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3 Oil Supply Events that Could Spike Brent

Written By Christian DeHaemer

Posted December 25, 2011

The recent price for Nymex crude was $99.49. Brent has fallen to $109.38, and WTI Cushing spot price is trading at $98.72.

The price for European-traded oil, or Brent, has been dropping for the past few months — and the spread between Brent and WTI has narrowed as the Eurozone GDP slows and Libya comes back online.

The price of crude in the United States is climbing as the jobless number falls and consumer confidence picks up. (The jobless number came in at 364,000 last week, which was below the expected 380,000.)

The price of WTI crude is up 25% in the fourth quarter. Last week, crude supplies in the U.S. fell 10.6 million barrels — or 3.2 percent.

According to Bloomberg‘s experts, WTI is expected to average around $100 a barrel for 2012. This is what Nymex has priced in.

What isn’t priced in is more chaos from oil-producing regions…

Bombs in Iran

Someone is still setting off bombs in Iran.

There was a large explosion at a big refinery in Isfahan last week — and a second at a Revolutionary Guards base in Kerman, the headquarters of the Guards operations in Afghanistan.

This comes on top of several previous blasts at army stations as well as at least four nuclear scientists who were blown up, poisoned, or shot to death.

It is not widely known who is responsible. It could be an Iranian faction, the U.S., Israel, or the Saudis. There is no shortage of powers that don’t want Iran to get a nuke.

Now Iran has announced they will hold a naval warfare game near the Straits of Hormuz. This is the number one shipping lane for crude oil.

All the while, the Iranian economy is being squeezed…

The currency, the rial, is in a death spiral after four rounds of UN sanctions. It has dropped from 13,000 to the dollar to 15,000 to the dollar in just a few weeks. It fell 15% in just three days after UAE-Iranian trade was cut due to new sanctions.

In fear of their currency, Iranians have been lining up to buy gold. As a result, the government halted all direct official sales last week.

Iraq: No Longer Our Problem

The U.S. forces recently left Iraq, leaving a power vacuum.

On Thursday more than a dozen explosions were set off, killing 63 people and wounding more than 180 others in the worst violence in months.

According to Voice of America:

The apparent coordinated blasts Thursday struck across the city, mainly in Shi’ite areas, days after the final withdrawal of U.S. troops from Iraq.

The attacks come amid a political crisis, as the Shi’ite-led government pursues the arrest of Vice President Tariq al-Hashemi on charges that he plotted to kill other government officials.

But Hashemi, a Sunni, said Wednesday the allegations are politically motivated by the prime minister, who Hashemi says wanted to consolidate power when U.S. troops left this month.

Iraq exported 64.8 million barrels of oil in October and brought in $70 billion in revenue. The country has hopes of exporting 4.5 million barrels a day by 2014. A sharp increase in violence or even civil war will take this supply off the market.

Kazakhstan Riots

Sixteen people were left dead and hundreds injured in Kazakhstan over the weekend.

Kazakhstan is the second-biggest oil producer in the former Soviet Union behind Russia. It pumped out 1.76 million barrels a day last year.

News is now leaking of a riot in Western Kazakhstan during the 20-year anniversary of independence celebrations. This is the worst violence in this autocratic country in two decades.

Many believe these riots were started by oil workers who have been striking since May.

Oil production has fallen 8.5 percent this year due to the strikes.

If this turns into a Central Asian Spring, Brent oil could spike 20 percent. That’s what happened after the Libya revolution, when its 1.66 million barrels a day were pulled off the market…

Brent crude jumped more than 20 percent in the first two months of the rebellion against Libyan leader Muammar Qaddafi, rising to as high as $127.02 a barrel on April 11th.

That would put Brent crude at $130.80.

Ideas on how to profit in the New Year below.

Have a great holiday,

Christian DeHaemer Signature

Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.

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