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Oil and the new world order

Mon, Oct 6 2008, 15:34 GMT
by Phil Flynn

Alaron

Oil and the new world order. We are in a new world, a post bailout world. The bailout or rescue has been passed yet it seems that the rest of the world’s credit and stock markets are not that impressed.

The oil market is trying to find out exactly how it fits into this new world economic of bailouts and global economic turmoil. Oil is not the best hedge against a market meltdown and China and India will slow. The buying frenzy that engulfed the oil market in the beginning of this year is about to go into reverse and the myths that the oil bulls tried to feed us are coming apart at the seams. The world is going to feel the effects of this global credit crisis. Our advisories and enemies are feeling joy because of our problems even though they are going to have the same problems but only worse.

The International Herald Tribune reported that Russia sees in this credit crisis the end of US domination. The Herald Tribune said Dmitri Medvedev the Russian puppet - or I mean president - said in a speech (last) Thursday that, "the financial crisis in the United States should be taken as a sign that America’s global economic leadership is drawing to a close." So who do you think is in charge? Russia? Where investors are fleeing faster than a burning building? It's an argument that leaders here have been making for some time, though investors in recent weeks have been fleeing Russia and depositing money in US Treasury bills. Why is the Russian president saying this? Is it ego? Is it because he actually believes it? Or is it a desperate attempt to give a boost Russia’s own crumbling economy?

President (puppet) Dmitri Medvedev said that the US crisis showed that the times when one economy and one country dominated are gone for good. The world no longer needed a "megaregulator". (Of course it is unclear whether Medvedev can go to the bathroom without Chairman Putin’s permission.) Russia has argued that the freewheeling Anglo-American style of capitalism is to blame for the crisis, (What, is he writing material for the Obama campaign now?) a position echoed by Germany and other Continental European nations. Medvedev even called it financial “egoism.”(Of course I am sure that he got Mr. Putin’s permission first.)

Putin also weighed in saying that after the US House of Representatives initially failed to pass a bailout bill, “The saddest thing is that we can see an inability to take appropriate decisions. In contrast the Russian bailout was decided by decree. (You see Russia believes that the right to dissent or question should be abolished. Who needs human rights? Freedom of speech can just get the way of the power of the state and the ability of Putin and his cronies to drink in power and money. Why have the freedom to use your brain when Mr. Putin can do all the thinking for you. In his inhuman view of society and humanity the state’s will is the only thing that matters. The dream of freedom is dead in Russia.)

It is not just Russia that is delighting in this monetary crisis. It is al-Qaida that is finding more things in common with Russia. The AP is reporting that, "The enemies of Islam are facing a crushing defeat, which is beginning to manifest itself in the expanding crisis their economy is experiencing.” The AP is quoting American traitor and California-native Adam Gadahn. Gadahn says that, "this crisis, whose primary cause, in addition to the abortive and unsustainable crusades they are waging in Afghanistan, Pakistan, and Iraq, is turning their backs on Allah's revealed laws, which forbid interest-bearing transactions, exploitation, greed and injustice in all its forms." Of course Gadahn and his vision of humanity only offer death and destruction and the killing of innocents as an alternative. Yet in the end the US will be back and stronger than ever.

It was not freewheeling capitalism that got us in trouble. It was government intervention in capitalism that caused the problem. Now they have to admit that they screwed up by forcing the lenders to make loans to people who could not afford to pay them back. Yes, some of the bankers got caught up in all the excitement and always figured that home prices would go up forever, yet the boom was exasperated by the government and the great enabler Fannie and Freddie that would always buy whatever housing paper the banks could come up with. We now have to go through the pain of the after the housing bubble hangover. Despite all the stuff you hear, the truth is that this housing slowdown in the US and the resulting credit crisis will be felt from China to Charleston. Demand for oil will not be what many thought it would be.

Oil has gone through a historically unprecedented spurt of demand growth that began with strong growth in the United States and spread to China and the rest of the world. That spark of demand growth was ignited in the US and will reverse it the same way.

And the growing evidence of that slowing US demand is becoming more evident week after week. Take last week’s Energy Information Agency report that showed that total US supply of oil products fell by an almost shocking 7.1 percent compared to last year. Demand for gasoline averaged only 8.9 million barrels a day which was down by 4.5 from last year. Distillate fuel that includes heating oil jet fuel and diesel averaged 3.8 million which was down by 8.4 percent from last year. That is not to say that we still do not have some issues with supply because we do.

Kristen Hays at the Houston Chronicle writes that three weeks after hurricane Ike came ashore, nearly half of the Gulf of Mexico’s oil and gas production remains shut in as pipelines and gas processing plants undergo repairs. The Interior Department’s Minerals Management Service, which regulates oil and gas activity in the gulf, said Friday that 48.2 percent of oil production was still off line. Now if you want some good news you can take some solace in falling retail gasoline prices. Gas prices have fallen 18 days in a row.

We're short November crude from apprx 10800 - lower stop to 9500!!!

Stopped on long November heating oil from apprx 27000 at apprx 26700. Sell November heating oil 28500 - stop 29000.

We're short November RBOB from apprx 26500 - stop 23300!!!

Stopped on long November natural gas from apprx 740 at apprx 720. Buy November natural gas at 670 - stop 640.

Have a GREAT day!

Published on  Mon, Oct 6 2008, 15:37 GMT