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The chaos and Egypt causing turmoil for oil prices are surging to the highest levels in more than a year and some analysts predict an even bigger spike.
If the violence intensifies.
But wasn't the US shale boom supposed to stop spikes like this from happening and prevent panic in the markets joining me now -- energy analyst Stephen short.
Welcome back the -- Stephen we appreciate your being here especially if you're there day after July 4.
So this -- spike in oil to over hundred dollars a barrel it's.
All error it's not -- isn't -- talking to stay here.
While the concern is of course -- -- flow of barrels we're talking about a potential civil war.
In a country that sits atop the Suez Canal which is responsible for transiting 60% of the world trade and oil on tankers.
So the fear of course now is some sort of disruption to -- flow.
I also have to add that you have to wonder why given the amount of oil sitting -- in North America.
Why we're dragging our feet on keystone because -- you referenced were sitting on a surplus of oil here probably is here.
And the potential problem in the Middle East is we have the oil but we need to get the oil to where it needs to be to the refineries in this is the fear that we are pricing in right now.
Now this price rise has been building up now for the past two weeks because what we've seen now with Wall Street with investors coming into the market.
There are now starting to exit there -- large positions in natural gas and they've been moving them into oil.
-- now you take a tremendous amount of an investor flow of money coming into the oil market.
You throw a big geopolitical headlines like potentially disrupting the flow of -- significant amount of oil.
And hence you've got the template for significant rise in price will now where we -- for a look at a couple of Beers but.
But that's why we're thinking this is all just play because it just -- flood and 95% of the trade that they make of these pieces of paper for oil prices and everything it turned into.
Actual barrel of all I mean isn't there a chance mean what could you said 60% of all of the oil trade containers goes from the -- can now.
What percentage -- tanker oil of all oil in the world.
April I don't have that number offhand that despite but it is a significant amount -- eyes we referenced in forward the United States.
Now five years ago the United States -- -- twelve million barrels a day of oil today we need to only in import seven million barrels a day that's still a significant amount.
But we have a limited our exposure to this situation at this point -- now it seems to me though that.
The Suez Canal if something did go wrong there.
I mean what a bunch of oil needing countries simply -- have shipments of military guidance saying hey we're keeping this thing opened up -- let this closed out.
What we do have recent history to fall back on -- years ago we had the civil war.
And Libya and -- around this time of the year actually was a little earlier.
Where the market lost one point two million barrels a day of the Libyan exports a significant amount a very high quality oil.
And in that price rise we saw oil prices rise from about ninety dollars a barrel to a 115116.
Dollars a barrel.
So if you do you have a civil war.
Regardless of what the military can do you will see a disruption in this is what the market it's no it's important to keep in mind what markets are they are driven by.
Right now you take the greed the Wall Street money piling into this market you add to that -- -- the destruction of a significant amount of oil go through the Suez.
And now you've got that table is set now for that rise in price but it's been a significant rise.
If we see a quick resolution to the situation in Egypt and to tempers -- down.
You'll see oil prices fall a lot -- -- And a lot steeper than we've -- -- so right now we're at a 10200 in three.
If we don't get any sort of resolution coming out of this long holiday weekend.
It's a -- it's not inconceivable that we can go up -- -- 115 where we war.
A year ago and where we were two years ago I want to see that in -- hinges.
Yup that they'll be bad for the US economy -- but that doesn't happen.
-- keep my fingers crossed on that.
OK but if there is -- that little cut off from the Suez how -- in the US actually lift production to offset some of the impact of that.
-- take months and months but -- be -- -- and weeks.
Now and are now now we're we're talking about the US cannot respond to this situation and are the only swing producer out there.
It would be Saudi Arabia and of course today would be quick.
To respond to this and I'm sure they are taking measures.
But again keep in mind if it is Saudi Arabia cut oil have to go through the -- -- only other option is to take it around the Horn of Africa not gonna add weeks that's gonna add tremendous cost.
-- transiting not oil and of course -- cost has to be translated.
And represented in the price and hence why a lot of this is already getting priced into the market.
But if we get and we don't see that disruption.
-- -- -- clubs harm to your Dennis when.
You know we're sitting on a surplus -- -- here in the United States but again you look at Wall Street.
They now own in the in the paper market which they're not going to take delivery.
But if you take all the oil sitting in the central United States work where the contract is traded in Cushing Oklahoma.
Wall Street to drain the fifty million barrels sitting in there right now.
And replace that oil for five times over this is how much land they are sitting on.
I would literally is a potential situation where the tail is wagging the dog and a nice -- being driven in your fearful and got a functions you have this price rise.
Got to run thanks for being with a but you know and those oil pits all those traders did a bunch up Brady cats and panic -- worried about everything I'm not afraid don't be afraid Stephen -- -- behind us.
All right I'll try not to be back content.
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