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Shaky oil market tracks intractable Mideast conflict
By Amelie Herenstein
AFP
PARIS
Petroleumworld.com 08 11 06
The escalation of the Middle East conflict and the risk of unrest spreading to Iran is shaking up an already tormented oil market, which is once again hitting records.
Brent North Sea oil surged on Monday to a new record, at 78.64 dollars a barrel,
after the closure in Alaska of the largest oil field in the United States.
At the same time, the hurricane season in the Gulf of Mexico risks causing serious damage to US oil equipment, as was the case last year, analysts say.
The closure of the Prudhoe Bay field in Alaska, resulting in an output reduction of 400,000 barrels per day, added to the list of problems hitting crude producing countries like Nigeria, Iraq and Venezuela.
But another factor has been concerning operators recently: the four-week old conflict between Israel and Hezbollah in Lebanon and its role in complicating talks over Iran's nuclear aspirations.
Lebanon, Israel and Syria -- a modest oil producer -- do not have significant weight in terms of energy.
But Iran is the fourth crude oil producer in the world and a key member of the Organisation of the Petroleum Exporting Countries (OPEC).
With 10 percent of world reserves, Iran produces around 4.0 million barrels per day and exports about 2.5 million bpd to Asia and Europe.
Such a large output would be irreplaceable should a problem occur in current conditions because the gap between offer and demand on a world scale remains very narrow (between 1.5-2.0 million bpd), offering little room for manoeuvre.
"We are reduced to speculation, to conjecture since there is no problem (now). But there could be one," Francis Perrin, chief editor of specialised oil publication Arab Oil and Gas, told AFP.
The international ratings agency Standard and Poor's shook markets on Monday by suggesting four possible future scenarios, including the price of a barrel rising to 250 dollars if the conflict in Lebanon spread as far as Iran.
If Tehran blocked the Strait of Hormuz, which links the Persian Gulf and the Gulf of Oman, it would prevent tankers from transporting crude from major Gulf producers and could plunge the planet into a recession.
If there is a blockage, "there is no short term limit for the price of oil", said Olivier Appert, president of the French Oil Institute (IFP), underlining that "two thirds of reserves are in the Middle East".
Standard and Poor's "continues to believe that the most likely (occurence) is that those who keep a cool head will win out and that oil prices will back down". But the agency added that "unfortunately, the list of unfavourable options is almost infinite".
Whether the conflict in Lebanon spreads to neighbouring countries or not will determine the level of oil prices in the short term, according to the agency.
Perrin also thought that prices could still rise, but was "convinced that Iran will not, in cold blood, stop exporting its oil and will not let itself be dragged into the Middle East conflict".
For now, Tehran's message is "we do not want to stop our oil production, we will only do it if we are forced to", he added.
AFP 08 1607 GMT 08 06
Copyright ©2006 AFP. All Rights Reserved.
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