Will we see oil prices higher than during the Katrina crisis?


http://www.globeinvestor.com/servlet/story/GAM.20070328.ROIL28/GIStory/

Spectre of Iran war spooks oil markets
SHAWN MCCARTHY


00:00 EDT Wednesday, March 28, 2007

OTTAWA -- Anxious energy traders displayed a hair-trigger reaction yesterday to tight crude oil markets, driving prices sharply higher on a mere rumour of military confrontation between Iran and the United States and its British ally.

And analysts said North American motorists face the potential for much higher prices in the coming driving season if the standoff over Iran threatens to disrupt crude oil shipments in the Middle East.

In after-hours trading yesterday, U.S. crude oil futures spiked more than $5 (U.S.) a barrel to briefly top $68 -- the highest mark since last September -- after rumours surfaced of military action over Iran's seizure of 15 British marines and sailors.

After the initial surge, prices settled back to $64.50 a barrel, up $1.59 from Monday's close.

Calgary-based oil analyst Peter Linder said the market is extremely nervous about the potential for war in Iran, and any subsequent closing of the Gulf of Hormuz, through which about two-fifths of the world's oil passes.

"This is the most dangerous area in the world in terms of supply and demand for oil," said Mr. Linder, vice-president of investment for Delta One Energy Fund.

"If there is war with Iran and the straits are closed, you could see $100 oil. So you ain't seen nothing yet -- possibly."

A Pentagon spokesman said the U.S. military was not aware of any confrontation in the Persian Gulf.

"I'm not aware of anything. No one is beating down the door," said Defence Department spokesman James Turner, when asked about a possible military response.

Mr. Linder noted that prices spiked to a record $78 last summer based on concerns about Iran's nuclear program and the loss of several hundred thousand barrels of oil supplies a day when the Alaska pipeline was shut down.

A military confrontation with Iran would have a far greater impact, he said.

So far there has been no disruption to Iran's daily shipments of around 2.2 million barrels, but supply concerns helped push U.S. oil to a three-month high of $63.30 Monday.

Bart Melek, commodities analyst with BMO Nesbitt Burns, said traders had largely ignored the growing threat in Iran, but can now be expected to build in a risk premium that could add as much as $10 to the price of crude oil.

Even as Iran looms increasingly large in world oil markets, traders also had to digest a renewed threat from weather forecasters about storms on the U.S. Gulf Coast, which is still rebuilding from two powerful hurricanes that hit in 2005.

After a quiet hurricane season last year, Florida and other Gulf Coast states likely will be hit again with destructive storms, private weather forecaster AccuWeather said yesterday.

U.S. crude traded lower for much of yesterday's session before rebounding in late activity.

Additional support for crude came ahead of U.S. government oil inventories to be released today.

Analysts forecast the data will show a gasoline draw of 1.8 million barrels for the week ended March 23, the seventh successive week of declines.

The data were expected to show a rise of 1.6 million barrels in crude stocks, with distillates down 1.2 million barrels, a Reuters poll showed.

Dire Strait?

Analysts fear Iran could seek to impede trade through the Strait of Hormuz if it were threatened or attacked. The strategic channel at the entrance to the Persian Gulf is among the world's most important waterways because of the huge volume of oil exported through it daily.

Oil flow through the strait accounts for roughly two-fifths of all globally traded oil, according to the U.S. Energy Information Administration (EIA).

Some 16-17 million barrels are carried through the narrow channel on tankers daily, according to the EIA.

Some two million barrels of oil products, including fuel oil, are exported through the passage daily.

Ninety per cent of oil exported from Gulf producers is carried on oil tankers through the strait.

SOURCE: REUTERS NEWS AGENCY

© The Globe and Mail

Mr. Mahmood,

How much did you bag from oil companies to stage this drama ?

Does this halt the oil production ?

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The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM