Time To Go Long Oil Again As Iran Ramps Up Uranium Enrichment

The prospect of a U.S. military strike on Syria has stoked fears that Damascus, or its closest ally Iran, may retaliate against U.S. allies in the Gulf – all leading global oil or gas suppliers. The Middle East produced 28.27 million barrels a day (bpd), or 32.5% of the 86.15 million bpd of oil produced globally in 2012, according to the BP Statistical Review. Below are facts about threats to the major energy transit routes of the Middle East and possible alternative routes.

The recent developments in the Middle East and North Africa have been the focus of attention for policymakers as the implications of escalating unrest are significantly problematic for the global economy. The recent upward pressure on oil prices has been a reflection of market expectations rather than actual shortages in supply but there are fears that the recent surge in oil prices could persist if the political tensions in the region do not improve.

What is Saudi Arabia’s bottom line for propping up oil prices unilaterally before it leans on the rest of OPEC to help share the burden? At $112 a barrel for Brent crude, well above OPEC’s preferred $100, it may not look like a hot issue just yet. As Ali al-Naimi, oil minister for Saudi Arabia, OPEC’s biggest producer said this week, the oil market is in “the best situation it can be” and at “the right price.”

Politicians and pundits from Riyadh to Washington have castigated recent American foreign policy in the Middle East for being unfocussed, misguided or harmful to national interests. Contrary to these accusations however, the Obama policy is none of the above: It is a pragmatic approach that takes into account a progressive decline in the political and economic importance of the Middle East.

The recent conflict in Syria is fanning flames across the entire Middle East. It’s another tragic, gruesome aspect of the “Oil Wars” scenario that I’ve developed in these pages over the past few years. For now, the heat has died down and Pres. Obama has postponed airstrikes against Syrian targets. But there’s no telling where things will stand a few weeks from now. Either way, the whole area is ugly, and could get uglier in a hurry.

The Middle East has a dramatic impact on the global price of oil… and today we’ve got visual proof! I call it the “Middle East Effect” – and over the past few years it’s responsible for the majority of oil’s major moves, including a recent pullback in prices. So what’s next for the Middle East Effect and oil prices? Let’s have a look… Before we get our boots muddy in the Middle East, let’s back up and take a look at how the oil market works. Consider it a crash course on crude!

The United States has nothing left to pressure Tehran over its nuclear programme except for war, and if it chooses conflict Iran could close a key energy chokepoint, its envoy to Baghdad told AFP on Thursday.

With the market still hopeful of some deus ex resolution to the Fiscal Cliff will take place in the last few trading sessions of the year (one where the market itself will not have to be the catalyst for such a resolution, because once the selling starts in earnest, who knows if and when it stops, hence the loading up on prodigious amounts of puts), here is Iran out of left field, adding yet another known unknown to the inequality, announcing that it will begin six days of naval drills in the Straits of Hormuz on Friday.