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'Worst Ever' OPEC Meeting Sees Oil Rise Sharply – Inflation Pressures, Growth And Sovereign Debt Concerns Support Bullion

Tyler Durden's picture




 

From Gold Core

'Worst Ever' OPEC Meeting Sees Oil Rise Sharply – Inflation Pressures, Growth and Sovereign Debt Concerns Support Bullion

Gold is marginally lower while silver is showing strength again today after yesterday’s 'worst ever' OPEC meeting ended in disarray and saw oil prices surge. Markets await today’s ECB rate decision and signs as to whether interest rates are set to rise sooner rather than later. Signs of an interest rate rise in July should see the euro and gold rally versus the dollar. The precious metals are also likely to be supported by further sharp falls in peripheral markets bonds, particularly Greece, this morning.

While all eyes are on the ECB today, there was a reminder late yesterday that it is not just the Eurozone that is struggling with debt. Fitch Ratings said it would put US debt on watch in early August if Congress fails to raise the federal debt limit.


Oil in US Dollars (WTI) – 12 Years (Weekly)

OPEC, the oil cartel’s increasing impotency was seen yesterday when Libya, Iraq, Angola, Ecuador and Algeria sided with increasingly influential Iran and Venezuela rather than Saudi Arabia and its allies Kuwait, Qatar and United Arab Emirates.

Oil had already been consolidating over $100 a barrel (WTI) and $110 a barrel (Brent) and further signs of the increasing lack of importance of OPEC may lead to higher oil prices.

Geopolitically, the failed OPEC meeting yesterday is important as it signals the declining power of the U.S.’ primary ally, Saudi Arabia.

It also shows Russia’s increasing power on the world stage. Russia is the only country to have increased oil production in recent years, as OPEC exports have fallen.

Leading OPEC nations including Saudi Arabia seem to be reaching or have reached their peak oil production, in what is termed "peak oil." 


Oil in US Dollars (Brent) – 12 Years (Weekly)

Cartels can be successful in the short term but attempts at price fixing or keeping prices near a certain level are always ultimately futile as ultimately supply and demand will always be the final arbiter of price.

The crisis in OPEC comes at a difficult time for oil markets as emerging market demand for oil, particularly from Asia, continues to grow.

Also, Japan’s nuclear crisis is leading to a decline in nuclear energy production, possibly long term in nature, and China’s massive drought has led to marked decline in hydroelectric energy production.

There is increasingly the real risk of an oil crisis especially given the very tense geopolitical situation in North Africa and the Middle East.

It has also increased tensions, which were already very tense, between the U.S. and Venezuela and more importantly Iran. 


Gold Adjusted for Inflation (U.S. Urban consumers price index - CPURNSA) – 1971 to Today (Weekly)

“Opec, led by Iran and Venezuela, has snubbed its nose at the United States and the rest of the western nations addicted to Opec oil,” Democratic congressman, Mr Edward Markey said. “This is a clear sign that America must engage in a long-term plan to break our ties to this Opec-controlled market, and prepare to deploy America’s oil reserves now to head off an economic collapse from continued high gas prices.”

Separately, Iran announced it planned to treble its capacity to produce highly enriched uranium which alarmed western powers and was deemed ‘provocative’ by one international relations analyst.

There is the increasing possibility of a 1970’s style oil crises and stagflation which saw gold prices rise 24 times from $35/oz to $850/oz in just 9 years.


Cross Currency Rates

Gold’s price rise since the year 2000 is meager in comparison as gold prices have only risen just over 6 times in 11 years.

Oil prices have risen over 10 times since 1999. For gold prices to just catch up with the price increases seen in ‘black gold’, gold would have to rise over $2,500/oz (10 X $250/oz).

Coincidentally enough this is the inflation adjusted high of 1980 – a level we have long contended gold would likely reach in the course of this bull market.

Should gold match its last bull market performance from the 1971 to 1980, it would have to rise 24 times or from $250/oz to over $6,000/oz.

Something for the perennial gold bubble callers to consider before they continue to discourage people from diversifying into gold.

SILVER

Silver’s increasing industrial use and demand was confirmed this morning. Bloomberg’s Nicholas Larkin reports that silver usage in solar panels may double to more than 100 million ounces by 2015. Demand for the metal in the applications was about 50 million ounces last year, the Silver Institute said in a just released statement on its website.

NEWS

(Financial Times) -- Oil leaps as Opec descends into acrimony
http://www.ft.com/intl/cms/s/0/2989e512-91b9-11e0-b4a3-00144feab49a.html#axzz1OlSElNZ6

(Irish Independent) -- Gold profits in EU central banks should be used to alleviate crisis
http://www.independent.ie/business/european/gold-profits-in-eu-central-banks-should-be-used-to-alleviate-crisis-2669955.html

(Reuters) -- Gold flat; palladium firms on auto recovery
http://www.reuters.com/article/2011/06/09/us-markets-precious-idUSTRE74F62H20110609

(Reuters) -- Gold steady as dollar softens ahead of ECB decision‎
http://uk.reuters.com/article/2011/06/09/markets-precious-idUKL3E7H901A20110609

COMMENTARY

(The Telegraph)  -- Interest rates will rise quickly
http://www.telegraph.co.uk/finance/personalfinance/savings/8563152/Interest-rates-will-rise-quickly.html

(The Telegraph) -- Gas, electricity price shock shows CPI inflation measure is meaningless
http://blogs.telegraph.co.uk/finance/ianmcowie/100010515/gas-and-electricity-price-shock-shows-the-government-measure-of-inflation-is-meaningless/

(ZeroHedge) -- Jim Rogers: "Bernanke Is A Disaster" Who Will "Bring QE Back"
http://www.zerohedge.com/article/marc-rogers-bernanke-disaster-who-will-bring-qe-back

(The Golden Truth) -- The only gold bubble likely to burst is the bubbling ridicule of gold
http://truthingold.blogspot.com/2011/06/keep-your-eye-on-ball.html

(GoldSeek) -- U.S. Hurtles Toward System Failure
http://news.goldseek.com/GoldenJackass/1307649600.php

(Got Gold Report) -- When Big Sellers of Silver Futures Seem Timid
http://www.gotgoldreport.com/2011/06/when-big-sellers-of-silver-futures-seem-timid.html

 

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Thu, 06/09/2011 - 07:12 | 1353964 Oh regional Indian
Oh regional Indian's picture

Black Gold, Yellow Gold, Silver.... the three legs of the stool on which the ponzi is balanced.

With such volatility in all three, can tipping point be far?

Not far at all I feel.

ORI

http://aadivaahan.wordpress.com/2011/06/07/bend-your-mind-around-this/

 

Thu, 06/09/2011 - 09:42 | 1354180 fiddler_on_the_roof
fiddler_on_the_roof's picture

Changed your tune to include Gold also? Previously you were all silver, asking people to sell Gold and buy silver. A lot of people would have lost money, if they followed that.

Thu, 06/09/2011 - 13:12 | 1354908 fiddler_on_the_roof
fiddler_on_the_roof's picture

I put more credence to Eric Janzen of iTulip.com. He was the first to call a bull market in Gold before all the others in 2001 right along "ANOTHER".

Thu, 06/09/2011 - 10:57 | 1354408 ibjamming
ibjamming's picture

War for oil is coming...time to eliminate the middle man.  $50 oil would do WONDERS for the worlds economy.  They were fools for not raising output.  Gotta have those indoor ski centers, the highest hotel, and islands that look like palm trees...ALL on OUR dime!  Fuck you ME, OPEC nations...you're price is too high, we're REALLY fucking desperate...we're coming to take it.

We're trying it the "peaceful" way...changing out the government.  We're trying to put in ANOTHER American owned government...that doesn't cost as much as the old one did...that will allow us to "take" their oil...and allow military basing.  Baring that...invasion...it doesn't matter who is in charge or who wants control.  We'll invade and set up OUR government.  Iran is the stickler but not a problem.  We already own Iraq and Afghanistan.  We've got tham squeezed.

China will play along of be decimated...financially.  All debts to China ERASED...Europe and the US...all contracts void...shipments to be sent to the "allies" instead.

It's perfect and our only way out of this mess.  War to take over the ME oil.  Russia would be pissed too...and I'm not sure what they will do.  Maybe we'll just split the ME oil reserves...50/50...Russia/China, Europe/America.  Think of 1/3 the debt instantly erased.  Think of $50 BBL oil again.  <$2.00 gas!  AND they can demand...and get...austerity too!  To support the "war effort".

I'm convinced...war is inevitable...by the end of the year?

Thu, 06/09/2011 - 07:14 | 1353965 speconomist
speconomist's picture

Sounds to me like Gold Core is always cheerleading commodities

Thu, 06/09/2011 - 07:16 | 1353967 Lone Mad Minute...
Lone Mad Minute Medic's picture

I fear I'll be an old man before the tipping point ever happens. 

Thu, 06/09/2011 - 07:29 | 1353977 Monedas
Monedas's picture

Buck up, Soldier ! I am an old, white man....but I think I'll live to see the collapse ! Think of all those poor coots who showed me and others the way....then passed away ! We'll have to enjoy the collapse for them, too ! Monedas 2011 Nominee for Hoarder's Hall of Fame !

Thu, 06/09/2011 - 07:47 | 1353988 Broomer
Broomer's picture

Perhaps. However, it is my opinion that in the current environment ownership of physical precious metals will outperform any kind of paper asset - if not for anything else, because value will never drop to zero.

Disclaimer: if you don't have the ways to survive sometime (insert anything from a week to two years here) without visiting the nearest 100-miles-away-store you are doing it wrong, wrong, wrong. And no, precious metals and/or cash are not security. Remember always that you also need water.

Thu, 06/09/2011 - 07:18 | 1353970 Monedas
Monedas's picture

So that's why those solar panels are so expensive....still ! They've "Got Silver ?" ! Thanks, Idi-O-Bama ! Keep pushin' 'em ! Monedas 2011 Worldwide Fiat Ponzi Scheme....From our Socialists to yours ! Enjoy !

Thu, 06/09/2011 - 07:21 | 1353971 scratch_and_sniff
scratch_and_sniff's picture

Has anyone noticed a new silver correlation with EUR/USD, which is kind of interesting?

Thu, 06/09/2011 - 07:24 | 1353972 alexwest
alexwest's picture

###
It also shows Russia’s increasing power on the world stage. Russia is the only country to have increased oil production in recent years, as OPEC exports have fallen.

##

another stupid lie..

Russia didnt increase nothing...
oil export is flat from 2005, gas export is dwn 10%..

alx

see official data
http://cbr.ru/eng/statistics/?Prtid=svs

Russian Federation: Crude Oil Exports, 2000-2010
Russian Federation: Oil Products Exports, 2000-2010
Russian Federation: Natural Gas Exports, 2000-2010

Thu, 06/09/2011 - 08:04 | 1354010 speedy
speedy's picture

Crude oil exports are more or less flat, however, oil product exports have risen.  Now, to export more oil products you have to either increase oil production or decrease internal oil consumption. You can make oil products with out oil!

 

 

Thu, 06/09/2011 - 08:16 | 1354020 Tim White
Tim White's picture

Wa-a-a-y better than Alka-selzer!! ( Sig.)

Thu, 06/09/2011 - 08:15 | 1354023 Urban Redneck
Urban Redneck's picture

Don't cite export statistics to refute production statistics, which were in turn supporting a claim about market share- that is sloppy, if not stupid.

The issue is Russia's increasing share (hence power) of global petroleum production and exports.  Incidentally, global production is basically flat for several years.  

Thu, 06/09/2011 - 08:30 | 1354037 alexwest
alexwest's picture

sloppy

thesis was OPEC decreased exports, so RUSSIA increased production AND EXPORT.. well its bullshit ..

otherwise who GIVES A FUCK THAT RUSSIA PRODUCE MORE AND CONSUME domestically? in such case CHINA would be great oil power cause it imports more and more oil..

btw, please publish hard facts about Russian increase of oil production, urls please, or its just poinless factless blubbering

alx

Thu, 06/09/2011 - 09:49 | 1354201 Urban Redneck
Urban Redneck's picture

You are wrong - both in logic & on facts

Your original post and the link therein do not refute the claims actually made in the article.  EIA data support the claims, so take it up with the EIA.  Otherwise please stop your factless blubbering or stupid lies.

http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=5&pid=53&aid=1&cid=regions&syid=2005&eyid=2010&unit=TBPD

Total Oil Supply
(Thousand Barrels Per Day & % of World Total)
YEAR  Russia         Saudi Arabia    
2005  9511-11.24%    11096-13.12%       
2006  9677-11.43%    10665-12.60%
2007  9878-11.68%    10249-12.12%
2008  9794-11.45%    10783-12.61%
2009  9934-11.78%    9760-11.57%
2010  10134-11.67%   10521-12.13%       
  

Exports of Crude Oil including Lease Condensate
(Thousand Barrels Per Day & % of World Total)     
YEAR  Russia         Saudi Arabia    
2005   5222-11.76%   7690-17.31%
2006   5106-11.72%   7309-16.78%
2007   5172-12.12%   6947-16.28%
2008   5120-11.99%   7240-16.96%
2009   5430-13.15%   6354-15.39%

Thu, 06/09/2011 - 07:24 | 1353976 chistletoe
chistletoe's picture

Canada has also increased oil production in the past few years,

mainly through prodigious expansion of oil sands exploitation.

Amazingly, the US has also increased oil production, albeit slight,

through many smaller projects, such as horizontal drilling in the Bakken and EagleFord shale.

Now, can someone please explain to me why traders believe that the collapse of discipline at OPEC, their inability to impose and enforce quotas anymore, because

so many of their rogue members support Iran in their desire to pump like there is no tomorrow, is bullish for oil prices?  What am I missing?

(besides, "down is up", "right is left" etc etc etc )

Thu, 06/09/2011 - 07:44 | 1353986 Flakmeister
Flakmeister's picture

Because pumping like there is no tomorrow is not going to increase the overall rate.... Read up on what the Texas RR commission did when Texas peaked in 1970.... in essence, they said all production restrictions are removed....

Thu, 06/09/2011 - 10:22 | 1354279 DaveyJones
DaveyJones's picture

guess someone likes to junk facts

Thu, 06/09/2011 - 08:01 | 1354004 overmedicatedun...
overmedicatedundersexed's picture

Obuma's 4th war started with no mention on ZH, tyler you are slipping;; YEMEN we ain't  coming back til it's over over there...

Thu, 06/09/2011 - 08:09 | 1354016 Broomer
Thu, 06/09/2011 - 08:13 | 1354017 CEOoftheSOFA
CEOoftheSOFA's picture

I think OPEC is producing at full capacity, or nearly full capacity.  Therefore, they have little power to control prices.  The countries like Saudi, Kuwait, and the UAE would like to keep the price low to prevent a recession and a reduction in demand.  The price-hawkish countries realize thay they are at full capacity and want to raise the price.  If I were them, I would raise it. 

Thu, 06/09/2011 - 08:44 | 1354061 zaknick
zaknick's picture

Those Iranians are a hoot!

Not only are they at the center of resistance providing a core upon which others to coalesce against the KKK/Bankster Empire but in the same day they also inform the banksters that they are tripling HEU production!

Oh say can you see!! The mushroom cloud over thee?

Break the banksters buck! Hell yes!

Liberty or death, bitchez!

Thu, 06/09/2011 - 08:58 | 1354085 ping
ping's picture

All my normal BS aside, if you can't GTFO when the SHTF and oil supplies start collapsing (um, that's now, I guess...) -

Get yourself a small generator and enough *fuel stabiliser* and gas to last a few years. It's two or three hundred bucks to keep one guy in basic lighting, small CB radio, etc. 

Even your car can run small appliances if you get a forty dollar power converter for the cigarette lighter, and use it sparingly.

Hand-cranked battery lanterns and radios are great too. Lots under five dollars.

Solar costs a bomb. Got large scale solar lighting - it sucks.

You can get water purification tablets and filters for one person at a hundred bucks for a year's supply. Collapsable water bladders (or soda bottles) will store tap water for 6 months if you add a few drops of bleach. (Read an online 'how to' guide first.)

Superb antibiotics, medical kit and diverse medicines, come in at under under a hundred bucks for a year, for one person. 

Got land? Coppicing is a great way to grow firewood. Dirt cheap. Quick.

And my favourite: tinned corned beef will last five years, easily. No microbe wants to eat it.

 

 

 

Thu, 06/09/2011 - 11:30 | 1354503 DosZap
DosZap's picture

Most canned goods will last WAY past expiration.

If the ends are not expanded, and the insides are not showing corrosion(flaking), good to go.

Any canned good.

Just beware ye urban dwellers.If you do STOCK up, you will be relieved of your supplies, if there is a shortage by the Federales.

Also, most likely you will not get to stay in your home.

So, be prepared for that rude awakening.

Do NOT follow this link or you will be banned from the site!