Wednesday May 16, 2012

I've Been Thinking:

There has been an explosion in the oil pipeline in Syria. The bombing was originally reported by Syrian rebels and then it was reported in the Syrian press. The press also reported that pipelines had been bombed by rebel forces on April 21 and April 29.

There are several important issues here. Syria is not a player in the world oil market so the destruction of these oil lines will have no impact on world prices. Syrian production is already at 30% of what it was before the rebellion.

The explosion/s will, however, have a serious impact on Syrian cash flow. Oil is extremely fungible and the Syrians need the cash so they need to export whatever they can. The EU has a block against Syrian oil.

Convenience in shipping is very important and this oil is easily piped to the ports, loaded onto tankers and shipped. The best partner for oil from Syria is Iran they use tankers which are flags for hire. They get the crude and take it where it needs to go. But right now many Iranian tankers are filled with oil and sitting, waiting for a port of call to unload their black gold.

It seems that the pressure being applied to Iran is impacting, perhaps even more strongly and effectively, on Syria.

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