AMSTERDAM (ResourceInvestor.com) -- International crude oil prices are showing increased potential to reach new record levels, largely based on growing concerns that Iran could be hit by military actions or increased hars sanction regimes.
Several military websites, such as the well-informed news site Debka.com, are indicating that American and British forces are increasing their posture in the Persian Gulf. Analysts have stated that Patriot rockets have been placed in Bahrain while an American navy force has set course from American port San Diego to the Persian Gulf. Several news sites are reporting that American investors have been advised to leave the Persian Gulf at present, indicating possible military action in the foreseeable future.
According to Debka, officers of the U.S. Central Command 5th Fleet HQ at Manama have stated that investors and operators are advised to leave the region without any delay. The same message has been given by Arab news sources indicating increased military operations in the region. UAE new sources have also reported that overall occupancy of hotels in the region have soared, as soldiers are taking up most of the available rooms. Bahrain’s chief of airs defense operations, Gen. Khaled al-‘Absi, stated to the press that new alarm networks had been installed and air defense systems upgraded to handle chemical, biological and radioactive attacks.
Analysts are most worried about possible military actions due to the fact that American nuclear carrier USS Nimitz and its support ships are set to depart from San Diego to join the John C. Stennis Strike Group in the Persian Gulf. Officially, the new carrier is en route to relieve the USS Dwight D. Eisenhower , but it is expected that, based on the current confrontation between Iran and Great Britain caused by the Iranian hostage taking of 15 British marines, all three U.S. carriers will stay put in the region, putting in place a formidable force capable of hitting Iran very hard.
European analysts have said the current situation in Iran shows that the radical elements in the power base of the Iranian regime currently have the overhand. More liberal politicians have been sidelined after the Iranian Revolutionary Guards have taken over the management of the British hostage takings. Debka has reported that heading the tough Tehran faction are hardline president Mahmoud Ahmadinejad and Gen. Rahim Safavi, commander of the Revolutionary Guards whose naval wing performed the seizure.
It can be expected if the Iranian government will not relieve the British marines the coming days, a military blockade of the Iranian sea lanes will be set in place. Tehran already has threatened to react to the latter with an appropriate answer, possibly meaning a closure of the Straits of Hormuz, blocking 40-60% of total oil and gas exports immediately. Revolutionary Guards spokesmen have even indicated that military strikes against Arab strategic objectives or oil tankers in the Gulf could also be an option. Russian military sources have stated off record that American plans are indicating a surgical strike to be planned for April 6.
The current crisis has already resulted in a surge in oil prices, without a real solution seen in the near future. Ongoing confrontation will bring crude oil prices to levels of above US$70 per barrel soon. OPEC countries have off records indicated that when these price levels are returning the oil cartel will consider a change to its current export quota system, largely targeting bringing price levels down to around US$60 per barrel.
A total blockade or war with Iran will be the nightmare scenario feared by analysts worldwide. The latter is a real option, as Iran’s military build up currently has increased the country’s capabilities to block the world’s most important oil and gas export routes via the Strait of Hormuz. No real action to prevent the latter is in place, as it will only take some minor surgical strikes by special forces of Iran to sink some VLCCs in the sea lane to block it effectively.
The oil market should be assessing its current options rationally, as there is a real threat at present a vast part of crude oil exports are to be blocked for a medium to long-term. Investors will be already trying to assess their options, as crude oil prices seem to be heading for an unseen spike in the short term.
