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Archive for the ‘Oil’ Category

Jim Rogers is a bit odd (sorry Jim) in some ways, but a pretty sharp crayon when it comes to the markets. First off, I apologize about the crappy quality of this video, I think someone filmed their TV, yuck. But, it is timely since it is from yesterday, and he has some pretty interesting things to say about the markets. He also admits he is “horrible” at market timing, so fear not if you have some trades that have gone bad and think you’ll “never make it”!

This discussion started when some of us coaches emailed about Jim. A month ago Jim said he was selling USD, but with this caveat toward the end of an interview:

If anything, if I were a good trader, I would probably buy the dollar, because it’s probably going to have a rally. But when it rallies, I would suggest you get out of dollars.

And sure enough, Edward Goettig (one of the coaches) said Jim said yesterday that he is buying dollars, until the dollar stops rallying whereupon he’ll sell them again. I totally agree with his posture and have been thinking the same thing. Anyway, the interview:

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oil_well.jpg     Quick, what’s a technical implication of big fat round numbers (like 100)? The answer is that they often serve as support or resistance. This morning oil is at about $97/barrel.

    Here’s the deal: as oil goes higher, the dollar tends to head lower, and vice versa. So effectively the buck is near some big support. Just keep this in mind in your trades. Our EUR/USD pennant pop is puttering around some still, nothing to report there.

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In addition to being interesting and informative for trading, the OPEC meeting sure was entertaining! I mean, what do you expect with a couple of freak-shows like Hugo Chavez (Venezuela) and Mahmoud Ahmadinejad (Iran) running around? *note, no offense if you’re a big fan of either, they were just trying to push their own political agenda the whole time rather than deal with oil! The map above is of the world’s OPEC countries, by the way.

I noticed a Christian Science Daily Monitor article by Dan Murphy did an awesome job of recapping a lot of this today. Here’s some of the “best of” brought up by Mr. Murphy (& we’ll talk implications for trading at the end):

 

… the organization that was created in 1960 to stabilize prices, today wields less clout than it once did over the cost of crude. The 13-nation cartel once controlled prices often by just talking about pumping more or less oil. But now its leaders say booming world demand – largely from India and China – and concern over a possible US attack on Iran are driving prices.

OPEC’s biggest producers – Saudi Arabia and its Gulf neighbors – say they’d like prices to be a little lower but are pumping near capacity now. After all, their currencies are pegged to the dollar, so a weak US economy hurts them, too. Analysts say that while Saudi Arabia and others might be able to squeeze out an extra 1 million barrels a day, that’s only 3 percent more than estimated current OPEC production of 31 million barrels a day.

After Mr. Chávez urged OPEC’s leaders to use their oil wealth to become an “active political agent” and warned that oil prices would rise above $200 a barrel if the US takes military action against his ally, Iran, Saudi King Abdullah dismissed his arguments.

“Oil … should not become a tool for conflict and emotions,” he said. “Those who want OPEC to become an organization of monopoly and exploitation ignore the truth.”

The joint OPEC statement released at the end of the summit said that the “stability of the oil market is essential,” which oil analysts said was a repudiation of Venezuela’s and Iran’s aims.

“There are basically two camps, Iran and Venezuela and one led by Saudi Arabia,” says Mr. Alani, the oil analyst. “What happened at this conference was that the leaders of OPEC – Saudi Arabia and the Gulf states – made it clear they oppose the use of oil as a weapon, so the radicals within OPEC were isolated.

“What’s going to happen now is the leaders will do everything they can to maintain supply. But there’s very little they can do if there’s an attack on Iran or something of that nature. In that case, prices will double, perhaps go to $300 a barrel.”

Conclusions? Perhaps it is safe to say that with no rescue from the supply side of the equation, high oil prices could come down from decreased demand – if the global economy really stalls. So a huge heads-up/reminder that if you are interested in trading the loonie, or pound, keep an eye on global economic news especially regarding China, India. You don’t have to be an Indian economist – I’m not – just keep reading the news and have a feel for how trends are going. And stay alert regarding any Iran possible-war news! And you thought the loonie is high now …

 

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Came across a really interesting article. Most of us have heard the theory that oil production is peaking soon (like, possibly by the end of this decade) which demand increases. Here is an article which documents it and tries to make the case, so if you’re bored and want to see with your own eyes this theory’s arguments and evidence enjoy.

The conclusion is a loonie-bull’s best friend: get ready for more appreciation over the long term, as for any other currency which benefits from high oil prices (GBP).

Do you see what I see below? A resistance line on oil discovery (yikes) – a pic pulled from the article – and a long term support line for the EUR/CAD – heads up over the next several months!

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Here’s how this works. Usually, oil is denominated in USD, meaning any random country pays an oil exporting country in greenbacks. However, it’s recently been disclosed that a couple of Japanese oil companies (Japan Energy Corp, the 6th largest, and Cosmo Oil Company – yes, that’s really the name) are buying Iranian oil in yen. What gives?!

Whitehouse policies, including stepped-up sanctions with Iran, are part of the cause. Obviously Iran sweetens the deal for its customers to avoid getting dollars. Imagine how this could happen with Venezuela, and think this through to a logical conclusion: if folks buy less USD to pay for oil, it’s another whammy for the buck. So, pay more attention to these political vibes when you consider your long term forex posture or a trade involving the dollar. Remember the cause and effect, and trade with the cause.

And lest you be tempted in siphoning some Iranian oil across its border to avoid the whole oil problem (admittedly, at times I am tempted to do this), check out the clip below of Iranian women special forces and beware 🙂 Here’s a screenshot of these women, dressed for success in their traditional attire yet scaling down walls after the bad guys – don’t mess with Texas!– er, Iran! (Sorry, dubyah.) :

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(oh no! Here they come! Run!!)

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