General discussion


Iranian Oil Bourse Is History...But Oil's Still Dangerous For Dollar

By sleepin'dawg ·
This comment is by Kathy Lien & Boris Schlossberg, editors of The Money Trader.

Dear A-Letter Reader,

On March 21st Iran was scheduled to launch the world's first oil trading exchange that would have set prices in euros rather than dollars. Many analysts feared this would have spelled disaster for the greenback since oil is the world's most popular commodity and requires most nations to hold vast reserves of dollars in order to purchase it. If oil were to be suddenly settled in euros, the global need to hoard dollars would diminish considerably, eliminating one of the key supports for the US dollar in the currency market.

The doomsday scenario did not come to pass, as Iran failed to construct the necessary infrastructure for a successful launch of the exchange. It is still insisting on opening a Persian Gulf oil bourse with the southern Iranian island Kish as its base of operations according to a report by Iranian state-television on Saturday. 'The issue has already been agreed upon and the oil ministry has been instructed to open this bourse in the Persian Gulf island of Kish,' Economic and Finance Minister Davoud Danesh-Jafari said. However, at this point, the issue of an Iranian oil exchange to challenge the New York and London markets appears to be more of a P.R. stunt rather than a viable competitive threat.

Even if the Iranians managed to open up for trading, the key question remains: who would trade with them? Given the recent antagonistic rhetoric of the country's political leaders, many investors would likely shun the bourse for fear of not having their trades honored. Successful financial markets require trust and cooperation and Iran's antagonistic actions over the past several months (especially their insistence on developing nuclear capabilities) have engendered little goodwill in the world community.
But dollar bulls should not be so quick to breathe a sigh of relief....

Dollar Dodged a Bullet, But Not the Firing Squad

While the immediate threat of the Iranian oil bourse may have disappeared, the greenback remains highly vulnerable to rising oil prices. Indeed the irony of the matter, is that despite the failure of the Iranian oil bourse, crude itself is trading higher now than when the issue of the Iranian oil bourse first gripped the attention of the financial markets.

Political instability in Nigeria and ever growing demand from China have put an ironclad bid underneath the commodity. To understand why, one only needs to look at the report of the Chinese National Development and Reform Commission. It noted that China produced 11.2% more electricity in Jan-Feb period of this year than last. But China's crude oil output only rose 2.5%. Since electric power generation demands energy to get the turbines going, this means China is experiencing a massive deficit and therefore increased demand for crude on the world's markets.

T Boone Pickens-a man whose hedge fund generated over $1.5 Billion in profits over the past 5 years-projects that very soon world demand for oil will increase to 87 MM barrels per day while world supply will only be able to produce 85 MM barrels per day.

In fact, as China continues to grow, oil analysts calculate that it will create demand for an additional 20 MM barrels per day if it simply matches the current per capita energy consumption of Mexico. As we drove the highways of Southern Florida this weekend, we couldn't help but notice that gasoline prices - which only a few weeks earlier were near the $2.50 gallon level - were now inching towards the $3.00 barrier. We believe that the $3.00/gallon gasoline will have a serious negative impact on US consumer spending going forward and that in turn will weigh heavily on the US dollar.

Finally, while the Iranian oil bourse is history, the country's destabilizing effect on the oil markets may just be beginning.

Just this week, Iran announced that it has successfully fired a high-speed underwater missile capable of destroying huge warships and submarines. The Iranian-made missile has a speed of about 350 kilometers an hour underwater, claims the Iranian navy. If this is true, it means the missile can travel three or four times faster than a torpedo and according to Iranian navy the missile has a " very powerful warhead designed to hit big submarines...even if enemy warship sensors identify the missile, no warship can escape from this missile because of its high speed.".

Even more dramatic, Iran tested this missile in the Straight of Hormuz - the narrow passageway in the Persian Gulf that borders Iran and through which 25% of the world's oil supply flows. This is also a very provocative move given that the UN gave them 30 days starting last week to stop their nuke program. More turmoil in both the oil and the currency markets is the likely bet.
Kathy Lien & Boris Schlossberg
Editors, The Money Trader

Web site:

Tis the Shoulder Season for Oil and Gas - And The Best Time To Invest in Energy

The next major energy rally is just around the corner, but for now energy prices are still well below their highs last year. The CRB Energy Index, a sub-component of the widely followed CRB Index, has been the worst-performing sub-index of the commodity benchmark over the last six months. The U.S. Northeast has been enjoying their warmest winter in decades, meaning less people needed natural gas to heat their homes. This explains why natural gas, which hit a record high of $15.38 British Thermal Units (BTUs) last December, has crashed 50% over the last three months. Currently, the market is in what's called the "shoulder season," when winter-heating demand for natural gas has all but vanished, and the demand from summer air conditioning hasn't started yet. But once Americans hit the road for summer holidays, the demand for gasoline will spike once again.

The recent downturn in prices for many energy stocks and especially some of Canada's oil and gas trusts, now offer a buying opportunity. But be warned: not all trusts are created equally. Virtually all Canadian energy trusts have part of their earnings tied to the natural gas cycle. Unless spot prices rally meaningfully from depressed levels soon, some trusts might be forced to cut monthly distributions.


Anybody still claiming Iran shouldn't be shut down now, before they become a real menace and to **** with all the mealy mouthed, bleeding heart, liberal/socialists???

Dawg ]:)

This conversation is currently closed to new comments.

Thread display: Collapse - | Expand +

All Comments

Collapse -

Calm down now...

by dawgit In reply to Iranian Oil Bourse Is His ...

Europe wanted to do that more than 2 years ago, Iran is mearly try'n to get with it. (a little late) To gain favor with the Europeans. (Europe gets most of its oil else where now anyway. The Euro would have been the world standard now (& the base for oil prices) had it not been for the Chineese step'n in. They wanted $s because they have too much of it. (They didn't want to loose) It would have made the $ worthless. In a few more years China will own America anyway and then it won't matter.

Collapse -

The only way you are going to realise that a war with iran is useless

by mjwx In reply to Iranian Oil Bourse Is His ...

is to let you go ahead and do it. You will have to do it alone. I've tried to warn you about the results (economic damage and lives lost). The US has dug its own grave in the Mid-East because the only ones over there with the necessary undercarriage to stand up to the extremists were the dictators and now you have them offside as well.

Dawg, you and I have discussed the moral law before and how it will work against you but here it is from Sun Tzu (translated to English):

5,6. The Moral Law causes the people to be in complete accord with their ruler, so that they will follow him regardless of their lives, undismayed by any danger.


Who's side is imbued with the moral law in Iran (of the Iranian people seeing as it is their country were fighting over)? My point is simple: If you go to Iran you will lose. If you want we can discuss all of Sun Tzu's keys to victory and how they relate to this conflict, in fact I would be pleased to oblige you on that.

The OZ and UK govts are already walking a fine line with its citizens. Oz elections are next year and after Iraq and the IR reforms (means workers can be sacked for no reason). The Liberal party (OZ politics are different to US so words like "Liberal" don?t have the same meaning) is not in a very good position for re-election. I think Tony?s done his dash in the UK (but you may want to talk to a pom about that).

You can go to Iran but Australia wont support you and if any Aussie (that?s pronounced Ozzy for all you yanks) disagrees with me please make your voice heard.

Collapse -

Australian politics

by jardinier In reply to The only way you are goin ...

Do you and I live in the same country? I wouldn't think so from your interpretation of Australian federal politics.

Howard sent Australians to Iraq -- I have no idea why because it was not essential as an ally to the US and all we have gained from it is that we have now became a major potential terrorist target.

Why would he not decide also to send a token force to Iran if the US decided to invade? Not that America could feasibly conduct three wars concurrently as Iraq is already rocketing the country towards bankruptcy.

As for Howard not winning the next election -- you must be joking, or don't you know about the infighting in the Labor Party?

Do you seriously think that the big, fat useless lump of lard Beazley would have a hope against either Howard or (in the unlikely event of a leadership change) Costello?

Collapse -

Julian don't be too hard on him. He's only ..............

by sleepin'dawg In reply to Australian politics

twenty-three years old and possesses all the stupidity that evolves from naivete,inexperience and a deficient education. He is also absent minded and should have known better than to insult a Canadian by calling him an American and that's only the first among many items that he has overlooked or has forgotten. He has forgotten my current situation which sort of places me in a rather unique place to comment on Sun Tzu as it was written in its original language. He sort of reminds me of myself back in the days when I was young and foolish but I grew up after I turned age 18. There are some that never grow up and/or never learn.

From what he said in his reply it is quite obvious he didn't read very much of the article never mind reading it in its entirety. He is running on, with youthful naivete about the uselessness of war and can you think of anyone who doesn't realize that more than I.

Don't they teach basic English skills in Australian schools??? Anyone with the brains God gave a flea realizes that war, most any and all war is pretty useless, which wasn't the point and any soldier, former or otherwise, knows that beyond any shadow of doubt. What I was speaking of, is the inevitability of war, especially one with Iran. Anyone who doesn't understand that should not be permitted to be out without proper supervision.

Dawg ]:)

Collapse -

English skills in Australian schools

by mjwx In reply to Julian don't be too hard ...

I was caught in the position of for the first few years of my education receiving the arse end of the old system (phonetic) and the bleeding edge of the new system (the whole language). Effectively I learnt by two different systems.

Canada is as much a part of the US as any of the other 51 states (52 including Canada) and I don?t want to see Australia as state #53. Canada doesn?t appear to be making any move to separate itself from the US (you even speak ?American? instead of correct English which kind of makes you a hypocrite when discussing my English skills now doesn?t it?). Insult Canada, I would say Canada insults itself.

?There is no avoiding war; it can only be postponed to the advantage of others? Niccolo Machiavelli. To whose advantage is this war? Perhaps the average persons, I don?t think so. I also fail to see weather the fact that Americans aren?t wanted in the Mid-East (see ?the moral law?) does not apply.

Being older just makes you more senile. It takes a young brain to realise that current systems are inadequate. Young men fight wars the old men just start them.

Collapse -

Being down under and far, far, away, must yield an effect similar to......

by sleepin'dawg In reply to English skills in Austral ...

hydrocephalus; unfortunately it also makes for a gross national inferiority complex which can only gain relief by turning out more alcholics per capita than most anyone else, swimmers and slightly mediocre beer. Canada as a member of the G8 makes its mark in the world on a daily basis; Australia has to wait four years before the Olympics roll around to make any sort of impression. Canada has the US at its backdoor but unlike Australia, you didn't see Canada swept up in the Iraq fiasco or the Vietnam War.

We have to deal with the US on a daily basis; we don't have the luxury of being far off out at the back end of beyond, like OZ, where your nation is more of an afterthought rather than a real entity. Your comment is kind of funny because every time the US beats the drum the Aussies come a running, all eager to please, for all the good it does them. Most people that emmigrate from OZ choose to go to the US over any other destination, while Canadians will commute to the US for work but generally maintain their home base connections, often maintaining residences in both place but the Canadian one is the one they invariably retire to. I think Australia is more likely to beome state number 52 than Canada, although it might make more actual sense for Canada to become just that.

As for Canadians speaking "American" that's a laugh. We still put the "U" in words like colour and neighbour and we think you and the Americans are the ones with "accents". It is a well known fact that the Brits, being incapable of speaking English without regional accents, hire a lot of Canadian on air personnel for the BBC because our English is considered almost accentless. The Americans do the same for their broadcast networks as well.

When Australian entertainers decide to look for the greater amount of money available in northern hemisphere markets, they have to take special classes to lose their Aussie accents if they hope to be comprehensible to the civilized world. It is also interesting to note that once they have established a foothold up here they tend to only return to Australia for the occasional visit and they don't seem to choose to retire there, either.

As for your having learned two different systems of language, that's old hat. Canada went through that over forty years ago and has disposed of both; fortunately or unfortunately, remains to be seen and no, we do not use the American system, per se, either. Add to that the fact that many of us are bilingual, English and French, plus many have three or four languages such as German, Japanese and a few flavours of Chinese and you will find that linguisticly, we run circles around you.

So, effectively you learned two different systems??? I'm assuming you refer to linguistic teaching methods, although you weren't exactly clear on that. It seems neither one took very well as evidenced by,"I also fail to see weather the fact that.....". Now you have to excuse my inferior English but I wouldn't have inserted a word about climate here. I think the word I would have used is "whether" and also,I would have spelled it precisely that way. :^0 Neither Webster's nor the OXford Concise makes any reference to "weather" being used in this manner and if you are going to claim it is a typo and you left out an "H" wheather doesn't exist at all; unless it is some peculiar sort of Australian spelling.

There is a little phrase in French which goes, "Plus ce la change, plus ce la meme chose". Now I know there is a large possibility I have made errors in spelling in the French due to my being incapable of inserting the proper accents, where they belong, into the French but the sentiment is clear enough. If you are fortunate to live long enough, you will learn just how accurate that statment is.

Canada insults itself??? Well it beats the **** out of being an insult like so many consider Australia to be. On the international scene, Australia is perceived as being crude and rude as witnessed by the recent disturbance caused by Australia's feeble attempts at humour in their ads promoting tourism. You just have to accept that nobody really takes Australia seriously on the international scene; never have and probably never will, either.

BTW it has just been recently confirmed, Canada now has the largest proven oil reserves in the world outstripping even most OPEC nations, in fact many of them combined. Can you hear it???
Ka-ching, ka-ching. Thats the sound a gas pump makes as the money adds up. Even now, Canada is a net exporter of oil. Yup; we'll be selling oil and not just to the US. Japan and China are also very interested at present. We'll be pumping and selling to everyone when the Middle east drys up; maybe we'll have enough to sell to Australia if and when there current resources dry up. Get your hats in hand and get in line.

edited for typos and probably will still have missed some.

Dawg ]:)

Collapse -

If little Johnie retires

by mjwx In reply to Australian politics

I think beazley has better chance than costello. There's no point in arguing Aussie politics at the moment.

If howard gets re-elected were screwed via means of the IR legislation.

If Beazley gets elected were srewed even if he reverses the IR legislation.

If costello gets elected thing go from bad to worse.

From my perspective were damned if we do and damned if we dont.

Related Discussions

Related Forums