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Iranian War Games(2)

Wed, Jul 9 2008, 14:41 GMT
by Phil Flynn

Alaron

Iranian War Games: You put the Iranian risk premium in. You take the Iranian risk premium out. You put the Iranian risk premium in and you shake it all about. You do the hokey pokey and you turn yourself around, that’s what it’s all about.

It's oil hokey pokey with the market as Iran war games, complete with missile tests of missiles that can reach Israel, has traders falling back into the risk premium game after just getting out.

The Energy Information Agency short term energy outlook is out they say that the oil market remains tight, evidenced by rising prices, low surplus production capacity and the concern that global supply growth may not keep pace with demand growth over the near term. Preliminary estimates indicate that higher oil consumption in the second quarter and a modest increase in production left Organization for Economic Cooperation and Development (OECD) commercial inventories below the 5-year average at the end of June.

Saudi plans to raise production from 9.4 million bbl/d in June to 9.7 million bbl/d in July, a 27-year high for the nation, have not resulted in an easing of prices. Supply losses in Nigeria and heightened tensions between Iran and Israel raised new concerns about future supplies. Moreover, while the Saudi action adds supplies to the market, remaining available surplus production capacity during the third quarter is at the low level of about 1.2 million bbl/d, all concentrated in Saudi Arabia.

On the consumption side world oil consumption continues to grow despite 7 consecutive years of rising prices. Preliminary data indicate that world oil consumption during the first half of 2008 rose by roughly 520,000 bbl/d compared with year-earlier levels. Compared to year-ago levels, this increase reflects a 170,000-bbl/d gain in the first quarter, followed by an 870,000-bbl/d increase in the second quarter. A 760,000-bbl/d decline in consumption in OECD countries during the first half of 2008, mainly concentrated in the United States, was more than offset by a 1.3-million-bbl/d increase in consumption in non-OECD nations led by China and the Middle East world oil consumption is projected to rise by almost 1.2 million bbl/d during the second half of the year, reflecting the impact of higher expected prices, lower economic growth, and growing pr assure in some countries (such as India, Malaysia, Indonesia, and China) to ease price subsidies, which could dampen consumption growth. Global consumption in 2009 is expected to increase by 1.4 million bbl/d because of upward revisions in projected 2009 economic growth in some regions, such as Latin America. If financial strains in the United States spread to foreign nations, depressing economic growth, consumption growth would also slow.

No Picking on Pickens. T-Boone Pickens did not invent peak oil but has made many millions discussing the possibility of it. Now he wants to ride like the wind. Pickens is a man, a man with a plan. But will the plan save the US or will it just make him a lot more money.

T Boone says it straight that we Americans are addicted to foreign oil. Boone says that, “it’s an addiction that threatens our economy, our environment and our national security. It touches every part of our daily lives and ties our hands as a nation and a people. The addiction has worsened for decades and now it’s reached a point of crisis. In 1970, we imported 24% of our oil. Today it’s nearly 70% and growing. As imports grow and world prices rise, the amount of money we send to foreign nations every year is soaring. At current oil prices, we will send $700 billion dollars out of the country this year alone-that’s four times the annual cost of the Iraq war.

Projected over the next 10 years the cost will be $10 trillion-it will be the greatest transfer of wealth in the history of mankind. (I say that this is assuming that we get nothing for our money spent.)

America uses a lot of oil. Every day 85 million barrels of oil are produced around the world. And 21 million barrels are used here in the United States. That’s 25% of the worlds oil demand. Used by just 4% of the worlds population. Can’t we produce more oil? T-Boone says that, “World oil production peaked in 2005. Despite growing demand and an unprecedented increase in prices, oil production has fallen over the last three years. Oil is getting more expensive to produce, harder to find and there just isn’t enough of it to keep up with demand. The simple truth is that the cheap and easy oil is gone. (We are doomed) What’s the good news? (T Boone can make money on it!). No, actually Pickens says that, “The United States is the Saudi Arabia of wind power”. Yes, I think he said this with a straight face - we are full of wind! Just think, if we could harness all the power of the blowhards in Washington D.C. we could power the entire nation for years to come! Pickens says that, “studies from around the world show that the Great Plain States are home to the greatest wind energy potential in the world-by far. The Department of Energy reports that 20% of America’s electricity can come from wind. North Dakota alone has the potential to provide power for more than a quarter of the country.

Pickens says that, “Today’s wind turbines stand up to 410 feet tall. With blades that stretch 148 feet in length. The blades collect the wind’s kinetic energy. In one year, a 3-megawatt wind turbine produces as much as 12,000 barrels of imported oil.

Wind Power currently accounts for 48 billion kWh of electricity a year in the Untied States- enough to serve more than 4.5 million households. That is still only about 1% of current demand, but the potential is much greater.

A 2005 Stanford University study found that there is enough wind power worldwide to satisfy global demand 7 times over-even if only 20% of wind power could be captured.

Building wind facilities in the corner that stretches from the Texas panhandle to North Dakota could produce 20% of the electricity for the United States at a cost of 41 trillion. It would take another $200 billion to build the capacity to transmit that energy to cities and towns.

Boone says, "That’s a lot of money, but it’s a one-time cost. And compared to he $700 billion we spend on foreign oil every year, it's a bargain." Pickens also says that wind will be an, “economic revival for rural America and that developing wind power is an investment in rural America." T-Boone thinks we can use that savings to power our cars! Stay tuned for that.

And stay tuned to the Fox Business Network! If you don’t have it it's time to get it! Always remember that trade recommendations are a guide. Due to the high volatility and the fast changing market condition call me or one of my team to find out about changing market conditions. Call me at 800-935-6487 or email me at pflynn@alaron.com to open your account.

Stopped on long August crude from apprx 14300 at apprx 13800. Buy August crude at 13500 - stop 13400.

Sell August RBOB at 35500 - stop 36000.

Buy August heating oil at 39000 - stop 38700.

Buy August natural gas at 1270 - stop 1202.

Have a GREAT day!

Published on  Wed, Jul 9 2008, 14:43 GMT

Archive

• Go ahead OPEC Make My Day!
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