Trump’s Iran-Decision Did-not And Won’t Affect Oil Prices

Unless U.S.A. decides to go to War to Impress Stormy Daniels.

  • By some reports, President Trump’s Iran-decision caused oil prices to “jump 3%”. Actually that was intra-day; the change day-on-day was 1.7%. The probability the mini-jump was not caused by the announcement is 59%; since the null-hypothesis needs less than 5% to be called “statistically-significant”, that’s not.  The probability is 86% if you do four-day changes, i.e. even less probable.
  •  The day after Benjamin Netanyahu made his presentation on Iran, oil prices dropped 2.8%; which, intriguingly, is “statistically significant” (P>[t]=0.0438*); perhaps  the markets’ take; was that they figured the likelihood of an interruption in Iranian oil supplies, or a war, was less likely, after they heard the presentation?
  • The fact of the matter is that U.S. never got close to lifting sanctions on Iran. Yes they nominally allowed trade of a few things, almonds for example, but they kept the payment systems blocked. Right or wrong, unless The President is seriously contemplating a Bush-Style adventure in the Middle East, the decision to leave JCPOA will have little effect on anything, except U.S. relations with other world-powers.
  • So far, the markets do not appear to be betting on war, perhaps they suspect The President is simply seeking attention, nothing new there, but why now? Some commentators have suggested he’s trying to deflect attention from Stormy Daniels & Co, which sounds far-fetched but that type of behavior is a common trait of narcissists.
  • Let’s hope not, because as the probes get closer to the bone, the temptation to find an even bigger distraction may prove irresistible. If there is a war, global oil supplies will likely drop by 30 Million Barrels per day (28%), unless a way is found to neutralize Iran’s SUNBURN anti-ship missiles; which can reach the SPM’s in Fujairah.
  • Clear-heads might argue that risk is hardly worth the brinkmanship or bravado, particularly on an idea that appears to have been even less well thought-through than the immigration fiasco, The Wall, or (allegedly) sending a thug to physically intimidate Stormy Daniels.

I live and work in the Middle East, in oil & gas. I like to think I am quite well-informed, but I didn’t even know that the U.S. sanctions against Iran had been lifted. I checked, in 2017 EU exported one-hundred-times more goods and services to Iran than U.S.A. The reason is partly because of “covert” sanctions.

By way of example, I help finance building jack-up-barges. Those things have nothing to do with anything military or nuclear; they provide a stable work platform for brown-field oil-and-gas, much safer than a DP-2. Many suppliers offer three-to-five years credit, not just on the kit, on the whole boat, if you buy their equipment. It’s tough to get bankers to crawl out of under the table these days, so that’s important.  And at least that way you get to talk to professionals, all bankers want to talk about these days is how to offload the “assets” they got lumbered with, from bad loans they made prior to 2015.

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The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and ...

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