Saturday, February 26, 2011

Crude Will Top $200 If Both Algeria, Libya Shut Down

Russians, eastern Europeans blame U.S. and western Europeans for "colonial attitudes" that led to "endless chain" of mideastern revolutions

Tokyo - An analyst for a major investment banking house said futures deliveries on light sweet crude could top $220 a barrel if both Algeria and Libya shut off production simultaneously.

Nomura Holdings, Inc., pointed to civil unrest that led Muamar Qadafi to vow to fight to “his last drop of blood” and the end of a 19-year state of emergency in Algeria as unruly crowds placed pressure on the two military dictatorships.

“If Libya and Algeria were to halt oil production at the same time, prices could peak above $220 a barrel and OPEC spare capacity will be reduced to 2.1 million barrels a day, similar to levels seen during the Gulf War and when prices hit $147 in 2008,” a statement from the bank read. During that time, the analyst noted, oil prices rose 130%.

Chesapeake Energy CEO Aubrey McClendon wouldn't go that far, but said that oil prices could stay “scary strong” for years. A major purveyor of natural gas that is “beginning to look cheap today,” according to Dow-Jones blogger Dave Kansas, the energy firm is up 4% on the news.

Dallas gas producer T. Boone Pickens of Mesa Petroleum fame predicted an end to the dominance of crude petroleum as the primary source of refinement choice and the emergence of natural gas as a major motor fuel in the near future as crude prices on April deliveries rose to nearly $100 on the New York market, and topped that at London, where Brent crude chimed in at $110.

The White House froze all Libyan assets, closed the embassy at Tripoli and advised banks to watch closely for suspicious transactions amongst top Libyan officials.

President Obama and Saudi Arabian government officials made soothing noises at week's end, saying OPEC would take up the slack if any such thing happened. Clearly, the world's financial analysts don't buy that line.

“By any measure, Moammar Gadhafi's government has violated international norms and common decency and must be held accountable,” said President Obama Friday night. He condemned “the Libyan government's contnued violation of human rights, brutalization of its people and outrageous threats.”


Pressure on the Dollar and the Euro continued to rise as the mideast revolutions progressed.

Southern European states of Portugal, Italy, Ireland, Greece and Spain (PIIGS) are clearly in danger of a collapse of banks and currencies unless the rest of the European Union moves to bail them out once more.


According to the U.S. Treasury, American banks are in worse shape than at any time in recent history, with banks at risk of failing making up 12 percent of the nation's 7,657 federally insured banks. It is the highest level in 18 years.

The Treasury Department report confirmed that 22 banks have failed so far this year, compared to an overall failure of 157 banks in 2010.

Only a small fraction of federally insured banks – about 1.4% of which have assets above $10 billion – are driving the bulk of earnings growth, including the largest, which are Bank of America, Citigroup, JPMorgan Chase & Co., and Wells Fargo & Co.

Though the banks' income rose to an all-time high of $87.5 billion in the October – December quarter of 2010, compared to a $10.6 billion total for the same period of 2009, government officials called for more vigorous lending.

FDIC Chairman Sheila Bair noted that there is little “upward momentum” to be seen.

“A key reason why revenues havent' grown faster is that loans have nnot been growing. It's not going as fast as I would like to see...I also think that banks need to get back to the basics of making loans.”

WHOSE FAULT IS IT? Osama bin Laden, says Qadafi

For a mideastern view of the problem, look to Col. Qadafi, who blames it all on Osama bin Laden, the Islamic radical scion of a wealthy Saudi Arabian construction family who bankrolled 9/11 attacks on America through the Al Qaeda terrorist organization while hiding out in a cave in Afghanistan.

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