Global Turmoil Increases Oil Prices

Source:

"Markets refocus on Middle East turmoil, as well as Japan's energy needs."

The oil price has rebounded as markets refocus on the Middle East, as well as Japan's energy needs.

Brent crude futures broke back above $113 a barrel, while US light, sweet crude reached $100 again.

With Libyan production already near zero, markets took fright at the turmoil in Bahrain and the risk it may spread to neighboring Saudi Arabia.

Meanwhile, with much of Japan's nuclear power sector shut down, the country is set to increase energy imports.

The market had initially taken fright at Japan's earthquake and tsunami on Friday, with crude prices falling from recent highs on fears that Japanese demand would slump.

Brent crude dipped to $107.35 a barrel earlier in the week, while US crude hit $96.21.

Large parts of Japanese manufacturing have been shut down in order to assess damage from the twin disasters, and are likely to operate below capacity for months as the government rations electricity.

Markets had feared this would also affect global production, as many industries—such as cars and computer manufacturers—rely on Japan to produce critical parts.

However, analysts say it is becoming increasingly apparent that with its electricity generating capacity severely limited, Japan will need to significantly step up its energy imports.

Japan's nuclear capacity—which accounts for nearly 30% of electricity generation—has been hardest hit, with 11 of its 54 reactors not operating.

The total loss of generating capacity is estimated at anywhere between 10% and 40%.

Power shortages are expected to remain a problem for at least six months, and may even intensify in the summer when households typically increase electricity consumption for air conditioning.

The country is expected to need more finished fuel products, as well as coal and liquefied natural gas (LNG), which can be used for power generation.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe