Quotes: MENA   Enter Symbol: NewsLetter: Search: advanced

Syria and crude oil shocks  Join our daily free Newsletter

MENAFN - Khaleej Times - 03/09/2013
No. of Ratings : 0
Add to Mixx!



(MENAFN - Khaleej Times) Syrian scenarios now obsess world financial markets.

The October contracts for Brent and West Texas oil futures eased to 115 and 108 after the British parliament rejected David Cameron's vote to participate in Barack Obama's coalition for a strike in Syria.

Westminster obviously has too many bitter memories of Tony Blair's "poodle diplomacy" in the countdown to the Iraq War in 2003. The Arab League has also declined to support a US strike on Syria, unlike the case in Libya. The Pentagon and White House sources suggest the US is prepared to launch a surgical strike on Syria military targets to punish the Assad regime after it violated Obama's red line on chemical weapons. In the Mediterranean, US naval warships position for cruise missile strikes off the Syrian coast. The world's stock markets have mostly fallen in August and some Asian currencies (Indian rupee, rupiah, peso, baht and ringgit) are in a free-fall against the dollar. I reiterate my call for Brent to rise to 120 by October.

The prospect of US military intervention in Syria comes at a crucial moment in Middle East oil politics. Two months after the Egyptian military high command overthrew the Muslim Brotherhood government of Mohammed Mursi, violence still rages in the Sinai, a threat to the four million barrels of oil and refined products transported across the Suez Canal, the region's second most significant energy choke point after the Straits of Hormuz. Iraq's oil exports and production have also fallen as violence has escalated against the provinces of Anbar and Diyala even as the government of Nouri Al Maliki is embroiled in a dispute over oil and gas drilling with the Kurdish Regional Government in Erbil.

Sectarian violence in Iraq is now at its worst levels since the departure of American combat troops. The Kirkuk-Ceyhan northern pipeline alone has been attacked multiple times in August alone and exports have almost valued below 200,000 barrels a day. Iraq could even be unable to supply Chinese, South Korean and Taiwanese refineries who were forced to switch to Basra Light, Iraq crude after the US and EU embargoed imports of Iranian oil. Libya's militias have also disrupted its oil terminals and ports on the Mediterranean and caused production to drop to post-Gaddafi lows of 800,000 barrels, far below 2010 production levels of 1.6MBD. The inflow of Syrian refugees has led to economic and political stress in Turkey, Lebanon, Jordan andraqi Kurdistan. Syria's role as a minor LNG producer in Deir Zor is dwarfed by diplomatic backing by Russia and Iran.


The worst-case Brent scenario is an unanticipated escalation of the Syrian crisis to a wider Middle East war. The Assad regime could retaliate by firing its Russian-built missiles at the US Sixth Fleet in the Mediterranean or, as Saddam Hussein did during the 1991 Gulf War, against other targets. Energy infrastructure is an obvious target to disrupt the global economy, as the "tanker war" in the Gulf of the late 1980s or the sabotage of 600 Kuwaiti oil wells in 1991 demonstrate. If a strike on Syria leads to Iran and Hezbollah's direct military involvement, oil prices will panic since the Opec's spare capacity is down to one MBD even as economies of China, Europe, US and Japan rebound.

If Turkey bombs Syria, Assad's missiles could retaliate against the Turkish oil port of Ceyhan, the terminus of Iraqi Kurdistan natural gas pipeline. Ceyhan is three hours from the Syrian border and while no Rotterdam, Singapore or Houston, the Turkish oil port is the hub of one per cent of the world's oil production. In a worst-case scenario, Brent could well rise to 150 and trigger a global economic recession, as oil shocks did in 1973, 1979, 1990 and 2008.

The best-case scenario for oil markets would be a US missile or stealth bomber strike on Syrian military targets that does not lead to retaliation by the Assad regime. Obama's credibility (red line on chemical attacks) in international relations requires a military strike that does not lead to involvement in the civil war. The Kremlin could decide that Gazprom exports to the EU are more crucial to Putin's own regime survival than backing Assad to the bitter end.

The Kremlin backed losers like Gaddafi and Saddam in past oil wars. This could cause Brent to fall to 105 but no lower since the geopolitical risk premium in oil prices is not limited to the Syria crisis alone.

Brent could fall below 100 if Iran's Supreme Leader decides that sanctions hyperinflation and oil sales embargoes could be lifted with a diplomatic rapprochement with the White House. It is not coincidental that Russia is the largest supplier of Urals trade, gas and coal to Europe and therefore gains from Middle East tensions. This is not the case in Iran, whose oil production has fallen from four MBD before sanctions to 2.5MBD now, below the output of Texas. An oil crisis benefits Moscow but not Tehran.

 


Khaleej Times




  MENA News Headlines
 Jul 2 2016 - Jordan to cut 77 percent of GDP by 2021MENAFN
(MENAFN) Jordan aims to introduce a program of far-reaching structural reforms in order to face economic challenges.Accordingly, the new financial measures would target boosting the GDP and enhance ...

 Jul 2 2016 - Saudi, France discuss Vision 2030MENAFN
(MENAFN) Saudi Arabia's Vision 2030 is a catalyst and accelerator for development, which aims to enhance non-oil revenues.Additionally, there is a focus on growing regional content in industry and ...

 Jul 2 2016 - Dubai to invest USD1bn in road projectsMENAFN
(MENAFN) Dubai is doubling down on its bet that investments in transportation will spur the emirate's economy as lower crude prices strain budgets.Moreover, Dubai predicts to seek bids among 8 months ...

 Jul 2 2016 - Perplex Launches First Hershey-Area Escape RoomMENAFN Press
(MENAFN Press) Immersive puzzling experience opens just 10 minutes from Hershey, PA What kind of business celebrates its grand opening by locking its doors? As the first escape room in ...

 Jul 1 2016 - Global Military Radars Market Receives Impetus from Development of Advanced TechnologiesMENAFN Press
(MENAFN Press) Albany, New York, July 1, 2016 The global military radar market is projected to expand at a considerable pace over the coming years owing to the urgent need for improved security ...

 Jul 1 2016 - Explanation of Vote at the Adoption of UN Security Council Resolution 2296 on the Situation in DarfurMENAFN Press
(MENAFN Press) Explanation of Vote at the Adoption of UN Security Council Resolution 2296 on the Situation in Darfur WASHINGTON D.C., United States of America, July 1, 2016/APO/ -- Ambassador David ...

 Jul 1 2016 - Mediterranean Migrant Arrivals in 2016: 225,095 Deaths: 2,889MENAFN Press
(MENAFN Press) Mediterranean Migrant Arrivals in 2016: 225,095; Deaths: 2,889 GENEVA, Switzerland, July 1, 2016/APO/ -- IOM reports an estimated 225,095 migrants and refugees entered Europe by sea ...

 Jul 1 2016 - Rising Student Competition and Reducing Passing Rate in Competitive Exams to Drive the Future Growth in Enrollment for Test Preparation Tutoring in India: Ken ResearchMENAFN Press
(MENAFN Press) Increasing number of internet users and Career Advancement Preferences is increasing the demand for online as well as offline test preparation market in India. The number of ...

 Jul 1 2016 - WFP and Sudanese NGO to promote food security and nutrition in SudanMENAFN Press
(MENAFN Press) WFP and Sudanese NGO to promote food security and nutrition in Sudan NEW YORK, United States of America, June 30, 2016/APO/ -- The United Nations World Food Programme (WFP) and ...

 Jul 1 2016 - United Nations Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator, Stephen O'Brien Statement on the appointment of Yacoub El HilloMENAFN Press
(MENAFN Press) United Nations Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator, Stephen O''Brien Statement on the appointment of Yacoub El Hillo GENEVA, ...

more...


 





Google

Easy Forex

 
 

Middle East North Africa - Financial Network

MENAFN News Market Data Countries Tools Section  
 

Middle East North Africa - Financial Network
Arabic MENAFN

Main News
News By Industry
News By Country

Islamic Finance News
Private Equity News

How-To Guides
Technology Section

Travel Section

Search News

Market Indices
Quotes & Charts

Global Indices
Arab Indices

Commodoties

Oil & Energy

Currencies Cross Rates
Currencies Updates
Currency Converter

USA Stocks
Arab Stocks
 

Algeria 
Bahrain 
Egypt 
Iraq
Jordan 
Kuwait 
Lebanon
Morocco 
Oman 
Palestine
Qatar 
Saudi Arabia 
Syria
Tunisia 
UAE 
Yemen

Weather
Economic Calendar
Financial Glossary


Financial Calculators

RSS Feeds [XML]

Corporate Monitor

Events

Real Estate
Submit Your Property

Arab Research
Buy a Research

Press Releases
Submit your PR

Join Newsletters


 
© 2014 menafn.com All Rights Reserved.  Terms of Service | Privacy Policy | Contact Us | Advertise | About MENAFN | Career Opportunities | Feedback | Help