Iran Oil Embargo Goes Into Effect: Crude Up 8%

Tyler Durden's picture


Following a 3-sigma fall yesterday, WTI crude has rebounded exuberantly amid the European ecstacy and the Iran Oil Embargo. Up almost 9% from late yesterday's lows (a 6-sigma jump), it appears yet another squeeze is in play (perhaps from demand-pull on the back of Hillary's unyielding national policy - oh yeah apart from China and Singapore). While the WSJ notes: "There's no material price premium from the Iran issue", it seems the potential for an epic short-squeeze - as Iran's largest importer of Oil (cough China cough) is now exempt (and continuing to hoard) leaving refiners potentially tight on supply - as macro tail-risk is seemingly removed from the downside by the 'nothing' summit we just experienced.

WTI swings of outrageous fortune...

as WTI reverts (like every other risk asset) to last week's end of week levels as Europe's imminent demise is demoted to a one month problem...

We can only assume that all those airlines hedging and gas stations are timing these moves perfectly to make sure that the 'tax rebate' of lower gas prices stays with us and creates a self-sustaining recovery </sarc>

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Fri, 06/29/2012 - 13:39 | 2573848 LawsofPhysics
LawsofPhysics's picture

Epic fail, and for that, we thank you.

Fri, 06/29/2012 - 13:44 | 2573864 NotApplicable
NotApplicable's picture

Good thing I went long on oil last night by filling up the car!


Fri, 06/29/2012 - 13:47 | 2573879 LawsofPhysics
LawsofPhysics's picture

We use a considerable amount of diesel, fuel tank hedging is about our only protection in that department.  Completely understandable.

Fri, 06/29/2012 - 14:05 | 2573956 Skateboarder
Skateboarder's picture

Gnarly swings man...

I've only seen six sigma in the manufacturing sense - what does it mean when you say it was a six sigma swing?

Fri, 06/29/2012 - 14:08 | 2573970 LawsofPhysics
LawsofPhysics's picture

In the simplest terms "sigma" can be considered the error of your measurement.  basically a six-sigma swing is one that is six times greater then your most sensitive reliable measurement.

Fri, 06/29/2012 - 14:34 | 2574060 Think for yourself
Think for yourself's picture

From what I remember of my math background, sigma is not about the error at all. Sigma is the greek letter to denote a standard deviation in statistics. The value of sigma represents how much variation from the mean is present in a sample statistical population.

The value of sigma will vary according to the population studied; a very consistent sample will have a very low sigma value, while another population that is very spread out will have a large sigma. Either way, though, if you refer to sigma as a variable and not as its value, whether the sample is consistent or very spread out will have no importance; any single measurement has the same likelyhood of being 1 sigma from the mean.

The likelyhood decreases nearly exponentially (or is it exactly expentially?) as the sigma number gets greater, so that a 3 sigma event is extremely unlikely and anybody in their right mind would think a 6 sigma event is a statistical error if it didn't happen right in their face.

I studied it for statistical mechanics, though, so I'm not aware of how it is used in economics. Probably that many people here could shine a light on this: what is the actual statistical population studied here? Is it the open-close moves? The intra-day extrema or weekly extrema? Basically, this event is a 6-sigma event - based on which measurement?

Fri, 06/29/2012 - 14:42 | 2574097 trillion_dollar...
trillion_dollar_deficit's picture

My only question would be over what time period is this typically measured against? Over the past year? Month? It would be great if someone could clear that up.

Fri, 06/29/2012 - 18:31 | 2574906 Spirit Of Truth
Spirit Of Truth's picture

Maybe this is why the Saudis and Israelis are on alert:

Fri, 06/29/2012 - 20:16 | 2575097 Bicycle Repairman
Bicycle Repairman's picture

Thank God Iran cooperated and put their foot down.  Gas was getting too cheap and we were using it all up.  Can we avoid the war now?

Fri, 06/29/2012 - 21:17 | 2575194 AldousHuxley
AldousHuxley's picture

Top importers of Iranian oil:






March 20, 2012: The Iranian oil bourse will no longer trade oil in the dollar but start trading oil in other currencies like the euro, yen, yuan


You see why US banksters are attacking weakest members of Euro in hopes of dismantling young Euro currency which is now US dollar alternative?


Euro + Iranian oil + Russian military + Chinese manufacturing is making a laughing stock out of America with weak currency + oil import dependency + fat military + little manufacturing.



Fri, 06/29/2012 - 22:03 | 2575259 AldousHuxley
AldousHuxley's picture

History repeating?


Aug 1990 UN Security council imposed total economic embargo on Iraq

1998 UN Assistant Security-General resigned as well as next 2 replacement because he felt guilty for genocide against Iraqi children who started to die off in masses.

Oct 2000 UN let's Iraq trade oil in Euros instead of Dollars

2003 US Invades Iraq, sadam sodomized



July 2007 Japan pays Iranian oil with Yen

December 2007 Iran stops accepting US Dollars

2008 Iranian oil bourse inaugurated

March 2012 Iran trades oil in namely Euro on Iranian oil bourse


2014 US Invades Iran?????


Fri, 06/29/2012 - 14:53 | 2574140 LawsofPhysics
LawsofPhysics's picture

Same difference- I for one do not trust any "one sigma" deviation.  

Fri, 06/29/2012 - 15:08 | 2574202 Think for yourself
Think for yourself's picture

Not at all. In economics, a one sigma deviation is very different from any kind of error measurement; it has nothing to do either with significant figures, and it can not mean anything regarding the precision of measurement since the values measured are known with absolute certainty - there is no error coming from the measurement device.

As such the sigma is simply related to the probability of the event, and a 1 sigma variation is meaningful in that it tells you the event is completely probable according to the previous statistical distribution and nothing to get excited about. There is no question of "trust" that is relevant here.

Fri, 06/29/2012 - 16:46 | 2574611 LawsofPhysics
LawsofPhysics's picture

Idiot, we are talking about two different "sigmas"  get the fuck over yourself.  I am an engineer I deal in reality, not make-belive shit.  eCONomics is shit.

Fri, 06/29/2012 - 17:10 | 2574709 Think for yourself
Think for yourself's picture

"Get the fuck over [myself]"? Please, no need to come to this kind of argument, so chill out a bit. I'm a physicist so I understand your viewpoint coming out of engineering - because when you measure a sample that has no significant statistical variation, it implies the reliability of measuring instrument/methodology, among other things. So to you it means the error range...

But please simply entertain the idea of how you would apply the same concept to economics - which I haven't studied, however that's fairly obvious mathematically... Since the measurements, for instance, on commodity trading values have an absolute certainty, then there is no "error" and the sigma represent purely the characteristic spread of the statistical distribution.


Fri, 06/29/2012 - 21:33 | 2575216 AldousHuxley
AldousHuxley's picture

physicsts > engineer IMO....

Fri, 06/29/2012 - 14:41 | 2574089 Skateboarder
Skateboarder's picture

Got it, thank you. I think I need another datapoint to bridge the analogy though. A six sigma process holds the property that the process specifications are six standard deviations above the process mean, thus making the error factor 3-4 defects per million. On the financial side, if you say that you have seen a six sigma swing, then are you saying that the error factor for that swing is six standard deviations above your mean and that the probability of that happening is 3-4 out of one million (0.000003?)

Standard deviation is a nonlinear function, so it's messin with my head when applied out of context where the mean, variance, and standard deviations of something (like a process) are truthful numbers pertaining to actual countable things!

Fri, 06/29/2012 - 15:05 | 2574191 slewie the pi-rat
slewie the pi-rat's picture

the bell curve can take different shapes:  widths and heights;  yes!  ordinarily along the two "tails" events are rare, but in a busy casino, people hit jackpots quite often during even during a coffee-stroll around the grounds

there is a LOT of action!  and this is a sigma jamma-lamma ding-dong for the price of oil;  one slot maching on the enormous floor

the price had gone down pretty far pretty fast as we know

look at the commentary below these charts about the indicators/  but "when"? can be pretty expensive trying to hit!

Light Crude Oil Daily Commodity Futures Price Chart: Aug. 2012


Fri, 06/29/2012 - 14:55 | 2574147 slewie the pi-rat
slewie the pi-rat's picture

SK8_er:  the reply from think4yerself is correct until he just goes off the page

on the bell curve distibution, the standard deviation is simply the standard deviation of the data array

in this case, tyler being tyler, we can assume this is the daily price data of the commodity chart for WTI indicated so this change in price is huge %-wise (depending on when you do the data cut) and also standard-deviation wise

statistically this is a "rare" price variance for 1 day;  but whether it is even a grey swan kinda depends on what happens next, price-wise

WTI chart from the crimex site?  they don't trade WTI per se but here is their NYmex-crimex near-month chart which is ditto shitto: Light Crude Oil Intraday Commodity Futures Price Chart: Aug. 2012

Fri, 06/29/2012 - 18:12 | 2574832 Skateboarder
Skateboarder's picture

You know, an 8 dollar swing is like a solid Charleston step, but look at the 6-month, switch the chart term to daily - it shows the quarterly decline. But you are entirely right, it's entirely dependent on the next steps. I don't think this particular swing is any more important than the others we've seen. Oil is going to follow the trend of USD decline as more countries operate away from dollar transactions and as our debt grows higher and makes us insolvent in the eyes of the middle east.

Fri, 06/29/2012 - 15:16 | 2574234 slewie the pi-rat
slewie the pi-rat's picture

1 mo thing abt the tails

if the frequency/probability out a ways there becomes greater, this a called a "fat tail" on the distribution curve

this indicates, perhaps, that a company can go go public after a few lean years of hard work, sacrifice, and lying, cheating, and stealing

on the other end, we have the fat tail of catastrophic failure;  where right after the shit is just barely in front of the fan, it actually hits the fan

we live in an era of secrets about the shit regarding everything except people it sometimes seems;  and then there's that fan...  L0L!!!

Fri, 06/29/2012 - 14:37 | 2574079 jal
jal's picture

There goes that dream of having cheap affordable gas for the summer.

The embargo/siege of Iran can only progress by having terrorist /mercenaries doing some physical action to cut off oil supplies.

Fri, 06/29/2012 - 17:32 | 2574753 Poetic injustice
Poetic injustice's picture

Winning like in Russian Roulette, blowing away only half of brain.

Big pain is coming this way.

Fri, 06/29/2012 - 13:43 | 2573857 pods
pods's picture

So we are now playing WWII Japan with Iran, after we created and unleashed terrorism on them in the form of a computer virus.

I bet you we didn't have any hand in the numerous car bombs either.

Why couldn't we start it on the 4th of July for shits and giggles?


Fri, 06/29/2012 - 13:50 | 2573890 LawsofPhysics
LawsofPhysics's picture

Too obvious?  Sorry, that's all I have.

Fri, 06/29/2012 - 14:45 | 2574112 old naughty
old naughty's picture

"We are playing Japan with Iran..."

Hummmmm, Iran does have nuclear generator.

But this sigma-stat thing confuses me, do they deviate, or the plan, never mind.

Que sera sera.

Fri, 06/29/2012 - 14:01 | 2573943 Id fight Gandhi
Id fight Gandhi's picture

United states of israel and all the problems that goes with it.

Sanctions are an act of war.

Fri, 06/29/2012 - 14:03 | 2573951 metastar
metastar's picture

It is funny how there exceptions for China as there are exceptions for Obama care.

RULE: If you are BIG, then the rules don't apply to you.

Fri, 06/29/2012 - 23:44 | 2575367 merizobeach
merizobeach's picture

Laws are for followers. :-)

Fri, 06/29/2012 - 13:43 | 2573859 flying dutchmen
flying dutchmen's picture

just opens the opportunity to short--- oil is going down, when china`s real situation is exposed.  Bailouts --- who the hell has money the money. There is only one way to get the problems solved and it wont be fun...

Fri, 06/29/2012 - 13:49 | 2573888 LawsofPhysics
LawsofPhysics's picture

Fair conclusion.  Now precisely who in that state-run centrally-planned communist society is going to expose it?  China will make their numbers be whatever they want them to be, period.

Fri, 06/29/2012 - 13:55 | 2573919 Quinvarius
Quinvarius's picture

Have you considered that oil might go to 300 this decade because that is how much money we created with more to come?  The only time I ever see oil go down is when there is an intervention via the government or CME margin games.

Fri, 06/29/2012 - 14:45 | 2574110 0z
0z's picture

Well, Oil demand will come down temporarily when all of these real estate developpers realize that copper and bricks are not edible, or when the chinese realize that empty skyscrapers do not engender prosperity.

Fri, 06/29/2012 - 13:44 | 2573862 Debtless
Debtless's picture

This whole market is so fucking broken, why should oil prices display any sanity.

When we eventually get our asses kicked, it'll be epic.

Fri, 06/29/2012 - 14:28 | 2574042 HungrySeagull
HungrySeagull's picture

Speaking of which...

I observed a say with me here...

A elderly man with a bike. Which had three wheels and held a second seat Hong Kong style and what must be his wife.

The bike had a rod connected to a two wheel trailer containing a very obese person.

Hauling the whole assembly is another Obese person in a hover round. A regular two inch cargo cable was used to tow the entire assemblage along the public roadway.

Temps around 112 today.

Fri, 06/29/2012 - 15:48 | 2574379 Debtless
Debtless's picture

Sounds like quite the party train. Should've followed them back to the nest.

Sun, 07/01/2012 - 16:53 | 2579145 MeelionDollerBogus
Fri, 06/29/2012 - 19:40 | 2575042 DosZap
DosZap's picture

Gosh, I guess that under $3.00 a gal this summer is now kaput!.

Prices were under $3.00 here for a few, back to that $5, or $6.00 promised!!


Fri, 06/29/2012 - 13:50 | 2573886 slaughterer
slaughterer's picture

The moves in Crude were helped by the House passing that $120b highway bill extending trans. funding through 2014 today.   Oil lobby helped greese that move.

Pile on Crude if you want, but the bullish fun will be over soon.   

Fri, 06/29/2012 - 14:21 | 2574014 iDealMeat
iDealMeat's picture

Love the CNBC headline related to that.  "Senate Expected Shortly to Pass Transportation Bill That Prevents Big Rise in Student Loan Rates (Click for Updated Story)"


idiocy...   all of them / it..


Fri, 06/29/2012 - 14:30 | 2574050 HungrySeagull
HungrySeagull's picture

Big rise my ass.

More like piling on the debt to the next generation of college bound wanna bes.

Tue, 07/03/2012 - 22:57 | 2585882 iDealMeat
iDealMeat's picture

"We need to pass it to find out what's in it"

- Cruella de Vil - aka Nancy Pelosi


Fri, 06/29/2012 - 15:06 | 2574198 Hohum
Hohum's picture

How in the world can the front month futures contract be affected by spending money for the next two years?

Fri, 06/29/2012 - 13:50 | 2573897 t_kAyk
t_kAyk's picture

Looks like the family choomwagon is staying put this holiday.  Pass it to the left...

Fri, 06/29/2012 - 14:31 | 2574054 HungrySeagull
HungrySeagull's picture


There fixed it for you.

Or better...

Choom Airlines, Flying high to provide you a good time.

Fri, 06/29/2012 - 13:53 | 2573913 New American Re...
New American Revolution's picture

This is a time honored method to create wars, that and driving our victims into bi-lateral trade agreements that distinquish our friend from foe in the coming war.   Vintage Satanic strategy, hats off the Clinton's and their boy "Barry" at the White House, at least they're transparent enough to be able to identify them during the Overthrow.   PS, is born, check it out, still working through a few kinks and text corrections.  Serfs Up America!

Fri, 06/29/2012 - 13:53 | 2573914 francis_sawyer
francis_sawyer's picture

Window dressing 101...

Fri, 06/29/2012 - 13:53 | 2573915 tony wilson
tony wilson's picture

somethng has to happen soon.

not because of the nuclear issue but because of the tesla energy and plasma physics energy,cold fusion and water fuel cell project

work iran has been doing.

they have to be stopped by the cartel.

why do you think the house of saud want iran dismembered.

they and the bush mob kill anything that can destroy oil price.


Fri, 06/29/2012 - 13:56 | 2573924 t_kAyk
t_kAyk's picture

As well as work that the Military Industrial Complex has been doing...

In the era of remote-controlled drones, invisible planes and microwave guns, no military innovation should come as a surprise. But among the array of new weapons none are more satisfying than a cannon that allows you to unleash bolts of lightning.

The Laser-Induced Plasma Channel (LIPC) cannon is currently being tested at Picatinny Arsenal, a key US Army research complex in New Jersey.

"We never got tired of the lightning bolts zapping our simulated targets," says George Fischer, who heads the research team.

The charge is created by emitting a laser pulse that charges the air, and forms a hugely destructive bolt of lighting.

"If a laser puts out a pulse with modest energy, but the time is incredibly tiny, the power can be huge," says Fischer. "During the duration of the laser pulse, it can be putting out more power than a large city needs, but the pulse only lasts for two-trillionths of a second."

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