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A Contrarian View On The Strategic Petroleum Reserve Release Decision

Tyler Durden's picture




 

Last week, many, Zero Hedge among them, blasted the decision by the IEA to released 60 million barrels of crude in what was perceived as a last ditch effort to lower the price of gas in exchange for brownie points, while ignoring the fact that the crude would have to repurchased at some point in the future almost certainly at a higher price, and that it puts OPEC in a position of potential retaliation that could have far more adverse price repercussions than the IEA's opening salvo. Then again perhaps the move was not as misguided as the skeptics believe. Below we present the view from Emad Mostaque of Religare Capital Markets who provides a different spin on things: "Market consensus following the IEA release of strategic reserves last week has been quite negative on fears of OPEC/Saudi retaliation, erosion of the all-important buffer and accusations of political pandering. We are more positive and see this as positive for market transparency and function. GCC and IEA objectives are aligned: Neither the GCC or IEA want oil prices over $100 or market distortions. The remainder of OPEC has no room to retaliate and we are likely to see more cooperation to reduce volatility. IEA targeting shortages, GCC price: This is essentially an oil swap agreement addressing the lack of light, sweet Libyan crude in the European market and the ridiculous Brent-WTI spread. The GCC will continue to pump heavier crude at market value and will defend prices in the $85-100 range. As a result, we do not believe reserves will fall to dangerous levels. Fundamentals and Libya: While we have been negative on the short-term oil price since the start of May and have been looking at the lower end of our $90-100 range for the summer, we are still constructive long-term and believe consensus estimates are reasonable. We also see a potential resolution in Libya as increasingly likely, with no increase in MENA violence."

Yet the punchline from Mostaque's line of thinking revolves around the possibility of OPEC retaliation:

OPEC unlikely to intervene: While there have been fears of production cut in reprisal from OPEC, we do not believe this will be the case as highlighted in our previous note on June 23rd “MENA Strategy - From OPEC to OPIC”. With the previous meeting having broken down on disagreement over production increases, we find it highly unlikely that the GCC nations of OPEC will agree to a production cut as long as the oil price remains within their comfort zone. Most of the non-GCC members are producing at capacity given inefficient economies and high budget breakevens and it would be a brave move to unilaterally cut production and pit themselves against the spare capacity of the GCC. It should be noted that while Iran currently heads up OPEC, this is a rotational position and does not indicate that they have taken control.

Needless to say, our opinion does not quite mesh with that of Religare, because if it all boiled down along rational decision making, OPEC would not have broken apart during the Vienna summit two weeks ago. Of course when it comes to irrational players, a rational decision is precisely one of the unexpected possible outcomes. Which is why we could very well be wrong. Although, much more than marginal supply and demand issues, the key driver of oil prices over the past decade has been central bank liquidity. Which is why the world should probably be far more concerned with what Bernanke will do than what the OPEC may or may not.

And finally, lest they be blamed for spreading optimism, Religare does note that despite all of the above (or below, where we have placed the full note), the likelihood of $200 oil has actually increased:

Feeding the bear: Finally, we would highlight that the chances of our bear case scenario of $200 oil outlined in our February 27th note, “Global Strategy – Resilience or Ignorance”, have increased given the shift in the political and economic situation in the MENA region, with the probability of an attack on Iran rising to 15% from 5% on a 12 month view

Much more in the full note:

MENA Strategy - The GCC and IEA Connection

 

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Mon, 06/27/2011 - 21:04 | 1407250 Cone of Uncertainty
Cone of Uncertainty's picture

Fuck the SPR, military coup bitches:

http://pecangroup.org/archives/3127

Mon, 06/27/2011 - 21:42 | 1407350 Spirit Of Truth
Spirit Of Truth's picture

Maybe.

IMHO, more relevant are the developments concerning Syria, Turkey, Hezbollah, Iran and Israel:

http://members.beforeitsnews.com/story/755/780/Turkey_might_launch_war_against_Syria.html

Mon, 06/27/2011 - 21:04 | 1407251 monkeyshine
monkeyshine's picture

I made relatively similar comments at the time... the release wasn't for political pandering it was to help Saudi in its war of attrition against Iran. Saudi can increase output, has a lot more sovereign wealth, 1/3 the population of Iran, (and even better ratios when you add the GCC countries into the mix).  The Sunnis rulers want the Shia rulers put in check this is one of the many ways they are trying to do it - by making it too expensive for Iran to play the games they are playing, forcing them to choose whether to keep spending outside their country when there is less and less to spend inside their country. 

Mon, 06/27/2011 - 21:11 | 1407263 mynhair
mynhair's picture

You assume Bstinky knew 2 months ago what to do?  Big fail in analysis.

The moron doesn't know when he gets his next cheeseburger.

Mon, 06/27/2011 - 21:16 | 1407270 dick cheneys ghost
dick cheneys ghost's picture


this story came out june 15th (the telegraph) a small piece of the puzzle.....

 

"It is understood that US and Saudi officials met to discuss exchanging high-quality crude oil stored in the US emergency reserve for heavier, low-quality oil from Saudi Arabia.

'The idea involved shipping some of the light low-sulphur – or "sweet" – crude out of the US strategic petroleum reserve to European refiners, who needed it because the civil war in Libya has cut off shipments. In return, Saudi Arabia would sell its heavier high-sulphur – or "sour" – crude at a discount back to the US.

However, the deal fell apart as Riyadh ultimately proved unwilling to subsidise European or US customers by discounting its crude prices below market value.

Saudi Arabia and its Gulf neighbours last week voted for an increase in production from Opec members in an attempt to dampen prices. However, the key meeting of the cartel fell apart after fellow members such as Algeria, Iran and Venezuela refused to back higher output''.

 

link...

http://www.telegraph.co.uk/finance/newsbysector/energy/8578318/Opec-to-haul-in-1-trillion-as-oil-prices-increase-risk-of-double-dip-recession.html

 

Mon, 06/27/2011 - 21:19 | 1407276 mynhair
mynhair's picture

In talks with IEA since April.  Egg, or chicken, or moron?

Mon, 06/27/2011 - 21:22 | 1407283 Atomizer
Atomizer's picture

SBASENS

http://research.stlouisfed.org/fred2/series/SBASENS

The muppet-in-chief is attempting to work new miracles. This messiah has special oil powers.

Recycling Petrodollars

 

http://www.newyorkfed.org/research/current_issues/ci12-9/ci12-9.html

Mon, 06/27/2011 - 21:21 | 1407284 Cdad
Cdad's picture

Seems to me that an awful lot of things could happen to the price of oil, the most significant of them being falling demand as we descend into the Greater American [and global] Depression.

Oil is a short for the time being.

That said, the SPR release was an offense to anyone with even a modicum of mental processing power.

Mon, 06/27/2011 - 21:18 | 1407287 knukles
knukles's picture

So it's all fucking hunkie dorie.
Thought so.

Mon, 06/27/2011 - 21:24 | 1407295 mynhair
mynhair's picture

Correctomundo.  Lower oil = higher RUT.

Mon, 06/27/2011 - 21:30 | 1407301 Mercury
Mercury's picture

Then again perhaps the move was not as misguided as the skeptics believe.

If this administration wasn't so desperate, wrong, and enamored of central planning, maybe they'd be given more benefit of the doubt when they tried their hand at price manipulation.

We also see a potential resolution in Libya as increasingly likely, with no increase in MENA violence.

Come on fellas, we all know that amounts to putting everything on red and giving the wheel a spin.  No one can predict what the hell happens over there next, especially now.

Mon, 06/27/2011 - 21:31 | 1407323 zeneta
zeneta's picture

My vote:

 

HUGO CHAVEZ IS DEAD !!

 

 

 

Mon, 06/27/2011 - 21:41 | 1407336 Caviar Emptor
Caviar Emptor's picture

I may have an overly developed sense of BS. But whenever I hear a full-on propaganda campaign, i get suspicious (summer of recovery, anyone?). In the last couple of weeks every oil major, minor and middie has been coming out of the woodwork to tell us 'mericains just how much freeking oil there is! An outrageous amount when you count the shales, the sands and gas-to-liquids. I even read today someone actually say "the glass isn't half empty, it's running over!". ;-)

Not so much that we'll have $30/bbl again, mind you. And not exactly tomorrow so don't old your breath. And oh yeah we still need to drill the ANWR. And of course in the meantime we'll still be importing more than half our oil. But don't worry! We're swimming in oil. 

Mon, 06/27/2011 - 21:44 | 1407360 hedgeless_horseman
hedgeless_horseman's picture

From the article...

The remainder of OPEC has no room to retaliate 

Enough said.

Mon, 06/27/2011 - 21:51 | 1407377 Caviar Emptor
Caviar Emptor's picture

+1. And the bluffing Saudis were allowed to walk away from the table to hide their red faces. They got a problem: no matter how much we think they have left, they can't get most of what's left out of the sand with the resources they've got and at today's prices. 

Tue, 06/28/2011 - 00:22 | 1407858 Oh regional Indian
Oh regional Indian's picture

+2
ORi

Tue, 06/28/2011 - 00:59 | 1407920 infinity8
infinity8's picture

I dunno but, back in '07, GE sold their plastics division to SABIC (saudi) and they (Saudi) built a Huge plant(s?).  that's value added and they can process/pump it straight in - no transport costs. GE kept rights on "proprietary" (primarily polycarbonate) resins. 

Mon, 06/27/2011 - 21:43 | 1407354 Atomizer
Atomizer's picture

With today's latest press release on new mandates for car manufactures to hit the 56/mpg target. I'm thinking Obama is looking at Briggs and Stratton technology to power all new US vehicles.

I smell a new M&A on the horizon. LOL. Who would of thought golfing could trigger new brainstorming idea's.

Mon, 06/27/2011 - 21:47 | 1407358 Eally Ucked
Eally Ucked's picture

The only problem with all those arguments is that oil producing countries are facing close to double digit inflation. In situation as this I cannot see them agreeing for lower price of oil to ease inflationary problems in Europe and US, that would be stupid and I don't think they are so corrupt to risk internal problems and yield to silly attempts of western powers to shift all the problems to them. It was good policy few years ago, not anymore.

Mon, 06/27/2011 - 22:02 | 1407400 RockyRacoon
RockyRacoon's picture

Ah, my internal combustion engine.  It's been fine knowin' ya.

I see a new method of propulsion on the horizon!

...or would that be in the rear-view mirror?

Mon, 06/27/2011 - 22:17 | 1407482 trav7777
trav7777's picture

Gasoline or alcohol fuel cell would be handy right about now

Mon, 06/27/2011 - 22:28 | 1407520 RockyRacoon
RockyRacoon's picture

Fred and Barney could use a new pair o' shoes.

Mon, 06/27/2011 - 22:07 | 1407442 ziggy59
ziggy59's picture

big deal..how much oil does the US use per/day? 20 million barrels/day, right?

Mon, 06/27/2011 - 23:26 | 1407742 snowball777
snowball777's picture

Getting warmer (higher).

Mon, 06/27/2011 - 22:16 | 1407461 Tunga
Tunga's picture

Tunga was able to use the 25 cents he saved on his last fuel purchase to buy a newspaper so he could see that there are still no help wanted ads in the classified section. With the exception of squeegee operators and bucket kickers wanted at some nuke plant in Nebraska. 

Mon, 06/27/2011 - 22:16 | 1407474 CrashisOptimistic
CrashisOptimistic's picture

"Although, much more than marginal supply and demand issues, the key driver of oil prices over the past decade has been central bank liquidity."

You're just wrong, Tyler.  The explosive printing started in late 2008.  Oil had already spiked in June to 146ish (Brent).  Brent was $25 in 2000.  It, Brent, spiked before the QE trillions got started.

Rather, it's the reverse.  Central Bank liquidity has been forced onto central bankers by the evisceration of civilization resulting from oil scarcity in a world with growing population.

This is not a religion thing.  It's just very hard for finance and economics people to grasp that economics and finance are moving off the table into the trash can.  Physics and geology now control everything.

Mon, 06/27/2011 - 22:55 | 1407637 trav7777
trav7777's picture

yep.  The part that's so hard for them to get is that their silly theories actually seemed to have some merit during the growth phase.

They never considered contraction; it does not exist to modern economics.  Anywhere.  I challenge anyone to find me a discussion of it, of "contractionary monetary aggregates" and other such shit.  Good luck.

Lack of growth is considered a crisis; just today I read some article lamenting the lack of population growth, or maybe below-trend growth, in California.  A catastrophe, must be "fixed."  These idiots seem to think we can grow forever.

Mon, 06/27/2011 - 23:06 | 1407692 the grateful un...
the grateful unemployed's picture

oil will be $25bbl again because the economy is now where it was in 2000. the whole detour around Iraq and the war on terror is over, and we are back where we were before Bush.  and really much worse structurally.  this is what happens when you make the wrong turn, (think 2000 Florida). stop the 9/11 attacks and the whole world looks a lot different.

Tue, 06/28/2011 - 02:43 | 1408068 That Peak Oil Guy
That Peak Oil Guy's picture

To be fair, most peak oil people approach oil prices without a single thought to monetary policy.  Mention monetary policy to your average peak oil zealot and you will get an intellectual blank stare.  We all have our favorite bad guy in this plot! 

But energy and money are inextricably intertwined!  Energy is a primary input to the economy and money provides the mechanism of economic communication.  When the input starts to become unstable the fiat money communication signal can be manipulated by humans in power to delay the bad news and keep them in power longer.

I see monetay policy these days as largly a human response to energy scarcity.  But we are playing with fire!  It stands to reason that if you manipulate the signal from supply to demand then you also affect the signal from demand to supply, and that is why as we manipulate the system to keep oil prices as low as possible then we are likely to see underinvestment in oil production relative to where we need to be to stay on the plateau, and therefore a somewhat quicker decline once the chickens come home to roost.  Manipulation of economic signals is always eventually doomed to failure, and the more manipulation the more likely the failure will be spectacular.

I would love it if we in the US reduced our oil consumption through economic crash and then sparked a global oil production crash due to underinvestment!  I think this is one way we still have a chance to ease the downward slope through mini crashes rather than one huge plunge.  But we must not do it faster than the rest of the world because we do not want a situation ala Tragedy of the Commons where someone like China is walking all over us.

TPOG

Tue, 06/28/2011 - 07:16 | 1408185 Ghordius
Ghordius's picture

+1 Great comment

It scares me though when you write "...if we in the US reduced our oil consumption through economic crash and then sparked a global oil production crash due to underinvestment...", myself I would wish for a more gradual adjustment to... what? I mean who is not lying when it comes to oil reserves?

I remember George W. Bush wishing for a more rational way to deal with oil consumption, at that time he said there was already an underinvestment in oil refineries, with most of them over 20 years old and nobody wanting to invest in new ones...

In southern Europe in the Seventies the progressive answer to that was to slap a 100% tax to gas prices. Driving in Greece, for example, was somewhat 10-25 times more expensive than in the USA. Germans proposed an increase of gasoline taxes in the Nineties up to DM 5 per liter, at that time roughly 8 USD per gallon, if I remember it correctly...

Tue, 06/28/2011 - 14:45 | 1409061 That Peak Oil Guy
That Peak Oil Guy's picture

I also would like a more gradual transition, but I think that our window of opportunity for that is past us, at least if you look at the economy as a whole.  People seem to be unable to make the decisions necessary to slow themselves down.  But I think this is just human nature.  Like all other things in nature we expand within the confines of our environment; we keep growing until our environment reigns us in.  Our incredible adaptability has allowed us to utilize so much of the global environment that there is a good possibility that by the time we reach our limits it will result in extinction of our species and much of life on the globe.  But like George Carlin said, the planet will be fine, it is the humans that need to worry!

http://www.youtube.com/watch?v=eScDfYzMEEw

If we manage to crash quickly while there is still energy left for the future, then perhaps we will reduce the pressure on our environment before it is too late.  And then future generations of humans will be able to rebuild a hopefully more sustainable society, constrained by still available but not abundant energy sources.

I am not saying this will be pretty to those of us who will live through this transition.  Fortunately the world is a big place and I am sure different regions will have different outcomes, so I think there is always hope!  As always happens in nature in times of stress we will compete for what resources remain, and through this time if we do not kill ourselves then we will grow stronger as a species.

People forget that there is a reason that the words economy and ecology have the same prefix!  The economy is our human abstraction of our underlying ecology based on true environmental restraints.  The problem is that this virtual human construct can be decoupled somewhat from the underlying reality, masking the warning signals that something bad is about to happen until it is too late!

TPOG

Mon, 06/27/2011 - 22:17 | 1407483 scimath_org
scimath_org's picture

 

 ??????????????????
http://www.scimath.org/edltv
???????????
http://www.scimath.org/

 

Mon, 06/27/2011 - 22:20 | 1407495 Rusty Shorts
Rusty Shorts's picture

Fuck you

Mon, 06/27/2011 - 22:26 | 1407529 RockyRacoon
RockyRacoon's picture

Eloquently stated, Mr. Shorts.

Mon, 06/27/2011 - 22:33 | 1407551 Rusty Shorts
Rusty Shorts's picture

 - intellectual property btw

Mon, 06/27/2011 - 23:28 | 1407754 RockyRacoon
RockyRacoon's picture

So I can quote you only with attribution.   Fair enough.

Mon, 06/27/2011 - 23:37 | 1407782 Rusty Shorts
Rusty Shorts's picture

 - your breaking up, whose intellectual property? what?

Tue, 06/28/2011 - 07:06 | 1408175 Yen Cross
Yen Cross's picture

+1

Tue, 06/28/2011 - 07:01 | 1408174 Yen Cross
Yen Cross's picture

+1

Mon, 06/27/2011 - 22:23 | 1407492 scimath_org
scimath_org's picture

Knowledge. http://www.scimath.org
Distance Learning Program.http://www.scimath.org/edltv

Mon, 06/27/2011 - 23:29 | 1407759 honestabe
honestabe's picture

60M barrels released over one month means nothing. Global production is about 88M barrels/Day. So, in one month, output=about 2500M barrels. 60M is a trivial drop in the bucket.

   This is just political hot air. Markets will forget this in very short order.

Mon, 06/27/2011 - 23:34 | 1407777 Atomizer
Atomizer's picture

It all stems back to central planning policies

Recycling Petrodollars

http://www.imf.org/external/np/exr/center/mm/eng/rs_sub_3.htm

OPEC OIL EMBARGO - 1973 

Bank Recycling of Petro Dollars 

I'm quite sure the attention span will be limited to read this bit.  

A Century of War

 

Tue, 06/28/2011 - 00:13 | 1407848 slewie the pi-rat
slewie the pi-rat's picture

i dunno.  i don't mind the oil deal b/c the way the paper market works who knows what will happen, or even if the sale is truly an arm's-length deal or merely a bankster vignette. 

i dunno abt the probability of iran lighting up militarily tripling from 5% to 15%.  that kinda  state dept. bullshit is way beyond my pay grade.

that said, this:  "...We also see a potential resolution in Libya as increasingly likely, with no increase in MENA violence." , is bullshit. 

why?  yes, there have been overtures and signs of this & that, primarily from the countries of africa--the african union.  but look what happened, today (Paste):

While NATO warplanes kept targeting his Tripoli compound at Bab al-Azziziyah and world leaders stepped up calls for the Libyan leader Muammar Al Qathafi to step down from power, the International Criminal Court (ICC) Monday issued three warrants of arrest for him, his son Seif, and his head of military intelligence, Abdullah Al-Senussi for crimes against humanity. (End Paste: ICC Issues Arrest Warrants for Libyan leader, his son Seif and Al Senussi   fr. The Tripoli Post)

apparently, as Tunisia, to the west, went to the moslem brotherhood in january, and, egypt to the east,  revo'd soon after, the moQ and his evil henchmen decided if they tried a revo in libya, they would blow the living shit outa them. 

sure enuf.  by the numbers.  is anyone surprised?  so, now, these 3 are charged w/ crimes against humanity , because they allegedly kicked ass and took names later, as we might say.  as far as i can see from this report, that is the basis of the indictment.

but i think, maybe, the indictment, itself may be more conducive to fighting than to talking.  maybe there is no way out.  the die is cast, as it were.  but, personally, i don't think this 'extra dimension' is helpful.  the moQ is a bedouin chief who has ruled these circa 150 tribes for 41 years.  then, sarko and bilary decided to get involved...

and now, everyone 'knows' he simply can not hold on, much longer.  i think that is the "potential resolution" here:  since we couldn't nail his ass in the first two weeks, we'll just hafta get him in the next two weeks.  hut. hut. hut.

...to be continued... 

Tue, 06/28/2011 - 01:24 | 1407964 CrashisOptimistic
CrashisOptimistic's picture

Gadaffi has demonstrated genius in all of this.

He called in favors in his region and very likely had money prepositioned in those countries to pay for those favors.  There is even rather a lot of talk that oil is flowing out of Libya into Chad and Sudan.  Off the radar screen is an upcoming oil war in Sudan, with the guy in the north about to lose the south's oil fields.  He's also under indictment and would be delighted to traffic Libyan oil and flow money to Gadaffi with which to pay "forces loyal to", aka, tribes.

He's fought brilliantly on the military front, too.  The tactics changes have been spectacular.  He's getting food and water from Tunisia and that's why there's fighting in the west, as the rebels have been begged by NATO to cut off supplies.

They are failing.  Bear in mind we're hearing only propaganda from "our" side on the war, and even we can see through it.  Every announcement that the rebels have secured Misrata is followed by stories of heavy fighting there.  Ditto Bregha.

NATO is messing up in another way, too.  There will eventually be a more or less surrender to Gadaffi, where they let him stay but he must allow inspectors to ensure he doesn't take reprisals against the rebels.  He'll agree.  And then he'll start pumping oil . . . in an amount of 200K bpd, which will be made available to Chad and Sudan and Algeria and Tunisia at market prices.

If Europe, who have just backstabbed him, wants any, the price will be Brent + $500/barrel.

Tue, 06/28/2011 - 01:58 | 1408007 slewie the pi-rat
slewie the pi-rat's picture

i think he is doing well to survive.  even caesar didn't make it to dinner that one night. i've put up this map of western libya before: Nalut Map | Libya Google Satellite Maps

if you move nalut to the right and down, you see dahibah which is over the white line/border into tunisia.  the border crossing which must be right around wazin, there, has changed hands a few times.  i think these roads are supply lines for both sides.  it's weird, but i think except for a few armored vehicles which the moQ sent into nalut, and which 'broke down' rather drastically, people are trying to...get...along?  

live and let live? also, there are published reports that int'l medical aid and supplies is getting in---to everyone, i would hope(!)---through this area.  yay!

this is the sahara desert in the middle of summer.  jeeeez!  war is one thing.  dying is another. 

Tue, 06/28/2011 - 01:25 | 1407969 CrashisOptimistic
CrashisOptimistic's picture

Gadaffi has demonstrated genius in all of this.

He called in favors in his region and very likely had money prepositioned in those countries to pay for those favors.  There is even rather a lot of talk that oil is flowing out of Libya into Chad and Sudan.  Off the radar screen is an upcoming oil war in Sudan, with the guy in the north about to lose the south's oil fields.  He's also under indictment and would be delighted to traffic Libyan oil and flow money to Gadaffi with which to pay "forces loyal to", aka, tribes.

He's fought brilliantly on the military front, too.  The tactics changes have been spectacular.  He's getting food and water from Tunisia and that's why there's fighting in the west, as the rebels have been begged by NATO to cut off supplies.

They are failing.  Bear in mind we're hearing only propaganda from "our" side on the war, and even we can see through it.  Every announcement that the rebels have secured Misrata is followed by stories of heavy fighting there.  Ditto Bregha.

NATO is messing up in another way, too.  There will eventually be a more or less surrender to Gadaffi, where they let him stay but he must allow inspectors to ensure he doesn't take reprisals against the rebels.  He'll agree.  And then he'll start pumping oil . . . in an amount of 200K bpd, which will be made available to Chad and Sudan and Algeria and Tunisia at market prices.

If Europe, who have just backstabbed him, wants any, the price will be Brent + $500/barrel.

Tue, 06/28/2011 - 02:21 | 1408049 slewie the pi-rat
slewie the pi-rat's picture

these people have all lived together, as one nation, in relative, if not absolute prosperity, for generations now, really.

i wouldn't be surprised if they took a good look around and had that wtf moment, or three.

Tue, 06/28/2011 - 01:27 | 1407975 CrashisOptimistic
CrashisOptimistic's picture

Gadaffi has demonstrated genius in all of this.

He called in favors in his region and very likely had money prepositioned in those countries to pay for those favors.  There is even rather a lot of talk that oil is flowing out of Libya into Chad and Sudan.  Off the radar screen is an upcoming oil war in Sudan, with the guy in the north about to lose the south's oil fields.  He's also under indictment and would be delighted to traffic Libyan oil and flow money to Gadaffi with which to pay "forces loyal to", aka, tribes.

He's fought brilliantly on the military front, too.  The tactics changes have been spectacular.  He's getting food and water from Tunisia and that's why there's fighting in the west, as the rebels have been begged by NATO to cut off supplies.

They are failing.  Bear in mind we're hearing only propaganda from "our" side on the war, and even we can see through it.  Every announcement that the rebels have secured Misrata is followed by stories of heavy fighting there.  Ditto Bregha.

NATO is messing up in another way, too.  There will eventually be a more or less surrender to Gadaffi, where they let him stay but he must allow inspectors to ensure he doesn't take reprisals against the rebels.  He'll agree.  And then he'll start pumping oil . . . in an amount of 200K bpd, which will be made available to Chad and Sudan and Algeria and Tunisia at market prices.

If Europe, who have just backstabbed him, wants any, the price will be Brent + $500/barrel.

Tue, 06/28/2011 - 02:45 | 1408075 slewie the pi-rat
slewie the pi-rat's picture

the revolution has a new flag which is actually the old flag, i think.  one thing you can say abt the libyans is that they are libyan. 

maybe that will get them thru this. 

i think the moQ did ok in many ways, despite his shortcomings, but prob shouldn't have tried to set up the inter-generational ruling family dynasty thingy at this point in time.  so, they will transition to something else.  some combo of ballots and bullets, but figure out something to vote on at this point, vote, and see what happens? 

i think they either must agree about something, and vote it in, or disagree about one thing, and poll the nation. too simple?  LOL. 

are the puppet masters too strong?  can they call the shots & shape the debate? double down, with thousands of more bombing strikes yet to come?

i think the libyans might have some innate capacity to work together, so here's to the forest, trees!

oh---and maybe try to listen to the voices of the nations of the african union, who present a willingness to mediate.  who knows?

Tue, 06/28/2011 - 07:10 | 1408176 Yen Cross
Yen Cross's picture

 That was a good (series) of posts Slewie! The 2 below it are as well!   

 

            Yen.

Tue, 06/28/2011 - 05:46 | 1408144 string
string's picture

ERoEI bitchez.

Tue, 06/28/2011 - 05:49 | 1408146 steveo
steveo's picture

Contrarian thought.  

Price of oil is going down.   "they" the power that be, want to increase their respect, by showing their power...the power to release that oil and "drive" prices down.  

 

This is sure gamesmanship, illusion is the main trump suit that they are living on.   No that many poeple are buying their shit either, many people do "get it"

Tue, 06/28/2011 - 06:09 | 1408152 falak pema
falak pema's picture

When the monetary crisis reaches boiling point, China will sit on each board meeting in EU and IMF and dictate its views. Watch the Sino-USD rift grow as both know they are now head on in conflict around a) the oil/commodity patch and inflation hedged shenanigans b) the Euro Sovereign debt where China will now openly step in as white knight on Germany's side. We will see if Bernanke then goes to QE-3 mode in August. As, if China/ECB succeeds in kicking the Euro/Pigs debt can down three years, then USD will be under heat from all around.

Oil price is a resultant off shoot of the monetary match. USA will use it to strangle China's economy through inflation, all the while it lets USD run down. China has every interest in seeing Oil price stay, at worse, constant in Euro terms as it moves out of USD into a basket of reserve currencies. Making EUro the energy currency pivot is now a chinese strategic objective.

Tue, 06/28/2011 - 06:45 | 1408162 schizo321437
schizo321437's picture

Didn`t someone on this site post the view that the only way Obama could win the election was to release the oil reserve to drive down gas prices? It all seemed a bit blatant at the time, it shows how shallow (the political class think?) the electorate are though. Or will show? Ugh what a mess :D

Tue, 06/28/2011 - 07:21 | 1408186 Yen Cross
Yen Cross's picture

 Is anyone listening to this CNBS?   What a joke!  The reserve/bailout curreny of planet Earth is the USD and every one knows it.  Liquidity!  The worthless Asians are rinse wahing USD every day in Asia and London. The Asian central banking system is a giant PARASITE on the west. The middle east is a joke as well.  We should rent out Aircraft carriers ! Great debt reduction strategy! Oh wait China would hijack them .

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