Expect the Unexpected with Iran This Summer

Expect the Unexpected with Iran This Summer

by | published April 11th, 2012

The IMF's outlook that oil prices will decline this year and through 2013 is “misguided.”

So said Kent on Monday, when he sat down with CNBC to discuss the ongoing negotiations between Iran and the West over Tehran's controversial nuclear program.

Despite sanguine sentiments spouting from a variety of sources earlier this week, Kent foresees greater uncertainty as a primary motif of the international oil markets this summer.

Iran has already thumped its chest, announcing it will cut oil supplies to Germany in July. This is viewed by some as a clever, yet risky, gambit in this greater game of political posturing over the EU-imposed embargo, announced in January.

The retaliatory posturing as Tehran continues its talks with Western nations has heightened the stakes. The EU continues to bootlessly struggle to guarantee crude shipments to at-risk economies like Greece, Spain, and Italy.

For now, Saudi Arabia has promised to fill the supply gap; however, the oil-rich nation will not guarantee any reduction in price to the European markets. That is just one spark in a chain of events that will lead to higher global prices.

And it will put one booming economy at risk.

Let's Be Honest: The Talks Will Break Down

Despite optimism from numerous policy wonks, three essentially non-negotiable items will lead to a breakdown in these discussions. According to Kent, the United States and the West must ensure that the following three events transpire in order to deem any negotiations as a success.

  1. There is a requirement “that all enrichment to 20% and 3% purity” of nuclear material must be stopped immediately.
  2. Iran must remove all currently enriched uranium from the country.
  3. Finally, Iran must dismantle its super-secret nuclear enrichment facility just outside of the holy city of Qom.

Iran likely will not be prepared to accept any of these mandates.

But it's the third point that really raises the stakes.

The nuclear facility about 20 miles north of Qom is completely non-negotiable, since Iran won't even admit the extent of the activities happening at this facility.

This is even more problematic because reports of its existence have been widely circulated since its creation, and Iran attempted to hide the facility and deny its existence for years.

But any potential military action against this facility would cause irreparable damage to the holy Shi'a city and potentially spark religious uprisings throughout the Middle East.

After the Breakdown

As talks break down and we approach the summer, tensions will increase by default.

And uncertainty will rise as we approach the embargo scheduled to begin July 1.

While the EU sticks to its guns, however, it hasn't quite figured out how to ensure delivery of crude to struggling economies the gap created by this embargo.

Enter Saudi Arabia.

The Saudis have assured that they will provide the necessary supply for now, but they have not guaranteed it at a particular price. And in a debt-ridden continent where few politicians are still willing to accept the gravity of the situation, it only provides a short-term solution without any stability in energy prices.

And, where there is short-term action, there is always reaction somewhere else.

While Europe may benefit from the ability to obtain crude from the Saudis, it could cause economic problems for another growing region of the world.

India is likely to lose the most if Saudi Arabia has to fill the supply gap. The loss of guaranteed supplies will likely spur an increase in the Asian premium for crude.

As global growth stammers along this summer, the availability of inexpensive energy sources threatens any nation attempting to maintain growth.

It's going to be a long, hot summer. The least we can do is profit from it.



[Editor's Note: Brent crude prices will only accelerate with global uncertainty running amok.

But if you were an Energy Advantage member, you'd already know the biggest trend in energy today, and, best of all, how to protect yourself against this uncertainty.

And we're smack in the middle of the biggest energy event to hit the markets in years. To hear about it, CLICK HERE.]

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  1. April 11th, 2012 at 14:00 | #1

    Dear James and Kent,

    My experience in eighteen years of petroleum stock market experience
    tells me that any stockmarket prophecy beyond three months has the same status as a dream. And that is not even counting a black swan.

    William B. Smith

  2. Les
    April 11th, 2012 at 15:57 | #2

    Why write “the holy city of Qom”, Dr. Moors? You’re not a Muslim. It’s obviously not a very holy act to build destructive weaponry in a so-called “holy city”.

  3. eric taylor
    April 11th, 2012 at 16:30 | #3

    We may very well have more “irrational exuberance” from all of the
    biased political bedfellows Dr. Moore, but Iran’s Trotsky
    revolutionary past is black listing them for the club nuclear
    Illuminati, and so yes, anything could happen to derail
    peaceable statesmanship over the next few years, even if it is
    a lot to do over nothing.

  4. April 11th, 2012 at 16:37 | #4

    Yesterday I was told by Charles Schwab that I can’t not deal in options the way I want. So today I lost $539 on the stock market because I had to take man to the doctor …..the is frusating.
    (I have had a stroke so I am story for my spelling.)

    Can you do anything to get me started on the rood to options?

  5. April 11th, 2012 at 17:12 | #5


  6. April 11th, 2012 at 17:29 | #6

    Threat to Humanity – Fuel Pools at Fukushima.

    Michel Chossudovsky, April 9, 2012

  7. carolus
    April 11th, 2012 at 21:28 | #7

    Rolf: You may have a point.
    See “The War of the World” by N. Ferguson.

  8. Robert Berke
    April 11th, 2012 at 23:05 | #8

    For over a decade, Iran has resisted every proposal to curtail nuclear development, even those that came from its allies, and is likely to do so again. Maybe this time some miracle breakthrough will occur, but history is certainly on Kent’s side.

  9. Sergey
    April 12th, 2012 at 02:45 | #9

    I agree with Kent as regards the uncertainty, but believe me – the things with Iran will be arranged. We’ve got all the sings for this: starting with the reluctance to build Keystone Pipeline and coming to spiritual common of Western civilisation with Shia(groupism in protestantism).

  10. Ed Gould
    April 12th, 2012 at 06:25 | #10

    We have a lot of nerve demanding that Iran end her nuclear p0rogram while we have looked the other way for decades as Israel stands as a provocateur with, probably, hundreds of nuclear weapons – which we indeed likely helped her produce. If we reap the whirlwind here, we have only ourselves to blame.

  11. Bert Lindsey
    April 24th, 2012 at 05:27 | #11

    by James Baldwin | published April 11th, 2012

    the byline to this piece is NOT Dr. M…
    Iran has the legal right, as signer of the international nuclear Non-proliferation agreement to do what it is doing….
    the 20% enrichment is Allowed under the agreement signed by Iran..(which Israel REFUSES to sign)…for medical purposes…
    Iran is CURRENTLY open to IAEA inspection…
    the “…chest thumping…” comment is SPIN…
    July 1st is the announced start of the embargo against Iran BY the EU…Iran did not start this silliness….

    As Mr. Gould said above, “We have a lot of nerve….”

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