Oil could hit $220 per barrel on the fear of the Libya and Algeria, cautions Nomura

Barclays Capital said 1 m barrels of Libyan output is "locked in", with the other 0.6 m at risk. While Saudi Arabia may respond by raising the output, it takes time and its oil is not a substitute for "Sweet Crude the Libya".

The crisis escalating triggered falls more on the global stock exchanges. Wall Street was down 1pc in trade at the beginning and the FTSE 100 1. 2pc. The Dow Jones index has shed more than 300 points during the three days of 12,075.

Nomura said a closure in Libya and Algeria would reduce global 2.9 m b/d supply and reduce the ability of spare OPEC b/2.1 m d, comparable to levels at the beginning of the Gulf war and worse than during the 2008 spike when prices hit $147.

Two price shocks preceded by - or triggered - a recession in Europe and the United States. Fatih Birol, Chief Economist, International Energy Agency said the last rising already become prices a "serious risk" for the fragile economies of OECD block.

Some analysts fear the underlying image is worse than officially recognized doubting Saudi claims of alternative ample capacity. Wikileaks cable cited comments by geologist of Saudi Aramco oil giant that Kingdom reserves had been exaggerated by 40pc. A second cable cited U.S. diplomats asking if the Saudis "more empowered to make prices downwards for an extended period."

Report from Nomura, who consider the scenario catastrophic to a real crisis in the Gulf, said recent oil price shocks have shown a pattern of three floors, with a final blow-off price in the final phase. The current crisis is the first step.

Soaring oil prices create a dilemma for banks, nasty because they inflationary if caused by the robust global growth, but the deflationist if caused by a tightening of supply which acts as a tax on consumption of nations. Big oil exporters tend to save additional revenues for first price spikes, so the initial effect is draining global demand.

The current image contains elements of both, with an extra touch of liquidity created by the US Federal Reserve leaking into the global system and play havoc with commodity prices.

Secretary of the Treasury Tim Geithner told us Wednesday that the global economy is relatively stong to "manage" the oil shock, insisting on the fact that central banks "have extensive experience in the management of these things."

The European Central Bank (ECB) responded to skyrocketing oil in July 2008 by raising rates even if the Germany and the Italy were in recession at that time there. Nout Wellink, the Governor of Dutch of the ECB, said that this was an error policy.

Circumstances are different this time still also dark. ECB chief Jean-Claude Trichet scored last month that the Bank will be "look at" the hump of prices in the short term, but the ECB rhetoric has since then harden. Fed doves will probably give more weight to the deflationary risks.

Jeremy Leggett, a leader of the task force industry UK peak oil and energy security, says the crisis Mid-East "shows the extreme fragility of the world system." People don't realize the proximity we a potential jump if that agitation reached critical mass in OPEC countries enough. "Governments must develop contingency plans and get cracking on proactive steps while we still have time", he says.

Charles Robertson in the Capital of the Renaissance, said concern actual harass investors is what happens in oil-rich Province Saudi Arabia Eastern home of Kingdom restless minority Shi'ite. The Saudis produced with FP6 11 of world production, but a more significant share of exports.

It does y potential serious tensions and not only among the Shiites. High unemployment and the youth bulge means disorders could be anywhere in the country. If Saudi Arabia or Iran is gobbled up, we have a serious problem. »

On Wednesday, the Saudi King Abdullah has unveiled $restriction of social aid for his people.

Energy & Utilities and positions vacant Oil & Gas jobs Telegraph

View the original article here

World Bank fears Europe's crisis could set off deeper global slump than Lehman collapse

"The global economy has entered a dangerous phase. The financial system of the largest economic bloc in the world is threatened by a fiscal and financial crisis that has so far eluded policy-makers’ efforts to contain it," said the bank in its Global Economic Perspectives.

"The possibility of further escalation of the crisis in Europe cannot be ruled out. Should this happen, the ensuing global downturn is likely to be deeper and longer-lasting than the recession of 2008/2009 because countries do not have the fiscal and monetary space to stimulate the global economy. Activity is unlikely to bounce back as quickly."

"An escalation of the crisis would spare no one," said Andrew Burns, the key author. "Developing countries should hope for the best and plan for the worst. If these downside risks materialised there is not much developing countries can do to prevent it. But they can prepare for it."

The report said rich countries had used up their fiscal and monetary shock absorbers after the Lehman crisis. While some poorer states still have the means to cushion the blow, many have already pushed fiscal deficits and credit growth to the limits of safety.

"Developing countries would have much less fiscal space than in 2008 with which to react to a global slowdown. As a result, if financial conditions deteriorate, many of these countries could be forced to cut spending pro-cyclically, thereby exacerbating the cycle."

The bank said there is a risk that turmoil in Europe could interact with the delayed effects of monetary tightening in Asia and Latin America, reinforcing each other in a "downward overshooting of activity".

The bank cut its global forecast from 3.4pc to 2.5pc for 2012, warning that the eurozone has already fallen into recession and is likely to contract by 0.3pc this year. "The possibility of much worse outcomes are real," it said. If Europe’s financial system to seizes up, this could lop a further 4pc off global GDP.

"While contained for the moment, the risk of a much broader freezing up of capital markets and a global crisis similar in magnitude to the Lehman crisis remains. The willingness of markets to finance the deficits and maturing debt of high-income countries cannot be assured. Should more countries find themselves denied such financing, a much wider financial crisis that could engulf private banks and other financial institutions on both sides of the Atlantic cannot be ruled out. The world could be thrown into recession as large or even larger than that of 2008-09."

The consequences would be dire for 30-odd countries with external finance needs above 10pc of GDP. The bank advised these states to "prefinance" their needs while the credit markets are still open, reducing the risk of a sudden crunch. Commodity exporters should brace for a fall in oil and metal prices of almost a quarter.

Emerging markets have already seen a rise in average bond spreads of 117 basis points since last July. Global trade volumes contracted at an 8pc annual rate in the three months to October. Capital flows to developing countries fell to $170bn in the second half of 2011 from $309bn a year earlier.

In a veiled attack on Europe’s austerity policies the bank said "it is not yet clear whether there is an end in sight to the vicious circle whereby budget cuts to restore debt sustainability reduce growth and revenues to the detriment of debt sustainability".

The bank’s "downside scenario" involves a credit freeze in two "larger Euro Area economies". Such an event would cause a further contraction of Euroland’s GDP by 6pc over the next two years. The bank stopped short of modelling what would happen if the eurozone breaks up altogether.

View the original article here

The FTSE could produce a positive surprise for brave investors in 2012

 Even the most bullish forecasters predict just a modest rise for the benchmark FTSE 100 index in 2012. Photo: GETTY

The domestically focused FTSE 250 fared even worse, falling 12.6pc over the 12 months as austerity measures and crumbling consumer confidence hit hard.

But will investors do any better in 2012? Will the UK's equity markets bounce back this year and compensate beleaguered investors for a dismal 2011?

The background noise is hardly encouraging. As my colleague Ambrose Evans Pritchard eloquently sets out, there is no quick or easy solution to the eurozone crisis - which has the potential to send London's equity markets spiralling back towards their 2009 lows of 3,600.

London managed to detach itself from the eurozone gloom last year. The FTSE performed relatively well, when compared to Germany's DAX which ended the year down more than 15pc and the French CAC which lost almost 18pc over 2011.

But could London really shrug off the exit of a peripheral euro member or even the collapse of the single currency that so many economists and politicians now predict?

Then there is the small matter of China: can the country's apparatchiks really engineer a soft landing for the over-heated economy? The latest economic data suggests it will be difficult to tackle inflation (and the property bubble driving it) without stalling economic growth.

The US could also throw London markets off course. Yes, election years have historically been good for stock markets. And we have seen more positive economics data in recent months, with fewer job losses and tentative signs of recovery in the US housing market, but few would bet on a smooth road to recovery from here.

Closer to home the prospects for the UK economy look bleak. Capital Economics is one of a number of economists that expect the UK to slip back into recession this year as the economy contracts by 0.5pc and unemployment rises above 3m.

It is hardly the best background for a market rally – so perhaps its not surprising that many expect the FTSE 100 to end 2012 even lower than it closed last year.

Even the most bullish forecasters predict just a modest rise for the benchmark FTSE 100 index in 2012. It is hard enough to find a serious commentator who predicts that the FTSE 100 will breach the 6,000 mark, let alone the 7,000-plus forecasts of only a few years ago.

Yet despite all the doom at 5,566.77 the FTSE 100 looks to be trading at historically cheap levels on a variety of measures – not least its dividend yield.

The blue chip index is yielding almost 3.5pc - double the meagre 1.75pc interest that can be earned in a National Savings account. With little prospect of interest rates rising in 2012 surely - argue the bulls - savers will be tempted to switch some of their savings into the market.

Markets have, of course, a record of catching out even the most experienced forecasters. Shortly before the 1929 stock market crash the respected economist, Irving Fisher, predicted: "Stock prices have reached what looks like a permanently high plateau."

So could the bearish forecaster be left red faced? The FTSE 100 undoubtedly has the potential to surprise on the upside this year – but you'd have to be very brave (and optimistic) to bet on it doing so.

There is however one sure-fire buy signal. Alex, the star of our daily cartoon strip. The investment banker has only been fired twice in his illustrious near-25 year career.

Both departures marked the bottom of the equity market.

View the original article here

Saudi sovereign offers $36bn deals uprising in the middle of the admonition of oil prices could double.

Growing unrest in the region led experts to warn yesterday evening Brent crude oil prices may double to $111 a barrel mark it culminated yesterday if the crisis continues to spread to other countries in the Middle East.

Team products said Nomura to oil price risk storage in unexplored peaks in the coming weeks if chaos strikes Algeria Similarly, reduce the ability of world reserve thin margins because just before the first Gulf war.

Wednesday, Brent crude rose more than 5MC almost $ 112 a barrel, threat levels that could derail the global economy. It closed at $111.25.

"We could see $220 per barrel should Libya and in Algeria halt oil production." We may be underestimating this speculative activities were largely not present in 1990-1991 ", said Michael Lo, strategist, Bank oil."

The warning came ENI Italy announced the suspension of supplies by the Libya pipeline and a string of foreign companies have been evacuated staff and stop production. Libya holds oil large de l'Afrique reserves and produces 1.6 m barrels per day (b/d), mainly for export to Europe.

German driller Winthershall stopped its production of 100,000 b/d in Libya, whereas ENI is stopped at a string of sites, considerably reducing the flow of 550 b/d. A number of producers have declared "force majeure".

Barclays Capital said 1 m barrels of Libyan output is "locked in", with the other 0.6 m at risk. While Saudi Arabia may respond by raising the output, it takes time and its oil is not a substitute for "Sweet Crude the Libya".

The crisis escalating triggered falls more on the global stock exchanges. Wall Street was down 1pc in trade at the beginning and the FTSE 100 1. 2pc. The Dow Jones index has shed more than 300 points during the three days of 12,075.

Nomura said a closure in Libya and Algeria would reduce global 2.9 m b/d supply and reduce the ability of spare OPEC b/2.1 m d, comparable to levels at the beginning of the Gulf war and worse than during the 2008 spike when prices hit $147.

Two price shocks preceded by - or triggered - a recession in Europe and the United States. Fatih Birol, Chief Economist, International Energy Agency said the last rising already become prices a "serious risk" for the fragile economies of OECD block.

Some analysts fear the underlying image is worse than officially recognized doubting Saudi claims of alternative ample capacity. Wikileaks cable cited comments by geologist of Saudi Aramco oil giant that Kingdom reserves had been exaggerated by 40pc. A second cable cited U.S. diplomats asking if the Saudis "more empowered to make prices downwards for an extended period."

Report from Nomura, who consider the scenario catastrophic to a real crisis in the Gulf, said recent oil price shocks have shown a pattern of three floors, with a final blow-off price in the final phase. The current crisis is the first step.

Soaring oil prices create a dilemma for banks, nasty because they inflationary if caused by the robust global growth, but the deflationist if caused by a tightening of supply which acts as a tax on consumption of nations. Big oil exporters tend to save additional revenues for first price spikes, so the initial effect is draining global demand.

The current image contains elements of both, with an extra touch of liquidity created by the US Federal Reserve leaking into the global system and play havoc with commodity prices.

Secretary of the Treasury Tim Geithner told us Wednesday that the global economy is relatively stong to "manage" the oil shock, insisting on the fact that central banks "have extensive experience in the management of these things."

The European Central Bank (ECB) responded to skyrocketing oil in July 2008 by raising rates even if the Germany and the Italy were in recession at that time there. Nout Wellink, the Governor of Dutch of the ECB, said that this was an error policy.

Circumstances are different this time still also dark. ECB chief Jean-Claude Trichet scored last month that the Bank will be "look at" the hump of prices in the short term, but the ECB rhetoric has since then harden. Fed doves will probably give more weight to the deflationary risks.

Jeremy Leggett, a leader of the task force industry UK peak oil and energy security, says the crisis Mid-East "shows the extreme fragility of the world system." People don't realize the proximity we a potential jump if that agitation reached critical mass in OPEC countries enough. "Governments must develop contingency plans and get cracking on proactive steps while we still have time", he says.

Energy & Utilities and positions vacant Oil & Gas jobs Telegraph

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Saudi ruler offers $36bn to stave off uprising amid warning oil price could double

The growing turmoil in the region led experts to warn last night that Brent crude oil prices may double from the $111 a barrel mark it peaked at yesterday if the crisis continues to spread to other Middle Eastern countries.

Nomura's commodity team said oil prices risk vaulting to uncharted highs over coming weeks if chaos hits Algeria as well, reducing global spare capacity to the wafer-thin margins seen just before the first Gulf War.

On Wednesday, Brent crude rose more than 5pc to almost $112 a barrel, threatening levels that could derail the global economy. It closed at $111.25.

"We could see $220 a barrel should both Libya and Algeria halt oil production. We could be underestimating this as speculative activiites were largely not present in 1990-1991," said Michael Lo, the bank's oil strategist.

The warning came as Italy's ENI announced a suspension of supplies through Libya's gas pipeline, and a string of foreign companies evacuated staff and shut production. Libya holds Africa's biggest oil reserves and produces 1.6m barrels a day (b/d), mostly for export to Europe.

The German driller Winthershall halted its 100,000 b/d production in Libya, while ENI stopped at a string of sites, vastly reducing its flow of 550,000 b/d. A number of producers have declared "force majeure".

Barclays Capital said 1m b/d of Libyan output is "shut in", with the other 0.6m at risk. While Saudi Arabia can step in by raising output, this takes time and its oil is not a substitute for Libya's "sweet crude".

The escalating crisis set off further falls on global bourses. Wall Street was down 1pc in early trading and the FTSE 100 fell 1.2pc. The Dow has shed more than 300 points over the past three days to 12,075.

Nomura said a shut-down in both Libya and Algeria would cut global supply by 2.9m b/d and reduce OPEC spare capacity to 2.1m b/d, comparable with levels at the onset of the Gulf War and worse than during the 2008 spike, when prices hit $147.

Both price shocks preceeded – or triggered – a recession in Europe and the US. Fatih Birol, chief economist for the International Energy Agency, said the latest price rise had already become a "serious risk" for the fragile economies of the OECD bloc.

Some analysts fear the underlying picture is worse that officially recognised, doubting Saudi claims of ample spare capacity. A Wikileaks cable cited comments by a geologist for the Saudi oil giant Aramco that the kingdom's reserves had been overstated by 40pc. A second cable cited US diplomats asking whether the Saudis "any longer have the power to drive prices down for a prolonged period".

Nomura's report, which does not examine the catastrophic scenario of a full-blown Gulf crisis, said past oil shocks have shown a three-stage pattern, with a final blow-off in prices in the final phase. The current crisis is at stage one.

Surging oil prices create a nasty dilemma for central banks since they are inflationary if caused by robust global growth, but deflationary if caused by a supply crunch that acts as a tax on consuming nations. The big oil exporters tend to save extra revenues from price spikes at first, so the initial effect is to drain global demand.

The current picture contains elements of both, with an added twist of liquidity created by the US Federal Reserve that is leaking into the global system and playing havoc with commodity pricing.

US Treasury Secretary Tim Geithner said on Wednesday that the world economy is stong enough to "handle" the oil shock, insisting that central banks "have a lot of experience in managing these things".

The European Central Bank (ECB) responded to the oil spike in July 2008 by raising rates even though Germany and Italy were in recession by then. Nout Wellink, the ECB's Dutch governor, said this had been a policy error.

Circumstances are different this time yet also murky. ECB chief Jean-Claude Trichet signalled last month that the bank will "look through" the short-term price hump, but ECB rhetoric has since turned more hawkish. Fed doves will undoubtedly give more weight to the deflationary risks.

Jeremy Leggett, a leader of the UK industry task force on peak oil and energy security, said the Mid-East crisis "shows the extreme fragility of the global system. People don't realise how close we are to a potential precipice if this unrest reaches critical mass in enough OPEC countries. Governments need to draw up emergency plans and get cracking on proactive measures while we still have time," he said.

Energy & Utilities and Oil & Gas vacancies at Telegraph Jobs

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Saudi ruler offers $36bn to stave off uprising amid warning oil price could double

The growing turmoil in the region led experts to warn last night that Brent crude oil prices may double from the $111 a barrel mark it peaked at yesterday if the crisis continues to spread to other Middle Eastern countries.

Nomura's commodity team said oil prices risk vaulting to uncharted highs over coming weeks if chaos hits Algeria as well, reducing global spare capacity to the wafer-thin margins seen just before the first Gulf War.

On Wednesday, Brent crude rose more than 5pc to almost $112 a barrel, threatening levels that could derail the global economy. It closed at $111.25.

"We could see $220 a barrel should both Libya and Algeria halt oil production. We could be underestimating this as speculative activiites were largely not present in 1990-1991," said Michael Lo, the bank's oil strategist.

The warning came as Italy's ENI announced a suspension of supplies through Libya's gas pipeline, and a string of foreign companies evacuated staff and shut production. Libya holds Africa's biggest oil reserves and produces 1.6m barrels a day (b/d), mostly for export to Europe.

The German driller Winthershall halted its 100,000 b/d production in Libya, while ENI stopped at a string of sites, vastly reducing its flow of 550,000 b/d. A number of producers have declared "force majeure".

Barclays Capital said 1m b/d of Libyan output is "shut in", with the other 0.6m at risk. While Saudi Arabia can step in by raising output, this takes time and its oil is not a substitute for Libya's "sweet crude".

The escalating crisis set off further falls on global bourses. Wall Street was down 1pc in early trading and the FTSE 100 fell 1.2pc. The Dow has shed more than 300 points over the past three days to 12,075.

Nomura said a shut-down in both Libya and Algeria would cut global supply by 2.9m b/d and reduce OPEC spare capacity to 2.1m b/d, comparable with levels at the onset of the Gulf War and worse than during the 2008 spike, when prices hit $147.

Both price shocks preceeded – or triggered – a recession in Europe and the US. Fatih Birol, chief economist for the International Energy Agency, said the latest price rise had already become a "serious risk" for the fragile economies of the OECD bloc.

Some analysts fear the underlying picture is worse that officially recognised, doubting Saudi claims of ample spare capacity. A Wikileaks cable cited comments by a geologist for the Saudi oil giant Aramco that the kingdom's reserves had been overstated by 40pc. A second cable cited US diplomats asking whether the Saudis "any longer have the power to drive prices down for a prolonged period".

Nomura's report, which does not examine the catastrophic scenario of a full-blown Gulf crisis, said past oil shocks have shown a three-stage pattern, with a final blow-off in prices in the final phase. The current crisis is at stage one.

Surging oil prices create a nasty dilemma for central banks since they are inflationary if caused by robust global growth, but deflationary if caused by a supply crunch that acts as a tax on consuming nations. The big oil exporters tend to save extra revenues from price spikes at first, so the initial effect is to drain global demand.

The current picture contains elements of both, with an added twist of liquidity created by the US Federal Reserve that is leaking into the global system and playing havoc with commodity pricing.

US Treasury Secretary Tim Geithner said on Wednesday that the world economy is stong enough to "handle" the oil shock, insisting that central banks "have a lot of experience in managing these things".

The European Central Bank (ECB) responded to the oil spike in July 2008 by raising rates even though Germany and Italy were in recession by then. Nout Wellink, the ECB's Dutch governor, said this had been a policy error.

Circumstances are different this time yet also murky. ECB chief Jean-Claude Trichet signalled last month that the bank will "look through" the short-term price hump, but ECB rhetoric has since turned more hawkish. Fed doves will undoubtedly give more weight to the deflationary risks.

Jeremy Leggett, a leader of the UK industry task force on peak oil and energy security, said the Mid-East crisis "shows the extreme fragility of the global system. People don't realise how close we are to a potential precipice if this unrest reaches critical mass in enough OPEC countries. Governments need to draw up emergency plans and get cracking on proactive measures while we still have time," he said.

Energy & Utilities and Oil & Gas vacancies at Telegraph Jobs

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

US markets increases the hopes that the stagnant job market could evolve

Thousands of demonstrators demanding jobs outside the city of Los Angeles hotel.  Photo: AFP

The S & P 500 Close up 1. FP7 to 1,330.97, its gain of a day more marked since the beginning of December. During this time, the Dow Jones Industrial Average ended 1. higher than 12,258.20 FP6.

After a month, dominated by the tumult in North Africa and a yo-yoing oil prices, investors warmed to the evidence that the US stagnant jobs market may finally be turning. The number of Americans seeking unemployment benefits dropped to its lowest level for more than two years. Wall Street economists were more impressed by the decline in the average of four weeks, a less volatile measure, which fell to 388,500, its lowest level since July 2008.

A stubbornly high unemployment rate which has not fallen below 9pc since the spring of 2009, has prompted the Federal Reserve to resume quantitative easing last November.

Further evidence that the labour market is improving will begin to escape financial markets not only with the likely end of QE in June, but with the prospect of the Fed, interest rates increase.

"No none can deny that a strengthening in the conditions of the labour market is underway,", said Jim Baird, Plante Moran financial advisors. "Combined with the increase in consumer demand, this should translate to a more rapid pace of job creation in time."

That hope will be tested today with the release of the monthly jobs report, which economists predict will show 200,000 jobs were created last month. Ben Bernanke, the Fed Chairman, said this week he is optimistic that the recovery will begin to generate jobs in the coming months.

America's service sector also struck a brilliant note yesterday, with the Institute for supply showing management indexes that it expanded at the fastest pace since August 2005. The index hit 59.7 in February, with a reading above 50 signals growth.

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Oil could hit $220 a barrel on Libya and Algeria fears, warns Nomura

Barclays Capital said 1m b/d of Libyan output is "shut in", with the other 0.6m at risk. While Saudi Arabia can step in by raising output, this takes time and its oil is not a substitute for Libya's "sweet crude".

The escalating crisis set off further falls on global bourses. Wall Street was down 1pc in early trading and the FTSE 100 fell 1.2pc. The Dow has shed more than 300 points over the past three days to 12,075.

Nomura said a shut-down in both Libya and Algeria would cut global supply by 2.9m b/d and reduce OPEC spare capacity to 2.1m b/d, comparable with levels at the onset of the Gulf War and worse than during the 2008 spike, when prices hit $147.

Both price shocks preceeded – or triggered – a recession in Europe and the US. Fatih Birol, chief economist for the International Energy Agency, said the latest price rise had already become a "serious risk" for the fragile economies of the OECD bloc.

Some analysts fear the underlying picture is worse that officially recognised, doubting Saudi claims of ample spare capacity. A Wikileaks cable cited comments by a geologist for the Saudi oil giant Aramco that the kingdom's reserves had been overstated by 40pc. A second cable cited US diplomats asking whether the Saudis "any longer have the power to drive prices down for a prolonged period".

Nomura's report, which does not examine the catastrophic scenario of a full-blown Gulf crisis, said past oil shocks have shown a three-stage pattern, with a final blow-off in prices in the final phase. The current crisis is at stage one.

Surging oil prices create a nasty dilemma for central banks since they are inflationary if caused by robust global growth, but deflationary if caused by a supply crunch that acts as a tax on consuming nations. The big oil exporters tend to save extra revenues from price spikes at first, so the initial effect is to drain global demand.

The current picture contains elements of both, with an added twist of liquidity created by the US Federal Reserve that is leaking into the global system and playing havoc with commodity pricing.

US Treasury Secretary Tim Geithner said on Wednesday that the world economy is stong enough to "handle" the oil shock, insisting that central banks "have a lot of experience in managing these things".

The European Central Bank (ECB) responded to the oil spike in July 2008 by raising rates even though Germany and Italy were in recession by then. Nout Wellink, the ECB's Dutch governor, said this had been a policy error.

Circumstances are different this time yet also murky. ECB chief Jean-Claude Trichet signalled last month that the bank will "look through" the short-term price hump, but ECB rhetoric has since turned more hawkish. Fed doves will undoubtedly give more weight to the deflationary risks.

Jeremy Leggett, a leader of the UK industry task force on peak oil and energy security, said the Mid-East crisis "shows the extreme fragility of the global system. People don't realise how close we are to a potential precipice if this unrest reaches critical mass in enough OPEC countries. Governments need to draw up emergency plans and get cracking on proactive measures while we still have time," he said.

Charles Robertson at Renaissance Capital said the real concern nagging investors is what will happen in Saudi Arabia's oil-rich Eastern Province, the home of the kingdom's restless Shi'ite minority. The Saudis produce 11.6pc of world output, but a much higher share of exports.

"There is potential for serious tension, and not just among the Shia. High unemployment and the youth bulge means unrest could be country-wide. If Saudi Arabia or Iran are engulfed, we have a serious problem."

On Wednesday Saudi King Abdullah unveiled $11bn of welfare projects for his people.

Energy & Utilities and Oil & Gas vacancies at Telegraph Jobs

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Oil could hit $220 a barrel on Libya and Algeria fears, warns Nomura

Barclays Capital said 1m b/d of Libyan output is "shut in", with the other 0.6m at risk. While Saudi Arabia can step in by raising output, this takes time and its oil is not a substitute for Libya's "sweet crude".

The escalating crisis set off further falls on global bourses. Wall Street was down 1pc in early trading and the FTSE 100 fell 1.2pc. The Dow has shed more than 300 points over the past three days to 12,075.

Nomura said a shut-down in both Libya and Algeria would cut global supply by 2.9m b/d and reduce OPEC spare capacity to 2.1m b/d, comparable with levels at the onset of the Gulf War and worse than during the 2008 spike, when prices hit $147.

Both price shocks preceeded – or triggered – a recession in Europe and the US. Fatih Birol, chief economist for the International Energy Agency, said the latest price rise had already become a "serious risk" for the fragile economies of the OECD bloc.

Some analysts fear the underlying picture is worse that officially recognised, doubting Saudi claims of ample spare capacity. A Wikileaks cable cited comments by a geologist for the Saudi oil giant Aramco that the kingdom's reserves had been overstated by 40pc. A second cable cited US diplomats asking whether the Saudis "any longer have the power to drive prices down for a prolonged period".

Nomura's report, which does not examine the catastrophic scenario of a full-blown Gulf crisis, said past oil shocks have shown a three-stage pattern, with a final blow-off in prices in the final phase. The current crisis is at stage one.

Surging oil prices create a nasty dilemma for central banks since they are inflationary if caused by robust global growth, but deflationary if caused by a supply crunch that acts as a tax on consuming nations. The big oil exporters tend to save extra revenues from price spikes at first, so the initial effect is to drain global demand.

The current picture contains elements of both, with an added twist of liquidity created by the US Federal Reserve that is leaking into the global system and playing havoc with commodity pricing.

US Treasury Secretary Tim Geithner said on Wednesday that the world economy is stong enough to "handle" the oil shock, insisting that central banks "have a lot of experience in managing these things".

The European Central Bank (ECB) responded to the oil spike in July 2008 by raising rates even though Germany and Italy were in recession by then. Nout Wellink, the ECB's Dutch governor, said this had been a policy error.

Circumstances are different this time yet also murky. ECB chief Jean-Claude Trichet signalled last month that the bank will "look through" the short-term price hump, but ECB rhetoric has since turned more hawkish. Fed doves will undoubtedly give more weight to the deflationary risks.

Jeremy Leggett, a leader of the UK industry task force on peak oil and energy security, said the Mid-East crisis "shows the extreme fragility of the global system. People don't realise how close we are to a potential precipice if this unrest reaches critical mass in enough OPEC countries. Governments need to draw up emergency plans and get cracking on proactive measures while we still have time," he said.

Charles Robertson at Renaissance Capital said the real concern nagging investors is what will happen in Saudi Arabia's oil-rich Eastern Province, the home of the kingdom's restless Shi'ite minority. The Saudis produce 11.6pc of world output, but a much higher share of exports.

"There is potential for serious tension, and not just among the Shia. High unemployment and the youth bulge means unrest could be country-wide. If Saudi Arabia or Iran are engulfed, we have a serious problem."

On Wednesday Saudi King Abdullah unveiled $11bn of welfare projects for his people.

Energy & Utilities and Oil & Gas vacancies at Telegraph Jobs

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.