GEO-POLITICAL ANALYSIS of OIL PRICE DROP THIS WEEK

ANAYSIS=>>Was Insider Trading Responsible For Sharp Slide In Crude Oil Prices This Week?

Mar­kets were seem­ingly taken by sur­prise this week on crude oil prices, led by a $3 drop on NYMEX this past Mon­day. There have been a cou­ple of dif­fer­ent analy­ses offered on the recent oil price drop from Mon­day Sep­tem­ber, 17th.

The Reuters expla­na­tion is pre­dictable and may be too cur­sory.

The first expla­na­tion offered was of an algo­rith­mic pro­gramme gone wild, fol­lowed by a price cor­rec­tion due to being at recent highs of $120/barrel on BRENT and $100+ on NYMEX. These were the favorites, how­ever the drop in prices isn’t due to just one fac­tor, and pos­si­bly even a result of insider knowl­edge.

Octo­ber futures options expir­ing on Mon­day and the gen­eral con­tract expir­ing today cer­tainly had a cas­cad­ing effect, fea­tur­ing a $3 drop in 1 minute (on NYMEX) on Mon­day, before regain­ing approx­i­mately $1 at the close. This was the last chance for traders to get on board the lat­est trend and clearly the trend has con­tin­ued with crude falling Thurs­day below $91/barrel ($90.66) on NYMEX before clos­ing at at $91.87. NYMEX crude even briefly fell just below its 100-day mov­ing aver­age at $90.73, spark­ing strat­egy shifts.

Other rumors about the effect of pos­si­ble Saudi inter­ven­tion via increased pro­duc­tion and a poten­tial US elec­tion sur­prise from a Strate­gic Petro­leum Reserves release also weighed on mar­kets. The mar­kets are not a mono­lithic entity by any stretch and what tends to hap­pen is that regard­less of the pre­vail­ing notions, a trend can be started by one fac­tor but exac­er­bated by oth­ers. The fact is that the “mar­kets” are traders (or high fre­quency com­put­ers com­manded by traders, and it’s not always the news specif­i­cally which dri­ves mar­kets, as the human mind doesn’t always pro­duce the most eco­nom­i­cally effi­cient deci­sion. The “tun­nel vision” think­ing of a trader’s one track mind often obscures real news and trends are fur­thered by the rip­ples caused from the ini­tial change in num­bers. This logic applies to the high fre­quency trad­ing com­put­ers also which move mar­kets quickly just based on how trad­ing met­rics are ana­lyzed by expen­sive algo­rithms (which are gold on Wall Street).

Today, a more likely rea­son for the price move emerged. A reported meet­ing Tues­day between Cather­ine Ash­ton, nego­tia­tor for the United Nations Secu­rity Council’s 5+1 (the per­ma­nent mem­bers of the plus Ger­many) han­dling talks over Iran’s nuclear pol­icy, who met with Iran’s For­eign Min­is­ter Saeed Jalili for “infor­mal dis­cus­sions” on the sit­u­a­tion. This meet­ing was held on short notice and out­come is unclear but some feel there has been a pos­i­tive pol­icy sea-change in Iran, putting the onus on the West to help resolve the sit­u­a­tion.

In light of that news, emerg­ing reports of curi­ous crude oil trans­ac­tions points to insider knowl­edge. On Mon­day, pre­ced­ing the $3 drop in prices, “some 13,000 con­tracts of CME’s West Texas Inter­me­di­ate crude oil con­tract and 10,000 con­tracts of the Inter­con­ti­nen­tal Exchange’s (ICE’s) Brent/BFOE crude oil con­tract” were unloaded on the mar­ket by affil­i­ated sell­ers pos­si­bly ema­nat­ing from Saudi Ara­bia, accord­ing to Asia Times. It stands to rea­son that some indi­vid­u­als had early warn­ing that the Mid­dle East risk pre­mium, said to add $10-$15 to the bar­rel price, would be com­ing off the mar­ket price. With most traders look­ing for crude to trend higher com­ing in Mon­day the 17th, the turn-around on options day bears some scrutiny. Who­ever made these trades beat the mar­ket, prob­a­bly with high fre­quency trad­ing help and led the rest of the mar­ket lower for this weekly cycle.

What effect these devel­op­ments have remains to be seen as it gets lost in the fog of war, but in the short term, the global econ­omy stands to ben­e­fit from depressed prices.

The fact that cheaper oil will mean less profit for pro­duc­ers, such as Rus­sia, Venezuela Saudi Ara­bia, will not impact on Iran as they have been sell­ing for any­where up to 25% less than mar­ket price any­way due to the hos­til­i­ties and sanc­tions. That oil has to go some­where and China, among oth­ers, has been a will­ing buyer. The sanc­tions have not really done much other than cause a few headaches and extra plan­ning for Iran as the tem­po­rary effects are begin­ning to wane, which the Wash­ing­ton Post just noted yes­ter­day. The biggest prob­lem was the insur­ance com­pa­nies black­list­ing tankers car­ry­ing Iran­ian crude, but that has sub­sided as ship­pers have found var­i­ous workarounds.

A poten­tial deal with Iran to end the diplo­matic stale­mate will come with ben­e­fits to the West. The ben­e­fits of a deal

1. Cheaper energy costs to the West in the short term, help­ing to reduce strain on the econ­omy.

2. A thaw in the Russ­ian energy stran­gle­hold monop­oly over Europe, to which Russ­ian earn­ings are heav­ily reliant.

3. There is also the ques­tion of Bahrain where the rulers are seen to be los­ing their grip on the coun­try.

If Bahrain falls into the hands of the rebels, then America’s 5th Fleet, will no longer have a base and will also open up a weak flank towards Saudi Ara­bia. The Shi’ite rebels are said to be influ­enced by Iran and some Saudi Ara­bian oil fields are located in Shi’ite ter­ri­tory.

It would be more for­tu­itous to make a deal with Iran, which would have many ben­e­fits includ­ing avert­ing a nasty con­flict. The only way this deal would go through, is with China’s back­ing as Putin and Rus­sia will most cer­tainly not want to bro­ker such a deal that will strip them of future earn­ings and power.

China is only ever inter­ested in greater eco­nomic activ­ity via increased trade, cheaper energy and raw mate­ri­als, not in war per se. China will also be very prag­matic, pro­vid­ing the islands sit­u­a­tion with Japan de-escalates also, as it is some­thing nei­ther coun­try really wants to go to war over. These oil fluc­tu­a­tions are just yet another act in the the­ater that the Elites have pro­vided us with increas­ingly over the last 12 years and beyond.

Against this back­drop, Israel would be forced to tone down the aggres­sive rhetoric and resolve the ongo­ing Pales­tin­ian open sore of a prob­lem instead, unless there is a false-flag “event” of ques­tion­able ori­gins.

The prob­lem with any deal is that, at the high­est lev­els, the coun­tries in the coali­tion against Iran are all com­manded by New World Order col­lab­o­ra­tors. In the long run, the real solu­tion lies in West­ern pop­u­la­tions awak­en­ing to this fact. Amer­ica also has the poten­tial to be energy self-sufficient in the next 10 years or so if it makes a con­cen­trated on rebuild­ing. Europe on the other hand will need strate­gic mutual under­stand­ings for their energy needs to be sta­bi­lized.

Infla­tion­ary pres­sure from the new unlim­ited quan­ti­ta­tive eas­ing pro­gram recently announced by the Fed­eral Reserve is part of the rea­son equi­ties and com­modi­ties (now ex. oil) have con­tin­ued to trend higher, shrug­ging off neg­a­tive eco­nomic indi­ca­tors. Aside from the Mid­dle East ten­sions, with crude oil being a de facto cur­rency, the price would nor­mally be dri­ven higher by the extra “punch” from the Fed. These fac­tors had given some sup­port to crude oil prices but the impact of defla­tion­ary forces and new devel­op­ments from Iran may out­weigh the upward price pres­sures and will be an inter­est­ing trend to watch over the next cou­ple of weeks.

This is ulti­mately a global con­ver­sa­tion for free­dom from tyranny, as oil wars con­tinue to break out and it remains the pri­mary source of energy for bil­lions of peo­ple. Access to energy con­trols life for most peo­ple and it will only be a good thing if this dev­as­tat­ing war is averted.