Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Land Rover Discovery Sport Rattling / Knocking Sounds From Car Pillars - 25th Apr 18
China Takes the Long View on Gold-Silver... and So Should You - 25th Apr 18
Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves - 24th Apr 18
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UK Gambling Statistics - What the Numbers Say - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Worries Escalate Over $200 Crude Oil and $6 Gas

Commodities / Crude Oil May 25, 2012 - 06:15 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDon Miller writes: Could new sanctions against Iran spark a crisis that drives oil prices to $200 a barrel?
The leaders of the Group of Eight (G8) economies certainly hope not.

Even still, they recently unveiled plans to tap into global emergency strategic oil reserves -- just in case.


Citing their "grave concern" over Iran's nuclear program and the "likelihood of further disruptions in oil sales" G8 leaders put the International Energy Agency (IEA) on standby to tap the reserves at a moment's notice.

"Looking ahead we...stand ready to call upon the IEA to take appropriate action to ensure that the market is fully and timely supplied," said the statement summing up their meeting last weekend.

But the G8 may just be trying to calm the markets before the storm. History shows that tapping into the reserves won't do much to prevent higher prices.

And there's no reason to believe this time will be any different.

New Sanctions Mean Higher Oil Prices
Even as Iran denies it's trying to build a nuclear bomb, Washington and Israel are imposing tough new sanctions to force Tehran to allow more U.N. inspectors on site.

The U.S. will kick things off by imposing a set of tough new sanctions in late June. Then matters will escalate dramatically on July 1 when the European Union begins an embargo of all Iranian crude.

The new sanctions may be the straw that breaks the camel's back when it comes to higher oil prices.

In fact, current measures have already reduced Iran's oil exports by more than a fifth this year.

What's more, in response to the tougher measures, Iranian Supreme Leader Ayatollah Ali Khamenei has denounced the sanctions and promised to close the Strait of Hormuz if they are instituted.

And make no mistake about it -- closing the Strait of Hormuz would put a chokehold on global oil supplies - and send the price of oil and gas into the stratosphere.

The narrow body of water links the Gulf -- and the oil-producing states of Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates (UAE) -- to the Indian Ocean.

On any given day, about 40% of the world's tanker-borne oil passes through a shipping lane only two miles wide at its narrowest point.

And although it's unlikely Iran could keep the strait closed for extended periods, it won't take long for crude prices to react, according to Dr. Kent Moors, Editor of Energy Advantage.

"Closing the strait would result in a rise in crude oil prices of between $20 and $40 a barrel in a matter of hours," he said.
Should the strait remain closed for 72 hours, traders will push up the price to $180 in New York, and closer to $200 in Europe.

As far as gas prices are concerned, each $1.00 rise in a barrel of oil would result in a 3.2-cent rise in a gallon of gasoline. So $200 oil equals roughly $6.00-plus gasoline.
And that's something the G8 leaders want to avoid - at almost any cost.

Releasing Reserves a "Non-Starter" for Oil Prices
It's unclear why the leaders have decided on a course of action that has failed to dampen oil prices in the past.

Last summer's decision to release 60 million barrels from IEA member strategic reserves in response to supply disruptions in Libya largely turned out to be a failure.

The experiment did drive down oil prices - initially. But even with Saudi Arabia pumping an additional 500,000 barrels of oil a day, oil prices still went higher.

When the program began on June 23, 2011, West Texas Intermediate (WTI) benchmark crude closed at $94.425 in New York, while Brent crude in London ended at $113.77.

When the release was called off on July 22, WTI stood at $99.175, and Brent was up to $117.80.

According to Moors, yet another release of reserves is a "non-starter."

"Should it be continued for any length of time, the strategic reserves would have to be replenished by purchasing crude at above market rates," Moors said. "It defeatsthe entire exercise."

Profiting From $200 Oil
So how can you protect yourself against the prospect of $200 oil?

If the Iranian crisis drags on for an extended period, investors should shift their focus to North American-based production, Moors says.

Companies - like Calgary-based Suncor Energy (NYSE: SU) - that are active in Canada's oil sands are one way to go.

Exchange-traded funds such as the United States Oil Fund LP (NYSE: USO) is another way to profit from higher oil prices.
But don't wait until it's too late...

What Kent learned on his way to an emergency meeting at Windsor Castle, leads him to believe that $200 a barrel is now a low-ball estimate.
You can learn more about Moors' Energy Advantage newsletter and the big move higher for oil prices by clicking here

Source :http://moneymorning.com/2012/05/25/high-oil-prices-worries-escalate-over-200-oil-and-6-gas/

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 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