Occupy Tehran? Iranian students, incensed with a new round of sanctions, stormed the British Embassy and added a new dynamic to a market already concerned about the rising tensions in the Middle East. The orchestrated take over from the government was a clear violation of international law and shows Iran's utter lack of respect for anyone else in the world. The pillaging of the UK Embassy had to have the support of the government because it is unlikely that without the government looking the other way, it would be impossible for a rag tag bunch of students to take over the fortified British compound. Iran, the world's fifth biggest oil exporter, was trying to stir domestic public outrage after a vote by Iran's leaders to end diplomatic relations with the UK and expel the British ambassador and the UK slapped sanctions on Iranian banks and their petrochemical companies. Obviously these sanctions have some bite as it raised the acrimony of the Iranian regime. The outcome means that more than likely the US will follow suit and put more pressure on the known terror state as it is clear to everyone that Iran is on track to secure a nuclear weapon after a report from the International Atomic Energy Association.

The likely hood of more sanctions against Iran look to tighten supplies of distillate in Europe and will put even more pressure on the world's newest diesel exporter, the US, to keep up with global demand. The United States, Russia, France, Britain and Germany all expressed outrage at the Iran, yet China remained quiet as it desperately needs diesel supply. They are fearful that if Iranian supply is cut it could lead to shortages in China for the coming winter.

China is also adding to the upside momentum in the market in a macro way as China's central bank said it would cut banks' reserve requirement ratio by 0.5 of a percentage point to help boost liquidity and support the economy amid market turmoil in developed countries. There are worries that China's manufacturing sector is slowing dramatically because of the slowdown of demand in Europe.

These worries, along with continuing improvement in US consumer confidence, is once again fanning the bullish flames in the energy complex. We are seeing the market play out the increased risk and fears in the spread. Once again it looks like the Brent versus West Texas Intermediate spread has bottomed out as increased risks overseas will drive the Brent market. We also see the heating oil versus gasoline spread gain for reasons other than the seasonal excuse that winter is coming.

As I mentioned before and have talked about for some time, the US is becoming a net exporter of gasoline and diesel. In today's Wall Street Journal there is a must read By Liam Pleven and Russell Gold. The Journal Points out, U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years. A combination of booming demand from emerging markets and faltering domestic activity means the U.S. is exporting more fuel than it imports, upending the historical norm. According to data released by the U.S. Energy Information Administration on Tuesday, the U.S. sent abroad 753.4 million barrels of everything from gasoline to jet fuel in the first nine months of this year, while it imported 689.4 million barrels. That the U.S. is shipping out more fuel than it brings in is significant because the nation has for decades been a voracious energy consumer. It took in huge quantities of not only crude oil from the Middle East but also refined fuels from Europe, Latin America and elsewhere to help run its factories and cars.

At the same time another shift in the continuing changing dynamic of the US energy space is the fact that the US is now producing more natural gas than it ever has before. The Energy Information Agency reported that natural gas production in the lower 48 U.S. states increased by 1.1%, or 0.72 billion cubic feet per day in September from August to a fresh record of 70.4 bcf/d. Dow Jones points out that, the rise came despite a month-to-month drop of 13.5% in output from the federal Offshore Gulf of Mexico largely as a result of Tropical Storm Lee, the EIA said. Offshore Gulf output was 4.17 bcf/day, down from 4.82 bcf/day in August and down from 5.93 bcf/day in September 2010.

The Energy Information Agency also pointed out that US gasoline demand hit the lowest level since 2001. Another reason we can export more stuff to other places.

The International Energy Agency Executive Director, Maria van der Hoeven said, current oil prices are high and the crude markets are tight, and if prices continue at current level they will have an impact on emerging markets. Dow Jones quotes him as saying, Oil prices are still quite high and we've said before that if oil prices are high at this level for a longer period it will have an impact on economic recovery, especially for developing countries, she said. Dow says that, Van der Hoeven declined to give a range for an oil price which would suits both consumers and producers or say whether she thought OPEC needed to raise output at its oil production meeting. Earlier this month, the Paris-based energy watchdog revised its forecast for global oil demand down by 70,000 barrels a day for 2011 and 20,000 barrels a day for 2012, another reason for forecast downgrades.

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