Beware of Party like its 1999 DJIA is up +200 points
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
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.