According to Reuters:

TEHRAN (Reuters) – An Iranian militia held civil defense drills on Sunday to prepare for any hostile air strikes and the military said it could close a waterway crucial for world oil supplies if Iran was attacked.

Officials also reiterated that Iran was ready to close down the Strait of Hormuz, a sea route at the mouth of the Gulf through which 40 percent of the world’s traded oil passes, if the United States attacked.

Navy Commander Rear Admiral Habibollah Sayari said foreign forces in the region were being closely watched and Iran would not allow any foreign ship to enter its waters.

“We are capable of closing the Strait of Hormuz,” he told IRNA news agency.

Read the full article at Reuters

- This is the type of tensions that probably caused by $50/barrel crude oil and more may follow if the prices continued like this.

This exercise may not be the last as Iran had many previous tension building military exercise before hence may not be a big indicator of rising tension unless there are actual fighting.

My friends are anticipating on a probable conflict either near the end of the year or early next year which may bring about a major disaster soon…but none of us wanted it to really happen maybe except my other “doomer” friend who had been preparing for it half his life…and he is getting impatient for it to happen haha.

The time maybe very bad right now with the world spinning down the economic disaster of the century which may end up with the 2nd Great Depression.

This may means lot’s to millions of people who are about to or already been “axed” by their company. It’s very hush hush now on who will be the next “victims” of this economic “retrenchment epidemic”.

Citigroup may end up getting some kind of bail out from U.S. Government despite their aggressive retrenchment efforts, their shares dropped last week and may need to knock off another 50k workers.

After a chat with my friend working in Citibank, I can felt his tensed feeling even thou he is confident that Citigroup is one of those company that belong to the “too big to fail” category and won’t be allowed to go down by the U.S. government.

It’ won’t be long before many other very big companies starts to take a queue numbers from the U.S. Govertnment for their ever lasting thirst for more money…to bail themselves out of the big hole.

This story may points to the old saying by people boarding the Titanic.

“This ship is too big to sink and it’s practically unsinkable.” and we all knows how it ends.

According to CNNMoney:

NEW YORK (CNNMoney.com) — The plunge in oil prices continued Thursday with prices falling below $50 a barrel as growing concern about the economy weighed on demand.

In the final day of trading for the December contract, U.S. crude futures fell $3.35 to $50.27 a barrel in electronic trading, but not before dipping as low as $49.91.

Oil last dipped below $50 on Jan. 18, 2007, when it traded at $49.90, according to CME Group, which operates the New York Mercantile Exchange.

Read the full article at CNNMoney

- Hold your breath everyone, it’s coming faster then I can imagine. The worst is not yet over, the price may fall further if it breaks the support once more.

Unless there are some kind of chaos to begin….hyper deflation may set in instead. This may be good for some but bad for many filthy rich corporation suddenly found themselves in the lower income bracket or worst.

This may be the beginning of the oil shortage unless the world prints free money to support the oil market as “investment” otherwise it WILL not be profitable to continue extracting oil anymore from non-conventional source like deep sea drill rigs, tar sands and other hard to refine heavy oil.

We may not worry about it now but the ripple effects coming fast and hard…be very careful out there!

According to Bloomberg:

Nov. 19 (Bloomberg) — The owners of an oil-laden Saudi Arabian supertanker hijacked off the coast of Somalia are in talks with pirates over a ransom.

Negotiators are aboard the Sirius Star, a man identifying himself as Farah Abd Jameh, a member of the group that hijacked the tanker, said in an audio tape aired today by Al Jazeera. 

According to Bloomberg:

Nov. 16 (Bloomberg) — OPEC, supplier of more than 40 percent of the world’s oil, is likely to cut production at its summit in Oran, Algeria, next month and may not lower output at its meeting in Cairo on Nov. 29, the group’s president said.

“We aren’t likely to take a decision in Cairo,” Chakib Khelil, who is also Algeria’s energy minister, told reporters today in Algiers. “In Oran, we will have enough information to make a decision. There we will decide to cut.”

Read the full article at Bloomberg

- So after last month of 1.5 million barrels cut by OPEC, they will be meeting again at December 2008 to discuss about the oil supply cut again and this time it may be even higher.

The probability of a price shock by this news may be uncertain due to the high volatility on the economy right now.

We can ensure that the oil traders are pretty jittery on this one and if the oil price continue to fall, less oil will be coming out into the market.

2015 is the estimated time given by the article above that the price may rebound back to $100 a barrel but it’s over conservative about their estimation as always.

My estimation is it may be earlier then predicted if the market starts to convulse itself by unforeseeable circumstances such as any conflict in the middle east or sudden major oil supply cut by the OPEC countries.

It may be few months down the road to see the price spike…or immediately. Depends on the market volatility and demand shock.

Panic button may be triggered, profit & greed push the spike all the way similar to the pressure selling last 2 months.

Well, I may be wrong so don’t bet on it hehe.

Looking at the free live oil chart and analyzing the price fluctuation, there seems to be a pattern forming.

The resistance floor level seems to be $60 and the top limit is about $70. So it seems to be consolidating the previous week.

There are rumors about the hedge funds being pulled out as we speak and because of the huge demand of US Dollar required to pay these hedge funds pull out….causing USD to go up.

This however may end once all the hedge funds are fully cashed out and may cause the subsequent drop in USD.

This can happen either in weeks or maximum within 12 months maximum according to the rumor.

But of course that will means the sudden spike in oil price if it’s in USD and the price may be one of the largest spike ever.

According to Yahoo!News:

OPEC president: More oil production cuts likely if prices do not rally

ALGIERS, Algeria (AP) — OPEC nations could further reduce oil output if moves last month to slash production do not bolster plummeting oil prices, OPEC president Chakib Khelil said Saturday.

Khelil, who is also Algeria’s energy minister, said an OPEC report would show by the end of the month whether all cartel members have enforced the daily 1.5 million barrel reduction decided in October.

- OPEC is trying very hard to put out this message to the world that this drop in oil prices is going to severely hurt OPEC’s supply in the future.

Another confirmation or threat to cut more oil supply in this article…could very well mean come Monday we shall see some kind of indication of a spike in oil prices…I may be wrong with so much crazy market movement…anything can happen.

Buckle your seat belt…Dorothy!

According to TimesOnline:

Royal Dutch Shell has become the latest oil company to halt development of Canada’s formerly booming tar sands industry, amid soaring costs and plunging oil prices.

The Anglo-Dutch oil group said that it was deferring indefinitely an investment decision on the second expansion of its oil sands project near Fort McMurray, in Northern Alberta.

The announcement was made as Shell unveiled a 22 per cent surge in third-quarter profits to $8.45 billion (£5.13 billion), despite a fall in production, thanks to record oil prices during the three months to September 30.

Extracting crude from the bitumen-rich Athabasca sands of northern Canada is an energy-hungry, costly and environmentally controversial process that pays off only with high crude oil prices.

Environmentalists welcomed the delays. Charlie Kronick, of Greenpeace, said the industry was risky not only because it requires high oil prices but because of a risk of international regulation of carbon emissions, which could undermine its rationale.

Although Shell said that it remains committed to the industry and continues to build operations able to produce 250,000 barrels of crude a day by 2010, it has chosen to delay a secondary expansion that would increase the total to 350,000 barrels per day.

Shell would not comment on the expansion’s projected total cost, but Justin Bouchard, of the Raymond James brokerage in Calgary, estimated that it would cost C$13 billion to C$16 billion (up to £8 billion), to build new pipelines, new extraction plants and an enlarged bitumen upgrader in Scotford.

Jeroen van der Veer, Shell’s chief executive, said that the decision had been taken because of “significant industry inflation and a tight labour market” in the Alberta region. “This final investment decision was originally planned for 2009, but we wait for costs to cool down before any new investment decision is made,” he said.

Shell’s earlier, 100,000 barrels-a-day expansion phase was expected to cost at least £6.2 billion. Last year, the group spent £1.2 billion on oil sands projects. Shell has a 60 per cent stake in the project. Its partners, Marathon Oil and Chevron, have 20 per cent each.

Compounding concern about investment in the industry, Total, the French oil giant, said this week that its Surmont and Joslyn projects were economically attractive only with oil above $90 a barrel. Although Total insists that it remains committed to current projects, its spokesman would not rule out future delays.

Read the full article at TimesOnline:

See Also

- This is another news on the Canada Tar Sands economic viability, previously it is stated that the oil prices must be above US$70 cost price to be viable but the above article put the price tag to be ATTRACTIVE is US$90 per barrel to remain economic viable.

This may means LESS expansion from Canada Tar Sands development to match the future increase demand for oil in USA and the rest of the world.

This is another key indication for my prediction that oil prices may shoot back up after reaching for the bottom of about $50 per barrel….this effectively cripple the middle east and the rest of the oil production countries and hopefully bring down the IRAN’s current hardliner president.

1. Expect oil companies to start cutting losses on some high-end projects.