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The Gas Shall Pass, as Will the Bearish Breakdown
Dear American Capitalist Readers,
Even after getting wind that Manhattan’s passing gas was harmless and there were no indications of terrorist-related activities, according to the U.S. Department of Homeland Security, exacerbated nervousness continued for most of the trading day yesterday. The gaseous odor forced evacuations from the Rockefeller Center to the city’s West Side.
Also largely exacerbated is the lingering oil drop. You may want to consider buying oil-related names like the OIH before the Northeast is revisited with colder air as soon as this week. According to MDA EarthSAT, “The colder air will enter the eastern U.S. from Jan. 18 through Jan. 22.” And if cold enough, we could see a resurgence of heating oil demand in the Northeast.
Plus, we’re likely to see rising oil prices, thanks to an oil supply shutdown from Russia’s Druzhba pipeline to the likes of Poland and Germany. According to Bloomberg.com, “The Polish segment of the Druzhba pipeline carries about 50 million tons of oil a year, including 96 percent of Poland's oil. About 27 million tons goes to German refiners such as PCK Raffinerie GmbH and Total Raffinerie Mitteldeutschland GmbH.”
According to a Reuters article, “Polish private television TVN24 reported earlier that the problems were related to a recent energy pricing dispute between Russian and Belarus.”
You may remember that Belarus unhappily accepted the doubling of the price it already pays for Russian oil imports under supply-cut threats. “The two countries,” according to the International Herald Tribune, “are now locked in a dispute over oil duties, with Russian determined to stop Belarus from re-exporting petroleum products made from processing Russian oil bought cheaply.” Belarus, on the other hand, will not be bullied “into surrendering its sovereignty through energy blackmail.” And, unfortunately, anytime you see tightening oil supplies in Europe, it’ll impact the U.S.
Another catalyst for oil: To combat the recent energy declines, OPEC may have to hold another meeting prior to its scheduled March 15, 2007 meeting. This follows the reported 500,000 bpd cut that was supposed to be effective on February 1, 2007. That, and the November 2006 proposed cut of 1.2 million barrels, may or may not happen.
Take care,
Ian L. Cooper, Editor, Early Alert Trader
