Arab World's Turmoil May Spell Sudden Petrocollapse

[madibe]

snow hope - I guess you are not watching the news. Please see my thread in the news re Libya - Gaddafi. I tried to catch the most salient points as he was translated.

[raspberry-blower]

Credit ratings of both Bahrain and Libya downgraded - this is potentially a game changer:

From Bloomberg:

Bahrain and Libya’s sovereign credit ratings were cut as the two Arab countries struggle to contain anti-government protests. Persian Gulf and North African stocks declined.

Bahrain’s long-term rating was reduced by one level to A-, the fourth-lowest investment grade, and the short-term rating lowered to A-2 at Standard & Poor’s Ratings. Libya’s long-term foreign and local currency issuer default ratings was cut to BBB, two notches above non-investment grade, from BBB+ at Fitch Ratings

Continues

Keep an eye on credit default swap spreads of the Middle Eastern countries.
Key questions:
How much of these do our WE ARE DODGY banks hold, and at what level do these weapons of mass financial destruction go off?

This would be a Lehmans Brothers re-run - this time Sovereign state style.
No doubt this will be complete with clueless numpties who purport to be economists parroting the refrain "Nobody could have forseen this happening".

[Lord Beria3]

http://www.telegraph.co.uk/news/worldne ... urope.html

Up to a million migrants could try and move into southern Europe. I mentioned this possibility a few days ago (but giving a time frame of decades!) - its staggering to see how fast the global order can unravel.

Really making me rethink the prospects of a hard crash.

Still, exciting stuff for us doomers

[Lord Beria3]

http://www.telegraph.co.uk/finance/fina ... rupts.html

First signs of real panic in the global oil markets... this is starting to get serious and exciting folks.

This is potentially worse for oil than the Iran crisis in 1979," said Paul Horsnell, head of oil research at Barclays Capital. "That was a revolution in one country, here there are so many countries at once. The world has only 4.5m barrels-per-day (bpd) of spare capacity, which is not comfortable."

US oil contracts jumped $6 a barrel on Monday to over $95, chasing Brent crude, which traded as high as $108, as the global oil system is drawn into the vortex. While Egypt is a minor oil player, Libya's Sirte Basin holds Africa's largest reserves and supplies 1.4m bpd in exports, mostly to Italy, Germany and Spain.

The key point...

Though Libya's oil fields are big enough to influence global supply, producing 2.3pc of world output, investors have broader concerns. The lighting speed of events in a country that was stable just days ago has caused markets to doubt assurances about Saudi Arabia and the Gulf states. The Gulf region ships a third of global oil output.

Michael Lewis, commodities chief at Deutsche Bank, said oil markets are bracing for trouble. December "call options" with a strike price of $120 on US crude have doubled suddenly, indicating fears of a nasty escalation. "Libya raises the stakes," he said.

All this instability will discourage investment, causing even more problems for global supply down the road... looks like the markets are starting to get it... this could get very dangerious.

[Ludwig]

Up to a million migrants could try and move into southern Europe. I mentioned this possibility a few days ago (but giving a time frame of decades!) - its staggering to see how fast the global order can unravel.

That's how history works: it's inherently inert. There are never any smooth transitions. Stresses mount below the surface until the surface can't hold any more.

[Lord Beria3]

Regarding Saudi Arabia, the linchpin of the global energy system. If unrest occurs here, this is when oil prices will explode and the whole system could go into meltdown.

http://www.energybulletin.net/stories/2 ... i-now-play

We keep hearing that al-Saud rule is safe (and the al-Sabahs of Kuwait, along with the al-Thanis in Qatar). But retaining power is only one metric for oil price stability. The chink in the Saudi armor is its oil-saturated, Shia-dominated Eastern Province. Here is Dharan, the headquarters of Saudi Aramco; the humongous 5-million-barrel-a-day Ghawar oilfield; the 800,000-barrel-a-day Qatif and Abu Safa oilfields; the gigantic Ras Tanura oil port; and the Abqiaq processing center. Because of all this, the king has nailed down every movable part in the province with overlapping protection -- private Aramco security, Interior Ministry forces, the National Guard, and the military, all of them manned largely by Sunni personnel and loyal to the royal family.

Greg Priddy, a global oil analyst at the Eurasia Group, a New York-based political risk firm, tells me that there is "a definite threat of a spillover" of trouble. "I won't be surprised if there is unrest in the Eastern Province," Priddy told me over the weekend.

Frank Verrastro, director of energy and national security at the Center for Security and International Studies in Washington, told me that, should it become clear that unrest is spreading from Bahrain, the Saudis will cut off the causeway. "That said," Verrastro continued:

unrest in the east, (were it to occur) proximate to critical facilities at Abqiaq, Ras Tanura and nearby production, would undoubtedly send oil prices rising for two reasons: 1. [Saudi Arabia] has the bulk of the globe's spare capacity (which is the "buffer" being counted on to offset any other disruptions); and 2. As the world's largest oil resource holder and exporter, any real protracted threat to supplies is a huge deal globally.

So trouble in Saudi Arabia no longer seems notional. Libya makes it more plausible.

SA is key, if the brutal Libyan regime can nearly collapse after a few days rioting, what chance does the Saudis have?

[Ludwig]

They say Saudi Arabia is rich enough that its people don't have the same levels of discontent as in neighbouring countries... I don't know much about SA, but there must surely be enough disgruntled people there to at least take to the streets before too long. The question is how much popular support they'll have.

[postie]

The question is how much popular support they'll have?...

....The entire US military? They wont let it go without a fight!

They can't afford to.

[ziggy12345]

They say Saudi Arabia is rich enough that its people don't have the same levels of discontent as in neighbouring countries... I don't know much about SA, but there must surely be enough disgruntled people there to at least take to the streets before too long. The question is how much popular support they'll have.

Saudis taking to the streets? Is there enough room for all the Audi 8s, Bentleys and RR's

[snow hope]

Not sure everybody in SA is rich and drives a Bentley.....

I have just ordered 900 litres of heating oil, to get the tank filled up in case problems emerge. Planning to get a fresh fill of my Jerry cans this week too (have to empty them first into the car tank).

I haven't been watching the TV news, so have missed some of the (dramatic) pictures......

Things certainly seem to be unravelling.

[Ludwig]

The question is how much popular support they'll have?...

....The entire US military? They wont let it go without a fight!

They can't afford to.

But can they afford to fight? They're stretched in Iraq and Afghanistan, and at least they had excuses (poor though they were) for invading those countries. I don't see how the US could keep control of SA if they invaded, except by installing a reign of terror (for which they'd need a proxy, I assume). Maybe biowarfare is the answer... :\

[adam2]

Not sure everybody in SA is rich and drives a Bentley.....

I have just ordered 900 litres of heating oil, to get the tank filled up in case problems emerge. Planning to get a fresh fill of my Jerry cans this week too (have to empty them first into the car tank).

I haven't been watching the TV news, so have missed some of the (dramatic) pictures......

Things certainly seem to be unravelling.

Agree, it might all pass without any significant effect on life in the UK.
BUT it does look worse this time, and after all, previous incidents in the ME although not TEOTWAWKI certainly resulted in oil shortages.

I would certainly advise the filling of heating oil tanks, jerry cans, vehicle fuel tanks and the like.
Protests, strikes, or blockades within the UK could also cause shortages.

[DominicJ]

Still, exciting stuff for us doomers

This would be a very inopportune time for it all to come down.

[DominicJ]

Snow
I both agree and disagree.

Egypt can increase fares to pass the Suez Canel, but only to the point where its the same price as taking the long way round, or building a pipeline around Egypt.
No government can change that.
No government would be stupid enough to try.


But I said much the same about Venezuala, yet the nut job in charge over there has halved oil production in a decade, and gives away half of what he does still get his grubby mits on.
So who knows?

[fifthcolumn]

Interestingly the UK is still in more or less decent shape compared to e.g. what it would be like in 2015. Though it imports *some* it's still *mostly* self sufficient. With a bit of rationing or e.g. forced public transport one or two days a week after declaring a state of emergency I think the UK would be in reasonable shape. At least compared to certain others that is. So I reckon that an Alex Scarrow weekend ain't happening in the UK.