“I expect oil prices to reach $110 during the first half of 2011, however, it could go above that level if Egypt’s current crisis continues,” says Imad al-Atiqi, a member of Kuwait’s Supreme Petroleum Council, in an interview today with Reuters. “A huge amount of oil passes through the Suez Canal and the country’s stability is essential for the Middle East’s stability, particularly Israel.”
Kuwait, an OPEC member, holds about 9% of the world’s known oil reserves, according to the CIA World Factbook. “Almost 16,500 ships transited the Suez Canal from January through November of 2010, of which about 20 percent were petroleum tankers and 5 percent were LNG tankers,” according to the U.S. Energy Information Administration (EIA). Total petroleum shipments through the Suez in the first 11 months of last year amounted to nearly 2 million barrels a day. For comparison, the U.S. imports last November totaled a bit more than 11 million barrels a day, according to EIA.
As for Imad al-Atiqi’s price forecast, is it slightly overbaked? Perhaps, suggests Raymond J. Learsy, author of Over a Barrel: Breaking Oil’s Grip on Our Future. “Clearly, the closing of the Suez Canal to the oil trade would be a hindrance, but hardly the disaster portrayed in the media and our friends at OPEC,” writes Learsy in a column following Imad al-Atiqi’s commentary.
Meanwhile, Mark Zandi, chief economist at Moody’s Analytics, advises that “if the turmoil is contained largely to Egypt, then the broader economic fallout will be marginal. Now, obviously, if it spills out of Egypt to other parts of the Middle East, the concern goes to a whole other darker level. It is certainly now on my radar screen.”