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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