Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Rising Crude Oil Prices, Is Yemen the Next Trigger?

Commodities / Crude Oil Apr 05, 2011 - 05:52 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleJon D. Markman writes: Crude oil futures spiked to a 30-month high on Monday - and crude prices have zoomed 19% so far this year - so it's no surprise that energy stocks have enjoyed one whale of a run.

Even so, energy stocks continue to top my list of favorite plays - and for one very good reason.


I'm talking about Yemen.

Small Country/Big Potential Impact
Oil futures rose past the $108-a-barrel level in New York yesterday (Monday), a price point they haven't seen for 30 months.

Ask the typical American consumer why oil prices have taken up residence in such a pricey neighborhood, and you'll likely hear about the unrest in Egypt, Libya, Tunisia and Saudi Arabia.

Going forward, however, the next culprit in this saga of rising oil prices figures to be a tiny Middle East country called Yemen.

Yemen, which is bordered to the north by Saudi Arabia, to the west by the Red Sea and to the east by Oman, produces about 300,000 barrels of oil per day - about 95% of which is exported.

In fact, because it sits at the crossroads of the Red Sea and the Gulf of Aden, Yemen is actually quite strategically positioned: On a daily basis, about three million barrels of Saudi crude float past - most of it destined for the United States and Asia.

That means that Yemen is positioned at a major "choke point," for the regional distribution of oil. And it's also shaping up as the next big catalyst for rising oil prices.

Yemen has been an ally of the United States and the Saudis for decades, and its long-time president, Ali Abdullah Saleh, has been battling rebels in his northern deserts for years.

Now, however, another war is being waged for control of the government in the Yemen capital. The rebellion started small, but it has exploded. Protestors have been shot, and the President Saleh's erratic public announcements make him seem unstable.

Here's why this is all so important.

According to analysts with TIS Group, foreign oil companies are responding to this unrest with a "partial response" - and are sending some of their workers home.

Occidental Petroleum Corp. (NYSE: OXY), DNO International ASA of Norway (PINK ADR: NTDOY), and OMV AG (PINK ADR: OMKVY) of Austria have all announced they are evacuating personnel.

In Yemen, as elsewhere in the Middle East, expatriates are largely responsible for running the oilfields. And when those "expats" hit the road, oil production tends to go straight down.

In Libya's case, when the Italian oil giant Eni SpA (NYSE ADR: E) began to evacuate, production fell from 1.6 million barrels per day (bpd) to around 500,000 bpd, according to analysts. (This was so problematic that Eni Chief Executive Officer Paolo Scaroni was in Benghazi on Saturday, where he "had contacts with the Libyan National Transitional Council to restart cooperation in the energy sector and get going again the collaboration with Italy in the oil sector," Italian Foreign Minister Franco Frattini told reporters yesterday.)

In Yemen's case, the rebellion is now fully engaged in the north where most of the country's oil facilities are. And that means exports could drop quite quickly - even more than they already have.

This will have a dramatic impact on the worldwide price of oil. If the Yemen government falls into the hands of anti-Western rebels, the development would put the three million barrels per day of Saudi oil floating past its coast in jeopardy. But also you have one more major oil exporter that is then not exporting.

This is occurring at a time when the excess production capacity once claimed by the Organization of the Petroleum Exporting Countries (OPEC) is gone. In order to make up for this, oil prices have only one way to go - and that's up.

Moves to Make Now
The bottom line: This is all supportive of higher profits for the companies in two of the exchange-traded funds (ETFs) that I like to recommend to readers: The SPDR S&P Oil & Gas ProducersETF (NYSE: XOP), and theSPDR S&P Oilfield ServicesETF (NYSE: XES).

With Libya's northern refining towns having fallen back to Moammar Gadhafi-controlled forces late last week, it looks like even more capacity is being taken out of the world's oil markets and that the next leg higher in crude oil prices is about to begin. Energy positions were the best of the first quarter, and that is likely to persist at least into the rest of the first half of the year.

Here's one final bit of food for thought when it comes to energy prices. We've all heard about the "emergence" of China's new, consuming middle class. If China's consumers come to use the same amount of oil per capita as their American counterparts, the exploration industry will need to find the equivalent of seven Saudi Arabias to supply them.

[Editor's Note: There's a new trading formula that could outperform the world's best hedge funds - and Money Morning guru Jon D. Markman can't wait any longer to tell you about it.

Markman has spent years successfully digging up the best emerging profit opportunities for investors. In fact, anyone who reads Markman's weekly Money Morning column, or subscribes to his Strategic Advantage newsletter, knows his knack for dissecting global financial events and trends.

His goal is to help investors learn the truth about how markets work, and offer ordinary investors extraordinary opportunities.

Now he's bringing you his latest moneymaking discovery, which puts the profit power of hedge fund hotshots in your hands. But he's only offering this new trading service for a brief period. For more information on this new investor offer, click here.]

Source : http://moneymorning.com/2011/04/05/rising-oil-prices-is-yemen-next/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules