Trader Talk

Oil has everyone ajar on Wall Street, but today Stratfor--a respected global geopolitical consultant--has put out a thought-provoking piece arguing that oil prices are likely to go DOWN, not up, in the coming months. A massive reduction in global demand due to a softer global economy? No, though that is the usual suspect the oil bears argue.

Instead, Stratfor says that lower geopolitical risk will be the factor that brings oil off its highs. Stratfor looks at some of the biggest producers in the world--Nigeria, Venezuela, the Persian Gulf, and Iraq, and sees a higher probability of calmer waters. Consider:

1) "The disruptions in Nigeria in 2006 and 2007 were all about determining who would become the next president (and thus gain control over the oil). That contest is now over and many of the forces who were disrupting crude flows have succeeded in getting into the new inner circle. No one in Nigeria now has a vested interest in seriously disrupting output. "

2) "Venezuela has seen its oil output drop by roughly a million barrels per day since Hugo Chavez became president a decade ago. While this decline is not over, it is no longer a surprise, and Venezuela's relative importance to the global energy picture is now roughly half of what it was ten years ago. There are few surprises that Chavez can throw at energy markets that do not also threaten his hold on power."

3) "The Arab states of the Persian Gulf are more tightly aligned to the United States than ever, and their security forces are more than capable of preventing small scale attacks by local militants from harming oil exports."

4) "Ultimately the Iraq conflict will burn until Washington and Tehran have a meeting of the minds. The November U.S. National Intelligence Estimate, which asserted that Iran lacks a nuclear weapons program, was a gesture of good faith from the United States to Iran, one that has sparked a series of public talks over the future of Iraq. Such a detente would bleed away--in fact, is bleeding away--much of the violence within Iraq. A calmer Iraq is one that can finally invest in energy infrastructure, and an Iran that is on better terms with the United States is one that is not pumping in the shadow of a war scare."

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Current DateTime: 10:59:09 14 Nov 2009
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