway, the Libya story is two months old. Why
the action so late in this game?
Is it about punishing speculators?
Obama promised to do this. I thought he delivered on his promise when
the CFTC started raising margin requirements willy nilly. But direct
intervention in the crude market? That is raising the anti by a great
deal of chips.
The driving force in the drop in crude over the past month or so has
being the growing realization that the global economy his hitting
multiple speed bumps.
Not to be boring, but China, Japan, Europe and the USA are all slowing
down. What “specs” out there were swimming against that tide? Not many,
in my opinion. So if one of the objectives was to beat on the players I
think this moved missed by 90 days. IMHO this silliness is setting up a
great buying opportunity. So the specs are going to cash in when this
washes out.
Is it about teaching a lesson to OPEC?
I am concerned that this is a factor. The US wanted OPEC to up
production. That didn’t happen. So the bad boys who produce oil just got
a shot across the bow.
Watch if this angle on the story gets “play”. It would piss off those
bad boys and they will retaliate. Does O really think he can take on the
world oil market? He can’t beat the Taliban. OPEC will crush him.
Is it about stimulating the US economy?
This seems to be a significant part of the equation. But just think this
through. The rule is that for every $1 drop in crude we see a 2-cent
drop at the pump.
Say for the sake of it that this drama will result in a $10 drop in
crude. So the pump goes down by a lousy 20 cents. Do the deep thinkers
really believe that if gas gets twenty cents cheaper for a month or two
that they have really bougt themselves anything? Are things so
desperate that steps not taken before are justified? That’s a conclusion
the stock market was pondering today. The bond market ran up the same
flag.
Is it about stimulating China or Europe?
That can’t possibly be the case. The 60mm brls represents just 16 hours
of global consumption. If it’s stretched out over 30 days it comes to an
insignificant 2% of daily demand. That is a super tankers worth. There
are hundreds of ships at sea right now with that much crude on them.
This has nothing to do with influencing global supply.
Is this a desperate move by the administration to show leadership?
I looked at the WH home page and did not see this important development
highlighted. Maybe the big O is trying to distance himself on this one.
I’m convinced this will backfire. Give it two months. Tops.
Are supply and demand conditions such that this extraordinary move is justified?
Beyond the already discussed Libya non event I’m not aware of something
that is blowing up in one of the big producers. Does Obama have some
insight on this? Does he know something I don’t about Iraq, Iran,
Venezuela or Nigeria? Stay tuned. If something blows in one of these
over the next few weeks you will see how things are orchestrated.
Is this a big deal?
On the numbers; no it is not. But it is one of those sharp right hand
turns that come up from time to time. Because it is so unusual it bares
noting. We live in an interventionist world. Every aspect of the global
economy is trying to be manipulated by the “Deciders”. I have never
seen a precedent like today. In that sense, I consider this to be a very
big deal.
Are we going to see more of this type of market intervention?
I’m sorry to say that we might. What’s been offered up is a drop in the
bucket. So round two of this foolishness is a distinct possibility.
Did Bernanke know this was coming when he spoke with great confidence that oil prices would soon retreat?
This took months to put together. Bernanke knew it was coming. We live in a manipulated world.
My thoughts:
-This was a bonehead move that was put together by Euro technocrats.
They dreamt this up two months ago. It was a dumb plan to offset the
consequences of Libya. Because 30 countries are involved it took sixty
days to ink an agreement.The timing today is a mistake.
-Mr. Khadafy is pissing many folks off at this point. He should be gone
by now. Look for Mr. K to get a cruise missile up his arse any day now.
The principal rationale for this market intervention is Libya. Take that
out of the equation and there is no justification left for continued
meddling in global markets.
-This one trick pony is going to knock 15 cents off the price of gas for
a month or so. There will be a disruption in market liquidity and
inventory levels. This will result in a big spike in crude sometime this
fall.
-OPEC will respond. “We” will pay a price for this.
-There will be technical problems at the SPR. They will not be able to deliver 2mm barrels a day of light sweet crude.
-Obama will get some egg on his face with this one.
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A feint to try and make the proletariat believe that the Kommissar and his Commissioners give a shit about the peasantry.
This isn't about oil, it's about shock and awe - dislocating the markets so bets get unwound. The question really is, which bet were they really targeting?
Big O and the IEA--WTF?
It's pretty obvious when you pause and think about it for a moment:
Whitehouse Taps Reserve with Eye on Votes
(The article is on FT.com; registration is required.)
Yes. It's about buying votes.
Good post Bruce and agree. What a farce.
you finally caught it, but what happens when the GOP slams Obama for selling US assets under duress to an international org, IEA. they will slam his ass and hard. and if he tries to give the Eurozone another 30M after 60 days lookout. Impeach the fucker!! well the GOP is never as tough as it talks. but the door is open.
"you finally caught it, but what happens when the GOP slams Obama for selling US assets under duress to an international org, IEA. they will slam his ass and hard. and if he tries to give the Eurozone another 30M after 60 days lookout. Impeach the fucker!! well the GOP is never as tough as it talks. but the door is open."
Perhaps I am paranoid, but I think the banksters have plenty of GOP bought that they would never punish Obama for helping banksters.
Goldman was short oil.
The move causes lower price, higher use; thus, exposes "SA...decline" sooner--which means, Goldman is long oil.
As an assessment of government speak, like everything else "spoken" by our "government": Told by an idiot, full of sound and fury, signifying nothing...
QE2 being over will make oil fall regardless...
QE2 being over will make oil fall regardless...
My thought is Obama knows QE2 ending will make oil fall, and by doing this he will be able to take credit for the fall.
This was a bonehead move that was put together by Euro technocrats. They dreamt this up two months ago. It was a dumb plan to offset the consequences of Libya. Because 30 countries are involved it took sixty days to ink an agreement.The timing today is a mistake.
This is obvious in retrospect and I feel dumb for not thinking of it myself. Thanks much.
+1 to the highlighting of this paragraph.
I don't trade and I don't invest in the markets, I read BK to learn and become more aware.
Also +1 to FisherBlacks thanks much.
Oil is an unbelievably precious resource that should be conserved for really important future uses, like food and water production. Our children and grandchildren also deserve to have some oil set aside for them.
An intelligent person would thus take steps to increase the price.
Oil is not used for producing food and water (I guess you mean fertiliser production and desalinisation). That's natural gas.
Oil is used (mostly) for transport, and partly for petrochemicals like plastics.
Approximately 15-20% of world oil production is directly connected to food production and distribution....
Oil is food..
"Oil is not used for producing food"
Neither of my two tractors run on natural gas. I have never seen a combine that runs on NG either. My trucks that are used to haul cattle to the sale barn don't run on NG. (Diesel for all mentioned).
NG is used for producing some of the fertilizer I spread on my pastures, when we get rain that is.
$10 per is about where it ought to be.
I agree, let's endure a little pain now to diminish a lot of pain for our progeny.
I don't understand the "let's make it as cheap as possible for ourselves right now" mentality. We have a duty.
"-Obama will get some egg on his face with this one." Mr Teflon? No way - the media has his ass. And what does he care, just another day at the links!
totally agree with this assessment
It is about the fact that oil is a finite resource. However, the gov't/IEA are attempting to frame their reasons for effecting this in a different light. I submit that oil production in SA is in decline.
On the surface, I agree that it's a WTF (Why The Fuck?) in this case. It was discussed, planned, and capitalized upon by those that matter, and we peons may never know the real reason...if one ever existed. Maybe it was just manipulation simply for the sake of someone connected, simple as that.
Someone (soros?) was big time short crude. My guess is this is linked to campaign contributions/reelection cash. B.O. is a cheezy Chicago thug and this reeks of corruption.
short gold or looking for a dip to get back in on..
Yup.
Bruce,
Here is your answer. China stepped into the European debt orgy in exchange for this. Quid pro quo.
http://online.wsj.com/article/SB1000142405270230456950457640516018444534...
"Big Asian consumers like China, South Korea and India have been finding it increasingly difficult to maintain a grip on inflation, with higher oil prices earlier this year a major driving factor. Many have taken the burden on themselves by offering heavy subsidies to consumers."
That's why war is coming! We ALL hate the fucking Muzzies and can't STAND the fact that we give them SO FUCKING MUCH MONEY! We're going to take back those oil fields...and hopefully end a barbarious religion. Without those trillions, Islam would die. Instant $50 BBL oil...INSTANT global recovery...EVERYONE would be full of hope again...ready to start another bubble! We'll REALLY start to rape the planet then...12 billion people by 2020? That's a LOT of resources! That crash is going to be a doozy! Better hope we invent "Mr Fusion" by then! "Mr Water" too!