Global Oil Supplies: Two more bullets aimed squarely at American energy consumers
By Adam Lass
In this article
A 5.6-magnitude quake has threatened easy transport of Iranian oil to the industrialized West.
Nigerian unions threatened to strike production and transportation facilities.
Crude oil futures hit a 2007 high at $69/barrel on the NYMEX.
Global Oil Supplies: Two more bullets aimed squarely at American energy consumers
Did I mention violent earthquakes in Iran? Or for that matter, violent strikes in Nigeria?
As I have been cataloging the various threats looming out there that could force oil up over $70/barrel by mid- summer, it seems that they break down into two distinct categories: natural disasters and human intransigence.
On the natural side of things, we've covered the 17 or so expected Atlantic hurricanes, any one of which could take out production in the Gulf of Mexico. I've also mentioned the 16 odd cyclones the same folks are warning about that could bottle up the endless carousel of megatankers bound for the U.S. in the Straits of Hormuz.
But I clean forgot to mention the fact that much of the Middle East's precious oil reserves are sitting within a cluster of classic fault lines and subduction zones such as the North Anatolian fault that periodically plague Turkey with death and destruction, as well as the active faults, along the Alpied earthquake belt located in the Iranian plateau.
In fact, Iraq experiences so much seismic activity that it rarely headlines in the West. Today, however, a 5.6-magnitude quake reminded all that the biggest threat to the easy transport of Iranian oil to the industrialized West may not be political feistiness. Centered some 18.6 miles underground, this latest bout of tremors was felt for some seven seconds in Tehran among other cities (including the Shiite holy city of Qom, which, miraculously, reported damaged buildings but no deaths or injuries).
And on the human front today Nigerian unions threatened to strike production and transportation facilities. By the bye, when they say “strike” in Nigeria, they mean that in a bit more visceral fashion than we do here in the states.
For example, should the United Autoworkers Union reject Ford (F:NYSE), General Motors (GM:NYSE) and DaimlerChrylser's (DCX:NYSE) attempt to get out from under their pension liabilities, its constituents will simply exchange their tools for picket signs.
In Nigeria, it is reasonably common for labor discussions to be preceded by a firebomb or two at the workplace, and the rupturing of pipelines.
I'll have more on the negotiations in Detroit on Wednesday, but I can tell you now that I believe that they are creating both false hope and a trading opportunity. Meanwhile, in New York, we saw crude oil futures push darn close to $69/barrel, while in Chicago, WOW readers' XLE call options hit another all-time high, pushing the max gains for the this play over 131%.
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Adam Lass is the founder and manager of the WaveStrength Group, and is a contributing editor for Taipan Financial News. As the creator of WaveStrength's proprietary analysis system, Adam's expertise has shaped a franchise of successful investment newsletters and services, including WaveStrength Options Weekly and WaveStrength Apex.
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