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2 Mar 3 2011 @ 10:58am by Matt Smith in Blog, Crude Oil, Global Energy, risk management

From Silence To A Caterwaul

As I was talking to somebody yesterday about the unrest in MENA and its potential impact on the global crude complex, I realized how completely immersed in the situation I have become. Therefore I figured it would be useful to highlight some of the more pertinent facts and figures involved, as they explain exactly why the crude complex is going ballistic at the moment. A good place to start is by taking a look at the bigger picture – literally – to see how the land lies, and where the potential dominoes may fall:

Lest we forget, the catalyst to the unrest in MENA was a man with a fruit and vegetable stall in Tunisia. He set himself on fire outside his local municipal office after police had confiscated his cart as he lacked a permit, then beat him up when he resisted. From this seed of resistance, protests and demonstrations ultimately led to the removal of the Tunisian President, Ben Ali.

From Tunisia, unrest then spread through North Africa to Algeria and Egypt, where Egyptian President Mubarak finally resigned after nothing short of a revolution rose up against him. Now over two months after the initial dissention by a man selling fruit, protests have spread from North Africa and into the Middle East, to such countries as Yemen, Bahrain, Oman, Iran, Iraq and Libya, where all have all experienced varying degrees of unrest. 

So from this background of the current unease, here’s ten points to give some perspective to explain why we have seen oil prices rally over 20% since mid-February, and why volatility is likely to continue:

1) Libya
–Has the largest proven oil reserves in Africa at 46 billion barrels
–They produced 1.6 million barrels a day in January 2011
–850,000 to 1 million barrels a day is currently offline (according to the IEA)

2) The top crude exporters in the world (note how many are in MENA):

3) Problems spreading to Saudi Arabia is the ultimate threat to global oil supply
–Saudi increased production by 8% to over 9 million barrels a day to offset the shortfall in Libya
–Is the world’s largest producer of crude oil, currently providing approximately 12% of global supply
–Has approximately one-fifth of the world’s proven oil reserves – approximately 260 billion barrels

4) Global oil production is currently 88 million barrels a day; of which MENA makes up approximately a third

5) Opec spare capacity: is currently at 4.7 million barrels a day. Some of that spare capacity is already being used by Saudi Arabia to cover the shortfall in Libya. The concern is that there is insufficient spare capacity to cover another significant supply loss, should contagion spread to another oil-rich country

6) Proven Oil reserves in the Middle East:
–Six out of ten of the world’s richest countries for proven oil reserves are in the Middle East. Libya is not included below, but has 46 billion barrels: 

7) A ‘Day of Rage’ has been announced for Saudi Arabia for March 11 and for March 20. In an immediate reaction to this, the King of Saudi Arabia announced a $36 billion stimulus program to garner public support

8) Other Notable Oil Producers in MENA (IEA data, Jan 2011)
–Iran 3.7 million barrels a day
–Iraq: 2.7 million barrels a day 
–Kuwait: 2.1 million barrels a day
–Algeria: 1.3 million barrels a day
–Oman: 0.9 million barrels a day

9) Bahrain. Saudi Arabia is especially concerned about the unrest in Bahrain, but not because they are a big oil producer (they are not). It is because of their proximity to Saudi Arabia (a 16 mile causeway separates the two), and their adjacency to key oil fields which produce 7.2 million barrels of oil a day:

source: JBC energy via Financial Times

10) Iran – If we are starting to see unrest in the most repressed of the Middle Eastern states, it is a sign that problems are far more widespread, and potentially far wider-reaching than anyone’s worst fears. 

I hope this post has been useful. As the voice of unrest rises in MENA from silence to a caterwaul, one thing is for certain; this situation is not going to be resolved anytime soon.

2 Comments on this post:

  1. Ann Barczak says:

    As usual, excellent & relevant.

  2. Matt Smith says:

    Aw, bless ya – thanks!!

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