Crisis Levels
Oil prices fall below $40 a barrel signaling that not all is well with the global economy. In a global equity market rout, fear trading has taken hold as traders run to the safe haven of bonds and run from just about everything else. An 8.5% decline on the Shanghai Composite Index is raising fears that China's economy is crashing and its near record amount of oil imports may soon drop. In the meantime the massive selloff in commodity markets and the rush to U.S. Treasuries are signaling a potential bout of deflation. Risk aversion is the name of the game and a drop in the dollar at the same time commodities are falling is a dangerous signal.
Iran's Oil Minister Bijan Namdar Zanganeh is talking tough saying that "We will be raising our oil production at any cost and we have no other alternative," according to his ministry's news website, Shana. "If Iran's oil production hike is not done promptly, we will be losing our market share permanently," according to Bloomberg. On the other hand Reuters is reporting that "Iran's Oil Minister said on Sunday that holding an emergency OPEC meeting may be "effective" in stabilizing the oil price. Iran endorses an emergency OPEC meeting and would not disagree with it."
It seems that Iran is engaging in some high stake negotiations with the Saudis to try to get them to cut production to allow the triumphant return of their embargoed oil. Obviously if the Saudis don't adjust output and Iran starts pumping the amount of oil they claim they can pump, then prices may crash in the future in a slowing global demand outlook.
The Financial Times is reporting that "Israel has imported as much as three-quarters of its oil from Iraq's semi-autonomous Kurdish north in recent months, providing a vital source of funds to the cash-strapped region as it fights militants of the Islamic State of Iraq and the Levant (ISIS).The sales are a sign of Iraqi Kurdistan's growing assertiveness and the further fraying of ties between Erbil and Baghdad, which has long harbored fears that the Kurds' ultimate objective is full-scale independence from Iraq."
Gas prices in the United States continue to plunge, except in the Midwest and in California.