Consesnus on oil - which at the moment is just over 50.From TIS: CONSENSUS ON OIL IS BEARISH—IS IT RIGHT? Several days ago, I showed the position of non-commercial owners of oil contracts and what the data shows is they own very little oil in relation to their history. The next chart shows the combined commercial position for Crude oil (net) and it appears a short remains in place, though it is rapidly being closed up.
As I listen to the pundits on bubblevision tell me a deal with Iran which removes sanctions will cause a flood of new oil supplies to hit the market, I have to wonder, then why is this short position being closed? One reason is Iran is part of OPEC and OPEC has production quotas. What chance do you think there is that the Saudis will give Iran a pass on those quotas? I would think zero, so the Iranians will try and cheat, not a new thing in the Gulf, but how much are they cheating already? With or without sanctions, Iran is going broke with $50 oil. Since Iranian production exported by water moves through the Persian Gulf, it seems highly unlikely Tehran would block the Gulf. But the Red Sea route and the Suez Canal area would be good targets for them to disrupt and in fact, Iranian backed Houthi rebels reached a Yemeni military base along the BAB EL-MANDAB chokepoint on March 31.
The next graph/table ( I couldnt encorporate the graphics for charts .. SORRY ppl) shows the world’s major oil shipping chokepoints and the amount of production moving through those locations. BAB-EL-MANDAB sees 3.8 million bpd transit daily and the Suez canal/SUMED pipeline, 4.6 million bpd. Aside from the Persian Gulf and the Straits of Malacca, there is nowhere else on earth which has this much oil passing through on a daily basis. The BAB is 18 miles wide, limiting tanker traffic to two, 2-mile wide channels according to the EIA.
A cut-off of the Red Sea route would reduce access to the Mediterranean from the Indian Ocean, access to the SUMED pipeline which transits 2.24 million bpd, more output than all but thirteen countries. Daily Transit Volumes Through World Maritime Oil Chokepoints Source: EIA
Volume Of Crude Oil And Petroleum Products Transported Through World Chokepoints, 2009-13 Sources: U.S. Energy Information Administration analysis based on Lloyd's List Intelligence, Panama Canal Authority, Eastern Bloc Research, Suez Canal Authority, and UNCTAD, using EIA conversion factors. This is not a prediction, but rumination. It seems the U.S. intention in the Mideast, is to leave.
This is why Iran is being set-up as a counterweight to the Saudis as the dominant powers. It puts Israel in a terrible position, as the country is being virtually abandoned, which is why Netanyahu made his speech to Congress. If the U.S. withdraws from the Mideast and the President has said many times, he wants to extricate the U.S. from the wars there, so what happens if that includes ending the 5th fleet patrols which have guaranteed the safety of oil shipments down the Persian Gulf, for decades?
Who would guarantee those shipments, if the U.S. would not? How would oil price an increase in maritime risk across the Persian Gulf? Sources: Bloomberg Data Bloomberg News Rosen, Armin, “War in Yemen could threaten one of the world's most important oil chokepoints” BusinessInsider 26 March 2015. https://www.businessinsider.com/war-in-yemen-could-threaten-one-of-the-worlds-most-important-oil-choke-points-2015-3 “World Oil Transit Chokepoints” EIA (Notes), 10 November 2014 https://www.eia.gov/countries/regions-topics.cfm?fips=wotc&trk=p3
We are not being told to whole story and we are not being told so as to keep everyone confused.
GLTA
I am certainly long after a conversation with management, and the charts are definitely point to an uptrend to start... There is a huge number of short shares that have been continuously covered to re-cycled new shorts on LRE and they will soon have to account. The shorts have conviction on this issue but they may be in for some pressure,
This IN SPITE of the so-called deal with Iran .. which I am calling bullshyte on.
Stay frosty and GLTA