If You Invest in Crude Oil, You Need to Know This


"A massive spike in crude oil prices may be on the way; the news from the Mideast is not good. It is no longer a question of when we put our crosshairs on the back of Iran's head. We are already at war."

A massive spike in crude oil prices may be on the way. The news from the Mideast is not good. Despite a decade of war, the region is in desperate shape.

Nowhere is that more evident than in Iran.

We've got a missing drone. A "mysterious" explosion outside the British embassy. Nuke plants taken down by the Stuxnet virus. And a handful of dead scientists.

It is no longer a question of when we put our crosshairs on the back of Iran's head. We are already at war. We've pulled the trigger.

Whether it's a political decision or one with military significance, the fight in Iran is decidedly covert. They're not telling us anything close to the truth. That's OK, though. . .

The market never lies:
Snyder - light crude spot price chart

At the same time a meltdown in euro debt is threatening to bring the global economy to a halt, the traders in the oil pit are spooked.

We know it is not a function of demand. Across the U.S., we've got too much of the stuff right now. And Europe certainly isn't bidding for more oil.

That means the price spike must be due to supply concerns.

For the ultimate insider's opinion on the subject, we turn to. . . Iranian Foreign Ministry Spokesman Ramin Mehmanparast. He tells us on Sunday that if the West were to block Iran's oil exports, the price of crude oil will double.

With that troubling nugget in mind, it's clear why the world's powers want to keep their fight with Iran on the quiet side.

But, dear reader, in this age of tell-it-all journalism, it won't stay a secret for long. If we can get Herman Cain's dating record through his first day of high school, we can certainly learn who's killing who in Iran.

In fact, we argue it won't be more than three weeks until this situation spins into a real mess. That means today's crude buyers are likely getting a great deal -- maybe even a 50% discount to the price to come.

There are several reasons we've got such a dire outlook. But the one we haven't mentioned much erupted last Thursday. . .

The Senate voted 100-0 for legislation that would penalize any foreign bank that does business with Iran's central bank. In effect, it's a backdoor oil embargo. Just about all of Iran's oil money flows through its state-run bank.

Granted, no laws with any sort of teeth get through the current Senate. And nothing, but the occasional fluff proposal, gets through on a unanimous vote.

In other words. . .the legislation and its 100-0 vote is a farce. The rules won't get through the House. And Obama has already wagged his finger at Capitol Hill for proposing such tough sanctions.

But, come January, European Union leaders (if their union is still around) have pledged to take on the idea of Iranian sanctions.

While the chances of a full-on sanction are slim (given the little information we have), all it will take to spawn a serious rally in crude prices is a slight escalation in hostility. Between now and the end of the year, I am certain we'll get it.

Andrew Snyder is editorial director of Insiders Strategy Group.

Andrew Snyder, Resource Investor

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