What do you mean the Straits of Hormuz are open? How could this be?! Did Iran not promise to shut down the Straits of Hormuz if Europe dared to impose sanctions on this rouge state? Well yesterday after agreeing to help Greece make up financially for the replacement of that cheap Iranian oil, the EU actually got the gumption to agree on an Iranian oil embargo. Now we are just waiting for Iran to follow through on their bold prediction that shutting down the straits of Hormuz would be as easy as drinking a cup of water. Come on now Iran, show us how it's done. 

According to Gas and Oil Liquids Daily, the EU bought 450,000 bpd of Iran's oil in the first half of 2011, or 18% of its total exports. China accounted for 22%, Japan 14% and India 13%. The UK and France have joined the US in sending warships to the Strait of Hormuz. Mediterranean countries that import much of their crude from Iran, such as Greece, Spain and Italy, had argued for sanctions to be phased in over as much as a year. Now after all of the trouble that the EU went through, the least Iran could do is follow through on their bold threat. Go ahead, make my day. So with Iran sanctions not causing any short term disruption in supply, the focus will turn to the fed.

Will the Fed lay the groundwork for QE3d? This will be another history making meeting because we will get a real idea on what the Fed Governors are thinking.

Talk about a big fracking deal. Apache is moving forward but Chesapeake is pulling back. Bloomberg News reported Apache Corp. agreed to buy closely held Cordillera Energy Partners III LLC for $2.85 billion in cash and stock, adding to Oklahoma and Texas operations that use hydraulic fracturing to get oil and natural gas. The acquisition will more than double Apache's holdings in the Anadarko basin and add estimated proved reserves of 71.5 million barrels of oil equivalent, the Houston-based company said in a statement today. The purchase will be paid for with $2.25 billion in cash and $600 million of stock and includes 18,000 barrels a day of existing productionGas prices have dropped to 10-year lows as the increased use of horizontal drilling and hydraulic fracturing, or fracking, has boosted U.S. production. Fields that also produce crude and natural gas liquids, including propane, are more valuable since those fuels are tied to oil prices, which rose 8.2 percent in New York last year.

Yet natural gas popped on news that Chesapeake Energy Corp is cutting back on dry production. The Ap reports that Chesapeake Energy Corp, Faced with decade-low natural gas prices that have made some drilling operations unprofitable, Chesapeake Energy Corp. says it will drastically cut drilling and production of the fuel in the U.S. Chesapeake, the second largest U.S. natural gas producer, said Monday that it plans to cut its current daily production by 8 percent. Over a year that means the company would produce the same or slightly less natural gas in 2012 than it did in 2011. Chesapeake produces about 9 percent of the nation's natural gas.That's a change from the dramatic increase in domestic output seen in recent years. Chesapeake and other drillers have learned to tap enormous reserves of natural gas trapped in shale formations under several states using a controversial drilling method known as hydraulic fracturing combined with horizontal drilling. The drillers force millions of gallons of water and sand, laced with chemicals, into compact rock to create cracks that serve as escape routes for the gas.

Extreme weather for two winters and two summers kept natural gas prices high by boosting demand for home heating and power generation. But this season's mild winter weather, especially in the Northeast and Upper Midwest, has crimped demand and led to a glut. Natural gas futures slipped to $2.32 per 1,000 cubic feet last week, their lowest levels since 2002, before rising slightly to $2.34 on Friday. Prices have fallen 23 percent since the beginning of the year. Storage levels of the fuel are 21 percent higher than their 5-year average for this time of year, according to the Energy Information Administration.

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