Friday, August 8, 2008

Oil Shock: War’s On, So Where’s the Oil Supply Fear?

Keith Johnson writing at Environmental Capital on the inside baseball of the oil market:

Which weighs more heavily on oil markets—the Russian Bear or oil bears?

Oil bears, it seems, for now. How else to explain that oil fell heavily today to around $116 a barrel—a 3-month low—even as open war rages near a crucial oil transport corridor in the Caucausus that carries more than 1% of the world’s oil supplies? Until now, any hint of supply disruptions—from rebel actions in Nigeria to Venezuelan strikes—has driven oil prices higher.

But actual fighting between Russian and Georgian troops over the breakaway Georgian province of South Ossetia has done anything but rattle oil markets. Georgia is home to part of one of the world’s biggest oil pipelines, the 1-million-barrel-per-day Baku-Tblisi-Ceyhan line that carries crude from the Caspian Sea to the Mediterranean, bypassing Russia. As Caspian oil guru Steve Levine points out, the pipeline alone makes renewed fighting over South Ossetia a big concern for the West—unlike in the early 1990s....MORE

Oil was last at $115.00 down $5.02 See also the chart at "Oil Prices: Support and Resistance"