Slamming the brakes on the Gulf's Growth

As the Arab "Boom Years" draw to a close, we now see events over the last 4-5 years (for example, the Arab Spring) form as a catalyst for the recent Oil price decline... Almost 50% from this time last year.

Simultaneous challenges of the threats from ISIS, political transitions &  falling Oil prices have remained extremely prevalent in 2015 and more so impacting the Oil rich states of North Africa over the Middle-East.

Slamming the brakes on the Gulf's Growth 

As Political turmoil spreads, the jihadi threats hover over Syria, Iraq & more recently producing itself in the conflicts around Libya's oil fields, as well as recent violence in Tunisia (post-Arab spring transitions).

The recent weeks headlines have been focused around Yemen and the coalition of Sunni Islamic states prodding their Gold feet over the Pan-Arabian Muslims - attempting to constrain an unwanted addition of rival Iran.

Libya, once Africa's richest nations is now on the verge of Bankruptcy.. being named "The New Somalia", as their new Government warns of an "Oil Production Shutdown" given the ongoing threats from ISIS and their "Black-Market" demands.  No-one could of imagined in Post-Gaddafi Libya that their nations Energy sector would be so badly affected.

Economic Impacts

Since the recent Egyptian revolution in 2011, Egypt's credit rating fell 6 points... Tunisia, since it's revolution has declined 4 points...  Egypt has been under the spotlight since 2011 as Ibrahim Mahlab's party seeks stability & attempts to gain against it's economic shortfalls.

These Gulf states were somewhat supported by years of $100+ oil prices, as well as donations from other powering Arab nations (For example, UAE donating almost $20bn to Egypt + a further $12bn from Saudi & Kuwait... for aid & "investment")

Egypt, in particular is viewed as pivotal in bridging the gap between the Middle-East & the North African states... as the UAE's Minister of State quotes "Egypt is central to the prosperity of the Middle-East" . However, the fall in Oil prices provokes pressures and furthermore, an instant-stimulus for these struggling economies.

Private Investor's eyes 

Most Foreign Investor's are burdened by the risks of domestic unrest and in attempting to control the "social peace", economic reforms to boost investment & reduce subsidies could be expected.. The overall thought is that the plunging Government revenues will surely filter into the real economy and the Growth forecasts become largely cloudy.

Already, real estate prices in the once BOOMING Dubai are now largely reducing and empty skyscrapers now account for 25% of Dubai's population. More-over, core infrastructure projects around the Gulf will be haltered, for example new Transport lines... at least until the Oil market stabilizes... if that.

With $20 Oil on the horizon.... Will these Economies Survive? 

Is Iran about to flood the Oil Market?

Dear Readers

Trust you all had a blessed weekend.

In my post : Oil to $20 by 2016  looks to be supported, perhaps underestimated by the upcoming decision on Iran's nuclear deal & also talks of removing Economic Sanctions for Iranian Crude Exports.


Potentially one of the Middle-East's biggest economies, Iran has been barred out by the West in refusing to give up it's Nuclear regimes.


However, new developments have come from talks between Iranian negotiators & world leaders continued in Lausanne this weekend.





Tehran - A sleeping Oil Giant

Since Economic sanctions had been placed on Iran, Tehran has been frozen out from the International Oil markets & denied access to Investment leading to key developments in the Oil/Gas industries.

With Oil prices pressured by the over-supply - any increase in Iranian output could easily speed up this decline down towards $20 per barrel.

The Iranian Oil minster mentioned that they could easily increase production by 1 million barrels per day, almost immediately after sanctions are lifted.

Trouble with OPEC & Saudi Arabia 

A potential limitation to this "flooding" impact comes from OPEC - the 12 member cartel controlling a 3rd of the World's oil supply. It currently maintains a quota system that Iran would have to negotiate.

It is unlikely that Saudi Arabia will be in favor of any increase to Iranian exports & their ongoing meetings up until June will tell of these tales.... However, oil may reach $20 by then already!

Stay tuned in for more....

Trading Oil with Atom8... Coming soon for April 2015.

- Peace & Love

Anish

If Yemen only produces 0.2% of the World's Oil, why is the price of Oil rising?

Dear Readers

As the advancements began yesterday on the Houthi controlled Yemen, we saw the price of oil jump almost 5%.

In this post, I attempt to break down the Economic reasons for this geo-political market shock & question the continuation of this rise or (as per my previous posting) a fall lower to $20 - possibly $10.

Fact

Yemen produces 0.2% of the World's oil!

Why did it have such a shock on the market? 

Albeit an insignificant Oil producer, the geographic location of Yemen is extremely relevant.

The nation shares it's main border with Saudi Arabia - the world's biggest Crude exporter and sits on one side of the oil shipping point used by crude tankers heading West from the Persian Gulf (transiting nearly 7 million barrels of oil a day).

Yemen is also located on Bab el-Mandeb, the 4th biggest shipping chokepoint in the wold by volume! It's closure may keep tankers from the Persian Gulf and reaching the Suez Canal & SUMED Pipeline.

Will Oil continue to rise?

"As the regional conflict intensifies, the price of oil will continue to rise" Kleinmen, Citibank Analyst. 

Even though prices are still down 40% from last year, a rally from $50 would be significant for the markets... adding an extra spice into the current EU Crisis and perhaps a catalyst for a USD reversal. 

However, other analysts & even the Foreign Minister of Yemen says that this attack is a "Necessary, short lived attack" to suppress the Rebel forces.. Which would imply this rally being concluded as a shock and the coming week(s), the markets could return below $50 per barrel. 

The fact is that the Oil market is still heavily over-supplied & storage levels are running at almost full capacity. Although, some more bullish investors are seeing this as a market-bottom - hinting at a reversal. 

I personally think, it just reminds people how sensitive the price of oil is - especially in relation to geo-political shocks & impacts on supply lines. 

Trading Oil with Atom8... Coming soon for April 2015 

Thank you for reading & as always... 

- Peace & Love

Anish 

$20 Oil by 2016?

Dear Readers

From our highs of $110 last year... We have seen the price of oil fall to uncharted territory - Lows not seen for 6 years & it looks like there is no stopping this fall... But what is the driving force behind the decline? & why are prices not being absorbed into our REAL Economy? Why are Petrol prices not falling & why are my flight tickets more expensive than last year? 

Let's try and break this down...


Key Economic Facts 

• The value of WTI/Brent has fallen over 50% in under 12 months;
• US Oil Production is at record highs; 
• US Hoarding levels are at all-time highs (Storage with the anticipation of a price hike); 
• Refineries are due to be offline for repairs in Spring...Storage levels set to increase further; 

Source : DailyFX

Political Uncertainties 

Let's take Iran for example... the falling Oil price has probably hit Iran more than others, given their export sanctions & talks of relaxing their sanctions have driven down global prices...

Why is Iran so important?

• IRAN has almost 10% of the world's proven reserves; 
• Iran has 37 million barrels of oil in storage ready for IMMEDIATE export

Relaxing sanctions would significantly support the European economies (who are becoming more reliant on trans-Atlantic Crude) & also ease the black-market issues which lurk in the background. 

The US Economy would also infact benefit!

However, actual oil production has dropped over 60% in the last 3 years; and Financial sanctions have made it extremely difficult for Iran to attract FDI to actually pump Oil out of the ground. Back in late 2014, India was importing 350,000 barrels of Iranian oil per day... That has now fallen to 50K.


What will happen now? 

Yesterday, Oil prices began their fight back on the back of a weaker USD... but this could easily be short-lived.

As Oil Storage capacities continue to deplete, it becomes more likely that prices could drop significantly. However, this also depends on the extent of production....

As all of this occurs, demand for domestic crude in the US declines... pushing prices down & forcing more into storage....

"WTI could drop to $35 per barrel in the coming months" Projection from Societe General.

Could Oil become the Most Lucrative Investment in Modern History?

As populations continue to exponentially increase... there is no doubt demand will rise... However, a renewed bout of weakness in the oil markets, notwithstanding this week’s price gains, was further backed up by comments from the Saudi Arabia’s OPEC governor Mohammed al-Madi, who said on March 22 that a return to $100 per barrel would be hard to reach. Saudi Arabia’s Oil Minister Ali al-Naimi reiterated that position, blaming non-OPEC producers for their unwillingness to cut back on production. He said that OPEC will not do it alone, and even revealed the fact that Saudi Arabia recently boosted its oil production to 10 million barrels per day. “The production of OPEC is 30 percent of the market, 70 percent from non-OPEC...everybody is supposed to participate if we want to improve prices,” al-Naimi said.

Trading Oil with Atom8 - Coming soon for April 2015

Hope you enjoyed the read. Any comments, Feedback would be largely appreciated.

Peace & Love 

Anish @anish8fx

Can I double my money by buying Silver now?

Dear Those who dare to ponder

We analyse here, the case for a long position in my favorite (sometimes overshadowed) Precious Metal - Silver (XAGUSD) 

It is first important to understand the history & Economics of Silver trading. As traditionally, Silver was commonly accepted as a monetary metal, but more nowadays its principal uses are for industrial purposes & derivatives trading. 

Isaac Newton set the monetary relationship between XAU & XAG at 15.5 times when he was the master of the Royal Mint (nearly 300 years ago). However, today the ratio is more about 75 times. 

Key Fact

Supply of mined Silver & scrap recycling materials total 980 million Oz. 

Vs

Demand of Silver is currently around 1,080 million Oz. (About 25% being bars & coins)

Silver Institute study. circa 2014. 

It is clear that the characteristic of this white metal is hard to substitute with others. So.... the price can increase somewhat without actually reducing the industrial demand. 

What contributes to a rise in the metals?

The notional thoughts of growing uncertainties among the major currencies economically are priced in a rise of Gold. The yellow metals seen traditionally as a hedge against uncertainty, as from the (almost) 2,000 oz high at the peak of the recession. 

Will the ongoing EU Crisis & a USD reversal warrant this long position? 

It stands to reason that Silver will also rise, according to the Newton based relationship and Silver's price volatility relative to Gold is about 2 times higher... So in a rising market... a good idea would be to get a leverage buy on Silver. As the ongoing uncertainties within the EU & fears of a USD (bull-run) end... Is beginning to interest buyers who are chasing a bottom of both Gold & Silver markets.... Of course, however is the price of Gold falls, the losses of Silver can be expected to correspond greater.  

Following the end of the gold standard and its replacement with government currencies, there have been many occasions when gold ownership has been banned. Today this may seem unlikely, but confiscation may become increasingly possible if monetary conditions deteriorate in the future. As silver is predominantly an industrial metal, it should offer protection against this possibility.

Silver trading at 5 year lows... 

Dynamics of the W,X,Y Elliot Wave Structure : 

In 2014... Investor demand outweighed supply by $113M. With Silver ETF trust fund holdings holding now record level highs in supply... However, some analysts think such a robust & consistent demand for Silver is crazy... As you can see from the chart above "retail investors" kept buying silver as it kept falling.... 

From $49.50 in 2011 to $12.40 in the spot market... A new, sudden & brief 5 year low!

Metally speaking... Technologies are now replacing the demand lost from smart phones... & the industrial uses of Silver is now once more questioned... However, many people look at Silver as an "indispensable metal" from solar panels to "Silver" touch screens... 

Furthermore, if you look at this market from an "Eagles eye"... the fact is that it looks historically cheap in terms of Gold. Being a noble metal, Silver does not rust or corrode... it is the most conductive of all materials for electricity...  

With Global growth... you can build a solid case for Silver's long-term value... But as short-term traders now... When Silver moves... It really moves as the 19% day rally proved back in December 14. 

Sane investors can fast track their Silver buying spree & check out www.atom8.com for the lowest possible costs. 

Peace & Love Guys 

-Anish 

Any questions, let me know & your feedback is most appreciated...

DEMOLISHING THE EURO CURRENCY

Dear Readers

Hope you all had an amazing weekend.

As talks progress with Brussels, Frankfurt & Athens... The Greek economy is presented with now 2 options :

- Leave the Euro, defaulting on it's debt & starting again with the Drachma;

OR

- Find a new "bailout" agreement from the ECB (heavily supported by German Euros) & continue operating with their high level of debts.

If Greece do leave the Euro, The markets will ask who is next?  As this event could create a cascade of defaults across the EU. Spain, Ireland, Portugal or even Italy... Causing mass scale crashes in the EU banking systems - possibly bankrupting Governments.

In reality... will the ECB let this happen?.... Maybe so....

Draghi reduced interest rates back in 2012 to prevent this very occurrence. However, Unemployment rates still remain at peaks greater than the recession.. Spain at 24%, Greece 26%, France 10.5%... To me this is not a Crisis but verging onto a depression..

Looking at the EU as a whole... many economic disparities are noticeable... For example, Ireland's main trading partners are the UK & the USA... Vs. Finland's main trading partner being Sweden. The formation of the Euro was based on a Political foundation rather than an Economic one.

This structural formation of the Eurozone has been the main creator of the issues faced within the EU. Outsourcing ones monetary policies to Brussels have left countries like Ireland, Portugal, Greece & Spain totally incapable of controlling their economies & promoting internal recoveries.... Then what happens? ... FDI drops... Foreign Investors start pulling out their money and start investing in developing nations, where yields over time are more promising.

Just today, Norway's biggest hedge fund announced a new tranche of investment into South Asian property.

Ladies & Gentlemen - we have now a Currency crisis.

For years now, Frankfurt & Brussels have been trying to counter-act this by currency devaluation in certain countries - so you have lower wages & internal devaluations - but the countries debt is still priced the same.

What happens now?

Theoretically, Greece can escape their debt burden... A possible sequence :
1. They default on all their debts;
2. Forces Greek banks to buy Greek bonds;
3. It has Greek banks sell their bonds back to the ECB - therefore putting the ECB in line for paying back Greek debt...

If the ECB agrees to this, it means the Greeks have escaped their debt burdens..

But why would the ECB buy Greek debt?

Would it not be economically cheaper for them to #Grexit?

More fiscal support is not supported by the Northern EU nations....

Keep it fresh guys

- Peace & Love
Anish

FX Room Interview with Dale Pinkert (link in blog)

Hey guys

Just a brief caption of my Market outlook... Link here:

http://ow.ly/KAxlh

Your feedback/comments would be greatly appreciated.

Anish