Crude Oil to Soar to $250/Bbl
The prices for crude oil soared again yesterday. Sept futures for Light Sweet climbed to $76.40 a barrel (the record is $78.4) on discovery of corrosion in Trans Alaska pipeline, which forced BP to halt daily deliveries of 400,000 barrels. The breakdown coupled with summer car trips of Americans and continued military campaign in Lebanon abruptly hiked the prices by more than $1.
The shortage of Alaska crude looks trivial vs. the threat of Iran to use the so-called energy weapon, if the United States imposes sanctions against Tehran. Iran warned the prices may reach $200 in this case.
But the worst will happen only if Iran not only stops deliveries but also blocks the Strait of Hormuz passed by oil tankers from Kuwait, Saudi Arabia and the United Arab Emirates. As more than 15 million barrels of crude are daily shipped via the Hormuz, i.e. nearly 40 fold more than via Trans Alaska, the sharp reduction in deliveries will trigger global recession similar to the one happened in 1980 to 1982 and fuel the prices to $250, according to S&P.
Still, the most probable scenario is the end of the Lebanese conflict and the following adjustment in crude prices to $70 by the end of 2006 and to $60 by late 2008. The United States and Asia will maintain the rates of growth, while Europe will accelerate.
Another option is denial of Arab states and Venezuela to export crude to the United States exclusively. Should it happen, the prices may hit $90 but it won’t last long. The embargo won’t be strict, so once the crude reaches the ocean, it will go where the money is, S&P forecasts.
www.kommersant.com
All the Article in Russian as of Aug. 08, 2006
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