morbius glass

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morbius glass: Energy markets, Commodities and Geopolitical analysis.

Posted by Adrian on August 22, 2008

Energy Market Watch: Japan oil imports increase

Japan that is solely reliant on imported oil has increased 2.78% in July volume up 4.12 million barrels a day. As the oil markets go through a tug of war of fundamentals, demand and geopolitical tensions. It may be a false dichotomy to anticipate a falling oil price anytime soon, even despite the slowing global economy.

The politics of oil will effect the oil price far more dramatically than speculators in the futures market, as discussed in Oil lower, volatility market reaction. Oil now showing price instability. Could the mother of all oil shocks be brewing?; the oil price should stabilize in the 100 -110 range, this is due to market dynamics of liquidity moving back in and out of the oil market. A sudden pull of liquidity out of the oil futures market, may send the oil price down to unsustainable lower oil price. Which could lead to a greater oil shock.

Japan and China will be interesting, in the sense of how both economies (Japan technically is now in recession and China slowing down prior and soon post Olympics) will cope with economies still highly dependent on oil shipped in from the Middle East, particularly Iran.

Yet we are still seeing uncertainty with the geopolitical situation in Georgia, with BP closing down pipes on the 13 August 2008 (since reopened). Which interestingly did not cause the market to rally on the oil price (13 Aug 2008 – $112). All this despite the largest oil pipeline in the world, the Caspian oil pipeline (that passes through Georgia) being vulnerable. There is now a delayed reaction from the market which is responding to a possible broader regional instability in Georgia.

With oil demand from Japan and China still significant, plus the nagging issue of the Iranian Nuclear issue and the current Georgia/Russia conflict. Oil is now sitting above the 120 price support and may ascend higher and may find support at 129 – 130 in the weeks ahead

Please refer to graph, WTI crude: (current oil price $121)

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