Hypersensitive Oil Market Reacts to Reports of Escalating Mideast Protests
Another day of escalating tensions in the Middle East, another rally in oil prices toward $100 a barrel. Take your pick of the headlines that have contributed the most to today’s $2 surge in NYMEX crude oil prices: Heavy clashes between Iranian protesters and security forces, Saudi government arrests a prominent Shi’ite cleric, Oman sends troops near UAE border.
And so much for last week’s rumor that Gaddafi was on his way to Zimbabwe or some other local. He remains in Libya. In fact, U.S. officials tell NBC News that suggestions that the Libyan leader will leave soon or the situation could be otherwise resolved are "premature" and that the current stalemate "could last for months.”
In this oil hypersensitive market, reports don’t necessarily need to be substantiated to move prices a dollar or more. Any report or rumor that inflames fears another domino is about to fall — that indicates another oil-producing nation could see its supplies disrupted — is one that traders take seriously. Witness the dollar surge in oil prices at 7 a.m. ET this morning, two hours before the open outcry session began, when a Russian news agency reported Saudi Arabia had sent tanks into Bahrain. The Saudi and Bahrain governments later denied the report. But, with oil prices moving at lightning speed in recent sessions, many traders say there’s no time to find out if rumors are substantiated. They need to make the trade.
So look for Mideast rumors and speculation to continue to drive oil price swings. Traders don’t have time to research reports and the actual supply impact. That’s up to journalists and analysts.