Living in the banking states of America. Who ever thought that Bank of America would now be America’s bank? America, and you the tax payers, are in the Banking business. It is a confidence game now and oil has to be confident that the world can still get credit to buy oil.
It is clear that oil is looking to the stock market for direction and our oil producing advisories are sweating out the correction big time. Last week I wrote that the drop in oil prices will be a bitter pill for oil producers because they became intoxicated with the power that high oil prices bring. Guys like Vladimir Putin from Russia and Hugo Chavez from Venezuela and Ahmadinejad in Iran, all rode into power surrounding the circumstances of a global economic growth. The subsequent oil price boom fed them their power and they will now be exposed for the real nothings that they are. The oil pendulum has started to swing the other way and will knock these guys on their backside and OPEC members will turn on each other and start eating their own in a desperate fight for economic survival. When your whole economy and the building blocks of your political power is tied to high oil prices you will rise and fall with the price.
How vulnerable are these guys? Well the most vulnerable is Hugo Chavez in Venezuela which according to estimates needs an average price of $97 a barrel to balance his budget. Chavez has squandered his oil wealth on his socialist revolution and as I have said many times over the years, Chavez has run his oil industry into the ground. The higher the price goes the more Chavez spends and they have not saved a penny from the windfall days. The losers are the Venezuelan people.
The next most vulnerable is Iran which according some estimates looks like it needs oil at $95 to stay afloat. Iran whose ranting leader Mahmoud Ahmadinejad is already under pressure because of mounting inflation and rising unemployment may have to deal with a major economic collapse if oil prices tank. So if you are looking for another reason to be celebrate falling oil prices, I've just given you one.
The next most vulnerable is Nigeria and Russia which according to some estimates needs oil above $70 a barrel. Russia has notably backed off their militant Georgia stance as investor capital fled the country. Russian oil production has already fallen short of expectations because of government intervention and may face more economic hardship if oil keeps falling.
You see our credit crisis becoming their energy crisis that will turn into their financial crisis all caused by low oil prices. As far as dictators who stake their power on oil, we'll see them rise and fall with the price and they never learn from history.
We're short November crude from apprx 10800 - lower stop to 8500!!!!
Sell November heating oil at 24000 - stop 25000.
Stopped on short November RBOB from apprx 26500 at apprx 19990!!!!! Sell December RBOB at 20000 - stop 20500.
We're long November natural gas from apprx 670 - stop 640!
Have a GREAT day!
