After Friday’s spurt in oil prices many look for a correction. If so, we caution taking that to heart. Course of least price resistance for crude is to continue to be north.
Friday’s spike in oil prices is attributed by observers to a weaker dollar, to fears of violence in Nigeria, to better US demand, to a blackout in Venezuela, to Japan’s boosted appetite with nuclear off line, to the extenuation of events in Libya.
No doubt some or all of these play a part but the heart of darkness is growing Saudi - Iranian tension in the region; all the rest pale by comparison.
From the Jerusalem Post: “The Saudi intervention in Bahrain last month ensured, at least for the moment, that the reigning al-Khalifa family would survive. But it has also set the scene for a growing, open confrontation between Tehran, which wants to extend its influence and power into the energy-wealthy Arab monarchies and emirates of the Gulf, and Western-aligned Saudi Arabia, which sees itself as the protector of Sunni power in this area. This rivalry is being played out around one of the most strategically vital areas of the world. It contains vital US air bases and the headquarters of the US Fifth Fleet. The security of world energy supplies depends on stability and the expectation of continued stability here.”
It is this rivalry and potential conflict which motivated us weeks ago to advise clients to look past Libya.
This most powerful of potential events effecting oil prices will remain with us for some time.
Robert Craven
Friday’s spike in oil prices is attributed by observers to a weaker dollar, to fears of violence in Nigeria, to better US demand, to a blackout in Venezuela, to Japan’s boosted appetite with nuclear off line, to the extenuation of events in Libya.
No doubt some or all of these play a part but the heart of darkness is growing Saudi - Iranian tension in the region; all the rest pale by comparison.
From the Jerusalem Post: “The Saudi intervention in Bahrain last month ensured, at least for the moment, that the reigning al-Khalifa family would survive. But it has also set the scene for a growing, open confrontation between Tehran, which wants to extend its influence and power into the energy-wealthy Arab monarchies and emirates of the Gulf, and Western-aligned Saudi Arabia, which sees itself as the protector of Sunni power in this area. This rivalry is being played out around one of the most strategically vital areas of the world. It contains vital US air bases and the headquarters of the US Fifth Fleet. The security of world energy supplies depends on stability and the expectation of continued stability here.”
It is this rivalry and potential conflict which motivated us weeks ago to advise clients to look past Libya.
This most powerful of potential events effecting oil prices will remain with us for some time.
Robert Craven
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