It made for great headlines, but the Syrian conflict never posed a serious risk to global oil supplies. Syria’s domestic production has dwindled and civil war ground exports down to virtually nothing last year. Escalating violence in Egypt, however, presents much more serious global oil market risk.
Insurgents displeased with the ouster of Muslim Brotherhood leadership reportedly stepped up Suez Canal attacks in recent weeks, with the stated goal of shutting down shipping through the strategic waterway. “In 2012, about 2.97 million bbl/d of total oil (crude oil and refined products) transited the Suez Canal in both directions. This is the highest amount ever shipped through the Canal and made up about 7 percent of total seaborne traded oil,” according to the EIA.
An attack that shut down the canal would be devastating for world oil markets, not to mention Egypt’s fragile economy. “On Aug. 31, two militants fired rocket-propelled grenades at a Chinese-owned cargo vessel traversing the Suez Canal. A Sinai-based Al Qaeda affiliate called Kataeb al Forqan claimed credit and posted a YouTube video of the attack. Although the vessel did not sustain significant damage, the group pledged to continue the assault on canal shipping,” according to a Washington Institute for Near East Policy article by David Schenker published in the Los Angeles Times.
Schenker paints a grave picture for Egypt and the wider region:
“For a state in which nearly 50% of the population is making less than $2 a day, with an official unemployment rate approaching 15% and a crippling 2012-13 budget deficit of $35 billion against $84 billion in expenditures, the loss of the canal would be devastating. Not only would it undermine confidence in the military’s ability to restore stability, it would embolden militants who continue to seek a restoration of Islamic rule in Egypt.”
Regional contagion stemming from Syria’s civil war is the most serious oil market concern associated with that conflict, but if the Egyptian security situation is as bad as Schenker reports, then oil market participants should be watching the Sinai Peninsula.
Forget Syria, Here’s a Real Oil Market Supply Concern
By Jared Anderson on September 24, 2013 at 10:00 AMIt made for great headlines, but the Syrian conflict never posed a serious risk to global oil supplies. Syria’s domestic production has dwindled and civil war ground exports down to virtually nothing last year. Escalating violence in Egypt, however, presents much more serious global oil market risk.
Insurgents displeased with the ouster of Muslim Brotherhood leadership reportedly stepped up Suez Canal attacks in recent weeks, with the stated goal of shutting down shipping through the strategic waterway. “In 2012, about 2.97 million bbl/d of total oil (crude oil and refined products) transited the Suez Canal in both directions. This is the highest amount ever shipped through the Canal and made up about 7 percent of total seaborne traded oil,” according to the EIA.
An attack that shut down the canal would be devastating for world oil markets, not to mention Egypt’s fragile economy. “On Aug. 31, two militants fired rocket-propelled grenades at a Chinese-owned cargo vessel traversing the Suez Canal. A Sinai-based Al Qaeda affiliate called Kataeb al Forqan claimed credit and posted a YouTube video of the attack. Although the vessel did not sustain significant damage, the group pledged to continue the assault on canal shipping,” according to a Washington Institute for Near East Policy article by David Schenker published in the Los Angeles Times.
Schenker paints a grave picture for Egypt and the wider region:
Regional contagion stemming from Syria’s civil war is the most serious oil market concern associated with that conflict, but if the Egyptian security situation is as bad as Schenker reports, then oil market participants should be watching the Sinai Peninsula.
Topics: Comment, Egypt, Geopolitical Risk, International Shipping, Middle East, North Africa, Oil, Oil Exports, Oil Markets, Oil Prices, Oil Production, Suez Canal, Syria