NATO Oil Tankers Attacked by Militants in Pakistan

(AP Photo/Aaron Favila)

Over two dozen oil tankers in the southern part of Pakistan were
set on fire, presumably in response to an attack by NATO helicopters which killed three Pakistani soldiers on the border.

The tankers which were attacked carried fuel for the armed forces in Afghanistan.

While tensions between the two countries have never rescinded, they have been managed in general. This attack reveals the underlying pressure in the shaky alliance, which is ready to explode at any perceived provocation, or real one for that matter.

Pakistan routes are used for supply transport, including things like clothing, parts and fuel. Weaponry isn't transported via Pakistan because of the militant presence in the country.

What was unusual about this raid was its location in the Sindh province, out of the usual region in the northwest part of Pakistan where the rebels have a stronger presence. That could imply they've expanded their reach beyond that area.

At this time approximately 80 percent of non-weaponry is transported through Pakistan, but NATO has been looking for other supply routes in nearby countries so they are overly reliant on Pakistan.

In the northwest region of the country there are usually Pakistani security forces included with the transports, but in the other parts of the country that's not usually the case because of little activity by the insurgents.

Security officials in Pakistan have reportedly warned they won't supply security details any longer if NATO sends helicopters into the country again.

Since Pakistan is reliant upon U.S. and NATO money, it's hard to tell if they would follow through on that threat or not. But it is possible they would.

Interestingly, polls of Pakistanis show that many of them consider the United States an enemy, which has caused a lot of problems for the Pakistani government.

A formal protest over the helicopter excursions has been lodged by Pakistan to NATO.

Fire on BP (NYSE:BP) Oil Processing Vessel

Earlier today BP (NYSE:BP) had to stop capturing and processing oil as a fire broke out on the Discoverer Enterprise, the oil tanker being used to collect the oil on a daily basis since the cap was placed on the oil well.

There was reportedly no permanent damage to the BP vessel, and the oil processing stoppage was only temporary.

Conjecture is the fire probably started as a result of the ship being hit by lighting, which caused the stoppage in oil recovery at about 10:30 AM EDT.

Another ship in the area, Q4000, may begin operations for capturing oil in the area today, which would add approximately 50 percent more capacity to capturing the oil, reaching up to 28,000 barrels a day.

With no one really sure as to how much oil is escaping the oil well, it seems BP is taking a incremental strategy to attack the problem, although if they need to, they're ready to capture up to 50,000 barrels of oil if there is that much leaking into the Gulf.

Commodities | Raw Materials Down in 2009?

A recent report from the Economist Intelligence Unit (EIU) says that industrial commodities will probably continue to fall in 2009 as the price index is projected to plunge by up to 41 percent this year.

On the other hand, in 2010, expectations from the EIU report says prices of the majority of industrial raw materials should bounce back in at least a limited amount in prices, although in the long term most investors and futures traders are positive about the return of the bull market in commodities.

In the auto industry, that continuing decline will cause natural rubber demand to fall even more, as synthetic rubber becomes more competitive in price (that'll last as long as petroleum prices remain down), and platinum, while expected to fall in demand in 2009, possibly pressuring platinum prices and futures down, there could be an override there from investors speculating.

The recent announcement that Indian consumers are migrating from gold to platinum may offer some support in 2009 as well.

Obviously gold and silver futures and prices should enjoy a solid year in 2009, as investors continue to look for the few places of safety available, as confidence in the U.S. slides as investors start to understand forced liquidation propped it up when it should have been falling, and now they're starting to flee it as they see the fundamentals and huge bailouts will continue to undermine its strength.

Availability of credit in the latter part of 2008 and early part of 2009 have also affected the movement of commodity stocks as financing has held back acquisition of raw materials in many cases and many companies.

Cutbacks by producers has also generated the possibility that supply may be more difficult to acquire this year, putting more pressure to meet demand and move the stock prices higher. Shortages could be a reality with some raw materials in 2009.

Demand for metals in the consumer electronics sector has also left demand down, and so prices are expected to be pressured down for metals used there too.

The one unknown question out there is how far along companies are in forced liquidation. If their positions are mostly unwound, base metals may be a little stronger than expected, although most aren't holding out much hope for 2009, and are looking for 2010 for the beginning of a modest recovery.

Some companies may have enough cash and credit lines available to tap, and so may do well, others probably will take longer, the reason its such a mixed commodity futures market at this time, and investors are being cautious.

That's also a factor with the U.S. dollar, which will assuredly contract and collapse some this year. Again, the U.S. dollar has benefitted from forced liquidation because of commodities being sold to raise capital which has artificially kept the U.S. dollar strong because of most commodities being dollar denominated.

With the ongoing recession across the world, there's little hope that oil prices and futures will rise any time soon, a reason the super contango has been helping the pocket books of those investing in it.

Investors are simply buying and storing oil in supertankers until prices start to move again. Their hope is obviously the storage costs won't outpace the price increase, however incremental they may be.

Because it's a super contango, the futures are much further out than normal, and investors can more easily make those decisions.

Although it's not quite here yet fully, the commodity market, as far as gold and silver goes, is starting to behave somewhat predictably again, as investors run to a haven of safety with their capital.

Other industrial raw materials and futures will struggle to go up this year in any meaningful way, and we can expect this behavior for the rest of 2009.

Nordic American Tanker Enjoys Solid Third Quarter

Nordic American Tanker (nyse:NAT) enjoyed a solid third quarter, surpassing analysts' estimates for earnings by 2 cents a share.

Earnings for the quarter surged to $42.7 million, or $1.24 a share, in sharp contrast to the $1.2 million loss, or 4 cents a share suffered in the third quarter of 2007. Analysts were looking for $1.22 a share for earnings.

Considering the company took a 10 cents-a-share charge on income lost from drydockings, it was a good quarter. The company said out of the 50 days ships were out of service, 33 of them were planned. Until 2010 there are no more scheduled drydockings.

Much of the success for the third quarter was because the average vessel received a day rate average of $68,362 a vessel, much better than the expected average of $64,000 a vessel. The company added that what is called the Suezmax spot market is still going strong in the fourth quarter as well.

Suezmax tankers refers to the largest ships that are able to travel through the Suez Canal. Rates for the fourth quarter are over $55,000 on average, and trading at $65,000 a day. This is far above the $40,000 some analysts are looking for for the fourth quarter.

At this time expectations are day rates for 2009 will be around $37,000 for Suezmaxes, which would end up paying out $3.50 a share for the year. That would be a significant decline from the $4.89 paid out this year. It remains to be seen if the $37,000 is a realistic figure, as the market has resisted downward moves so far.

Nordic announced it would pay out $1.61 a share in dividends on Friday, far above the $1.50 some were looking for.

Top executives told investors that they are in a solid position as a company, even in the current economic crisis, and are in good shape going ahead. They reminded shareholders that they have no debt, finances are in good shape, and they have a $500million revolving credit line in place through September 2013.

Some of that credit line is being used to finance two new vessels to be put into service in the early part of 2010. There is also $31 million in cash available as of the end of the third quarter.

The top variable to consider going ahead is the exposure Nordic has in the spot market, with only one of their twelve tankers on a long-term fixed rate charter. The other eleven are working in the spot market. As mentioned earlier, the spot market looks to be weaker in 2009 than in 2008, yet it was supposed to be weaker in the third and fourth quarter, and yet has remained much stronger than expected.

While the current economic conditions should eventually slow things down for Nordic, you've got to feel pretty good about their prospects and how the leadership in the company has been managing the risk.