Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
Israel’s 50-Year Time Bomb, Pushing Palestinians to the Edge - 19th Oct 18
Bitcoin Trend Analysis 2018 - 19th Oct 18
History's Worst Stock Market Crash and the Greatest Investing Lesson! - 19th Oct 18
More Signs of a Stocks Bull Market Top and Start of a Bear Market in 2019 - 19th Oct 18
Stock Market Detailed Map Of Expected Price Movement Before The Breakout - 18th Oct 18
Determining the Outlook for Gold Mining Stock - 18th Oct 18
Investor Alert: Is the Trump Agenda in Peril? - 18th Oct 18
Stock Market is Making a Sharp Rally After a Sharp Drop. What’s Next? - 18th Oct 18
Global Warming (Assuming You Believe In It) Does Not Affect Gold - 18th Oct 18
Best Waterproof Compact Camera Olympus Tough TG-5 Review - Unboxing - 18th Oct 18
Silver's Time Is Coming - 17th Oct 18
Stock Market Volatility Breeds Contempt - 17th Oct 18
Gold 7-Year Bear Market Phase Is Over - 17th Oct 18
Gold - A Golden Escape - 17th Oct 18
Tec Stocks Sector Set For A Rebound? - 16th Oct 18
Real Estate Transactions are Becoming Seamless with Blockchain-Powered Data Sets - 16th Oct 18
Important Elements of a Viral Landing Page - 16th Oct 18
Stephen Leeb Predicts 3-Digit Silver and 5 Digit Gold?! - 16th Oct 18
BREXIT, Italy’s Deficit, The EU Summit And Fomcs Minutes In Focus - 16th Oct 18
Is this the Start of a Bear Market for Stocks? - 16th Oct 18
Chinese Economic Prospects Amid US Trade Wars - 16th Oct 18
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

Crude Oil $130 Could Be Just the Beginning as Libya Crisis Intensifies

Commodities / Crude Oil Mar 03, 2011 - 08:59 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDavid Zeiler writes: With rising violence in Libya looking increasingly like a war, the head of Libya's national oil company said yesterday (Wednesday) that crude prices could reach $130 a barrel within a month.

But that may be just the beginning, as other analysts have raised fears of oil prices topping $200 and even $300 a barrel.


"The oil market is very sensitive," Shokri Ghanem, chairman of Libya's National Oil Corporation, told Reuters. "Speculation is very important for the market. When you see that production in an important country went down you are afraid it will go down even more."

The two-week-old uprising in Libya, which seeks to remove Col. Moammar Gadhafi from power, has severely disrupted oil production there, cutting it to about 700,000 barrels a day from 1.6 million. That, combined with similar turmoil in several other oil-producing countries in the region, has pushed prices up more than $15 a barrel in the past month.

The price of Brent crude for April hovered around $116 yesterday, just a few dollars below its recent high of $119.79 on Feb. 24.

Libyan oil production almost certainly will decline further as long as the conflict goes on. Libya's oil industry relies on the expertise of foreign workers, most of which have fled for safety. To make matters worse, most of the oil facilities lie in rebel-held areas.

"If this continues [the price] will go up and up and I won't be surprised if the prices reach as high as $130 (per barrel) or more in the next month," Ghanem said.

Neither side showed any sign of giving in yesterday, with both rebels and government forces claiming to control an oil refinery in Brega, a port town about 120 miles southwest of the rebel-controlled city of Benghazi.

Gadhafi remained defiant, telling supporters, "We will fight until the last man and last woman to defend Libya."

Meanwhile, rebel leaders called on foreign powers to launch air strikes on strategic locations to "put the nail in [Gadhafi's] coffin."

One major concern is that the worsening conflict could completely halt the flow of Libyan oil -- a strong possibility if the country descends into a lengthy civil war. The U.S. clearly is worried this could happen.

"In the years ahead, Libya could become a peaceful democracy, or it could face protracted civil war, or it could descend into chaos," Secretary of State Hillary Clinton told Congress on Tuesday.

And with many other Middle East nations experiencing their own internal strife, further threatening the world's supply of oil, crude prices could soar past even $130 a barrel.

Although Saudi Arabia in particular has volunteered to compensate for the drop in Libyan oil production, that's likely a very temporary solution because of rapidly rising global demand, according to Money Morning Contributing Writer Kent Moors, Ph.D., and an expert on global energy.

"By 2012, soaring international requirements for oil may effectively reduce the Saudi surplus to about 2 million barrels a day," Moors warns. "That reduces the effective Saudi surplus after Libyan replacement to about 400,000 barrels a day."

Moors also pointed out that Libyan oil is light sweet (low-sulfur) crude, which is easier and cheaper to refine than Saudi Arabia's crude.

"So even if the volume concerns are met, the Saudi solution will still bring about an increase in prices for the end user," Moors said.

But as bad as that sounds, the greatest fear -- a widespread toppling of regimes in the Middle East -- would create price pressures on oil that seem nearly inconceivable.

"In an absolute worst-case scenario - if the entire Middle East falls under radical control - we could be looking at $300-a-barrel oil and pump prices of $9.57 a gallon," said Money Morning Contributing Editor Martin Hutchinson.

In addition to costing motorists an extra $2,700 per year in fuel costs, such a scenario would have grave implications for the U.S. economy.

Higher oil costs would triple the U.S. balance of payments, subtracting 4% from the U.S. gross domestic product (GDP), Hutchinson said. Those payments would also threaten the dollar and drive inflation much higher.

Hutchinson advises investors hedge against such economic disaster by taking positions in two Canadian tar sands oil companies, Suncor Energy (NYSE: SU) and Cenovus Energy Inc. (NYSE ADR: CVE).

Source : http://moneymorning.com/2011/03/02/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules