Phil Flynn: Jobs Baby Jobs!

Oh sure I can talk about Iran and The possibility of cracks showing in the EU oil embargo but let's face it today at least for awhile it jobs baby jobs! The oil market has been driven to and fro with a lot of bullish and bearish forces at play but the strength of the US jobs market will be the determining g factor as to wither we go higher or lower today. Oil was able to shake off a bearish Department of Energy Inventory report in part because there are worries about the resolve of Europe to embargo Iranian oil.

Other counties such as Japan and other Asian refiners are looking for alternative sources of oil which of course would be short term bullish. Yet with weak demand short term right now there is no fear that there will be a shortfall of oil. But back to the bullish word that China will imports a record amount of oil in 2012 as they look to rebuild and expand their strategic reserves. And on balance strong economic data in the US! Now the final piece of all of these forces will be Jobs, baby Jobs.

Reuters News Reported that " Japan's biggest refiner JX Nippon Oil & Energy Corp is talking with top exporter Saudi Arabia and other oil producers to source crude to replace any disruption to its imports from Iran, the company's president said on Thursday. Fresh U.S. sanctions on Iran over its nuclear program could make it difficult for refiners in Japan, Iran's number three crude buyer, to pay Tehran for its oil. Japan is seeking an exemption to U.S. sanctions that President Barack Obama signed into law on Saturday. The sanctions, if enforced, would penalize financial institutions for undertaking transactions with Iran's central bank, exposing the U.S. operations of Japanese banks that deal with Iran."

Bloomberg News Reported " The leader of financially struggling Italy questioned the scope and timing of a possible European Union halt to Iranian oil purchases, raising an obstacle to stiffer sanctions on Iran’s nuclear activities. Penalties set to be announced on Jan. 30 should be phased in and exempt crude sold by Iran to pay off debts to Eni SpA, Italy’s largest oil company, Prime Minister Mario Monti said. “An oil embargo is conceivable as long as it remains gradual and excludes the deliveries that serve to reimburse the billion euros in debts that Iran owes to Eni, our national company,” Monti told France’s Le Figaro in an interview published today.

Europe’s sanctions threat and an Iranian demand that U.S. warships stay out of the Persian Gulf have stirred new tensions between Iran and the West, contributing to higher energy prices. EU sanctions decisions require that all 27 member states go along. An oil supply dislocation might further damage the economies of Italy and Greece, two countries at the forefront of the European debt crisis. Italy is battling to get by without a bailout and Greece is seeking a second package.


Phil Flynn can be reached at pflynn@pfgbest.com


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Iran Tension Fails to Push Crude Oil Through Resistance

Crude oil closed lower due to profit taking on Friday as it consolidates some of the rally off December's low. The mid range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If February extends the rally off December's low, the 75% retracement level of the 2011 decline crossing at 104.84 is the next upside target. Closes below the 20 day moving average crossing at 98.86 would signal that a short term top has been posted.

First resistance is Wednesday's high crossing at 103.74. Second resistance is the 75% retracement level of the 2011 decline crossing at 104.84. First support is the 10 day moving average crossing at 100.78. Second support is the 20 day moving average crossing at 98.86.


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Phil Flynn: Taking The Embassy By Storm!

Occupy Tehran? Iranian students, incensed with a new round of sanctions, stormed the British Embassy and added a new dynamic to a market already concerned about the rising tensions in the Middle East. The orchestrated take over from the government was a clear violation of international law and shows Iran's utter lack of respect for anyone else in the world.

The pillaging of the UK Embassy had to have the support of the government because it is unlikely that without the government looking the other way, it would be impossible for a rag tag bunch of students to take over the fortified British compound. Iran, the world's fifth biggest oil exporter, was trying to stir domestic public outrage after a vote by Iran's leaders to end diplomatic relations with the UK and expel the British ambassador and the UK slapped sanctions on Iranian banks and their petrochemical companies.

Obviously these sanctions have some bite as it raised the acrimony of the Iranian regime. The outcome means that more than likely the U.S. will follow suit and put more pressure on the known terror state as it is clear to everyone that Iran is on track to secure a nuclear weapon after a report from the International Atomic Energy Association.

The likely hood of more sanctions against Iran look to tighten supplies of distillate in Europe and will put even more pressure on the world's newest diesel exporter, the US, to keep up with global demand. The United States, Russia, France, Britain and Germany all expressed outrage at the Iran, yet China remained quiet as it desperately needs diesel supply. They are fearful that if Iranian supply is cut it could lead to shortages in China for the coming winter......Read the entire article.


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Phil Flynn: Can Turkeys Lay Eggs?

Well can turkeys lay eggs? We know that can't fly. Can they? Well even if they can't, there is plenty of egg laying going on whether you are focusing on the purchasing manger data in China and Europe and perhaps what may be a bit more disturbing is the subpar German bund auction.

China PMI readings fell to 48 from 51 in October, the biggest month over month drop in over 32, hitting the lowest level since march of 2009. Germany's 10 year auction was not well received to say the least with 35% of the bunds unsold. Still the yield in Germany at 1.98%. is much better than say a country like Spain which currently is around 7%, yet Germany is supposed to be the strong economy in Europe. The lack of interest in this auction shows that the market believes it will be up to Germany to take on the debt of its less than, shall we say, industrious neighbors. Or is it because German Chancellor Angela Merkel challenged the effectiveness of the common European bond.

Add to that a subpar reading on Eurozone manufacturing that surprisingly contracted coming it at a less than expected at 47.9, below a forecast of 50.1. But the country’s flash services PMI was up at 51.4 against an expected 46.6. What was more disturbing was that industrial new orders showed the largest decline since records began in 2005, coming in at a -6.4 and was only expected to fall -2.4.

After data like that it is no wonder that the US is calling for more stress tests on our banks to head off what might be a crisis in the Euro Zone that may be already impacting China and may threaten the economic data in the US that, as of late, has been over whelming positive. With all of this uncernatainty is it any wonder why OPEC is trying to hang onto their existing production quotas despite the fact that if Europe rolls over and China slows, there might be a slowdown in demand. Oh sure, in the short term despite the slowdown in manufacturing China demand will remain solid as the country is trying desperately to keep ahead of distillate demand ahead of winter. Yet perhaps the flattening of the crude curve may be signaling tougher demand times ahead.

OPEC Secretary General Abdalla Salem el-Badri told said, "Prices are comfortable" for both producers and consumers. What consumers he talked to I am not sure. They are probably not in China or Europe. Ali Naimi, the Oil Minister of Saudi Arabia, said he is "very happy" with oil prices. If Ali is happy then OPEC is happy. Don't you feel better?

Dow Jones says that in the first half of 2012, demand for OPEC crude is expected to fall by more than 1.3 million barrels a day, compared with the fourth quarter of 2011, to an average of 29.29 million barrels day, according to the group's latest report. That is lower than OPEC's current production of about 30 million barrels a day.

Now all of this bad economic news and uncertainty, while bearish, might have been wildly bearish if it were not for the worries surrounding Iran and Egypt. Sanctions and increased pressure on Iran, as well as the uncertainty surrounding Egypt, is raising the geopolitical risk premium. So instead of oil prices crashing we may see the market try to stabilize or rebound. That may be even more true because of the impending turkey day holiday as traders give thanks that they are not Europe. Besides, with the geo-political risk, being short over an extended holiday with global supply risk possibilities does not go well with cranberries or pumpkin pie. We should see some short covering before the end of the day.

Products have been getting support because of the renewed interest in Brent as well as strong global demand for distillate and a rebounding appetite for gas ahead of the holiday. Today we get both the Energy Information Agency petroleum stocks as well as the natural gas storage. The American Petroleum Institute reported that crude oil inventories tanked by a stunning 5.57 million barrels. Yet what we lost in crude we gained in gas, rising by 5.42 million barrels. That increase is the bonus from strong distillate production that led to a drop of 886,000 barrels.

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Phil Flynn: Arab Spring Sprung

Ah another sign of spring. No, not the weather but the Arab spring. While oil got slammed yesterday on European Sovereign debt woes and fears that France may get a downgrade, the focus today may be on a new round of sanctions on Iran and another revolution in Egypt.

Oh sure it helps too that the rating agencies reaffirmed the US credit ratings after the Super Committee seemed to lose its super powers. Reuters News said, "rating agencies Standard & Poor's and Moody's said there will no immediate downgrade of their credit ratings on the United States due to the failure of a congressional "super committee" to reach an agreement on debt reduction. But Fitch, the third leading ratings agency, which currently has the most positive rating of the three on U.S. debt, said it could cut the outlook on its triple-A" rating, with a downgrade an outside possibility."

Yet while gold and silver plummeted, oil prices fought back off the lows despite the pressure in the outside markets as pictures of violence in Egypt flashed across the TV screen. Word that protesters were demanding an end to the military rule that has been in place since Hosni Mubarak was deposed caused the country's interim cabinet to resign. Yet the masses in the second Egyptian revolution don't seem to be buying it and appear even more determined than some of the "Occupy Wall Street" folks......Read Phil's entire article.


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Crude Oil Rises for a Sixth Day on Iran’s Nuclear Speculation

Crude oil rose a sixth day in New York on speculation Iran’s nuclear plans threaten Middle East stability and an offer to resign by Italy’s Prime Minister Silvio Berlusconi brings Europe closer to solving its debt crisis.

Futures advanced as much as 0.5 percent, matching the longest run of gains since the six days ended Nov. 8, 2010. The U.S. may pursue additional sanctions against Iran following release of a United Nations report that concludes the Islamic Republic was working to develop a nuclear weapon, according to two U.S. officials. Fuel stockpiles fell last week, the American Petroleum Institute said yesterday.

“This current supply shock potential that the markets are looking at with Iran has pushed the price well above our outlook,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who had forecast oil to trade from $80 to $90 a barrel. “The situation in Europe will still take some time for the corrective activities to flow through to the real economy”.....Read the entire Bloomberg article.


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OPEC Expected to Keep Oil Production Quota Unchanged

OPEC will probably keep its production quota unchanged when it meets on Dec. 11 in Ecuador, ministers from Angola, Venezuela and Libya said. The Organization of Petroleum Exporting Countries considers oil at $80 to $85 a barrel a “comfortable price,” Angola’s Minister of Petroleum Jose Maria Botelho de Vasconcelos said yesterday. Crude traded around $86 a barrel in New York today. Venezuela’s energy minister Rafael Ramirez, who said he prefers a price level of $100 a barrel, told reporters in Doha today that the group will likely maintain its existing output target.

“The current environment is of some stability,” Angola’s Vasconcelos said in an interview. “The sentiment among members is for maintaining the production level.” Libya’s top oil official, Shokri Ghanem, said yesterday in Doha that the organization will seek stricter compliance with the current production target. OPEC, which produces about 40 percent of the world’s oil, hasn’t changed its formal limit since December 2008, when it announced record supply cuts and a quota of 24.845 million barrels a day.

The group’s adherence to that level has faltered as recovering demand and rising prices encourage members to exceed their individual allocations. Compliance among the 11 nations bound by quotas slipped to 51 percent in October, according to data from the group published on Nov. 11. Qatari Energy Minister Abdullah bin Hamad al-Attiyah said today he won’t attend the Dec. 11 gathering in Quito, Ecuador.

Angola’s Vasconcelos said he expects the country’s oil production to increase to 1.9 million barrels a day next year, close to its maximum capacity. Angola pumped an average of 1.73 million barrels a day in November, according to a Bloomberg survey of producers and analysts on Nov. 30. OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from the quota system.

Posted courtesy of Bloomberg News

Bloomberg reporter Grant Smith can be reached at gsmith52@bloomberg.net

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Musings: Iran Gaining Control of Iraq Without Firing A Shot?

In early July we wrote an article entitled “Middle East: Oil Industry’s And World’s Next Black Swan?” At that time all eyes in the oil industry and among American citizens were focused on the developments with BP’s Gulf of Mexico Macondo well, which was then spewing oil and creating one of the world’s worst environmental disasters. We suggested that maybe people should be scanning the horizon for the next industry Black Swan.

We went on to offer our best guess on what that Black Swan might be, the Middle East. We said that many people wouldn’t consider the Middle East to be a Black Swan, an unknowable and thus unanticipated event, but rather just an ignored developing trend. In that article we said: “A number of recent data points have emerged that suggest the Middle East may become a focal point of political and possibly military action before the end of the year, or maybe even earlier.”

We suggested that maybe people should be scanning the horizon for the next industry Black Swan
In July, the focus of Middle East developments was on when Iran might be able to complete building a nuclear weapon. That timetable is dependent upon the country’s ability to produce enriched uranium, which is being done in one or maybe more nuclear facilities. The buzz at that time among military and intelligence sources was that Israel was preparing an air strike to destroy Iran’s nuclear facilities as it had done a number of years earlier.

Supporting that view was Congressional testimony from Secretary of Defense Robert Gates and Central Intelligence Agency head Leon Panetta that Iran would be completing development of a nuclear weapon in one to two years time at the outside. Also revealed in Defense Secretary Gates’ testimony was that the U.S. had overhauled its NATO missile defense plans based on intelligence that Iran could fire “scores or hundreds” of missiles against Europe in salvoes rather than one or two at a time. Sec. Gates did not mention Israel in his testimony but clearly that nation is considerably closer to Iran than most of Europe......Read the entire article > Iran Gaining Control of Iraq Without Firing A Shot?



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Irans Option In Case Of Attack On Its Nuclear Facilities

The Obama administration recently announced its plans to sell $60 billion worth of advanced aircraft to Saudi Arabia, the culmination of a deal over which negotiations began in 2007. The package will include 84 Boeing F-15 fighter jets and another 70 upgrades; 72 Black Hawk helicopters; 70 Apache helicopters; 36 Little Bird helicopters. Reports also say that Washington may include a $30 billion package to update Saudi naval forces.

A 30 day Congressional review of the deal will likely begin within the next month and the White House is touting the deal as a major boon for the US economy that will support at least 75,000 jobs in the defense industry.

The deal is also designed to cement US preeminence in the Saudi oil sector, which is under significant threat from the increasing penetrations of Chinese, Russian, and Indian carbon economy interests. Saudi Arabia has the ability to pick and choose with whom it does business given that some are saying peak oil is already upon us.

US media is suggesting that the deal means that Israel no longer finds a threat in Saudi Arabia and sees the advanced aircraft package as containment against Iran. Speaking of which, sources in the Gulf region report that Iran is preparing for a possible attack by Israel and/or the United States on one or more of its nuclear production units by stockpiling arms and munitions with its proxy militias in Kuwait and Bahrain.

We have received all kinds of back channel dialogue from the UN General Assembly gathering in New York City this week so I include a special commentary from Claude Salhani, who has been covering terrorism issues in the Middle East for quite a number of years and checks in with a column titled, "Iran's Option In Case of Attack On Its Nuclear Facilities."

By Claude Salhani

Sources in the Gulf region report that Iran is preparing for a possible attack by Israel and/or the United States on one or more of its nuclear production units by stockpiling arms and munitions with its proxy militias in Kuwait and Bahrain. Earlier this month the tiny Kingdom of Bahrain announced the arrest of 23 men whom it accused of wanting to commit acts of terrorism and plotting to overthrow the government. Bahrain may well be the smallest of Arab countries yet it contributes greatly to the overall security of the Gulf region and the Middle East. Among other things Bahrain serves as the regional headquarters to the US Navy fleet operating in the Persian Gulf.

Strategically located at about halfway up the important sea lanes in the Gulf and through which most of the world's oil is carried from extraction sites to refineries aboard super tankers, the island nation of Bahrain is linked to the Saudi Arabian mainland by a 15-mile (24 km) causeway over the azure waters of the Persian Gulf. The causeway takes one into Saudi Arabia's Eastern Province, where the largest Saudi oil fields are located. Saudi's Eastern Province is largely Shiite.

Bahrain's population of 729,000 is composed of 70 percent of Shiites and the rest are Sunni. The Sunnis hold all the top positions of power in the country, from the king on down to every major office. The Shiites, who generally feel they are treated as second-rate citizens, relate to their coreligionists in the nearby Islamic Republic. Iran periodically likes to remind the Bahrainis that their island used to belong to Iran and that the Iranians have not forgotten that.

This is a part of the world where tensions run high and conflicts can easily ignite, particularly given that all the ingredients for an explosive situation are present: oil, religion and politics. The events that unfolded in recent days in Bahrain could well serve as the foundation for a John LeCarré novel, with one exception: this was no fiction. It's real and it could represent a very real and present danger to the security of the region. The men arrested in Bahrain were said to be working for "outside forces," the term usually meant to indicate Iran. Pointing the finger directly at the Islamic Republic can prove to be a dangerous gamble. Yet that language remains clear.

The report of an attempted coup in Bahrain is something that must be taken very seriously and should send alarm sirens wailing all the way from Manama, the capital of the tiny kingdom to the corridors of power in Washington. Tehran realizes two very important facts in case of attack against its nuclear facilities: First is that if attacked by Israel and/or the United States it will be incapable of striking back directly seeing the US' domination of the skies and Israel's quasi impregnable air defense system (with US contribution).

And second, Iran also knows that it must retaliate at all costs or lose all credibility. Hezbollah, the Lebanese Shiite paramilitary movement is in a perfect position to hit Israeli towns and cities from the north and could target large centers of population as far south as Hadera and possible further. Hezbollah's arsenal includes long range field artillery and Iranian supplied medium range rockets. From the south, Hamas, the Palestinian Islamic Resistance Movement can target Israeli locations the suburbs of Tel Aviv. Hamas' artillery is more antiquated and their Qasam rockets are home made and inaccurate, though they can still cause damage and casualties.

In the Gulf, Iran supports and arms and trains Kuwait's very own Hezbollah, who in turn is believed to have been supplying training and weapons to the Bahraini Shiites, such as the 23 men who were recently arrested in Bahrain. And of course one must not forget the influence Tehran carries in Iraq, where the US still has some 50,000 troops deployed and where Iranian-backed militias would very likely go on a shooting spree.

How seriously should one take the accusations?
Iran has periodically reminded Bahrain that the island is/was part of Iran. And if attacked by Israel and/or the US Iran might decide to push the envelope, especially if they feel they have popular support on the island.

Claude Salhani is a political analyst specializing in the Middle East and terrorism

Courtesy Oil Price.Com

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Crude Oil Steady as Report Shows Higher Crude Supplies, Drop in Fuel Stockpiles

Crude oil futures were little changed after a U.S. government report showed an unexpected decline in supplies of gasoline as crude inventories rose. Gasoline inventories fell 2.81 million barrels to 222.1 million in the week ended May 7, the Energy Department said today in a weekly report. Stockpiles were forecast to increase by 400,000 barrels, according to the median of 18 analyst estimates in a Bloomberg News survey.

Inventories of crude oil rose 1.95 million barrels to 362.5 million, the department said. Supplies were forecast to increase by 1.6 million barrels. Crude oil for June delivery fell 12 cents, to $76.25 a barrel at 10:35 a.m. on the New York Mercantile Exchange. Oil traded at $76.53 a barrel before the release of the report at 10:30 a.m. in Washington.

Prices also moved lower as the International Energy Agency cut its estimate of world oil demand this year by 220,000 barrels to 86.4 million barrels a day in a monthly report. The Organization of Petroleum Exporting Countries bolstered oil output by 40,000 barrels a day in April, according to the IEA. Supplies from the 11 members bound by quotas rose to 26.79 million barrels a day, 70,000 barrels a day more than in March. That means the group’s compliance with the record output cuts slipped to 54 percent last month. Iraq has no output target.

OPEC members will need to pump 28.7 million barrels a day to balance global oil demand and supply this year, according to the IEA. That is 400,000 barrels fewer than the Paris based agency estimated last month. Iran, holder of the world’s second largest oil reserves, may be storing as much as 38 million barrels of crude at sea as demand declines for the heavier, sour grades the Persian Gulf country sells, according to the IEA.

Reporter Mark Shenk can be contacted at mshenk1@bloomberg.net.


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Phil Flynn: Forget those Fed Fund Futures, Oil is the key!

Ben Bernanke spoke yesterday and the oil market listened. Of course listening to Ben Bernanke and his comment about the price of oil made one wonder whether or not Big Ben gave traders the green light to buy oil. Among other things that the Fed Chairman said about the economy was that the current price of oil was not a threat to the economy. "At this point oil prices are not a serious threat to the recovery," Bernanke told a Congressional Committee. "Clearly if it moves a lot it would be a negative, so we have to watch it."

Of course they have to watch it. If oil prices spin out of control it could endanger an economic recovery which begs the question, at what point does Bernanke see oil prices as a threat? Obviously that is a difficult question as the price of oil can move higher comfortably as long as it accompanies strong economic growth. With Mr. Bernanke basking in the light of some strong data and earnings, it seems the oil price right now is a concern but not a major one. My guess is that Mr. Bernanke’s point of pain on oil is $90 for the rest of the year. That means that instead of watching Fed fund futures for an estimate of when interest rates will raise, perhaps we'd do better to watch the crude oil curve.

If we see oil go solidly above $90 a barrel then perhaps that would be the month we would expect a rate increase. Which means according to the oil market price with the December contract trading currently at 8990, there is an approximate 98 percent chance the Fed will raise rates in December and with January at 9006 over a 100% chance they will increase early next year? If the front month oil contract goes solidly over $90, the pressure on the Fed would be enormous to try to do something despite the subdued core inflation rate.

China is hot, hot, hot. So hot that it's getting too hot for the Chinese government to handle? China's GDP came in at a three year high blistering rate of 11.9% raising fear this morning that China is going to have to do something dramatic to try to slow things down. At the same time Chinese consumer prices climbed 2.4 percent in March which was less than expected. Yet at the same time this is a number that is fraught with danger for the future of the Chinese government. Those fears about China may be one reason the oil market seems less than impressed with China’s strong GDP or perhaps the market feels that yesterday move up in oil basically priced strong China growth in.

How much of the Iranian threat is priced in. Some traders took note of the story about Iran’s capability to shutdown the critical oil export choke point the Straits of Hormuz. Bloomberg News reported, “Iran’s build-up of its defenses gives it the capability to block a major Persian Gulf oil- transit route and project military strength on its territory, the U.S. Defense Department’s intelligence director said. “It does have the ability to restrict access to the Straits of Hormuz with its naval forces temporarily and threaten U.S. forces with missiles,” U.S. Army Lieutenant General Ronald Burgess, director of the Defense Intelligence Agency, told the Senate Armed Services Committee. Iran has taken steps to strengthen its military defenses and cultivate allied terrorist groups targeting the U.S. and Israel, Burgess told the committee. “Iran can conduct limited offensive operations with its strategic ballistic missile program and naval forces,” Burgess said.

Iran has threatened to block the Straits of Hormuz before. The EIA says that narrow Straits of Hormuz between Iran and Oman (21 miles width at its widest point) is the most important choke point for oil shipments from the Persian Gulf. Roughly 17 million barrels per day, more than 20% of the world’s total oil supply, transit this route. If the Straits of Hormuz were blocked, only a small share of the oil could be transported along alternative routes. The most viable is a 745-mile long east-west pipeline through Saudi Arabia to the Red Sea. The possibility that Iran might try to close these straits would cause the mother of all oil spikes but at the same time it would also be the end of the Iranian regime as we know it. The global outrage from such a move would be met with swift and lethal resistance.

Oil also got a boost yesterday on the EIA which showed a surprisingly large crude draw on the East Coast. I suspect that that number will be adjusted somewhat next week to the upside but that does not help us this week. The EIA said that crude oil inventories decreased by 2.2 million barrels from the previous week. At 354.0 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 1.1 million barrels last week, and are above the upper limit of the average range.

Phil Flynn can be reached at pflynn@pfgbest.com. And make sure to watch him every day on the Fox Business Network!

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Iraq, Iran Agree to Solve Dispute over Border Oil Field

Iraqi and Iranian officials will meet next week to try to solve their border issues, including the dispute over a southern Iraqi oil well which Iranian forces occupied last month, foreign ministers of the two neighboring countries said Thursday. Iranian Foreign Minister Manouchehr Mottaki made the announcement after meeting his Iraqi counterpart, Hoshyar Zebari, in Baghdad. "Everything will be solved," Mottaki told a joint news conference. "Joint technical committees will start meetings in a week from now, and the borders between the two brotherly countries will be marked," he added.

"We have agreed to normalize the situation on the two countries' borders and bring it back to where it was standing before," Zebari said. The issue of the oil well and all other issues can be solved bilaterally between the two countries, he added. Iraqi officials said last month that Iranian forces occupied Well No. 4 on the al-Fakkah field, in Missan Province in southern Iraq, which straddles the two countries' frontier. The field has estimated reserves of 1.55 million barrels and is part of a cluster of fields Iraq unsuccessfully put up for auction last June.

Iraqi officials said Iranian forces have since withdrawn 50 meters away from the well but they still control the area and are preventing Iraqi oil workers from reaching the well.....Read the entire article.


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Crude Oil to Record the Strongest Annual Gain in a Decade

Crude oil edged higher to settle at 79.28, up +0.5%, Wednesday as the EIA report showed inventory draw in crude and major oil products. Tension between Iran and the Western world, potential oil exports from OPEC and market optimism after strong macro-economic data also boosted price. The February contract, currently trading at 79.6, is prone to record the third weekly gain. Crude oil price, surging almost +80% in 2009, will probably record the biggest annual increase since 1999. According to the US Energy Department, crude inventory drew -1.54 mmb to 326 mmb in the week ended December 25. Cushing stock also drew -0.19 mmb. For oil products, distillate stockpile dipped -2.06 mmb (consensus: -2.23 mmb) to 159.3 mmb. This an initial sign of moderation in the pace of inventory draw. Gasoline inventory also dropped -0.37 mmb to 216 mmb.

Decline in inventory levels in recent weeks has been sending a positive signal to investors that the energy market is improving. This is also the major reason for oil's rally these 2 weeks. However, details in fuel demand suggest we should be more cautious. 4 week averaged demand for gasoline was 9.024M bpd, compared with 9.041M bpd the same period in 2009, while the 4-week averaged demand for distillate, at 3.689M bpd , was -8.8% below the same period last year. Since the protest began on December 27 in Tehran, the Iranian government has detained about 1000 people. At the same time, Iran accuses Western countries of spurring the demonstrations. Oil prices usually get supported when turmoil occurs, especially in the Middle East as the region in rich in oil. Iran, the world's second largest oil producer, may threaten to suspend oil exports if the tension escalates.....Read the entire article.

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Crude Oil Set for Biggest Annual Gain in Decade Amid Iran Political Unrest

Crude oil was little changed, heading for its biggest annual gain in a decade, on forecasts that U.S. stockpiles are narrowing while unrest in Iran sows concerns supply will be disrupted. U.S. crude inventories likely fell by 1.85 million barrels last week, according to analysts surveyed by Bloomberg News before an Energy Department report due today at 10:30 a.m. in Washington. Iran, holder of the world’s second largest crude reserves, detained about 1,000 people after the biggest anti- government demonstrations in six months.

“Stocks are showing the market is getting towards a more balanced situation, though it will take time,” said Alexandra Kogelnig, a consultant with JBC Energy GmbH in Vienna. “Tensions in Iran are always a factor even if there is nothing immediately happening, as if something major happens it will affect exports.” Crude oil for February delivery was at $78.73 a barrel, 14 cents lower in electronic trading on the New York Mercantile Exchange, as of 12:57 p.m. London time. It earlier rose as much as 32 cents, or 0.4 percent, to $79.19 a barrel. Futures are set for a 77 percent gain this year, the biggest since 1999. Prices have tripled in the past decade.....Read the entire article.

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Phil Flynn: New Year Traditions

Energy disputes between the Ukraine and Russia are becoming as much of a New Year’s tradition as the Waterford ball falling in Times Square. Once again as the new year approaches, we have another dispute between Russia and the Ukraine that may or may not be settled and rising tensions in and around Iran may cause more caution from sellers as we get ready to celebrate another holiday.

Sometimes the price gets ahead of the fundamentals. Other times the fundamentals catch up to the price. Last week in a holiday shortened trading week, oil got too excited about cold weather and a flawed weekly inventory report as the marketplace lacked the type of perspective it has when there is more volume. Yet yesterday I feared that the market might not be taking seriously enough the threats that were evolving in Europe and Iran. Of course if you assume that last week went too high and now we are holding gains it looks like once again the market had it right in the first place. It seems that rising geo-political heat is in part helping justify the extended rise.....Read the entire article.

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Growing Power of Iraqi Kurdistan Could Backfire on Tehran

Iran's strategy to break Iraq into three component territories, and to dominate those territories in order to reduce regional opposition and to gain unfettered access to Syria and the Mediterranean as a result of the Western invasion of Iraq in 2004, has had profound success. The country is now, at best, a federation, with elements of a slide toward confederacy or even the breaking away of some territory. Iran dominates, and will increasingly dominate, the Shi'a controlled central heartland and the Government of Iraq, particularly when US and Coalition forces depart. Iraq's northern, and predominantly Kurdish, region is now virtually an independent state. It is certainly an autonomous state.

And yet the solution which Tehran sought, the break-up of Iraq, may hold more problems for it than a unified Iraq, as the modern Iraqi state was created under British tutelage in 1922. Indeed, the Kurds, who had been financially swayed by both Baghdad and Tehran for decades, may feel sufficient strength that the foundations of a sovereign state can be laid. That sovereign state would, as the Iraqi Kurds have made clear — have aspirations on territory inside Iran, in Syria, and, significantly, Turkey (and possibly Azerbaijan and Armenia). In that respect, the Turkish-Iranian-Syrian rapprochement could not have come at a more propitious time. This reality, too, fuels the momentum in Ankara toward phasing out its strategic relationship with Israel. A Turkey-Armenia-Iran arrangement would help curtail Kurdish dreams of unity (even though the Kurdish tribes have historically been anything but trusting of each other, in many respects). And, fueling Ankara's concerns has been the heavy Israeli commercial involvement in the.....Read the entire article.


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Iraq Accuses Iran of Violating Border, Demands Withdrawal From Territory

Iraq’s National Security Council said today that Iran violated their shared border and Iraq’s “territorial integrity” and called on the Islamic republic to withdraw its forces from the region. Iraq summoned the Iranian ambassador in Baghdad and has begun “diplomatic steps” to resolve the situation, Iraqi government spokesman Ali Al Dabbagh said in a statement after a meeting of the security council.

Iranian forces entered Iraq at dawn yesterday and occupied an oil well in the East Maysan oil field, Zafer Nazmi, a border guard general, said earlier today. The Iranian forces positioned tanks around the well in the al-Fakah region, 450 kilometers (280 miles) south of Baghdad. The two neighbors have disputed the border of southeast Iraq for decades.

“The council stressed that the incursion is a violation of Iraq’s border and territorial integrity and called on Iran to withdraw from well 4 and lower the Iranian flag from the well tower immediately,” according to the statement. Crude oil for January delivery rose 71 cents, or 1 percent, to settle at $73.36 a barrel today on the New York Mercantile Exchange. It rose as much as 2.8 percent in intraday trading on news of the incursion.....Read the entire article.


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Hype hype, hype hype Iran

Oil prices got a bid from a rising stock market and concerns over Iran. Now, while some traders and analysts try to hype the Iran story, the truth is the odds of an imminent military conflict with Iran are being greatly exaggerated. And if we do actually get into a conflict, it is unclear as to whether or not it will have a long term impact on oil prices in a world awash in supply.

Many analysts point to the fact that the Iranians have threatened to close the Straits of Hormuz, a major choke point for global supply. The Straits are located between Oman and Iran and connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. According to the Department of Energy, Hormuz is the world's most important oil choke point due to its daily oil flow.....Read the entire article

Oil Rises for Second Day on Recovery Outlook, Iran Tensions

Crude oil rose for a second day on speculation the global economy’s gradual recovery will increase demand for fuel and energy. A Conference Board report tomorrow in the U.S., the world’s largest oil user, may show consumer confidence is at its highest in a year, according to economists surveyed by Bloomberg News. Prices also rose after Iran, the world’s fourth largest oil producer, conducted missile tests days before meeting with western officials over a previously secret nuclear facility.

Crude oil for November delivery gained as much as 47 cents, or 0.7 percent, to $66.49 a barrel in after hours electronic trading on the New York Mercantile Exchange. It was at $66.39 at 8:09 a.m. in Sydney. The contract rose 13 cents to $66.02 on Sept. 25, trimming its loss for the week to 8.9 percent. Prices climbed from $65.05, an eight week low, after U.S. President Barack Obama said a new nuclear plant Iran is building shows the Islamist nation is.....Read the entire article

Venezuela, Iran Ink Oil Invest Deals for South Pars, Dokobuki Field

Iran and Venezuela signed three oil deals Sunday during a Venezuelan presidential visit as the Islamic republic tries to mitigate the risk of new sanctions, Iranian news agencies said Monday. The accords were signed as Tehran is coming under increased international pressure over its nuclear program, including a threat to enforce sanctions against import products to Iran. The semi-official Mehr news agency said on Monday that Iran and Venezuela signed three memorandums of understanding in the energy sector in Tehran on Sunday as part of a visit to the country by Venezuelan President Hugo Chavez. They include two agreements of reciprocal investments in Iran and Venezuela each worth $760 million, according to Mehr and Shana, Iran's Oil Ministry news agency.....Read the entire article