Nomura Predicts $220 Oil If Just Libya, Algeria Cut Output

Wednesday, February 23, 2011
By Paul Martin

by Tyler Durden
ZeroHedge.com
02/23/2011

Waiting for a Saudi revolution before buying those $200 oil calls? It may be time to reevaluate: according to Nomura a halt in just Libyan and Algerian oil production (far more likely than the crisis spilling over to Saudi) would send oil to over $220/bbl. Specifically “the closest comparison to the current MENA unrest is the 1990-91 Gulf War. If Libya and Algeria were to halt oil production together, prices could peak above US$220/bbl and OPEC spare capacity will be reduced to 2.1mmbbl/d, similar to levels seen during the Gulf war and when prices hit US$147/bbl in 2008.” Wouldn’t a doubling in price lead to a major demand plunge as well? Yes it would “This could also result in a temporary demand destruction of some 2.0mmbbl/d globally.” Also, since the Fed’s free money was not flooding global market last time, $220 is just a lowball estimate: “We could be underestimating this as speculative activities were largely not present in 1990-91.”

More observations from Nomura’s Michael Lo:

The Rest…HERE

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