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March 03, 2011 – Comments (6) | RELATED TICKERS: SPY , QQQ , OIL

Why should you beware? Its the Arab thing, its not over and the mother of all Oil Exporters is gonna be tested next Friday with tweeters saying a major protest is planned for Saudi Arabia. So while you may be partying like its 1999 today, within 7 days you may be crying like its the Crash of March 2000...

 

Oil shakes starting to unsettle Saudi Arabia

Jared Lynch

March 3, 2011 

FEARS that Saudi Arabia, the world's biggest oil exporter, could be destabilised and rock global economic recovery have edged closer to reality.

As oil prices reached a fresh 2½ year high - just shy of $US100 a barrel - on Tuesday night, the Saudi stockmarket dropped to its lowest since April 2009, shedding 6.8 per cent.

Economists believe the selloff was sparked by the jailing of a senior Shiite cleric, who was pushing for a constitutional monarchy in the predominantly Sunni Muslim kingdom.

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West Texas Intermediate crude jumped $US2.66 a barrel, or 2.7 per cent, to $US99.63. Gold climbed to a record $US1434.93 an ounce as investors, fearing the surging price of oil could boost inflation and dampen economic growth, looked to safety.

Westpac senior economist Justin Smirk said that if unrest escalated among Saudis, it would be worse than the oil crisis triggered by the Iranian revolution in 1979.

''Because of the way Saudi dominates oil production, it would be worse than what happened during Iran's unrest because there is no one else that could make up the gap [in oil supply],'' Mr Smirk said.

''There is some nervousness that locking up the cleric could actually fire up or further instigate unrest from the local Shiites, who of course are probably getting some support from Iran.''

Mr Smirk said that if oil hit $US140 a barrel, as it did during the global financial crisis, it would derail the US recovery.

''A negative growth shock from the US would have an impact on us. It could actually impact us with the price of our exports, and therefore our growth.

''China is a significant importer of oil as well and that too could introduce some significant uncertainties within their own economy.''

US Federal Reserve chairman Ben Bernanke said on Tuesday night a prolonged rise in oil prices would spark dangerous broader price hikes.

''Sustained rises in the prices of oil and other commodities would represent a threat both to economic growth and to overall price stability,'' he said in testimony to Congress.

Dominoes continue to tumble across the Arab world, with protests spreading from Bahrain and Libya to what many considered a ''sleepy'' Persian Gulf kingdom, Oman, which produces about 1 per cent of the world's oil.

Saudi Arabia has increased its oil production after exports from Libya, about 2.3 per cent of world supply, almost entirely halted in recent days.

But Scotiabank commodities specialist Patricia Mohr said more disruptions to oil supplies would drastically tighten the market.

''In that event, members of the International Energy Agency which includes the United States, can be expected to temporarily release their strategic petroleum stocks, maintained for emergencies,'' she said.

 

6 Comments – Post Your Own

#1) On March 03, 2011 at 4:03 PM, catoismymotor (< 20) wrote:

It is like watching a storm roll in. All you can do is observe and do your best to ride it out.

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#2) On March 03, 2011 at 4:22 PM, L0RDZ (80.30) wrote:

In the middle east unless there is strong leadership  that doesn't tolerate any of the nonsense, they'll riot every day any day over the most triffling of circumstances. 

Let them demonstrate, the sooner we make the middle east insignificant the better, let them drink their poor quality oil ~ the heavy sour that is more costly to refine, personally I don't really care, let them do their ARAB thing ?

From what I hear most of the oil workers are not middle eastern but are hard working expatriates.

Look at that nonsense in Pakistan in which 2 criminal thieves were running around robbing people with ak-47's and they happened to mess with the wrong one and got killed, look at how they wanted to punish and kill the guy who defended himself but could care less about the guy who drove a car and hit and killed a by-stander trying to save the first guy.

I say cut off all the aid to the middle east  and let them handle their own business without any interference.

Our foreign policy has made us a target for too long.

 

 

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#3) On March 03, 2011 at 4:55 PM, L0RDZ (80.30) wrote:

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html

  Crude Oil and Total Petroleum Imports Top 15 Countries

December 2010 Import Highlights:  Released February 25, 2011
Monthly data on the origins of crude oil imports in December 2010 has been released and it shows that four countries exported more than 1,000 thousand barrels per day to the United States (see table below). The top five exporting countries accounted for 72 percent of United States crude oil imports in December while the top ten sources accounted for approximately 88 percent of all U.S. crude oil imports. The top five sources of US crude oil imports for December were Canada (2,064 thousand barrels per day), Mexico (1,223 thousand barrels per day), Saudi Arabia (1,076 thousand barrels per day), Nigeria (1,024 thousand barrels per day), and Venezuela (825 thousand barrels per day).

 

Worst case scenario any supply disruption from Saudi's at best only would at most affect 25% of the US supply of which the higher prices in oil would readily have Canada or Mexico eagerly make up any difference and or the US strategic reserve could easily drop the cost by expanding the available supply of oil.

Anyone every ask why oil across the pond is like 15 dollars more expense than it is on our side ?  Because we are oversupplied and its rather costly to store excessive oil  here while other in Europe they are undersupplied because its much cheaper to store oil and speculate it on ships rather than make it available.

 

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#4) On March 03, 2011 at 4:58 PM, selfdestruct2 (32.01) wrote:

Catoismymotor, ride out the storm and buy oil stocks, right?

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#5) On March 03, 2011 at 5:02 PM, ChrisGraley (29.72) wrote:

Anyone else topping off the gas tank on Thursday as well?

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#6) On March 03, 2011 at 6:38 PM, catoismymotor (< 20) wrote:

Selfdestruct2, no. Silver and gold miners. :)

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