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
The Incredibly Bullish Set-Up for Gold - 20th Oct 18
Here Comes the Stock Market Retest - 20th Oct 18
Waterproof Camera - Olympus Tough TG-5 Setup and First Use - 20th Oct 18
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

Market Oracle FREE Newsletter

Trading Any Market

Mounting Tensions in Middle East to Push Crude Oil Prices Higher?

Commodities / Crude Oil Aug 22, 2013 - 06:04 PM GMT

By: InvestmentContrarian

Commodities

Sasha Cekerevac writes: While many Americans might be disturbed by recent news of the ongoing mass violence in Egypt, it’s unlikely that many have considered the economic impact the growing violence could have on America. And if you think the impact won’t be all that significant, you would be wrong.

Oil prices are already seeing the effects of the violence, as the market sector is extremely sensitive to any increase in political uncertainty on the world stage.


While it is true that Egypt doesn’t actually produce much oil, there are two crucial factors that play into Egypt’s significance to this market sector: the Suez Canal and the Suez/Mediterranean pipeline.

Most people are unaware of how tight the supply of oil is globally. Any interruption in the supply chain will send oil prices up significantly.

We’re already seeing the impact the riots are having on the market, as oil prices have risen substantially over the past couple of months. This market sector doesn’t run with a lot of excess slack, and making up the shortage of supply is extremely difficult to do on a global basis.

According to the U.S. Energy Information Administration (EIA), approximately seven percent of all oil transported globally by sea went through the Suez Canal. If this route is affected, oil prices would have to rise, and this market sector would need to adjust to the lack of available routes.

The next available route from Saudi Arabia would be to go around the bottom of South Africa, which means a massive amount of additional miles. These increased costs borne out by this market sector would then translate to higher oil prices.

While the chances are low that the Suez Canal would be shut down completely, clearly, investors in this market sector are preparing for such an eventuality, as oil prices remain elevated. The one thing you don’t want to do as an investor is short oil prices, as violence continues to escalate.

But the Middle East’s tensions don’t end with Egypt. The energy market sector has to worry about Libya, which is incurring strikes by workers at its ports, and Iran is always a potential threat. While the new Iranian president, Hassan Rouhani, appears to be more moderate than the outgoing president, the country’s nuclear intentions remain unknown.

The Middle East is a powder keg and the entire energy market sector continues to watch for any additional sparks. Because the supply chain remains tight, I certainly wouldn't bet on lower oil prices until the violence calms down and some sense of normalcy resumes. However, at the moment, that seems like it won’t occur anytime soon.

This article was Mounting Tensions in Middle East to Push Oil Prices Higher? originally was published at Investment Contrarians

By Sasha Cekerevac, BA
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

About Author: Sasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what to look for as an investor. His newsletters provide an experienced perspective on what the big funds are planning and how you can profit from it. He is the editor of several of Lombardi’s popular financial newsletters, including Payload Stocks and Pump & Dump Alert. See Sasha Cekerevac Article Archives

Copyright © 2013 Investment Contrarians - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Investment Contrarians 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