Stratfor On The Very Real Obstacles To Libyan Ceasfire Rumors (Which Gave Goldman A Crude Entry Point)

Tyler Durden's picture

With oil once again supposedly doing a headfake on the second round of Libyan peace reports (remember when Hugo "Peacemaker" Chavez was going to usher in a new era of world peace?) here is Stratfor with a much needed analysis beyond just the headlines, of the real and very deep obstacles to a ceasefire in Libya, which may pour some water over the next attempt at spinning a "give ceasfire a chance" meme, which as we predicted yesterday will last at most a day or two. As for our comment that Goldman is now merely loading up on oil, well: we were right. Following the closing of Goldman's Top trade of 2011 which told GS clients to sell Crude, Copper, Cotton And Platinum who do you think was on the other side of the trade?

From Stratfor

The African Union and the Turkish government are both trying to
negotiate a cease-fire in Libya. Libyan leader Moammar Gadhafi has
already given the green light to an African Union proposal led by South
African President Jacob Zuma on the condition that NATO first cease its
airstrikes. The rebels in the east have rejected the terms of the
cease-fire, sticking to their demand that Gadhafi first step down.
Meanwhile, NATO forces maintained that they will continue launching
airstrikes as long as Libyan civilians in the east are threatened.

Clearly, the cease-fire negotiations are fraught with complications.
But as time wears on, it’s looking increasingly likely that the current
stalemate in Libya could give way to a de facto partition between east
and west. This may not be the ideal scenario for many, but it could
allow the United States to avoid another costly nation-building exercise
in the Islamic world, while allowing Gadhafi to remain in power,
however tenuously. Each party in this conflict — whether you’re talking
about the eastern rebels, Gadhafi’s forces or NATO forces — are facing
considerable dilemmas in how to proceed in this military campaign.

The eastern rebels have made clear that they’re not content with
holding onto the east and ceding the west to Gadhafi’s forces. The
problem with the rebel forces it that they are severely ill-trained and
ill-equipped. And if you take a look at the battles that have been
taking place in the energy-critical areas of (Marsa el) Brega, Ras
Lanuf, Zawiya and the port of Sidra, show just how difficult of a time
the rebels are having in trying to push Gadhafi’s forces back. And the
more Gadhafi’s forces deliberately pull back into built-up urban
strongholds in the west, the less likely NATO forces are to provide air
cover for fear of causing mass civilian casualties. Simply put, the
rebels do not have the fighting power to advance westward to Tripoli.

Meanwhile, Gadhafi’s forces remain largely in control of the main
energy-producing regions running alongside the dividing line of the
country and the Gulf of Sidra region. These forces reach as far as
Ajdabiya, just below the rebel stronghold of Benghazi. Though a number
of Gadhafi’s tanks are being eliminated by NATO airstrikes, his forces
have been able to rely on much less resource-intensive and highly mobile
civilian vehicles and technicals to move their forces around and push
the rebels back. Gadhafi’s forces are facing heavy constraints in
resupply as long as NATO forces are patrolling the seas and the skies
over Libya. All in all, though, Gadhafi would be negotiating from a
relative position of strength in any cease-fire negotiation. Even if
Gadhafi himself is eliminated, there do appear to be enough forces loyal
to him that could step in and reassert control from the west.

This obviously puts NATO in a very difficult spot. As long as
Gadhafi’s forces have the option of pulling back into well built-up
urban strongholds, NATO will face very heavy constraints in trying to
avoid the risk of blowback in causing civilian casualties. This gives
Gadhafi undeniable staying power. Meanwhile, the United States is facing
much more pressing and strategic concerns more eastward in the region
in the Persian Gulf region, where Iran is waiting to fill a power vacuum
in Iraq as U.S. forces are drawing down there. The U.S. then may be
resigning itself to the idea that it may not be getting much beyond a
stalemate in Libya, and that forcing a power vacuum in the country may
be a lot more trouble than it’s worth.



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Long-John-Silver's picture

Another war in a divided country like Vietnam before we lost that one. Just how stupid can these people be?

taxpayer102's picture

58,000 U.S. troops killed in Vietnam and the 1973 War Powers Act, conveniently forgotten by the Obama administration, Stratfor and the Pentagon.

RobotTrader's picture

Crude longs were smoked today.

It is going to take a couple more days of selling to cull the herd before Goldman starts dipping their toes in the water.

spiral_eyes's picture

read them like a book. as soon as the fuckheads on cnbc talk about commodities turning a bearish corner we know goldman will be buying the dip.

ZackAttack's picture

$700m per week for US airstrikes.

Because, you know, *so many* dictators have been bombed out of office.

dark pools of soros's picture

good for the economy..  rotating stock!!

Myzery's picture

$700mm a week in airstrikes


111mm taxpayers


$6.36 a week.

You probably save about that at the pump. 


Muir's picture

"who do you think was on the other side of the trade?"


dogismyth's picture please?  Take a look at DTO.  I think GS staged the recent upswing in oil based on bullshit propaganda pieces printed last week on the web.  There has never been a inverse V-shape decline in oil and that's what this will be if it continues downward...which I believe it will.  I think most of the sell-off occurred in the past two to three weeks when the heated news of LIbya hit the wire.  Take a look at volume on USO and UCO (on the daily and 60-min).  That's some mega volume!  Now take a look at DTO.  How convenient huh?  It trades 600k shares (65-day avg).  This is just another blatant example of insider buying/selling that occurs without repercussions in our market.  Yeah, I know it happens every day....

Bob Paulson's picture


sure oil might go down in the short term, but when the drama hits saudi arabia, you'll be wishing you held onto your longs.

That Peak Oil Guy's picture

Follow the oil.  There will only be a cease-fire if there is outside access to the oil and the investments of western companies are secure.


SDRII's picture

The bigger game here is the US payback for UK/Italy supporting Afghan. Given all the bravado out of the UK/France and Italy  - none can afford to actually admit they are limp despite outward realities. The Germans are content do do business (BASF fields) however. France is trying to make up for lost time in Algeria. Italy's PM would rather headlines about Libya than Morrocco. And the UK in post lockerbie guilt is trying to secure its hard won fields.

Eireann go Brach's picture

I am still surprised that no one from the public has ever taken a bat or any sharp object they have in their possession to Lloyd Blankfein and just smashed it over his head!

NOTW777's picture

so the goldman needs silver and oil

good thing they dont have chase or wait like normal market participants

dogismyth's picture

do we really believe that GS is late to the game on oil or PM?  Are you kidding me!  They are the game.

NOTW777's picture

I would not say late on oil but I think the commodities have gotten away on the big banks. also the gov might want to tamp down $5 gas.  if not GS on silver, maybe a client or another bank.

also - because they can

NOTW777's picture

also you think GS and JP gamed obama charging into libya?

ZeroPower's picture

Didn't GS sell their long crude exposure last week, thus confirming they got out near the top? At least intermediate-term top anyway..

gordengeko's picture

"Spotlight on Speculators If Oil Price Still Moves Up" dated 4-4-10

"Well, with Cushing inventories at record highs, literally bursting at the seams (see charts below), and only going to get worse over the next two weeks, and given the fact that the WTI contract is deliverable at the Cushing hub, we will finally test whether that hypothesis is true."

You can bet your ass they did!  Thank you Zero hedge for posting this article last week btw.  I closed out a double short and went double long and caught the quick spike up Friday for a quick 1 day 5%, thanks probably to GS.  Chart is screaming short-term top and with the analysis of the front month rollover on the contracts the fundamentals back it up.  Propaganda bullshit by MSM AGAIN on the oil news last thursday causing the spike.  How about an inquiry just to sooth us over and see if GS played this little top the last 2 days???

Myzery's picture

I thought all the buildup would have kept it more tame last week.


Tough to say what seasonal effects in the US are gonna have.

Arkadaba's picture

Well if you got decent financial news you would know - who do you subscribe to?


gordengeko's picture

First reuters on 4-6 7:55pm "Libya says NATO air strike hits major oilfield"

Then reuters on 4-7 8:31am "Gaddafi forces to blame for oilfield fire"

Then today's ceasefire talks obviously having an affect on oil prices.

Just saying, with the fundamentals and technicals saying crude is overpriced then this news of someone bombing oilfields spikes up oil 108-113 back to 108 in a little over 1 trading day??? That's a pretty major move based on speculation just a few hours after the news broke. It wasn't until they adjusted their story and said Gaddafi did it, that was a full 15 hours after the news first broke did oil finally breakout.  Now whether there is a conspiracy who the fuck knows, it just seems fishy to me and it only raised questions because I was in the short at the time for a good reason.

JR's picture

Yes, an analysis behind the headlines is needed. But does ZH owe Stratfor, aka George Friedman, money or is this neocon a brother-in-law to one of our Tylers?

This analysis, like most of Stratfor’s pro-war essays… is vintage neocon rhetoric.

Yes, it’s true that Israel is feeling mighty vulnerable with its former mentor in the Arab Club – Egypt – approaching free elections, and its former best Muslim friend – Turkey – getting cooler by the day.

But please, ZH, find us a Middle East source we can trust.  It’s not “rah-rah-Iraq War” Stratfor – whose operative Friedman has called for Obama to bomb Iran before the 2012 election.

As Justin Raimondo of said April 8 in Unholy Alliance: Neocons and "progressives" -- united at last over Libya, war powers, and the Constitution :

"[W]artime, for a neocon, is the equivalent of a church service. You don’t make a ruckus in church, especially at the very moment when the sacrament is being offered up by the high priests of the war god. A holy silence must be maintained until the ritual is completed: and even then, you risk being labeled a heretic, or even a 'crackpot.'”

NOTW777's picture

isnt it time for a new soros color book with some new key cliches and phrases to repeat over and over; ur talking "neocon" and war and YOUR president is lighting up the skys and asking for the debt ceiling to be lifted

hardcleareye's picture

Good number of "Credit Card Conservatives" voted for the lifting of that debt ceiling!  (I get my tax cuts you get your benefits, quid pro quo)  Lets face it the budget vote and the script acted out by the Washington Circle (all parties involved) sould be nominated for a Emmy Award, they didn't accomplish anything expect dig the hole deeper.  

nmewn's picture

"But please, ZH, find us a Middle East source we can trust."

Well, therein lies the problem.

When the practice of the culture is taqiyya & kitman (lying to infidels to further an agenda) it's kinda hard to pin it all down ;-) 

RobotTrader's picture

If Muammar Quaddafi is captured, oil will crash by $20/bbl.

Retail and airline stocks will rocket up.

Be ready.

falak pema's picture

He'll be caught the same day as Ben Laden. The way things are going he should be showing his nose in Benghazi soon. So oil won't go to 20$.

NOTW777's picture

the day obama took office bin laden was deemed no longer important along with deficits and body counts

dark pools of soros's picture

He just got a new assignment..  helping the rebels in Libya


Osama probably never missed a CFR meeting



New_Meat's picture

Ben b doin' the FRB thingie--he's too busy to go to Benghazi.  don't cha' know. - Ned

dogismyth's picture

my read is that it doesn;t matter if they kill Gaddafi or capture him...there are plenty of loyalists that will carry on even in his absence.  Also, removing Gaddafi may create a prolonged intervention with NATO which is a negative on all fronts.  If I was part of this evil game, I would say find a cease-fire agreement and let everyone relax before setting up the next stage of dissent and/or assassination of Gaddafi.  Either way, I'm sure the scum Goldman Sachs knows exactly how it'll play out. 

KickIce's picture

A clear example of what I call abusive owner / puppy syndrome.

First, the owner calls and the puppy runs immediately to him and gets smacked on the nose.  I little latter, the owner calls again.  This time the puppy is a little more reluctant but again comes to the owner and is soon rewarded with another smack on the nose.  The process continues, with each time the puppy a little more timid but each time with the same result.

New_Meat's picture

so you are in a committed relationship? ;-) - Ned

mogul rider's picture

Think like an oily squid and you'll be just fine.

Or maybe more like a vampire cuttlefish

Downtoolong's picture

Following the closing of Goldman's Top trade of 2011 which told GS clients to sell Crude, Copper, Cotton and Platinum who do you think was on the other side of the trade?

Hilarious. Beware acting on someone’s investment advice only to find out that your trading counterparty is them. Bastards.



falak pema's picture

That's why we call them the TENTACULAR squid.

apberusdisvet's picture

Oil will drop to $70 the summer before Obama's re-election; the most compliant puppet ever will be supported.

CrashisOptimistic's picture

That would require demand destruction.

falak pema's picture

Soon when the EU cohesion tears apart, as political will to handle the war effort weakens and ancillary  illegal immigrants spin-off fuels the current bickering going on...Turkey will in charge more and more of the Libyan scene. As USA will have other issues to address : namely Saudi and Iran.

bugs_'s picture

ba ba ba boooots on THE GROUND!!! BooYAH!!!

Rodent Freikorps's picture

Pork bellies did well.

Janeroo's picture

From Wiki...

BP Production Sharing Agreement

On May 29, 2007, during a visit to Muammar al-Gaddafi by British Prime Minister Tony Blair, British Petroleum (BP) signed a $900 million exploration and production agreement with the Libyan National Oil Company. The agreement, which will likely involve an estimated USD $2 billion in investment, covers three massive, largely unexplored tracts. The NOC signed the agreement with the LIA as BP’s 15% partner in a production sharing agreement (PSA).

Myzery's picture

any sources on various Oil Companies production or assets by country?


Clearly TOT and ENI are interested....

fellatio is not fattening's picture

I read the article and listened to the link, I am at a loss to see where you can say GS is on the other side and going long crude?  Is there a paragraph or something I missed that shows they are?  Thanks

JR's picture

Perhaps George Friedman can give us the neocon view on this one:

The LRC Blog

Orthodox Jewish Women Banned From Wearing Wigs in France

Posted by David Kramer on April 11, 2011 02:24 PM

Because the French government, in its infinite ignorance, has decided that it is a form of slavery for Orthodox Jewish women to be forced to wear wigs (called sheitels), the government has banned this practice.

Oh…wait a minute…the French government hasn’t banned Orthodox Jewish women from wearing sheitels because they are considered a form of slavery. The French government has banned Muslim women from wearing full-face veils in public because the French government—aka slave masters—who obviously own these women’s bodies and, therefore, can tell them what they can put on them, has deemed the wearing of such veils a form of slavery. Two women who were participating in a protest of this Hitlerian law have already been arrested. (Perhaps the government should suggest that, rather than wearing the veils, the Muslim women should wear badges on their arm sleeves depicting the Muslim symbol of a yellow crescent with an embedded yellow star in order to show their religion?)

By the way, I’m sure the fact that the man who first suggested the ban, President Sarkozy, is part-Jewish will sit very well with the global Muslim community.

[Thanks to Don Cooper]

nmewn's picture

I wonder how many buildings will be ransacked and Nordic chicks & Nepalese men will have to die over this one;

"Two anonymous young men in Iran, one Iranian and one Afghan, have burned a Koran in protest."

Oh, wait, they were an Iranian & an Afghan...never mind...won't happen ;-)