Monday, January 9, 2012

New Poll At the Sidebar at the Right: Will Events in The Mideast Result in Price Spike in the Near Term?


January 23, 2012: Just when I thought "this" was all going to end -- see story below -- Iran was giving in to the US re-entering the straight. But today, midday here in the US, Iran says it will definitely block the strait. Well, that's what the headline says, but the story is slight less definite. Iran's most recent statement follows EU voting, clearly, to put the Iran embargo in place: all contracts must be null and void within six months. Well, that gives us six more months of negotiations. No link, on purpose.

January 21, 2012: Iran just blinked. Iran's Revolutionary Guards welcome back the US Navy. I guess we plucked so many of their sailors out of the brink, they thought things "go better" with the US Navy in town.

January 17, 2012: I asked readers about a week what they thought the Iranian saber-rattling might mean for the oil markets. Motley Fool is asking/answering the same question.
If analysts are correct, the conflict will pass without a conflict because the effect on Iran would be far greater than on the U.S. or its allies. But the impact of sanctions is already being felt, and it may not be affecting the world in the way you would think.

There's no surprise that oil has traded higher recently on fears that Iran will retaliate. But the move has been subtle and hardly the kind of spike you might expect if threats were actually going to occur. That's partly because traders don't think the threats are going to lead to action and partly because this kind of geopolitical risk is already baked into the price of oil.
With worldwide oil supply relatively constrained, that will put more pressure on domestic oil companies and offshore drillers outside of the Middle East. Statoil, Whiting Petroleum, Continental Resources, and Kodiak Oil & Gas have more than a million combined acres in the Bakken shale play, the fastest-growing oil production play in the U.S. and higher potential prices could mean even more drilling. [COMMENT: way more than a million combined acres; CLR, by itself, has almost 1 million acres; WLL - 680,000; BEXP (Statoil) -- 380,000; and, KOG -- 150,000 which is another million.]

Growing production in the Gulf of Mexico, off the Atlantic, and even in Alaska could be keys for U.S. oil production as well if the Iranian fallout spreads. The Obama administration is opening new locations in the Gulf and Alaska for future sales, but rising oil prices or production disruptions in the Middle East could put pressure on the government to speed up the process.

No matter how you look at it, increasing domestic oil production both on and offshore will be critical if this dance with Iran goes on much longer.
January 12, 2012: price of oil slips below $99 on word EU gets cold feet about Iranian embargo.

Original Post

I had no interest in blogging about this because I thought it was a non-story.

Two weeks ago, I truly felt that Iran would not do anything that would result in a spike in the price of oil.

And I felt that way even as recently as an hour ago.

But with this article in Rigzone, I'm beginning to wonder.

It's not the article per se that makes me doubt my initial thoughts, but it's the number of articles and where those articles are posted that make me wonder.

I guess if I were a betting man, I would still bet that nothing is going to happen in the Mideast in the next six months that will cause a spike in the price of oil, even temporarily.

But, I'm curious. What do others think? Is the current Iran threat to close the strait just political theater, and nothing will happen, or is there some substance to this? Is there a reason the President of Iran Mahmoud Ahmadinejad is visiting Venezuela at this particular moment? Is Ahmadinejad looking for advice, or is he looking for support from Chavez? Will Chavez tell Ahmadinejad to "go for it": block the strait. Chavez, with cancer, doesn't have much to lose. 

I've put up a new poll on the sidebar at the right. Will events in the Mideast result in a spike in the price of oil, no matter how temporary, within the next six months?

I'm going to vote "no." I think it's all political theater for Ahmadinejad's followers back home.

I could be very, very wrong. But, wow, I just don't see it.

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