March 8, 2011
Crude dropped overnight, after the FT joined the BBC in the “False Rumor Spreading Korner”, after the Libyan Investment Authority held newspaper said some OPEC members are looking to raise oil output to avoid any supply shortfalls. Too bad that just like every other previous rumor-based attempt to drive oil lower, this one was refuted within minutes by the same OPEC members that were allegedly boosting their capacity (which does not exist in the first place). Perhaps if the FT had read the note sent out at midnight by Goldman’s David Greely, which noted that there is virtually no spare OPEC capacity left, they would have known why they should have come up with a more credible rumor: like Gaddafi committing suicide after watching the latest episode of Sheen’s Korner. So much for the rumor mill. Now on to facts, where instead we see a new development which threatens to send oil surging far higher. Reuters reports that formerly peaceful Kuwait has just joined the ranks of demonstrators, demanding the resignation of the prime minister in a peaceful protest early in the day, with a larger one expected later in the day: “Kuwaitis demonstrating outside parliament for the prime minister’s ouster came up with a new symbol of Arab discontent on Tuesday by handing out watermelons. “This is for the parliament’s poor performance,” one of the small band of protesters shouted as he gave a watermelon to a lawmaker making his way into the parliament. The significance was not spelled out, but in local parlance, a person who has a lack of understanding or holds an unrealistic point of view sometimes is called a watermelon. A potentially larger rally was expected later, inspired by spreading Arab protests that toppled leaders in Tunisia and Egypt before sparking the insurrection in Libya and spreading to other Gulf countries including Bahrain, Oman and Saudi Arabia.” Kuwait, for those keeping track, is the 4th largest oil exporter in the world.
In Kuwait, six members of the Kuwaiti youth group Kafi (Enough), gave watermelons to a few lawmakers as a signal of their political dissatisfaction in a country that has the most outspoken parliament in the Gulf Arab region.
The demonstration marked a tempered start to a planned day of unauthorised protests by youth groups demanding the removal of Prime Minister Sheikh Nasser al-Mohammad al-Sabah, a member of the ruling family, and greater political freedom.
Kuwait, the world’s fourth largest oil exporter, does not allow political parties, and its parliament is made up of individuals who form loose blocs.
Demonstrations are banned in Kuwait without prior approval and youth groups Kafi and al-Soor al-Khames (Fifth Fence), the main organisers, will present a challenge to the government since they had not sought permission for the protests.
Some of the protest organisers not only want Sheikh Nasser to step down, but seek a replacement from outside the al-Sabah family, which has ruled Kuwait for some 250 years.
The prime minister, a nephew of the ruler, has survived two non-cooperation motions in parliament since he was appointed in 2006. All other critical portfolios, such as defence, interior and foreign affairs, are held by al-Sabahs. The emir has the final say in all political matters.
Tension with stateless Arabs, longtime residents of Kuwait known as “bedoun” who clashed with police last month in protests demanding citizenship, appeared to be easing after some lawmakers promised to discuss a draft law in parliament on Tuesday that would grant them basic civil rights.
Perhaps SocGen should redo their scenario analysis to account for what increasingly seems to be the endgame: a complete shutdown of the MENA oil output as the region moves through a revolutionary phase inspired exclusively by Bernanke’s liberation efforts. In the meantime, we suggest all readers should go long Vespa, or whatever private equity company LBOed Vespa.
As for why last night’s attempt to spread a rumor about another “excess capacity” boost is likely the last one, we suggest readers skim the latest note by Goldman’s David Greely:
This article was posted: Tuesday, March 8, 2011 at 8:35 am