Yousef Gamal El-Din
Feb 21, 2011
With the recent turmoil across North Africa and the Gulf, investors are now becoming increasingly concerned that the ‘political contagion,’ as the wave of upheaval has come to be known, may flow over into Saudi Arabia as well.
The worry is that the protests in various parts of the Arab World will embolden Saudi youths, or the minority Shiites in the east, to revolt in a similar fashion.
The country supplies about 12% of global oil production and sits on at least a fifth of the world’s oil reserves.
By being on the eastern border of the Kingdom, Bahrain is near key parts of the country’s crude reserves. Although doubtful that Saudi Arabia would be drawn into the contagion, “the fear factor could potentially force oil prices higher and leave the equity markets lower”, Gary Dugan, CIO at Emirates NBD, told CNBC.
Using information from the Energy Information Administration (EIA) for 2009: If you take of Saudi Arabia, and add to that other major oil exporters in the region that have seen turmoil in recent days, such as OPEC members Libya and Algeria, you’re looking at roughly 16% of total oil production that could be at risk. Pricing the risk premium in the current environment will prove to be a daunting guessing game for traders.
This article was posted: Monday, February 21, 2011 at 9:51 am