Why Oil Prices May Remain Strong, War or No War

By Katie Holliday

Uncertainty over rising tensions in Syria has driven oil prices to fresh highs in recent weeks, but analysts say the bullish sentiment is expected to stay regardless of whether or not the scenario escalates into a full blown war.

"Even if there is a war in Syria or no war in Syria I think oil will remain strong," said Sean Hyman, editor of Moneynews at the monthly newsletter Ultimate Wealth Report. "WTI could go from $108 to $117 [a barrel] and Brent could go from $115 to $125 [a barrel] very easily."

"You've got strikes of oil workers in Libya ... you've got Egypt really still in limbo with their government ... and you've also still got what could turn into a war in Syria. I believe you've got a big case for oil and oil stocks to go higher," he said.

Syria tensions were renewed this week after key U.S. congressional leaders voiced their support for President Barack Obama's call for a military strike against Syria to retaliate against its use of chemical weapons against civilians, making the likelihood of action look more imminent.

Libya's oil production has fallen to about one sixth of its pre-2011 civil war levels in recent weeks due to a month-long disruption by armed security guards who shut the country's main export ports. Meanwhile an attack on a ship passing through the Suez Canal over the weekend has flagged continued geopolitical risk in Egypt.

Han Pin Hsi, global head of commodities at Standard Chartered, said if Syria tensions ease, he doubted Brent would spike as high as $125 a barrel. It would likely trade in a $105-$115 a barrel range, while WTI would trade at a $5 discount to Brent, he said. "Oil will remain firm because of risks to supply from other oil producers: Iran is not coming back quickly, there are issues with Libya and tensions in the Middle East North Africa area will keep oil firm," he said.

However, oil could reach $125 a barrel if tensions in Syria escalate, Hsi added.

"It's anyone's guess what would happen to oil then, but we would probably see a spike. But oil at $125 a barrel would be a significant headwind for the already fragile global economy, causing a lot of problems, so it would not be sustainable for long," he said.

Last week, Societe Generale analysts laid out a case for Brent to spike to $150 a barrel temporarily if Syria's supporters seek to punish the U.S. and its allies for a military strike, a development many industry watchers see as a worst case scenario.

Last week U.S. crude reached its highest level in over two years, while Brent crude moved to its highest level since February. They have since pulled back. On Wednesday, Brent traded at $115.77 a barrel at mid-morning in Asia, while WTI traded at $108.29 a barrel.

Reposted from Daily Finance

A White-Hot Future for Oil and Gas

By JAMES KANTER


















Refining towers at the Zawiya oil refinery near Tripoli, Libya.

BRUSSELS — Opportunities in oil and natural gas have rarely been so bountiful. New finds and technological advances and fresh access to some countries are pushing exploration and production into areas once considered peripheral.

Some of the most promising new fields are in deep water off the coast of Brazil. Experts say they could yield as much oil as the North Sea. There have been significant strikes off the coast of French Guiana, north of Brazil, and off Ghana in West Africa.

Iraq is opening up after years of sanctions and war. It could be a second Saudi Arabia.

Russia is increasing production in its Arctic regions, while Canada is steadily producing more oil from its abundant tar sands.

In the United States, the vast deposits of natural gas found in shale rock could transform the country into a major energy exporter.

Those prospects “will certainly have significant impacts on the energy map,” said Maria van der Hoeven, the newly appointed executive director of the International Energy Agency, which advises member countries, including Germany, Japan and the United States, on energy policy.

The prospects are coming into view as revolution and instability threaten new investments in resource-rich countries like Libya and Iraq and after a nuclear disaster at the Fukushima Daiichi power plant in Japan that prompted Germany to declare it would phase out nuclear technology.

Fewer reactors should drastically increase demand for electricity from natural gas, while lower-than-expected growth in energy exports from the Middle East and North Africa could “radically alter the global energy balance,” Ms. van der Hoeven said.

Yet the new opportunities also present companies and investors with a dizzying array of risks — including the high cost of development and exploitation and the possibility that energy prices could fall, especially if the global economy slows drastically and energy demand slackens.

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Did The Price Of Oil Help Cause The Financial Crisis Of 2008? Will Surging Oil Prices Soon Spark Another Financial Crisis?

By Michael Snyder

The Economic Collapse

Oil prices are starting to spin out of control once again. In London, Brent North Sea crude for delivery in February hit 91.89 dollars a barrel on Friday. New York crude moved above 88 dollars a barrel on Friday. Many analysts believe that 100 dollar oil is a virtual certainty now. In fact, many economists are convinced that oil is going to start moving well beyond the 100 dollar mark. So what happened the last time oil went well above 100 dollars a barrel? Oh, that's right, we had a major financial crisis. Not that subprime mortgages, rampant corruption on Wall Street and out of control debt didn't play major roles in precipitating the financial crisis as well, but the truth is that most economists have not given the price of oil the proper credit for the role that it played in almost crashing the world economy. In July 2008, the price of oil hit a record high of over $147 a barrel. A couple months later all hell broke loose on world financial markets. The truth is that having the price of oil that high created horrific imbalances in the global economy. Fortunately the price of oil took a huge nosedive after hitting that record high, and it can be argued that lower oil prices helped stabilize the world economy. So now that oil prices are on a relentless march upward again, what can we expect this time?

Well, what we can expect is more economic trouble. The truth is that oil is the "blood" of our economy. Without oil nothing moves and virtually no economic activity would take place. Our entire economic system is based on the ability to cheaply and efficiently move people and products. An increase in the price of oil puts inflationary pressure on virtually everything else in our society. Without cheap oil, the entire game changes.

The chart below shows what the price of oil has done since 1996 (although it doesn't include the most recent data). With the price of oil marching towards 100 dollars a barrel again, many people are wondering what this is going to mean for the U.S. economic "recovery"....

Just think about it. What is it going to do to U.S. households when they have to start spending four, five or even six dollars on a gallon of gas?

What is it going to do to our trucking and shipping costs?

What is it going to do to the price of food? According to the U.S. Bureau of Labor Statistics, food inflation in the United States was already 1 1/2 times higher than the overall rate of inflation during the past year. But that is nothing compared to what is coming.

During 2010, the price of just about every major agricultural commodity has shot up dramatically. These price increases are just starting to filter down to the consumer level. So what is going to happen if oil shoots up to 100, 120 or even 150 dollars a barrel?

Demand for oil is only going to continue to increase. Do you know who the number one consumer of energy on the globe is today? For about a hundred years it was the United States, but now it is China. Other emerging markets are starting to gobble up oil at a voracious pace as well.

Not that the price of oil isn't highly manipulated. Of course it is. The truth is that the price of oil should not be nearly as high as it currently is. Unfortunately, you and I have very little say on the matter.

If the price of oil keep going higher, it is really going to start having a dramatic impact on global economic activity at some point. Meanwhile, oil producers and the big global oil companies will pull in record profits, and radical "environmentalists" will love it because people will be forced to start using less oil.

When it comes to oil, there are a lot of "agendas" out there, and unfortunately it looks like the pendulum is swinging back towards those who have "agendas" that favor a very high price for oil.

So what does that mean for all of us?

It is going to mean higher prices at the pump, higher prices at the supermarket and higher prices for almost everything else that we buy.

If the price of oil causes a significant slowdown in economic activity, it could also mean that a whole bunch of us may lose our jobs.

In an article that I published yesterday entitled "Tipping Point: 25 Signs That The Coming Financial Collapse Is Now Closer Than Ever", I didn't even mention that price of oil. There are just so many danger signs in the world economy right now that it is easy to overlook some of them.

Yes, it is time to start ringing the alarms.

The ratio of corporate insider stock selling to corporate insider stock buying is at the highest it has been in nearly four years. This is so similar to what happened just prior to the last financial crisis. The corporate insiders are seeing the writing on the wall and they are flocking for the exits.

Many savvy investors are getting out of paper and are looking for hard assets to put their money in. For example, China is buying gold like there is no tomorrow. The Chinese seem to sense that something is coming. But of course they are not alone. All over the world top economists are warning that we are flirting with disaster.

On Friday, Moody's slashed Ireland's credit rating by five notches to Baa1, and is warning that even more downgrades may follow.

Just think about that for a moment.

Moody's didn't just downgrade Irish debt a little - what Moody's basically did was take out a big wooden mallet and pummel it into oblivion.

Irish debt is now considered little more than garbage in world financial markets now. Unfortunately, Greece, Spain, Portugal, Italy, Belgium and a bunch of other European nations are also headed down the same road.

The truth is that the euro is much closer to a major collapse than most Americans would ever dream.

The world financial system is teetering on the brink of another major financial crisis, and rising oil prices certainly are not going to help that.

If the price of oil breaks the 100 dollar mark, it will be time to become seriously alarmed.

If the price of oil breaks the 150 dollar mark in 2011 it will be time to push the panic button.

Let's hope that the price of oil stabilizes for a while, but unfortunately that is probably not going to happen.

The truth is that the economic outlook for 2011 is bleak at best, especially if the price of oil continues to skyrocket.

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