Alaron Energy Commodity Comment

CHICAGO - Feb 5/07 - SNS -- Following is the oil and ethnaol futures comment from Alaron Trading Corp.

Last week we mentioned how the Supreme Grand Pooh-Bah Ayatollah Ali Khamenei thought that the counties that control close to half of the worlds natural gas supply should start there own little gas cartel. Well it seems that President Vladimir Putin kind of likes the idea and says it is very interesting to him. Mr. Putin seems very interested in the power that energy dominance brings and is thirsty for even more. Of course many experts doubt that a Russian Iranian cartel is a threat and in fact Business Week on line says that a “Gas OPEC" is a pipe dream.

Yet the truth is the experts may be missing the larger significance and there might not be a gas cartel but a new cartel to undermine the power of Saudi Arabia. That’s right. Iran is already in a cartel and the truth is that they are not very well liked especially by the in de facto leader of the cartel and chief swing producer, Saudi Arabia. It rankles the Iranians that the Saudis control the cartel and that Iran’s more aggressive viewpoint on supply is ignored because the Saudis hold all the cards as the top oil producer. In fact the only other producer in the world that could hold a candle to the Saudis is, you guessed it, Russia.

Russia controls 26.7 percent of the world's natural gas supply as compared to the United States 2.9% share and is expected to supply Europe with three quarters of its gas supply. IfRussia and Iran decide to withhold its oil and gas, the size of their combined cooperation could send prices soaring. But even more ominous would be if Iran and Russia decided to start a new oil cartel and enlist other disgruntled members of the old cartel to stand up to Saudi Arabia and its control of the cartel.

Maybe at this point it is a pipedream but the cooperation between Russia and Iran raise a lot of security issues and not just oil security. Russia has not been as helpful as it could be in dissuading the Iranians to give up its quest for nuclear weapons.

Now we all knowIran is still a major threat to world oil supply and the reason we know that is that they keep telling us they are. Iranian President Mahmoud Ahmadinejad has threatened to blow Israel off the face of the earth and has basically threatened to blow anyone off the face of the earth that dares stand in the way of their nuclear ambitions. Iran has threatened to cut off the Straights of Hormuz where 20% of the worlds oil supply travels through on a daily basis! Iran is also sponsoring terror in the region. They have supported the insurgents in Iraq and have been behind the war between Hezbollah and Israel in Lebanon.

These threats make it clear that Iran, the world's 4th largest oil producer, is a reason that oil prices will remain strong. And if they join forces with Russia, it could change the face of the oil power balance as we know it. It is possible that Iran is looking to join forces with Russia to create an alternative cartel from OPEC?

And in Venezuela President Hugo Chavez is making May Day a new Venezuelan holiday - as in get out of town day. May first is the socialist workers day and is the deadline for foreign oil companies to surrender control of their big oil projects.

Russia has also decided to sell Venezuela a missile defense system that supposedly is a defensive system that will protect them from US attack.

We're long March crude from apprx 5151 - raise stop to 5600!! Put in a profit target of 6400!

We're long March RBOB from apprx 15200 - raise stop to 15100. Put in a target of 17000!!!

We're long March heating oil from apprx 15600 - raise stop to 16200. Target 18000!!!

Buy March natural gas at 730 - stop 690.

Phil Flynn

Alaron Research Team

800.935.6487

pflynn@alaron.com

www.alaron.com

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