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Thu 24 Feb 2011 01:06 PM

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Arab revolts may spark severe oil market shortages

Goldman says oil market at tipping point, can’t accommodate another disruption after Libya

Arab revolts may spark severe oil market shortages
OIL PRICES: Brent oil surged over 7.5 percent to its highest since August 2008 on Thursday
Arab revolts may spark severe oil market shortages
oil, gas, oil and gas, energy, oil refinery, GCC energy, Middle East energy, OPEC

Goldman Sachs said on Thursday oil markets were driven by
fears of unrest contagion to other producing nations after Libya and that
another disruption could create severe oil shortages and require demand
rationing.

"The market cannot accommodate another disruption, in
our view, with the problems in Libya potentially absorbing half of OPEC's spare
capacity," Jeffrey Currie said in a research note.

Brent oil surged over 7.5 percent to its highest since
August 2008 on Thursday on concern the bloody unrest that has cut more than a
quarter of OPEC-member Libya's crude output could spread to other major
producers, including top exporter Saudi Arabia.

"This makes the risks now associated with further
contagion much higher than they were several days ago, as further disruptions
could now create severe shortages in global oil markets that would require
substantial demand rationing," Currie said in his note.

"Although we still see contagion to the large energy
producers in the Gulf as relatively low, the stakes associated with further
contagion are now much higher, which creates even further upside risk to our
price forecasts," the note said.

However, it added that the high level of global inventory
could easily accommodate a full outage of Libyan only exports for more than 100
days and OPEC spare capacity could easily absorb the entire loss if needed.

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E.C. Tan 9 years ago

It's impossible because Libya's oil production is accounted for only 2% of global total production. Oil price sky rocketed is due to pure speculation just like before. Example, South & North Korea had conflict recently oil price went up. Iranian naval ships passed thru' Suez canal, oil price went up. The speculators took every opportunity in the world events to raise the oil price.

Suleyman 9 years ago

Knowing Goldman's key role in creating, and profiting from, the baseless oil price bubble of 2008; you can be sure that this statement is designed as part of another manipulation where Goldman (and similar entities) will make a killing on the price movements, at the expense of the real consumers of the physical product. The bankers greed game has no rules and no limits.