Futures broker Lannie Cohen is betting crude oil will tumble the day any US attack on Iraq begins, because it happened that way last time.
Cohen is a technical trader, meaning he charts past price movements to assess the likely direction of the market. He and other technicians downplay analysts and economists who say the world's oil producers can't pump enough to cover shortages should war disrupt supplies from Iraq or its neighbors in the Persian Gulf, source of a quarter of the world's oil.
Speculators' short positions in crude oil on the New York Mercantile Exchange have more than doubled in the past three months, to the highest in the 20-year history of the contract, according to Commodity Futures Trading Commission data. A short position is a bet that crude oil will fall.
"We have been moving steadily up on war fears. Once we invade, look out," said Cohen, president of Capitol Commodity Services Inc in Indianapolis. "All you have to do is look at the historicals."
New York crude oil plunged 40 percent in the first two trading sessions after a US-led coalition began bombing Iraqi forces on Jan. 17, 1991. The price touched a record US$41.15 a barrel on Oct. 11, 1990, as troops massed in the Persian Gulf.
This time, preparations for war have helped oil prices gain 54 percent from a year ago. New York oil rose as high as US$39.99 last month. The US and UK have moved nearly a quarter-million troops to the region.
"We won't have a precipitous drop like we did in 1991 because inventories are so much lower now," said Andrew Lebow, an energy broker at Man Financial Inc. in New York. "Things are way too tight."
US oil inventories are 17 percent lower than they were in January 1991, and demand is 13 percent higher, according to government and industry figures. A strike that began in December in Venezuela halted most exports from the world's fifth-largest source of petroleum, accounting for some drop in stockpiles.
Commercial supplies of crude in the US last week fell to 269.8 million barrels, matching a 28-year low, according to Energy Department figures. At the outset of Desert Storm, there were 326.8 million barrels in storage.
Most of the world's oil producers are pumping at full capacity. They have just 900,000 barrels per day of spare production capacity, less than the 2.5 million barrels of Iraqi supplies that could be knocked off world markets by a war, the International Energy Agency said in a report this week.
By the time missiles starting exploding over Baghdad in 1991, oil prices had already retreated 22 percent from the record. Saudi Arabia, the world's biggest crude producer, and other OPEC members had increased output in the months after Saddam Hussein's August 1990 invasion of Kuwait provoked a UN embargo on Iraqi oil exports.
Analysts also doubt US-led forces can repeat the quick success of the Gulf War. A full-scale invasion of Iraq might take longer than the four days it took for US-led troops to push Hussein's army out of Kuwait.
"We had a tremendous dropoff in prices when success became evident" in 1991, said Marshall Steeves, an energy analyst at Refco Group Ltd. "We won't see that again."
Steeves predicts oil at US$50 a barrel if OPEC and other producers fail to cover lost Iraqi supplies.
On the first day of the war in 1991, US and European governments tapped emergency reserves. That boosted already ample global supplies, assuaging fears that refiners might have difficulty acquiring cargoes, said Michael Fitzpatrick, an energy specialist at Fimat USA Inc.
US Energy Secretary Spencer Abraham has pledged to tap reserves again to cover any significant supply disruption. The US and 25 other countries hold 4 billion barrels of emergency supplies.
Still, traders worry Hussein may destroy wells in Iraq and neighboring countries, crippling supplies for years.
CHIP RACE: Three years of overbroad export controls drove foreign competitors to pursue their own AI chips, and ‘cost US taxpayers billions of dollars,’ Nvidia said China has figured out the US strategy for allowing it to buy Nvidia Corp’s H200s and is rejecting the artificial intelligence (AI) chip in favor of domestically developed semiconductors, White House AI adviser David Sacks said, citing news reports. US President Donald Trump on Monday said that he would allow shipments of Nvidia’s H200 chips to China, part of an administration effort backed by Sacks to challenge Chinese tech champions such as Huawei Technologies Co (華為) by bringing US competition to their home market. On Friday, Sacks signaled that he was uncertain about whether that approach would work. “They’re rejecting our chips,” Sacks
NATIONAL SECURITY: Intel’s testing of ACM tools despite US government control ‘highlights egregious gaps in US technology protection policies,’ a former official said Chipmaker Intel Corp has tested chipmaking tools this year from a toolmaker with deep roots in China and two overseas units that were targeted by US sanctions, according to two sources with direct knowledge of the matter. Intel, which fended off calls for its CEO’s resignation from US President Donald Trump in August over his alleged ties to China, got the tools from ACM Research Inc, a Fremont, California-based producer of chipmaking equipment. Two of ACM’s units, based in Shanghai and South Korea, were among a number of firms barred last year from receiving US technology over claims they have
It is challenging to build infrastructure in much of Europe. Constrained budgets and polarized politics tend to undermine long-term projects, forcing officials to react to emergencies rather than plan for the future. Not in Austria. Today, the country is to officially open its Koralmbahn tunnel, the 5.9 billion euro (US$6.9 billion) centerpiece of a groundbreaking new railway that will eventually run from Poland’s Baltic coast to the Adriatic Sea, transforming travel within Austria and positioning the Alpine nation at the forefront of logistics in Europe. “It is Austria’s biggest socio-economic experiment in over a century,” said Eric Kirschner, an economist at Graz-based Joanneum
France is developing domestic production of electric vehicle (EV) batteries with an eye on industrial independence, but Asian experts are proving key in launching operations. In the Verkor factory outside the northern city of Dunkirk, which was inaugurated on Thursday, foreign specialists, notably from South Korea and Malaysia, are training the local staff. Verkor is the third battery gigafactory to open in northern France in a region that has become known as “Battery Valley.” At the Automotive Energy Supply Corp (AESC) factory near the city of Douai, where production has been under way for several months, Chinese engineers and technicians supervise French recruits. “They
RSS