Wednesday , May 22 2024

Oil Prices Certain to Fall … Unless They Rise

On the one hand:

    If U.S.-led forces invade Iraq (news – web sites), world oil prices will probably plunge from current levels and stay there — so long as the conflict ends quickly and causes little damage to production capacity in the Persian Gulf, several energy analysts said Friday. [AP]

On the other…

    However, a war that spills into neighboring countries or one in which Saddam Hussein sabotages his own oil fields could panic markets and trigger a spike in prices to $50 or even $60 a barrel, some said.

Yet again..

    Analysts say that fears of a wartime disruption in supply have swollen crude prices by at least $5 a barrel. This so-called war premium has increased along with tensions in the Persian Gulf because markets worry that hostilities with Iraq will paralyze that country’s 2 million barrels in daily oil shipments.

    Although prices might rise in the last hours before any actual outbreak of hostilities, several analysts predicted that an attack on Iraq would knock the floor out from beneath the market – just as it did when coalition forces launched Operation Desert Storm on Jan. 16, 1991.

    Futures contracts of U.S. light, sweet crude plummeted by $10.90 a barrel on Jan. 17, 1991 to close in New York at $21.30.

    “History would suggest that oil prices would go down fairly rapidly, maybe $5-7 a barrel, probably within one day,” said Angus McPhail, an analyst at ING Financial Markets in Edinburgh, Scotland.

    He believes that markets will be awash in crude after a swift war, particularly if Venezuela continues to recover from an oil industry strike and other members of the Organization of Petroleum Exporting Countries keep busting their output quotas. For the second half of the year, ING Financial Markets foresees an average Brent crude price of $18.50 a barrel.

    “We are adamant that oil prices will fall,” McPhail said.

Then again…

    In a worst-case scenario, a wider war could inflame regional hostility to the United States and lead to another Arab oil embargo. Prices might then spike to as much as $60 a barrel, said Rob Laughlin, managing director of London brokerage GNI Man Financial.

    Former Saudi Arabian oil minister Sheikh Zaki Yamani agreed, telling an industry conference Friday that prices could exceed $50 a barrel if supplies from neighboring countries such as Kuwait and Saudi Arabia were interrupted.

I am voting short war, falling prices – about damn time on both counts.

About Eric Olsen

Career media professional and serial entrepreneur Eric Olsen flung himself into the paranormal world in 2012, creating the America's Most Haunted brand and co-authoring the award-winning America's Most Haunted book, published by Berkley/Penguin in Sept, 2014. Olsen is co-host of the nationally syndicated broadcast and Internet radio talk show After Hours AM; his entertaining and informative America's Most Haunted website and social media outlets are must-reads: Twitter@amhaunted,, Pinterest America's Most Haunted. Olsen is also guitarist/singer for popular and wildly eclectic Cleveland cover band The Props.

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