(All contect in these articles should be viewed as opinion by our AP's)
Oil Prices Could be this year's outlying event
by: Tyler Wood February 22nd, 2012
The risk premium on Oil may be the outlier event of the year. Yes, just like it could have been last year. However, the tensions are mounting. Europe and Asia are buying and stockpiling oil in the event there is disruptions in supply from Iran. There are other things such as Greece, and the effect of its latest bailout on European demand along with the rest of the likely european bailouts. But in reality, there is an Iran risk premium being put into the price.
In the event conflict does rise in the area, Saudi Arabia could use its excess capacity to keep oil prices in check, but it hasn't done so since 2005. Many of the developed countries have been cutting back on oil consumption, but that conservation has been offset by dramatic consumption increases in China and other emerging nations, contributing to the problem. There really is no one country that can dictate or cap oil prices, especially with Iran producing 4 million barrels of oil a day. This kind of disruption could be a huge dampener to any major growth.
Iran said recently that it will stop selling oil to France and Britain in retaliation for a planned European oil embargo this summer.
France and Britain import almost no oil from Iran, so the statement is mainly symbolic, but it raises concerns that Iran's 4 million barrel a day production of crude could take the same hard line with other European nations that use more Iranian crude.
Carl Larry of Oil Outlooks and Opinions said in a report. "A real stoppage of 4 million barrels a day will send crude markets to at least $130,” “A stoppage longer than a month will push that number to $150. Damage to oil fields or transport areas will add even more premium that will not go away for years.”
Best Wishes,
Tyler Wood Alternative Investment Specialist
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