Sharky,

If you remember the super contango situation we had for the past couple of months where the price of the futures was way above the spot price so it made perfect sense to buy millions of barrels at spot and future sell into the market at much higher prices. The returns are guaranteed as all cost for storage insurance etc. are easily covered leaving a couple of dollars profit per barrel. Since then many have jumped on the bandwagon including a couple of the majors. You can’t blame them as it is free money with virtually no risk. Currently there are millions of barrels stored offshore and in tanks around the world. Now we get to the good part. Not happy with their returns the same hedgers have jumped in as speculators. They are watching the spot price and as soon as the price hits a high they are collectively selling the oil they have already future sold and forcing the price down. As it hits a low they are buying back to cover their futures and subsequently driving the price back up again.

On another note about the OPEC cuts. The talk here in UAE is that Saudi Arabia are currently pis**d of with several of the other members. The reason is as always with these promised cuts there is cheating going on. Strangely enough the Saudi’s are generally keeping to their commitment and have cut considerably down to their quota’s. I do know that Abu Dhabi have also cut back but not completely to their quota yet but the intention is there. As far as I am informed the Saudi’s will not agree to any further cuts at the next OPEC meeting until the other members are seen to be honouring their commitments. This move should surely drive the others to really cut as Saudi are the bullies of OPEC and can mess the others up badly if they don’t comply. They also have the backing of Abu Dhabi on this point and I do know that Abu is currently producing at around $2 a barrel with Saudi somewhat less than that. There could be some real boxing at their next meeting and as a result we might see real cuts soon and a final drive of the price to $60. This is the price CLL currently need to at least cut down the bleeding and restore some confidence until the next leg up going into the back end of the year and into next.

Currencies: Yes for sure the Chinese RMB is the place to be. Actually my wife is Chinese and these last couple of years a lot of my cash has been going off to China and we have bought a couple of properties there near my wife’s parents. The best decision I have ever made in my life. Unfortunately the temperature there in winter does not suit me and we are now looking in Beihai in the south. When I started sending money the XCH rate was 8.2/$. Now look where it is. Also when I signed my contract I made sure I was paid in Dirhams not Dollars as I see no future in the dollar. At the moment they are tied together but they will de-peg for sure sometime soon.

Anyway please have a good weekend all and keep your chins up.

Den