Middle East Crisis: Will Oil Prices Rocket? #TradingDebates

WILL THE OIL PRICE ROCKET? Crisis in the Middle East SAXO CAPITAL MARKETS Conflicts in Syria, Egypt, and Libya and general instability in the wider Middle East have sent oil prices soaring. What are the factors you should con- sider when trading oil? HOW MUCH OIL IS PRODUCED GLOBALLY? Although oil production in Syria, Egypt and Libya together account for less than 2% of total global output, the conflict could spill over into Iran and Saudi Arabia, two of the largest oil producers in the world. Oil Production [Million Barrels per Day] SAUDI ARABIA 11.55 SYRIA KUWAIT IRAN LIBYA JORDAN IRAQ BAHRAIN IRAN 3.54 1.48 QATAR UAE OMAN LIBYA EGYPT 3.21 0.92 SAUDI ARABIA UAE OMAN IRAQ EGYPT 2.99 0.72 YEMEN KUWAIT SYRIA BAHRAIN 2.8 0.18 0.05 QATAR YEMEN JORDAN 1.58 0.16 SOURCE: US EIA HOW MUCH OIL PASSES THROUGH THE SUEZ CANAL EVERY DAY? The Suez Canal in Egypt is also an important chokepoint for shipments of oil between Europe and Asia without navigation around Africa. Around an estimated four million barrels of oil pass through the Suez Canal every day, according to the US Energy Information Administration. Volume of Crude Oil and SOURCES: US EIA Petroleum Products Transported Through Suez Canal in 2011 [Million Barrels per Day) OCEANS BEYOND PIRACY 1.4 PETROLEUM PRODUCTS 0.8 CRUDE OIL 1.7 CRUDE OIL An oil tanker going from Saudi Arabia to the United States has 2,700 miles longer to travel when taking the route south of Africa rather than the Suez canal. + 2700 MILES ARE THERE ANY OIL SUPPLY DISRUPTIONS? Fears of a supply disruption in the region may lead to higher oil prices. Will oil make a return to $128 a barrel, or even match the 2008 peak of almost $150 a barrel? Libyan Oil Production 2,000,000 1,600,000 MAR 13 1,200,000 800,000 400,000 JAN 08 JUL 08 JAN 09 JUL 09 JAN 10 JUL 10 JAN 11 JUL 11 JAN 12 JUL 12 JAN 13 AUG 13 SOURCES: US EIA, REUTERS Libya is currently creating the biggest headache, as port strikes and pipeline shutdowns have resulted in the daily output of just 200,000 barrels per day, according to Reuters. This compares with 1.4 million barrels a day in March 2013. US OIL PRODUCTION SOFTENS THE BLOW The price spike in Brent crude has been much weaker than in the previous two years when it hit $128 a barrel. The difference this time is that markets have taken comfort from the recent increase in US oil production, which has risen by more than 2 million barrels per day over the last 12 months, US Crude Oil - Import and Production [1,000 barrels daily average per year] US crude oil imports * US crude oll production 11000 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 2007 2008 2009 2010 2011 2012 2013 SOURCE: US EIA MONEY MANAGERS' EXPOSURE TO BRENT CRUDE* *tracked by the IICE Burope Exchange. Money managers continue to increase their net-long exposure to Brent crude, which as a percentage of total open interest has moved about 12% - a level not seen during either the Libyan War in 2011 or when sanctions were imposed on Iran in 2012. Brent Crude Oil [Money Managers Speculative Positioning and Price] Speculative positions, Brent Crude, contracts USD/barrel 250000 130 200000 122 150000 114 100000 106 50000 98 90 DEC 10 MAR 11 JUN 11 SEP 11 DEC 11 MAR 12 JUN 12 SEP 12 DEC 12 MAR 13 JUN 13 AUG 13 SOURCE: ICE FUTURES EXCHANGE Crude Oil 57% of Saxo Capital Markets clients based in 57% 43% the UK hold a net-long position in crude oil while 43% of Saxo Capital Markets clients based in the UK hold a net-short position. LONG SHORT CRUDE OIL *AS OF SEPTEMBER 4, 2013 CRUDE OIL SOURCE: SAXO BANK RESEARCH SOURCES: US Energy Information Administration, Oil Production: http://www.eia.gowcountriesindex.cfm?view=production US Energy Information Administration, World Oil Transit Chokepoints: http://www.eia.gov/countries/regions-topics.cfm?fips=wotc&trk=p3 Oceans Beyond Piracy, The Economic Cost of Maritime Piracy: http://oceansbeyondpiracy.org/sites/default/files/documents_old/The_Economic_Cost_of_Piracy_Full_Report.pdf TradingFloor.com, What happens next in oil markets: http://www.tradingfloor.com/posts/happens-oil-markets-833302181 Saxo Bank Research, Crude Oil: http://www.saxoworld.com/mediacentre/economic-research ICE Europe Exchange, Oil futures: https://www.theice.com/futures_europe.jhtml Reuters, Libya's oil chaos deepens as armed group shuts pipeline: http://uk.reuters.com/article/2013/08/27/uk-libya-oil-idUKBRE97QOTU20130827 This infographic has been produced for information purposes only and should not be considered as investment advice. Trading margin products can result in losses that exceed your initial deposit. Saxo Capital Markets UK Limited is a company authorised and regulated by the Financial Conduct Authority, registration Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA.