Oil faces demand destruction after quake

The energy markets are trying to come to grips with the demand destruction that is coming out of the tragedy in Japan. Scenes of utter devastation and explosions at two nuclear plants are giving this a dynamic unlike any disaster we have seen in the past.

During all disasters of this nature the market goes through phases and right now we are in the middle of the demand destruction phase. Toyota is one company that is shut down and hopes to restart production on March the 16th. Sony shut down 6 plants. Other companies will be unable to get power. It looks like this process may take some time because of the aftershocks and the ongoing concerns surrounding Japan's nuclear power plants.

US forces have pulled their ships away from the plants on concern that things could get worse. A hydrogen blast was reported at Unit 3 of the Fukushima Daiichi nuclear plant. Rolling blackouts and shut down production will kill demand. Long-term this will be bullish, yet the assessment phase will take some time.

Libya forces loyal to Gadhafi are making headway. Reports that they have retaken the oil town of Brega and now are offering amnesty to troops that surrender seems to suggest that Gadhafi is regaining control.

In the mean time the Obama administration is spinning the oil market to deflect blame from themselves for these sharply rising prices. Forget the fact that the Obama administration has hamstrung the industry and cost thousands of jobs due to his drilling moratorium, he is now trying to take credit for an increase in U.S. oil production.

Even former-President Bill Clinton criticized the policy by saying that a slowdown in permitting offshore drilling projects is an unnecessary delay that the U.S. economy doesn't need. The President will try to gain political cover and has ordered a review of why oil companies aren't producing more petroleum on federal land. He also said that he would try to monitor "any possible manipulation in the oil markets" and work with states to monitor for potential price gouging at the gas pump.

The situation in Japan and the Libya continue to Change!

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome