Higher oil prices in view as traders wake to Middle East

Higher oil prices are going to be a fact that we all live with in 2011 as continued unrest in the Middle East looks set to rocket, while many traders seem to have taken their eyes “off the ball” while looking to the recent nightmare scenario now facing Japan.

Bahrain Problems Escalate

Helicopters flew overhead and Bahraini police fired teargas on Wednesday as they cleared protesters from a central roundabout that had become the symbol of an uprising by the island’s Shi’ite Muslim majority.

Advancing less than 24 hours after Bahrain declared martial law, police moved in thick lines from Bahrain Financial Harbour, the country’s main financial district, to the Pearl roundabout.

Bahrain has been gripped by its worst unrest since the 1990s after protesters took to the streets last month, inspired by uprisings that toppled the leaders of Egypt and Tunisia.

The problems facing Bahrain could at some point, spread into Saudi Arabia in some form, which is the worst case scenario for oil prices, as many forecasters believe that if there is unrest in Saudi Arabia (OPEC’s flagship oil exporter in the Middle East) then oil prices could hit $200 in a short period of time.

The Middle East supplies 40 percent of the world’s oil.

Japan’s Nightmare Continues

Japan’s government acknowledged today that it may need the help of US military forces to stop continuing radioactive emissions from a nuclear power plant at the Fukushima nuclear site.

Helicopters have been sent to drop water over the reactor in a further attempt to cool the site, however they were called off due to high radiation levels in the air surrounding the area.

Japan’s nightmare continues as the world watches and hopes that any nuclear leak can be contained, and quickly.

Japan is the third largest economy in the world. With several nuclear sites now out of action in the country and rolling power blackouts possible (due to lack of electricity), energy in Japan is now in short supply, and that includes petrol and oil.

There having been reports of motorists getting into fist fights as they wait in lines of 100 or more cars for a ration of petrol. Some petrol stations that still have supplies are rationing drivers to 2000 Yen ($2) of fuel only. In Tokyo some petrol stations have also run dry.

South Korea to Supply Japan with Oil

Meanwhile, South Korea’s four oil refiners, the world’s sixth largest in capacity, aims to supply more than 2 million barrels of oil products sought by Japan to plug an output gap after last week’s killer earthquake and tsunami.

These are part of efforts by Japanese refiners, trading firms and utilities to secure alternative supplies of oil products and gas, while steel mills are diverting metallurgical coal to other countries due to plant outages and port disruptions caused by Friday’s earthquake.

The supply diversion from South Korea comes as regional diesel, jet fuel and fuel oil markets are supported by expectations of stronger demand for utility fuel in Japan to replace the loss of nuclear power and refining production.

JX Nippon Oil & Energy Corp, Japan’s top refiner, has today asked for 1.0 million to 1.5 million barrels of oil products including gasoline, naphtha, fuel oil and diesel.

Latest Oil Prices

In see saw trading today, Brent oil futures for April 2011 delivery was trading at $110.14 a barrel, 11.00 GMT on the ICE Futures Exchange, while US WTI oil futures was at $98.67.

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