Tuesday 22 February 2011

Libya-Oil Spike?

Baltic Dry Index. 1295 -06

LIR Gold Target by 2019: $30,000. Revised due to QE.

We begin by extending our sympathies to the people of Christchurch, New Zealand following a devastating earthquake.

This morning it’s all eyes on events in Libya. With the Libyan airforce attacking rebel army bases, and the Libyan dictator threatening a fight to the “last man, woman and bullet”, the oil companies are scrambling to get their employees and their dependents out. Civil war seems only days away, unless the military unite to remove Gaddafi. At risk, roughly 1.4 million barrels a day of mostly continental Europe’s daily oil supply.

Bad things happen fast in the global economy if there’s a sudden drop in global supply. Below, yesterday’s increasingly alarming news. Will Saudi Arabia follow Bahrain? Will Italy sink with Libya? Stay long precious metals.

Oil shock fears as Libya erupts

The spectre of full civil war in oil-rich Libya and reports of the creation of an Islamic emirate in country's "Barqa" region has moved the Mid-East crisis into a more dangerous phase, setting off an explosive rise in US crude prices.

By Ambrose Evans-Pritchard, International Business Editor 8:38PM GMT 21 Feb 2011

"This is potentially worse for oil than the Iran crisis in 1979," said Paul Horsnell, head of oil research at Barclays Capital. "That was a revolution in one country, here there are so many countries at once. The world has only 4.5m barrels-per-day (bpd) of spare capacity, which is not comfortable."

US oil contracts jumped $6 a barrel on Monday to over $95, chasing Brent crude, which traded as high as $108, as the global oil system is drawn into the vortex. While Egypt is a minor oil player, Libya's Sirte Basin holds Africa's largest reserves and supplies 1.4m bpd in exports, mostly to Italy, Germany and Spain.

BP, Statoil, Total and ENI have begun evacuating families and non-essential staff from Libya. BP chief Bob Dudley told Sky News that the company has only limited exploration in Libya but "remains committed to doing business" there.

Germans oil explorer Wintershall said it was winding down its Libyan operations, but Italy's ENI has most to lose from its pipeline to Libya. ENI's stock tumbled 5pc in Milan, leading a 3.6pc fall in the MIB index.

Global oil inventories are higher than before the 2008 price spike, and OPEC can raise output if needed. It has refused to act so far despite pleas from the International Energy Agency (IEA) that the supply picture is already "alarming".

More

http://www.telegraph.co.uk/finance/financetopics/oilprices/8339440/Oil-shock-fears-as-Libya-erupts.html

Oil Driller Eni at Risk in Libya as Anti-Qaddafi Unrest Spreads

By Alessandra Migliaccio - Feb 22, 2011 12:01 AM GMT

Eni SpA, the Italian oil producer that’s drilled in Libya during the whole of Muammar Qaddafi’s 41-year rule, is the foreign company with most to lose as the regime threatens to unravel.

As the former colonial power, Italy is the biggest investor in Libya and Rome-based Eni is at the forefront of the relationship. Italy’s largest company pumps almost 250,000 barrels a day in the North African country, or about 14 percent of its total production. Eni’s shares dropped the most in 19 months yesterday as unrest worsened

“Italy and particularly Eni are heavily exposed in Libya and stand to lose a great deal if things fall apart,” said Nicolo Sartori, an energy and security researcher at Rome’s IAI Institute for International Affairs. “Eni’s production and exploration interests in the area are considerable.”

More.

http://www.bloomberg.com/news/2011-02-22/eni-s-libyan-oil-drilling-at-risk-as-violence-threatens-italy-s-interests.html

Marathon Oil evacuates families of expats in Libya

Feb. 21, 2011, 7:30 p.m. EST

http://www.marketwatch.com/story/marathon-oil-evacuates-families-of-expats-in-libya-2011-02-21

Oil, Bonds Gain on Libya Turmoil; Asia Stocks, Kiwi Dollar Drop

By Shiyin Chen and Saeromi Shin - Feb 22, 2011 8:05 AM GMT

http://www.bloomberg.com/news/2011-02-22/oil-gold-gain-as-libya-turmoil-worsens-asia-stocks-u-s-futures-decline.html

Libya: intelligence agency 'jamming' television signals

Libya's intelligence agency is behind the powerful jamming that has disrupted Al Jazeera television's signal across much of the Middle East and North Africa, the Arab satellite broadcaster said on Monday

12:08AM GMT 22 Feb 2011

"The source of (the) signal blockage has been pinpointed to a Libyan intelligence agency building ... south of the capital Tripoli," said Al Jazeera, whose coverage of a regional political unrest has been watched across the Arab world.

Access to the network's website continued to be blocked in Libya, the Qatar based broadcaster said in a statement.

http://www.telegraph.co.uk/news/worldnews/africaandindianocean/libya/8339711/Libya-intelligence-agency-jamming-television-signals.html

Ratings agencies downgrade Libya, Bahrain

Feb. 21, 2011, 4:08 p.m. EST

NEW YORK (MarketWatch) — The governments of Libya and the small island kingdom of Bahrain had their credit ratings cut Monday as ratings agencies responded to violent unrest in the Middle East and North Africa.

Fitch Ratings downgraded Libya’s credit rating to BBB from BBB-plus and warned that a further downgrade could be in store without political resolution to a crisis that has reportedly left hundreds dead.

Fitch said the downgrade “reflects the eruption of political risk evidenced by the increasing momentum of the popular uprising aimed at ending Muammar Gadhafi’s 42-year rule,” and also noted that oil-rich Libya is the sole Fitch-rated sovereign that has no government debt.

Separately, Standard & Poor’s lowered the Bahrain government’s long- and short-term sovereign ratings one notch to “A-/A-2.” S&P said its action came after it had reappraised political risks in the kingdom, where the agency said it expected continued demonstrations, despite the government’s use of deadly force to halt the protests.

http://www.marketwatch.com/story/ratings-agencies-downgrade-libya-bahrain-2011-02-21

While the Middle East prepares for democracy, Russia’s Gazprom seeks to take over Europe’s natural gas market. Out of the frying pan and into the fire, perhaps.

Gazprom chief Alexey Miller warns Europe on 'safety' of Middle East oil and gas supplies

Europe needs to reconsider the “stability and safety” of its oil and gas supplies from the Middle East after protests that have pushed the oil price above $105 per barrel, Alexey Miller, the chief executive of Gazprom, has warned.

By Rowena Mason, in Moscow 6:00AM GMT 22 Feb 2011

Mr Miller, the head of Russia’s biggest gas producer and the largest source of European imports, said the events of the past few weeks ought to prompt serious analysis about the stability of imports from the region.

“As far as the Middle East and North Africa is concerned. we need to reconsider the question of reliability and stability of hydrocarbons,” Mr Miller said at the Moscow headquarters of Gazprom.

“I think the question of reliability and stability and safety of supplies from there should be analysed and considered much more importantly than they were before these events.”

His comments show Russia is seeking to capitalise on the turmoil in Libya, Egypt, Bahrain, Algeria and Tunisia to promote itself as a more trustworthy source of gas for European countries.

Mr Miller’s remarks come at a time when Gazprom’s dominance as a gas supplier is being threatened by the emergence of shippable liquid gas supplies from the Middle East and the development of cheap and abundant “shale” gas in the US and potentially eastern Europe. Countries in Europe have also been trying to reduce their dependence on Russian gas after a crisis in winter 2008, when the Kremlin turned off the taps to the main supply route through Ukraine following a spat over transit prices.

More.

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/8339386/Gazprom-chief-Alexey-Miller-warns-Europe-on-safety-of-Middle-East-oil-and-gas-supplies.html

At the Comex silver depositories Friday, final figures were: Registered 41.91 Moz, Eligible 60.46 Moz, Total 102.37 Moz.

+++++

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

No crooks today, just another warning that the current sunspot cycle just getting underway, holds out the risk of a devastating solar flare reaching the earth. Thanks to our modern electronic way of life, modern earth has never been more exposed to threat from a massive solar flare. If the internet failed, what would happen to global commerce.

Solar storm 'could cause more damage than Hurricane Katrina'

A powerful solar flare hit the Earth last week – and experts are now warning that the next one could be catastrophic

By Steve Connor, Science Editor, in Washington Tuesday, 22 February 2011

Havoc wreaked by a solar storm – such as the one that occurred last week – could be equivalent to a "global hurricane Katrina" that would cost up to $2 trillion dollars in damage to communications satellites, electric power grids and GPS navigation systems, scientists said yesterday.

Thursday's solar flare was the biggest for four years and ejected billions of tons of matter travelling at a million miles per hour towards Earth.

When it hit our magnetic field it generated magnetic storms and power surges which disrupted communications and grounded flights.

Senior government advisers have warned that the world has never been more vulnerable to the effects of such an events, which buffets the complex and delicate electronic technology that now controls almost all aspects of modern society.

----The approximately 11-year solar cycle is now emerging from one of its quietest periods in 50 years and is expected to reach a solar maximum in 2013, when the number of solar flares on the Sun which generate electromagnetic storms reaches a peak.

----About 10 or 20 hours after the initial blast of electromagnetic radiation, a second burst of high-energy charged particles will hit the Earth.

These have the ability to induce dangerous electric currents in power lines and oil pipelines, Dr Bogdan said. A 14-year-old early-warning satellite is the only way of directly detecting the potential magnitude of the danger this wave of charge particles within a solar storm poses to pipelines and electronic systems on Earth, he said. "Any storm coming from the Sun has to pass over that spacecraft before it hits Earth. If it takes 20 hours to go from the Sun to Earth, it's going to take about 20 minutes to go from that spacecraft to Earth. So our last warning is a 20-minute warning, which will tell us how big, how strong, how nasty that storm might be," he told the meeting.

http://www.independent.co.uk/news/science/solar-storm-could-cause-more-damage-than-hurricane-katrina-2221706.html

A Super Solar Flare

May 6, 2008: At 11:18 AM on the cloudless morning of Thursday, September 1, 1859, 33-year-old Richard Carrington—widely acknowledged to be one of England's foremost solar astronomers—was in his well-appointed private observatory. Just as usual on every sunny day, his telescope was projecting an 11-inch-wide image of the sun on a screen, and Carrington skillfully drew the sunspots he saw.

On that morning, he was capturing the likeness of an enormous group of sunspots. Suddenly, before his eyes, two brilliant beads of blinding white light appeared over the sunspots, intensified rapidly, and became kidney-shaped. Realizing that he was witnessing something unprecedented and "being somewhat flurried by the surprise," Carrington later wrote, "I hastily ran to call someone to witness the exhibition with me. On returning within 60 seconds, I was mortified to find that it was already much changed and enfeebled." He and his witness watched the white spots contract to mere pinpoints and disappear.

It was 11:23 AM. Only five minutes had passed.

Just before dawn the next day, skies all over planet Earth erupted in red, green, and purple auroras so brilliant that newspapers could be read as easily as in daylight. Indeed, stunning auroras pulsated even at near tropical latitudes over Cuba, the Bahamas, Jamaica, El Salvador, and Hawaii.

Even more disconcerting, telegraph systems worldwide went haywire. Spark discharges shocked telegraph operators and set the telegraph paper on fire. Even when telegraphers disconnected the batteries powering the lines, aurora-induced electric currents in the wires still allowed messages to be transmitted.

"What Carrington saw was a white-light solar flare—a magnetic explosion on the sun," explains David Hathaway, solar physics team lead at NASA's Marshall Space Flight Center in Huntsville, Alabama.

Now we know that solar flares happen frequently, especially during solar sunspot maximum. Most betray their existence by releasing X-rays (recorded by X-ray telescopes in space) and radio noise (recorded by radio telescopes in space and on Earth). In Carrington's day, however, there were no X-ray satellites or radio telescopes. No one knew flares existed until that September morning when one super-flare produced enough light to rival the brightness of the sun itself.

More

http://science.nasa.gov/science-news/science-at-nasa/2008/06may_carringtonflare/

The monthly Coppock Indicators finished January:

DJIA: +161 Down 10. NASDAQ: +228 Down 10. SP500: +161 Down 4.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. December is the seventh down month, but the downward momentum has virtually stopped. I would put on (purchased) synthetic double options here for a breakout in either direction. Professional traders would adopt much more risky granted option strategies.

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