Nothing like a war with Iran to liven up the oil market. - Brent up $1.90
Baghdad (AP) — General Qassim Soleimani, the head of Iran’s elite Quds Force, was killed in an airstrike at Baghdad’s international airport Friday, Iraqi television and three Iraqi officials said.
The strike also killed Abu Mahdi al-Muhandis, the deputy commander of Iran-backed militias known as the Popular Mobilization Forces, or PMF, the officials said.
Their deaths are a potential turning point in the Middle East and are expected to draw severe retaliation from Iran and the forces it backs in the Middle East against Israel and American interests.
The PMF blamed the United States for an attack at Baghdad International Airport Friday.
https://www.foxnews.com/world/rockets-baghdad-airport-injuries-reported
https://www.newsweek.com/iraq-militia-official-killed-us-iran-tensions-1480181
Strange that Fox has headlines that feature only the Iranians but Newsweek has " Killing Iraq Militia Officials" as the lead in the headlines.
Of course we can never trust anything that anybody says about why things are happening in the Middle East.
Newsweek is describing this as a dynamic with America at fault and Trump is being unfair and the aggressor.
Fox tells us something completely different, especially with regards to the evil leader from Iran that just got taken out and was obviously the target.
https://www.foxnews.com/world/rockets-baghdad-airport-injuries-reported
"President Trump ordered a game-changing U.S. military attack that killed Iranian Gen. Qassim Soleimani, the head of the Islamic Revolutionary Guard Corps' elite Quds Force, among other military officials at Baghdad International Airport early Friday, the Pentagon confirmed.
Soleimani is the military mastermind whom Secretary of State Mike Pompeo had deemed equally as dangerous as Islamic State leader Abu Bakr al-Baghdadi. In October, Baghdadi killed himself during a U.S. raid on a compound in northwest Syria, seven months after the so-called ISIS "caliphate" crumbled as the terrorist group lost its final swath of Syrian territory in March.
In April 2019, the State Department announced Iran was responsible for killing 608 U.S. troops during the Iraq War. Soleimani was the head of the Iranian and Iranian-backed forces carrying out those operations killing American troops. According to the State Department, 17 percent of all deaths of U.S. personnel in Iraq from 2003 to 2011 were orchestrated by Soleimani."
The other MSM sources I've been reading are not telling us this right now.
The 608 number sounds pretty silly in its precision, and forgets that the result of sacking Iraq was replacing a Sunni government hostile to Iran with a Shiite one dependent on Iran. Iran was quite happy to let us do it.
For now, everyone seems to be hoping that things don't get completely out of hand. If they do, this analysis from the MWI at West Point is a quick overview of what could happen.
Patrick,
Thanks for that article. It was very enlightening and is a reality check on what we could be dealing with.
About 21 million barrels of oil a day flowed through Strait of Hormuz in 2018
The Strait of Hormuz, a narrow waterway in the Middle East that marks the most sensitive transportation choke point for global oil supplies, was back in focus Friday after a U.S. airstrike killed a top Iranian military commander and heightened fears of a confrontation between the two countries.
https://en.wikipedia.org/wiki/List_of_current_ships_of_the_Islamic_Republic_of_Iran_Navy
https://www.newsweek.com/us-navy-destroy-iran-heartbeat-gop-congressman-1443917
Even the NYTimes had an opinion that agreed with this:
"If Iran won’t change its behavior, we should sink its navy."
https://www.nytimes.com/2019/06/14/opinion/iran-oil-tanker-attack.html
metmike: I will guess that Iran knows that in the open waters, the US has the power to obliterate them several times over and it will not only make their navy go bye bye, it would be an embarrassing loss.............so they will pick battles which they can claim victories over, if they go that path.
In the last year, it seems like they have insisted that all the bad stuff happening was not from them. At this point, in order to save face, if there are attacks or damage, they may be wanting to take credit for it and even insist it was worse to prove they can't be pushed around.
I am strongly against military and other interventions in the Middle East but if Iran were to mess with world oil supplies and disrupt the global markets, which goes well beyond just oil, then we would have no choice and hopefully would be backed by the Europeans.
The biggest problems that Iran could cause relate to their ability to cut off or damage oil supplies.
The one that I think nobody can stop would be bombing of Saudi Arabian oil wells like Iran(was accused of) did in September.
https://www.aljazeera.com/news/2019/09/saudi-oil-attacks-latest-updates-190916102800973.html
"The pre-dawn attacks on September 14 knocked out more than half of the top global exporter's output - five percent of the global oil supply - or about 5.7 million barrels per day."
These very low altitude flying missiles and drones are extraordinarily challenging to stop.
Quite simply, the kingdom’s defenses — no matter how high-tech — are designed for entirely different kinds of threats. The low-flying and relatively cheap drones and cruise missiles purported to have been used in Saturday’s attack are a fairly new challenge that many nation states are not in fact prepared to counter.
The Saudis have a lot of sophisticated air defense equipment. Given their general conduct of operations in Yemen, it is highly unlikely that their soldiers know how to use it.
It also doesn’t help that massive oil plants are just easy targets.
“Saudi oil assets are vulnerable for the simple reason that when flying over them at night, they stick out against the desert background like a Christmas tree,” Michael Rubin, a former Pentagon official and Middle East expert at the American Enterprise Institute, told CNBC in an email.
“This means that enemies don’t need high-tech GPS-guided drones, even though they might have them, but can also use relatively lower technology drones.”
A scary element to this is that Russia and China are allies of Iran.
https://www.unitedagainstnucleariran.com/russia-iran-china-axis
Fortunately, the US is more energy independent now and this lessens the risk a bit with regards to that element.
https://qz.com/1779526/iran-retaliation-a-concern-but-us-far-less-reliant-on-foreign-oil/
For now, Iraq is getting lots of benefits, e.g. Iraq kicking the US out, just by acting reasonable while Trump threatens war crimes. (Destroying cultural sites? This is Red Skull stuff)
That can't last forever, and then the next round starts. How long before it escalates into something that closes the Straits? I'd guess 6 months, with a lot of bumps along the way.
After that, I think I'll get out of oil investing for good. At this point, it's become way too much betting on disaster.
Great thoughts Patrick.
Interesting that the liquid energies reversed and closed lower today.
Heating oil was the weak link, really getting slammed .....closing 10c off the highs and down almost 4c. The other ones were just down a bit after being sharply higher.
This is going to be news driven, so it probably just means the bullish news topped out for now. Next big flare up will cause another knee jerk jump higher.
At some point, the market could get tired of reacting to news without an actual event and it will take an event that disrupts supplies to make new highs.
Iran can actually get some sympathy by NOT doing something crazy since it’s easy to side with the other side when Trump is the opposition and making loose cannon statements that can only inflame the situation.
Lack of sustained cold and negative seasonals probably hurt HO alot.
The long RB short HO and long CL short HO spreads with HO as the weakest almost always works when the weather is warm in January.
If I remember right, RB and CL tend to have just about bottomed now and do so around 1.5 months sooner than HO.
Thanks for that spread idea, never thought of that. I will be watching it.
Soon, very soon. . . . .Vertical take off, very similar to the space shuttle launch. . .
And so the "open" retaliation begins.
We should keep in mind that Iran bombed Saudi oil facilities in Sept after attacking vessels in the Gulf on 2 occasions a few months earlier, as well as the more recent attacks on our embassy and base that killed an American.
Iran was enraged at the US for the crippling sanctions that have been so economically devastating to its country(and they had never intended to honor the commitment in the nuclear agreement, having already violated in the last inspection).
This was before we took out it's top military leader..........that was planning more attacks. Now, because of the assassination, they have all the reason they need to be open about the attacks and to escalate them.
So now we wait to hear what the damage is coming from the Iran attack and to see what the US retaliates with.
The US was expecting this and knows where every missile came from and we might guess that those sites will be targeted in the response........but uncertainty reigns.
Iran doesn't have to pretend anymore about not developing a nuclear bomb and being good boys in order to try to get the sanctions lifted.
It will be interesting to see how our allies as well as China and Russia respond. One would think they want to stay our of it as much as possible and stress messages that ask for the impossible...............de escalation and calm.
What happens to the nuclear deal between Iran and the rest of the countries? As long as they are in the deal, I assume they would not be imposing sanctions on Iran, like the US is but can that change now?
Many of them will likely want to distance themselves from getting involved in this because it seems to be the recipe for failure, no matter what they do.
If oil facilities are actually attacked, then this spike higher will look like a tiny blip.
I really think that the only way out would be for President Trump to withdraw from Iraq and back off. If we have an escallating war with Iran, President Trump will not be elected for a 2nd term. No way. Not only did he promise to to get us out of the Middle East, having the worst war imagineable........with powerful Iran would assure him of losing.
His desire to be elected in 2020 could be incentive enough for him to do something totally unexpected.................withdraw instead of getting into the worst fight yet.
CLG has dropped over $1 since the highs now.
The Monday reaction high was 64.72 and we took that out pretty easy, now at 65.45, near the highs for Feb Crude.
I trade natural gas very actively, which has been sheltered from global energy markets and news like this because they haven't affected the price for quite some time but seem to remember, around 2 decades ago that NG sometimes would move up or down in sympathy with the liquid energies.
Maybe there are some places in the Northeast that could switch between heating oil and natural gas before, when the cost differential was too extreme but after the huge boom in supplies gushing in from fracking a decade ago, natural gas has usually been much cheaper.
Probably we have seen new buildings and replacing of old HO systems using all NG in the last decade, when possible.
NG spiked down on milder 18z guidance but has come right back close to unch.
OK, just while typing, CLG has dropped below $65. Wild.
Richard must be loving it but I imagine that the price of call options is the most expensive in over a decade.
The message seemed pretty clear. in the address to the nation.
President Trump is setting the stage for backing off and letting NATO take over, potentially withdrawing our troops to appease Iran..........after a new deal is cut.
The biggest surprise was him stating that he will be asking NATO to get more involved. No way he says that unless he wants the US LESS involved.
No military strikes or retaliation for yesterdays attacks are coming but the US is ready.
Oil has plunged below $60, down over $5 from the highs last evening.
President Trump wants to be elected again in 2020 and knows that a war with Iran means that will never happen.
He also has acted more like a dove in his actions vs his blustery threats in tweets the past 3 years.
Funny thing about the dynamic with the US and Iran.
To see if anything had happened this morning, instead of checking the news........... I checked the price of oil.
Nothing bad happened.