North Africa Revolutions affects Oil Prices
Fears of disabling the Suez Canal and SUMED drive up oil prices
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The threats to the canal and the Suez-Mediterranean
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The Arab countries produce more than a third of the global oil, and have about two thirds of the global oil reserves. The Egyptian popular revolution has raised a lot of concerns given that Egypt is considered the largest populous Arab country, lying in a region globally considered the richest in oil wealth. Moreover, the possibilities of the extension of the revolution spark to other countries in the region caused the global markets' perturbation for a period of time.
Indeed, oil prices rose despite that the fact that Egypt is not a crude major producer, and that the protests did not affect navigation in the Suez Canal through which 2.4 million oil barrels pass per day. The Chairman of the U.S. Energy Information Administration Richard Newell believes in the limited impact of the possible closure of the Suez Canal on the global oil markets for the existence of a surplus of the global oil shipping energy standing at 4-5 million barrels per day, accounting for 10% of the global shipping energy. However, he added that in case of closure of the channel, the oil transfer period will increase because the carriers will be forced to cut an additional distance of 9565 miles around the Cape of Good Hope at the far south of Africa, which means increasing the trip duration 12 days, and this, in turn, will raise the transport costs and thus the barrel price.
Newell has clarified that about 45 million oil barrels per day are transported through the waterways in the world, and this figure includes the transfer of 3-4 million oil barrels and oil products per day across the Suez Canal and Sumed pipeline which passes through the Egyptian lands and whose length reaches 322 km and transports oil north from the Red Sea to the Mediterranean.
Newell has clarified that about 45 million oil barrels per day are transported through the waterways in the world, and this figure includes the transfer of 3-4 million oil barrels and oil products per day across the Suez Canal and Sumed pipeline which passes through the Egyptian lands and whose length reaches 322 km and transports oil north from the Red Sea to the Mediterranean.
Oil hits $100 a barrel as Egypt protests mount
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Dr. Abdullah El-Badry |
OPEC secretary-general Abdalla Salem El-Badri by then warned “there could be a real shortage” of crude oil passing through Suez Canal. While stressing that the market was still well supplied, El-Badri said “if we see a real shortage, we will need to act.”
The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil, with the bulk coming from its member Saudi Arabia. The oil cartel chief said there was no need for an emergency production meeting ahead of the next scheduled gathering in Vienna in June 2011.
Libyan Oil Exports to Stop
Eastern areas holding much of Libya's oil have slipped from the control of Muammar Gaddafi, who has unleashed a bloody crackdown on protesters to keep his 41-year grip on power, and now the Green Book Republic lives on red embers.
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Staff from international oil firms is among the many leaving the country as governments around the world scramble to send planes and ships to evacuate their citizens from the North African producer. The unrest has added as much as $20 a barrel to oil price in the potential for further disruptions.
Libya was producing 1.7 million barrels per day (bpd) before the unrest, according to the International Energy Agency. Of this 1.3 million bpd was exported, mostly to Europe, China, the United States, and other customers.
Continuous unrest and violence stop Libyan oil exports, deprive the global oil market of Libyan exports, and raise oil prices to above $120 a barrel, the highest level since two and a half years, and analysts expect a further increase in prices. It would be optimistic to expect Libyan oil production to return to normal levels this year.
The Organization of Petroleum Exporting Countries -OPEC- has expressed its willingness to increase production in case of the lack of supplies. Also, the Saudi Oil Minister Ali Al-Naimi: "high prices are not a result of the lack of supplies. The OPEC and Saudi Arabia are ready to fill any supply shortages in the future. We have done that in the past and we have succeeded in financing markets and restoring their stability."