Oil prices expected to soar in wake of killings

Financial Times ^ | May 30, 2004 | Carola Hoyos and Javier Blas

[sarcasm]

Oil prices are expected to surge - if only temporarily - when already jittery markets reopen globally on Monday after the weekend attack on oil industry personnel in Khobar, eastern Saudi Arabia.

Although Saudi Arabian oil supplies were not interrupted and Khobar, the Persian Gulf coast town, has no production, export or refining facilities, analysts said on Sunday that fears about the stability of the Saudi regime, the world's most important oil exporter, and further al-Qaeda-linked attacks will be deepened by the raid.

So concerned are markets about supply shortages that the recent Saudi pledge to raise production levels ahead of Thursday's meeting of Organisation of Petroleum Exporting Countries has done little to push prices below the recent $40 per barrel level.

"Now terrorist attacks are targeting one of the core points of the global oil system," said Antonio Merino, chief economist of Repsol YPF, the Spanish oil company. "This is especially relevant at a time when it is generally accepted that more Saudi oil is needed."

The effects of the attacks on global markets may be softened by holidays today in both the world's most important trading centres, New York and London. The much smaller Singapore oil market will be the first test today.

Following a similar terrorist attack in Saudi Arabia this month, crude futures soared nearly $2 per barrel in the first 48 hours of trading.

Despite fears of a growing campaign by Islamic extremists, however, oil installations in Saudi Arabia remain much more tightly secured than the offices and homes that were hit at the weekend.

Pipelines are buried deep beneath the desert and computerised control rooms in concrete bunkers direct theflow of crude at the kingdom's most important processing plants north of Dharhan.

Of more concern is the potential exodus of western experts, largely US and British, whom the Saudis rely on for expertise. Recent attacks have not seen a large outflow of expatriates, despite calls by the US state department for Americans to leave.

[neutrino]

Hello, Sarcasm!

This is an interesting situation. Oil prices don't just affect us - they also affect China. And China needs a lot of growth to keep the populace calm.

We live in interesting times; I think they'll get a lot more interesting.

[LuigiBasco]

Hey /sarcasm,
Do you know your name is mentioned quite often here on FR?

[Ernest_at_the_Beach]

Thanks for posting this . Marketflash says nothing to worry about:

Saudi Militants Hitting Westerners, Not Oil

[Asclepius]

Now would be the time for savvy speculators to off-load their oil shares only to buy them back when prices quickly recover to market levels.

All that lovely money at the low, low cost of a few westerners shot dead.

You don't think that Arab oil dealers and their terrorists comrades are in cohoots, do you?! Wait, no, that would be dumb.

[xJones]

How interesting. Suddenly the price of gasoline soared in the last few weeks. Then Saudi Arabia pledged to up their oil production. Then there were the kidnappings in Saudi Arabia which threatens all foreign workers whom the Kingdom depends on because they've never learned to produce their oil themselves.

Now there's predictions of further increases in prices, and all this during the countdown to a crucial U.S. presidential election. Interesting, to say the least.

[sarcasm]

Oil prices don't just affect us - they also affect China. And China needs a lot of growth to keep the populace calm.

They could simply cut the link between the RMB and the US Dollar.

[neutrino]

They could simply cut the link between the RMB and the US Dollar.

I'd love that! Their cost for oil would plummet - and so would their exports to the U.S.

China to mission control...we have a problem! (Wicked grin)

[xJones]

You don't think that Arab oil dealers and their terrorists comrades are in cohoots, do you?!

Cynic, of course not.

There was the dramatic scene broadcast live of valiant Saudi troops climbing down inadequate ropes to rescue the hostages in the building. Several hostages had already had their throats cut, but our Saudi allies did their best. Some of the kidnappers got away even in that restricted area, but no doubt they were exceptionally lucky.

In'sha Allah and all that because remember that we are talking about Saudi Arabia, the homeland of al Queda.

[sarcasm]

and so would their exports to the U.S.

That I doubt.BTW, the current edition of The Economist has an estimate of the real value of the RMB - let me find it.

[sarcasm]

MASH HERE

[LoudRepublicangirl]

Maybe there needs to be an emergency meeting regarding our energy policy. Those idiots who didn't want to drill in the Anwar and other places in the U.S. should pay to fill up all our tanks in the meantime.

[neutrino]

An interesting article, especially the point about relative contributions of China and the US to global economic growth.

But if the dollar declines in value, it seems to me that either the U.S. level of imports would decline a lot, or the trade deficit would increase a lot.

Is it your position that we'd let the trade deficit increase to such an extent?

[sarcasm]

Is it your position that we'd let the trade deficit increase to such an extent?

Nothing will be done about the trade deficit until the dollar plunges and foreigners start dumping U.S. debt.

[taxesareforever]

You gotta be kidding. Oil prices go up because of this? Why should anyone be surprised. They go up because of rumors. They go up because the weather gets cold or hot or cloudy. Or even it there is a chance of rain. This notice had to have come from Comedy Central.

[neutrino]

So, in other words, you're suggesting that the U.S. as a whole will function the same as would a profligate who abuses his credit cards, and won't stop spending until dragged, kicking and screaming, into bankruptcy court.

I can see the wisdom in your words! (Grin!)

[zencat]

Many times conventional wisdom doesn't work in futures markets. Oil may actually decline since the situation came to an end so quickly and did not affect any oil facilties.

I certainly wouldn't be long over this incident.