James Saft

Libya gives world economy needed break

Aug 23, 2011 18:57 UTC

James Saft is a Reuters columnist. The opinions expressed are his own.

For Libyans the fall of Muammar Gaddafi comes about 40 years too late, but from the point of view of the global economy it is not a moment too soon.

The apparent end of the reign of Gaddafi, whose whereabouts were unknown on Monday after rebels took Tripoli, will take pressure off of the price of energy, especially in hard-hit parts of southern Europe, and thus ultimately may remove roadblocks to further easing by either the European Central Bank or Federal Reserve.

Brent crude futures, the key European measure, fell by as much as 3 percent on Monday following the taking of Tripoli by Libyan rebels before settling about 1 percent down, while the U.S. measure rose about a third of a percent.

Libya accounts for about 2 percent of global oil production and in particular has supplied much of the oil consumed in Italy. While experts caution that it may take some time to restore production and exports, the nightmare option of mass sabotage by the falling regime now seems unlikely. Regime change also opens up the possibility that production and exploration in Libya are more competently and aggressively pursued than they had been. Corruption and kickbacks are rife in Libya, and while that may or may not improve, if it does, look for production figures to improve over the longer term.

Lower energy prices are an unalloyed good at this point for the global economy. High gasoline and heating costs act as a brake on consumer demand, something the hard-hit southern euro zone nations can ill afford as they descend into a vicious cycle of austerity and economic contraction.

Oil gets “evil speculator” buy signal

Apr 26, 2011 13:17 UTC

James Saft is a Reuters columnist. The opinions expressed are his own.

HUNTSVILLE — If history is any indication, the Obama administration’s investigation into oil speculators makes now a potentially great time to load up on oil futures.

The Justice Department on Thursday announced a working group to probe fraud, speculation, index trackers and “investor practices” in the energy market, a move taken after gasoline prices topped $3.80 per gallon, the highest in almost three years and a politically very inconvenient fact.

Authorities playing the “evil speculators” card is an  excellent indication that they have both lost control of the narrative and have little they can do to alter the policies and fundamentals that brought on the pesky high, or sometimes low, prices in the first place. The right play could just be to take this as a signal that prices are going to continue to annoy authority, and make your investments accordingly.

3 numbers spell danger: $100, 3.44, 20

Feb 24, 2011 13:13 UTC

If you think the recovery is firm and the risk of deflation has vanished, look at the three following numbers: $100, 3.44 and 20.

The first, everyone knows, is the price that New York crude oil touched briefly on Wednesday, driven 14 percent higher in just five trading sessions by conflict in Libya and concern over the reliability of supply elsewhere.

The second is the yield on 10-year U.S. Treasury notes, and if you are keeping score, they have dropped a rapid 28 basis points from early February, a drop that is telling you that bond investors do not believe the U.S. economy can easily withstand $100 oil.