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Is This The Catalyst For The Next Big Leg Down In Oil Prices & Energy Stocks?
Submitted by Emad Mostaque via ECStrat.com,
There is a possibility of a nuclear deal being agreed between the P5 + 1 nations and Iran next Friday, 20th March. This may be the precursor for energy stocks to recouple to downside and for spending cuts to spread from capex to dividends for majors.
The Iranian nuclear program and its ultimate intent is something that periodically hits the headlines, with views ranging from it being for peaceful use only to the Iranians being a "messianic, apocalyptic cult of zealots" who would try to annihilate Israel even if they were nearly annihilated in return to accelerate the advent of the Day of Judgement.
Our view, based on studying and translating internal Iranian legal judgments and discussions with a range of informed parties, is that Iran wishes to have a nuclear program as a matter of national pride and having nuclear weapons breakout capability as a deterrent against potential externally-catalyzed regime change.
Negotiations have dragged on for years, from Iran's offer to Bush to freeze the number of centrifuges they had at 164 in 2003 to today's position of Iran having almost 20,000, more efficient centrifuges and full nuclear weapons capability.
A confluence of political factors makes a deal highly likely at this point however.
Firstly, the USA has a stated policy of pivoting from the Middle East and Europe toward Asia. There are a number of reasons for this, but the major one is that the rebalancing of China is likely to be a fraught affair and nobody can forsee the outcome. As such, the USA would prefer a balance of power stabilising the Middle East, of which Iran and Iraq form an important part.
Second, a number of traditional Middle Eastern alliances such as have been frayed in recent years due to certain conflicts and clashes on a leadership basis. This is not to say that Iran, who are leading the fight against ISIS, are a prospective ally, but they may no longer be part of a defined Axis of Terror.
Third, President Obama is a final term President looking for some final wins. The recent letter from 47 letters in which they claimed to have the power to rewind any Iran deal ironically highlighted his ability to push through a deal if he chose on the response, with a range of parties, from Iranian lead negotiator Zarif to US government officials pointing out that any agreement would be bilateral and binding and that Obama has the power to put this in place. This has been our view for some time as the persistence of multilateral agreements, particularly those likely endorsed by the UN security council is huge, with sanctions also only working if one has assistance from a wide range of parties. Any future US leader could theoretically renege on the agreement, but this is something almost unprecedented and with minimal upside given the agreement will have clauses in case Iran steps out of line.
Fourth, the interim deal extensions which have rolled back Iran's nuclear breakout capability (they had lots of 20% enriched Uranium, which has now been converted to 5%, which takes longer to build a bomb from) have an initial end point at the 28th March for a preliminary deal (to be finalized end of June), with, from our sources, the technical details having already been worked out last year of how monitoring etc would work, but the political side not quite there. The Iranian new year celebrations of Nowruz start on the 21st March, putting pressure on the Iranian side to get a deal done by the 20th as the period after this is one where reaction locally will be minimal and it is generally difficult to get anything done for a while. The P5 + 1 parties are scheduled to start their latest talks on the 15th.
Fifth, the Iranian government has changed to a more moderate Rouhani from the more populist Ahmedinejad and the Iranian economy has stabilised dramatically, something likely to continue as they increase their influence in Iraq. It is notable that there are more American educated PhDs in the Iranian cabinet than the whole of Senate and Congress.
Finally, sanctions are already breaking apart on Iran as Russia has been pushed out in the cold due to what I believe is the true Clash of Civilizations. There have been numerous moves for increased co-operation between the two countries as part of Russia's push to increase its soft power in the Middle East as it fills the gap left by the departing USA and Russia is also set to sell Iran Antey-2500 anti-aircraft missiles, an upgrade on the already agreed S300 system. This is an interesting system as it offers anti-ballistic missile protection as well as anti-aircraft protection, effectively hardening Iranian nuclear sites against Israeli attack (the US could still overwhelm it)
So, with these factors it seems we are heading to a deal perhaps next week, or if not in June of this year when the interim deal officially subsides. After June given the political environment in the US and likely developments in Iran, it will become considerably more difficult.
This deal will likely involve export of Iranian uranium hexaflouride gas to a third party, perhaps Russia, for conversion into fuel plates, which are difficult to turn back into nuclear weapons grade uranium. Other nuclear activities will be frozen and European and SWIFT sanctions removed, as well as oil export sanctions. US sanctions will remain, subject to a 2-3 year monitoring period, but US-Iranian trade is likely to remain minimal and the SWIFT sanction removal will allow Iran to trade actively once more. There will be a 10 year "sunset" provision at which point the deal will have to be renegotiated, but the Nuclear Non-proliferation Treaty will stay in place past that, along with the Additional Protocol of increased inspections Iran is likely to agree to.
* * *
The market impact of an Iranian nuclear deal would be most immediately anticipating the return of 1mbpd of Iranian exports that disappeared a few years ago to be priced back into the market, along with expectations of rising Iranian production given they can access the market for much needed infrastructure investment (Iran still imports gasoline!).
This is likely to put pressure on a fragile oil price and set the stage for a second bottom before the much higher levels of oil price we have predicted in the coming years (my two year target remains $130 spot Brent, JP is considerably more bearish), particularly as Cushing inventories fill to the max in the next few months thanks to the contango still in place as we noted in January when predicting a sharp spike following the ascension of King Salman before the oil price subsided once more.
* * *
This presents an interesting short-term play as the likelihood of a spike on no deal is minimal as the market is not expecting one as this point in time, but the downside risk could be substantial as classical data like inventory build continues to mount and we are still a few months away from meaningful shale production slowdown.
Oil stocks have disassociated from oil prices given the steep oil contango, but as consensus expectations continue to drop and US companies in particular are forced to revalue reserves due to accounting rollover next quarter at $50 versus $90/barrel, we should expect to see increased pressure on dividends, with majors like ENI perhaps the first to go, destroying a key support for these stocks.
Gulf stock markets are likely to be relatively unaffected, although we could see some move in Dubai property as capital is repatriated to Iran. The Iranian stock exchange is a massive beneficiary at 10x the size of Nigeria and once SWIFT sanctions are removed, there are paths to invest in this at mid-single digit PEs and dividends in the teens, offering huge potential upside..
The markets that will be hit are likely Russia, which is one of the top performers year to date but has a currency that is basically pegged to oil now and Nigeria, where crunch elections are coming at the end of March and the central bank has simply run out of resources to stabilize the currency, which I still see going to 240 or so. The new budget in Nigeria is meant to balance at $50-60, but the leakage in the system still remains immense. There is some danger of political fracas during the elections and even worse if they are delayed once more.
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Bring back the Hum V
edit - erase - this dude rite below me said the same thing
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
Snitches get stitches.
I dont give a fug about P5 +1 and other bullshit..WHAT IS IMPORTANT IS THE DATE...MARCH 20th. So Shanghai gets a say in the gold fix AS OF MARCH 20th and this IRAN thingy is on the 20th...AND THE RAREST OF ALL MOTHER ECLIPSES WILL OCCUR ON THE 20th...
We'll talk again on the 21st...sould be some interesting sheeit to discuss then!
BEWARE THE IDES OF MARCH;)
especially hen the ides have been rehypothecated
And this Pi/date thing which is about to match up in about 2 minutes
The 7 year cycle, or Shemitah, is playing out again, and March 23rd is the end of the 6th month. The first 6 months are always slow burn months, where you see the pot boiling, but it isn't until the next 6 months that shit gets real.
That would be March 24th and onward. The time for talk is over, this isn't a BTD game anymore, we're seeing endgame now.
burn, heretic
Might want to do a little more close reading of Deuteronomy there slick...that debt release is only for people in the club. ;-)
Don't go crazy now, but I'm an Astrologer and the March 20 Total Solar eclipse is a big deal.
It's almost at the World Point which is 0 degrees in Aries.
The last time there was a Solar Eclipse in aspect to the World Point was June 21, 2001, at 0 degrees Cancer approx. 1 1/2 months before 9/11 .
In addition to other aspects, this eclipse is on the Mars / Neptune mid-point. From Louise McWhirter classic book "Theory of Stock Market Forecasting" following is a definition of the Mars / Neptune mid-point.
"The fatal flaw, great disappointment due to miscalculation or unrealistic expectations as well as inherent susceptibility to error"
Watch the period of time around the March 20th date. I'm expecting a large world event within 1 to 2 months.
Now back to your normal programming.
http://trading-daze.blogspot.ca/
Got Keshe?
https://www.youtube.com/watch?v=iL3RNHbKMtE&feature=youtu.be
The link said they are creating a "spaceship institute" -- is Bruce "Breanna" Jenners going to own a professorship there?
What difference does it make?
What demand?
I'm actually starting to see FOOD prices dropping. The Fed. is reloading. Inventory at tier 2 stores is rising.
Corruption requires cooperation to last and that cooperation must be bought and paid for. The illusion of money and its infinite print cannot be sustained once the real wealth has been consumed.
This Shit WILL end. Buy all you want.
food prices dropping? What fantasy land do YOu live in????
He must have changed shopping habits. Maybe he is that guy in his 50s I saw at the Farm and Feed store buying 5 x 100 pound sacks of dog food.
It is so reassuring to know that Obama can make ANY FUCKING DEAL he wants with Iran and there is nothing the congress or the American people can do about it.
Burn it to the ground
Dear Leader Obama is going to sweet talk Iran into giving us all of their nuclear power plants and weapons. The kind of sweet talking Dear Leader used to do when he was a two-bit community agitator. OK, Dear Leader is still a community agitator but he's also president.
When they put him up for a third term,, he will run under the communist flag
I thought it was third term socialist, fourth term communist? I guess it doesn't matter.
a nuclear iran will be good for america.
for once, Isreal and its polluting influence on american foreign policy will have to be more circumspect
There you have it...
Our obvious display of weakness, ignorance and duplicity is NEVER good for America or any other civilized people. Obama has only advanced this theme. If one cannot be respected for their integrity or strength they have no respect, even for themselves. Confidence is the vital component for survival and I'm seeing very little.
I don't recall Israel invading our embassy and kidnapping our people for a couple years
I do remember them attacking the USS Liberty, I do remember them stealing nuke tech, I do remember them selling our tech to our enemies, I do remember the billions of dollars in aid and money the US taxpayer has given them due to lobbying, and I do remember the dual nationals taking over our Federal Government.
Did you forget?
There is a back story to that that is never mentioned.
A whole bunch of the top SAVAK operatives and their families were being sheltered by
the US embassy. Taking that into consideration , the embassy personel were lucky that they did
not receive the instant street justice SAVAK got, and justly deserved.
Not to mention escorting the Shah to Egypt, trying to overthrow their government repeatedly, etc
How many false flags have you forgotten?
Stroke of the pen... law of the land.
God, I love a functioning representative government.
Oil goes thru the roof when Israel attacks Iran the day after an agreement is reached
No way Israel lets Iran into the world trade network
Does it really matter? We are cornered in a box with no way out.
Only nukes will get to the underground facilities in Iran.
Its common knowledge in the spook comunity that Iran bought twenty or
soviet era nukes on the black market in the early nineties.
Israel cannot attack without retribution, which is why they want Uncle Scam to do it,
guessing the Iranians will not retaliate in that situation.
Israel will not go it alone Plus Russia and China will not sit idly by in either scenario.
Remember its really about water and gas, not nukes.
But Nuttynayoo is stark raving mad, so who the fuck knows.
Why does nobody seem to have a problem with the little dog Israel telling the USA to attack Iran?
Because that poodle only hunts defenseless prey.
Israel is working with ISIS, that's proven. ISIS is created by the US, therefore the US and Israel aren't in the spat that we're led to believe. All theatre folks. Nothing has changed, the US and Israel are very much working together, as always.
Did you really think the Zionists and Israel would casually part ways? And no upheavel? Wake up.
"On the one hand we're now cozying up to Iran. On the other hand we're not going to fight ISIS."
This is not a problem of the "extreme Right."
Plus we have an election coming up in Israel.
"Fur could be flying real soon here."
"Dortmund" is the word...
The lunar eclips, equinox and astrological year are almost certainly a coincidence.
....and the cern restart. Check the Gann dates
Okay that wasn't funny until you piled on the collider.
yes the date of the eclipse is so that it is sign from God to Israel to start bombing. Bibi will look to the sky and say I TOLD YOU SO!
Bibi believes he is a god, why would he need a signal ?
Is it time to load up on Uranium miners?
Interesting the author mentions that USA-Russia would be a "clashing of civilations". Oswald Spengler in his seminal book "The Decline of the West", published in 1917 forseen that Russia would be the next new Rome/England//USA in his view. Milestones
WHY is Iran/Persia not allowed to have what Israel has: "THE SAMPSON OPTION"?
Because they weren't chosen.
The US won't attack Iran, the war in Iraq taught them what would happen. Israel wants a free hand to attack without fear of reprisal. Iran's overplayed its hand, and should have just shut up, made cooperating noises and built their bomb on the quiet. Change will come to Iran, sanctions didn't destroy Saddam, North Korea and will only entrench Russia. The US needs a bogeyman, Iran kindly obliged. The US are very big at bullying but once bodybags start arriving on the tarmac they lose their resolve.
Obama doesn't care about Israel or the US....he(his masters) want his global muslim caliphate of liberalism! OF COURSE IT MAKES NO SENSE....That is the liberal disease. Vote for democrats so they help the poor....BAM...the 1% become richer than ever! I am voting for Hilary/Obama ticket! Bill can be Sec of State and Corzine can be Sec of Treasury and Biden head of Defense..... Kim K will be first lady....as what we have now makes little better sense!
I don't know how you effectively sanction Russia when they're a leading exporter of something all of Zoorope needs...maybe that'll last through the summer months, but once it gets cold again...they'll drop like flies.
Explain how the Iranian economy has stabilised when its main export is oil. With the price of oil below $50 it stands to reason that sanctions were less destructive than the current price per barrell of oil. If the Iranians can now sell more oil into the already full marketplace and the price of a barrell drops even farther then Iran will suffer even more.
Have you seen the price of white caviar and pistaccios lately.
Why would they need oil as well ?
"Recouple to downside"
I guess "decrease" doesn't sound very cool even though it's more efficient.
Besides it helps to mask that the author is providing nothing more than a dressed up day at the races tip sheet. Gee and we wonder why are "markets" are nothing more than glorified casinos.
There are no legs down in the stock market....just printed legs up. ONE TRILLION EUROS LEGS!!! A trillion goes a long way in pumping markets. We all know the many trillions of FED printed slush funds. The Japanese are all in and are printing 70 Trillion yen per year plus debt of quadrillion....They only need 3.4 Quadrillion to carpet the entire planet in yen... We are going to be drowning in money euros, yen, USD....OH HAPPY DAYS....Money money everywhere all worth nothing!
https://www.dmr.nd.gov/oilgas/stats/statisticsvw.asp
Click the Bakken link. Production down in January 2015 from December 2014 (production was up Dec 2013 to Jan 2014). There were only 57 additional wells. If the Bakken is representative of US oil production, this glut will disappear soon enough unless the USA wants to import more oil. We'll see.
Can't wait for $20 oil. Maybe local gas prices will drop to $2.
Moe,
I guess you can't wait for depression squared then. Nyuk, nyuk.