Mention 'Iran' And 'Bomb' In The Same Sentence And See Your Oil Investments Rise

Date 14/07/2008

The Right Side

Garry White

Israel’s getting fidgety… it hasn’t bombed Iran since 1984. Speculation that they’re going to is pushing the oil price up and making oil and gold very attractive indeed…

Fear is stalking the markets – and share valuation across the board took a hammering last week.

US mortgage banks are in dire straights… Ahmadinejad has been testing missiles… The US and Israel may bomb sites in Iran… Russian threats over plans for a US missile shield in Europe have increased… and inflation is stalking every corner of the world. And you know what, it’s probably going to get much worse before its gets better… but every cloud has a silver lining.

The real beneficiaries are going to be gold and oil; which means we are ideally placed to profit from the turmoil.

Gold has reached a four-month high – smashing the $965 level. Oil futures reversed falls seen in the earlier part of last week to hit a new all-time high on Friday.

In any crisis gold is a safe haven – and with inflation and war fears at the top of the agenda it is no surprise that it is charging ahead again. Tight oil supply means the oil price is sensitive to any potential or implied supply shock…. And boy, there are plenty of potential supply shocks ahead.

Worrying about the future

The main one would be if the US bombed Iranian nuclear sites and cut off supply from Opec’s second-largest explorer. However, as I said on Friday, I do not believe that any attack is likely before the US Presidential election in November – so the oil market will be fearful until then.

Then there’s Brazil. A five-day strike at Petrobras is now under way… workers are unhappy about offshore working conditions.

The Campos basin accounts for 80% of Petrobras' daily production of 1.8 million barrels of oil, but the company is playing down its impact on production. This is patently absurd. If your offshore workers are not pumping oil, production will be hit. Big time.

This is all occurring at a time when inventories in developed economies have been under pressure. At the end of the second quarter, estimated OECD commercial inventories stood at 2.57bn barrels, 26m barrels below the five-year average and equal to just 53 days of forward consumption.

This implies no rapid or immediate pull back in the oil price.

So, although fear is rife and many sectors should be avoided (banking, homebuilding, retail) there are a many sectors that you should still be exposed to… and all of them are commodities.

To discover profitable opportunities to play the commodity sector click here.

Regards,

Garry White
Editor
Smart Commodities UK

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