GoldSeek.com: High Stakes Poker in the Crude Oil Market - by Gary Dorsch

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High Stakes Poker in the Crude Oil Market - by Gary Dorsch

It’s easy to call an opponent’s bluff in a game of high stakes poker, when you hold four Aces, and your only worry is being trumped by a straight flush. By camouflaging its refusal to cease uranium enrichment with a detailed offer for "dialogue,” Tehran scoffed at UN Security Council Resolution 1696, which called for Iran to suspend its uranium enrichment by August 31st, or face economic and diplomatic sanctions.

France began to fold its cards at the table on Sept 8th, when French Foreign Minister Philippe Douste-Blazy indicated that Paris might be flexible over its previous demand that Iran must suspend its uranium enrichment work before resuming even more negotiations. He also added that, “Iran should be considered as a great civilization, we need to engage in a dialogue that shows respect for this country," he said. Tehran has maneuvered skillfully, exploiting divisions, playing for time, coaxing better offers, while moving closer to completing the research, development and experimentation stages needed to operate its nuclear facilities at full capacity, the so-called point of no return towards building the Jihad bomb. Still, the neo-cons in Washington don't believe a word from the mullahs, and the hardliners in Iran are convinced the US wants regime change.

Another issue at stake is China: With 1.3 billion people, the People’s Republic of China is the world’s most populous country, its second largest oil consumer of 7 million barrels per barrel, yet only a third of daily US oil consumption. China’s economy expanded at an 11.3% annualized rate in the second quarter, its fastest in a decade. As such, China’s demand for energy is projected to increase by 150% by 2020, and its oil consumption is expected to grow by 7.5% per year, seven times faster than the US. Though during the 1970’s and 1980’s China was a net oil exporter, but it became a net oil importer in 1993 and is growingly dependent on foreign oil. China currently imports 43% of its oil consumption and is expected to increase its need for imported oil by 75% between now and 2010. The International Energy Agency predicted that by 2030, Chinese oil imports will equal imports by the US.

Does the Bush administration hold a straight flush, capable of beating Iran’s four aces? The governments of the 26 IEA member countries own about 1.5 billion barrels of oil in strategic reserves. That would be enough to compensate for a loss of all of Iran's oil exports for at least a year and a half. Furthermore, the IEA members also have access to another 2.5 billion barrels that could be used if necessary, said IEA agency's director general Claude Mandil on August 23rd. For now, sentiment in the crude oil market is ruling out these dire scenarios, after placing great faith in them for the past 12-months. But with a schizophrenic market, where sentiments can turn on a dime, it’s best to keep to short-term predictions.