Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Worse than Watergate - Release the Memo - Investigate Uranium One - 23rd Jan 18
CAT Stock Bouncing after JPM Upgrade How High and How Long Can This CAT Jump? - 23rd Jan 18
Why Banks Will Be Slammed In The Next Crisis—And That May Be Good News - 23rd Jan 18
Medicare Premiums Are A Shared Pool - Coming Changes That Will Transform Retirement - 23rd Jan 18
Charged Atmosphere of Heavy Police and Security Presence at Sheffield Street Tree Felling Protests - 23rd Jan 18
Pension Crisis And Deficit of £2.6 Billion At Carillion To Impact UK - 22nd Jan 18
Two Factors for Gold That You Don’t Want to Miss - 22nd Jan 18
Why You Must Own Silver in 2018 - 22nd Jan 18
This Could Be The Hottest Mining Stock Of 2018 - 22nd Jan 18
Stock Index Trend Trade Setups for the SP500 & NASDAQ - 22nd Jan 18
Stock Market Deceleration / Distribution - 22nd Jan 18
US Markets vs Govt Shutdown: Stock Markets at all time highs - 22nd Jan 18
Land Rover Discovery Sport - 1 Month Driving Test Review - 22nd Jan 18
Why should you use high-quality YouTube to mp3 converter? - 22nd Jan 18
Silver As Strategic Metal: Why Its Price Will Soar - 21st Jan 18
Stocks, Gold and Interest Rates Three Amigos Ride On - 21st Jan 18
Why Sometimes, "Beating the S&P 500" Isn't Good Enough - 21st Jan 18
Bunnies and Geckos of Sheffield Street Tree Fellings Protests Explained - 21st Jan 18
Jim Rickards: Next Financial Panic Will Be the Biggest of All, with Only One Place to Turn… - 20th Jan 18
Macro Trend Changes for Gold in 2018 and Beyond - Empire Club of Canada - 20th Jan 18
Top 5 Trader Information Sources for Timely, Successful Investing - 20th Jan 18
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

The Three Events That Just Sent Crude Oil Price Sinking… and Why There’s No Need to Panic

Commodities / Crude Oil Jul 08, 2015 - 11:37 AM GMT

By: ...

Commodities

MoneyMorning.com Dr. Kent Moors writes: Yesterday, three geopolitical crises converged, sending the price of oil sinking.

West Texas Intermediate (WTI), the benchmark for crude set in New York, was down 8%. Dated Brent, the internationally used benchmark set in London, slipped 6%.


But this was just another example of how herd mentality can impact commodity prices. Investors, spooked by the unfolding events and spurred on by the talking heads, merely overreacted.

Here’s my take on the three panic triggers that prompted yesterday’s oil price decline…

The Greek Tragedy Continues

The first trigger that sent oil prices lower was the Greek debt crisis. This mess reached its latest pinnacle (or trough, depending on one’s view) with a public referendum on Sunday in which over 60% of Greek voters defied the European Union, the European Central Bank, and the International Monetary Fund (the so-called “troika”) by resoundingly rejecting any further austerity measures.

The decision shocked lots of people (including me). It was a clear statement of national pride and frustration.

Unfortunately, aside from bravado, it accomplished nothing. In fact, by removing the only proposal from the table (made by the European creditors), the referendum leaves no basis for any negotiations. And the clock is ticking.

At least the lightning rod for European criticism (and in some quarters absolute hostility) – Yanis Varoufakis – is gone as Greek finance minister. He is replaced by another English-trained economist, Euclid Tsakalotos.

Now, I happen to know and have worked with Euclid from his days at the University of Athens. An earnest and capable academic theorist, he nonetheless has the same problem everybody else has in this government. Until rising to office, they have had absolutely no experience in international negotiations.

Greece already defaulted on an IMF interest payment last Tuesday, forcing banks to close for a week and counting due to lack of euros, and in two weeks faces a huge €3.5 billion payment to the ECB. If Greece doesn’t make that payment, its last lifeline will be cut and the Greek banking system will collapse. To say these are desperate times is an understatement.

A rising number of investors are simply writing Greece off, assuming they will leave the euro zone. Attention is now directed to the fear of contagion should the situation unravel further. One matter to keep in mind is that while Greece owes more money to Germany (€56 billion) than anyone else, it also owes €38 billion to Italy, €28 billion to Spain, and €12 billion to Portugal. Greece’s failure to pay will further weaken these other vulnerable economies.

Are these other “weak sisters” of the EU’s southern tier likely to follow suit?

The oil market hates such a toxic combination of uncertainty and volatility.

Uncertainty Over an Iranian Nuclear Accord

Second, there is Iran’s nuclear talks. I treated the major issues surrounding this matter in an Oil & Energy Investor last week (“How the Iranian Nuclear Deal Will Impact Oil,” July 2). As I wrote then, the Iranian oil sector is in such shambles it will take some time before any significant new volume comes online.

Even then, any Western agreement will spread the lifting of sanctions over time to require Iranian compliance at benchmark intervals.

And then there is the actual damage should any significant new oil make it to the market. As I will explain when and if this occurs, the primary loser will not be other OPEC members. It will be Russia. Stay tuned for more on this issue.

But a deal is unlikely. An 11th-hour demand from the Iranian supreme religious leader that U.N. sanctions against Tehran’s ballistic missile program and weapons exports also be lifted will be rejected by the West out of hand. These sanctions actually predate the nuclear concerns and address Iran as a sponsor of global terrorism.

This demand is enough by itself to scuttle the talks.

But even the chimera that 1) a deal will be struck; 2) it will allow Iran to move oil immediately into the international market; and 3) somehow Iran will ramp up production at very old and disheveled fields is enough for the experts to pound the oil price.

China’s Stock Market Slip

Finally, there is the China factor. The Shanghai Composite Index (SCI) has been clobbered recently, down over 30%. A move to pump liquidity into the stock market by the government in Beijing combined with principal domestic investors and institutions will offset some of the concern.

But the concern being expressed from the outside is one of a stock market sell-off reflecting a leveling off of Chinese economic expansion. There are, of course, no instant figures to justify this.

No matter, pundits will posit it anyway.

On the other hand, the stock market drawback could simply be an overdue correction. Even with the hefty losses of the last week, the SCI is still up more than 83% in less than a year.

The real reason for all of this angst is this. The argument runs that any one of these three factors will temper market demand for oil and oil products, thereby keeping prices from rising. Should all three collide at the same time… well, there’s an end-of-the-world-as-we-know-it script in there somewhere.

But as you can see, they won’t all happen at once.

They can’t, since two of them aren’t even real.

The price of oil will not stay here, of course. It will inevitably rise, although in a “ratcheting pattern,” with dips and plateaus along the way.

The depth of yesterday’s decline was an overreaction. But it continues to show how spooked investors (and the pundits leading them about) actually are.

Source :http://oilandenergyinvestor.com/2015/07/the-three-events-that-just-sent-oil-sinking-and-why-theres-no-need-to-panic/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules