For oil, the Iran deal won't change much
That's because world demand for it is pretty much insatiable.
Why isn't oil down more? It's a legitimate question, given that the Iranian deal isn't just about some oil being added to the market. This is about the odds that Iran, the biggest trouble-maker in the Middle East, is most likely to block up the Strait of Hormuz -- where 20% of the world's oil must travel through -- and the prospect that it will no longer do so.
I do not believe this was a surprise agreement. The oil traders -- in addition to, at times, apparently rigging the entire market -- seemed to know what was up well ahead of time. It would appear to me that the following is the reason oil hasn't gone through $90 per barrel yet, as so many have been waiting for: Real economic demand for oil is blunting the decline at these levels.
We know, for example, that the Saudi exports are their highest level in eight years. We know Iraq is pumping 3.5 million barrels a day, up dramatically from just a few years ago, and that the U.S. is pumping more oil than at any time since 1989. Yet, despite all this, prices haven't fallen that hard. I don't think this new oil from Iran will really add enough supply to make a difference internationally, where oil has stayed tight all along.
The spread between West Texas Immediate and Brent crude, which had narrowed to about zero this summer, is now back into place with a $15 differential. That has caused refinery stocks to come roaring back to become one of the great money-makers of 2013 -- something that Dan Dicker predicted here on our site. This is not a demonstration of how much oil we have found in the U.S., because the decline in WTI has to do with shipping problems domestically. Rather, it shows that world demand is pretty much insatiable. Just a little more bit more from Iran just doesn't seem as if it will matter.
That brings us back to a central issue: Oil is high because the world's economies, particularly China's, are actually doing better than we think they are. I continue to look at the large, internationally oriented domestic companies and marvel at how well they are performing in Asia, and how Europe as bottomed. The tightness in the international market is emblematic of that -- as is, by the way, the fabulous performances of the international oils. Notable among these are BP (BP), Exxon Mobil (XOM) and Chevron (CVX), as opposed to the domestics, which seem to be held hostage to the West Texas price.
That's why it is more important than ever to follow Brent. You need to notice that the $108 level represents a strong market that's not going to come down much at all, even given the additional 1.5 million barrels that are expected to hit the market as we free up some of the sanctions on Iran.
Because our markets aren't linked that well at all with Brent right now, don't expect a further decline in West Texas. But don't expect an increase, either.
To me, stasis at the $93 level seems about right, with an occasional dip to $91 and an occasional increase to $95. That's barring some sort of shock to the system -- the odds of which just went down pretty dramatically thanks to this historic agreement.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the securities mentioned
More from TheStreet.com
First off we have NO allies in the Middle East...We have users, beggars and dirt bags.
And NONE of them have American's interest at heart.
The Quran teaches that it's OK to lie and deceive when dealing with infidels. That's us, folks. and Iran's Mullahs have no intention of complying with any agreement with the naïve West. Kerry and the rest were patsies in this deal. Stay tuned.
Let's check reality here. Most West Texas oil is still pumped out of the ground at a price of $5 a barrel and Gulf of Mexico Oil for $20 a barrel
Yet gas prices are priced on the spot market for oil in the future contracts.
Hmmmm most oil future contracts are never filled --- this should be your first clue something is wrong
Let's say an Oil company wants the price of oil at $130 a barrel so he can make $125 on his West Texas barrel. Oil company has like 20 million barrels ready to make into gasoline so getting the price from $100 a barrel to $130 a barrel on the spot market will on margin cost them say $220 million dollars. They make a fake company up loan it $220 million that company buys on margin $220 million dollars of oil on the spot market for $140 a barrel pushing up the overall price to $130 a barrel.
The oil company can now price the gas $30 a barrel more for 20 million barrels this is an increase of $600 million dollars to them almost a three times return on the $220 million they have pumped into the futures market.
Everyone gets pat on the back for a job well done and the company has generated a $220 million tax credit when the fake trading company goes belly up.
Life is good in the oil patch and the money keeps on flowing.
"It's not based on trust, it's based on verification...."
ie; concerning Iran and Nuke deal.
I personally don't believe you are going to learn much from MSN or Cramer about Oil production, exploration, discoveries or finds Worldwide...Better to go to sites that specialize, or be invested in Energy plays and keep up with their Company progresses.
ie; Oil/Ngas producers, explorations, Pipeline companies, Coal companies and Refiners. Along with other forms of transportation, Rail or Shipping.
Actually you don't even have to be invested, just subscribe to their information.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Traders might want to bite on BABA, but long-term investors have reasons to wait.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.