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The article below is a guest contribution by Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors. In 2011, oil was one of the top performing commodities among those we track, with Brent rising more than 13 percent. Geopolitical risk and unexpected non-OPEC supply losses caused oil to rise significantly in early 2011. By October, we saw the black gold sink to a low of $80 per barrel before rising to its current level of nearly $108 a barrel. This year’s unrest demonstrated how major oil-producing regions can significantly affect oil prices. As I’ve previously stated, according to PIRA, the Middle East accounts for over 70 percent of OPEC oil production and, along with North Africa, more than 95 percent of the cartel’s capacity growth. A disruption of the supply chain can also influence oil prices. One of the largest chokepoints along the global oil supply chain is the Strait of Hormuz, which roughly 90 percent of all Persian Gulf oil tankers—some 18 million barrels per day—pass through, according to Barclays. With Iran controlling the entire northern border of the strait, there is a significant chance for disruptions should the country fall into conflict or war. The story will likely continue into the new year, as “sanctions against Iran, including a possible European Union oil embargo, and fear of an Israeli attack on Iran’s nuclear facilities led 2011 to close on a bullish note” for oil, said PIRA Energy Group in its new report today. Additionally, there’s new political uncertainty in Iraq that may keep oil elevated. The chart below sums it up: With more than 40 percent of the world’s oil controlled under autocratic rule, oil supply in democratic nations likely depends on the state of autocratic nations.
China Rises to Top of Energy Pyramid
Read China is World’s Largest Energy Consumer Continue reading Case for a sustained $100 oil price More on this topic (What's this?) 2012 Oil Price Outlook: How to Profit From $150 Oil (Money Morning, 1/6/12) The Best Energy Trades for 2012: Part II (Wealth Daily, 12/10/11) Iran’s Oil Blockade Threat Causes First Price Spike of 2012 (Wall Street Daily, 1/6/12)
Tim Guinness, chief investment officer at Guinness Atkinson Asset Management, talks about the outlook for oil prices. Source: Bloomberg, October 12, 2011.
This post is a guest contribution by Dian Chu, market analyst, trader and author of the EconMatters blog. It has become quite apparent that major changes are necessary in the oil futures market after the latest year of volatility which had little relation to the actual fundamentals of supply and demand in the marketplace. Oil is too an important commodity to have such a large dislocation from the actual physical market of supply and demand. It is used by people all over the world as a necessary commodity for daily transportation, businesses rely on the commodity to produce goods, and economies need a stable price reflective of fundamentals to flourish in an efficient matter. In short, speculators have no business in the oil market, they distort prices, and sure helped slow global growth during the past year by running up prices well beyond the fundamentals based upon actual inventory levels of the commodity. WTI & Cushing Inventory – A Curious Correlation
In addition, Libyan oil was offline the entire time, often cited by bullish speculators as a thesis to push up price regardless of the actual market effects of the offline oil which was more than made up for by Saudi Arabia. So now we can empirically validate that oil should never have been $115 a barrel, the market was actually over-supplied based upon inventory levels in relation to their 5-year averages. Continue reading Oil Market: Rectifying the broken paper pricing model More on this topic (What's this?) The (New) Truth About Oil (Money Morning, 8/18/11) What Really Drives Crude Oil Prices? (Investment U, 8/24/11) Sudanese Oil (Wealth Daily, 9/12/11)
With crude oil prices having surged over the past ten days, Chart of the Day has just produced a long-term chart of the inflation-adjusted price of West Texas Intermediate Crude, providing an interesting perspective. The graph illustrates that most oil price spikes coincided with Middle East crises and often preceded or coincided with a US recession. “The logic behind this is that a Middle East crisis can potentially disrupt an already tight oil supply and thereby drive crude oil prices higher. Also, rising oil / energy prices can, among other things, increase costs within the global economy’s supply / distribution chain and thereby contribute to inflation which can in turn encourage governments to halt or reduce any plans to stimulate the economy,” says the report.
Source: Chart of the Day, July 8, 2011.
In this video clip, experts discuss the relationship of energy with geopolitics, modernity, and the environment, as well as sources of clean and renewable energy. The speakers are: • Michael A. Levi, David M. Rubenstein Senior Fellow for Energy and the Environment, Council on Foreign Relations. • William F. Martin, Chairman, Nuclear Energy Advisory Committee, U.S. Department of Energy; Former Deputy Secretary, U.S. Department of Energy. • David Sandalow, Assistant Secretary for Policy and International Affairs, U.S. Department of Energy. • Presider: Thomas Wallin, Editor in Chief, Energy Intelligence Group, Inc. Source: Council on Foreign Relations. June 8, 2011 (hat tip: The Big Picture). More on this topic (What's this?) Residential Energy Consumption: Uncovering the Home Power Puzzle (Investment U, 5/20/11) How to Lower Your Energy Bills for Free (Investment U, 1/6/12) Natural Gas, the New King of Energy (Wealth Daily, 1/11/12)
According to a report by U.S. Global Investors – Investor Alert, BP published its June 2011 Statistical Review of World Energy last week. Global primary energy consumption recorded a 5.6% increase in 2010 – the largest since 1973. Interestingly, China’s energy consumption grew by 11.2% to make up 20.3% of the world total, eclipsing the U.S. for the first time.
Source: U.S. Global Investors – Investor Alert, June 10, 2011. More on this topic (What's this?) Don’t Fall for This China Head Fake (Wall Street Daily, 1/25/12) Scary: Why China is Buying Gold Like Mad (Learn Mining News, 1/30/12) China’s Factories Improve (Wall Street Daily, 2/1/12) |
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By Prieur du Plessis, on January 2nd, 2012 posted in: 
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