June has only just begun yet we have already had a very turbulent year. Political unrest in Tunisia and Egypt at the start of the year forced oil prices above US$ 100, for the first time in two years. This has been attributed to turmoil in Egypt threatening to affect shipments passing though the Suez canal and flow along the 200 mile Suez-Mediterranean pipeline. Approximately 2.5% of global demand passes through these mediums on a daily basis. Also, a fear that such rioting and political instability would sweep into major oil producing countries such as Saudi Arabia became instilled in many.
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Unfortunately, political instability didn’t end there and uproar began bubbling in Libya from mid January. Protests, unrest and political confrontation against Colonel Gaddafi began on 15th February and on 22nd February, only 7 days after ‘official’ conflict began, oil prices jumped to US$ 105.20 /bbl, the European Union commenced plans to evacuate its citizens from the country (due to the threat of an impending civil war) and BP officially suspended all onshore operations. However, supply from the nation, that houses 2% of global oil production and has a 10% share in the European market, was not yet affected. Yet, fluctuation continued both up and down and supply remained threatened. This risk peaked when an air strike was carried out near the oil terminal at Ras Lanuf and Brent crude was predicted to hit US$ 120/bbl. The cost of a barrel continued to oscillate following this due to the problems in Libya and then Bahrain, Yemen, Oman and Iraq, which renewed the worry that protests could spread through other, oil producing Middle Eastern countries.
Oil prices took a sudden dip when a devastating 9.1 magnitude earthquake hit Japan, the world’s third largest oil consumer, on 11th March. Fears of decreased demand came to the surface, and created a drop to below US$ 100 /bbl. This decline occurred despite the continued protest and impending civil war in Libya, the imposition of a no fly zone over the country, the threat of a planned day of protest in Saudi Arabia, a peaceful demonstration in Kuwait and continued trouble in Bahrain. Yet this didn’t last long as the predicted US$ 120 /bbl was quickly hit.
The most recent event, at the time of writing, which had the potential to affect the price of oil, was the death of Osama Bin Laden. In actuality, however, prices barely moved. This could be due to the fact that the threat of Al Qaida attacks to disrupt oil output from the Middle East is considered to now have fallen with the death of the group’s leader.
Shortly before this issue went to print a barrel stood at US$ 112.73, a return to start of year figures. As oil is undoubtedly not in short supply, despite the mayhem of the year so far, have these fluctuations all been due to speculation led by fear and sentiment? We may have to wait for the next half to play out before any final conclusions can be made, however, if oil can return to a price originally seen six months ago I’m inclined to say the answer to my question is yes.
In this issue, Nancy Yamaguchi looks at the Middle East with a focus on the Iranian refining industry. We continue to look at the Middle East with Grace Davision Refining Technologies and the topics relevant to fluid catalytic cracking in the region. Also, turn to the last page for our newest regular feature ’15 facts on…’ which will conclude our Middles Eastern coverage in this issue with 15 things you might not know about the region.