Oil Prices- Risk of Supply Shock/ Terror Not Accurately Priced In
In early August it was reported that Yemen foiled an Al Qaeda plot to take over gas and oil facilities in the country.
This follows a pattern of the group attempting to do both material and symbolic damage to Western economies. Think World Trade Centers.
If At First You Don’t Succeed
Al Qaeda originally tried to blow up the trade centers with massive bombs. The attempt was unsuccessful, years later, they hijacked planes on 9/11 …
Once again, the terror group will keep to its habit of choosing a target and going after it. They will conduct an all out attack on several oil installations at once, to damage and humiliate Western powers, an attempt to demonstrate they are still a viable power.
Of course, oil prices would zoom upwards. This coupled with the impending war of Egypt’s army and Islamists (the potential of Suez canal disruption is factored into oil’s price by many analysts) civil war in Syria, and a potential air strike/ invasion of Iran, along with the continued inflationary practices of central banks around the globe, coupled with my above thesis on a terror strike against oil installations which I don’t believe/ have read is factored in, make the risk of a sudden jolt in oil prices greater than usual.
While oil prices are above $100 a barrel, it’s my belief that the risk premium is currently undervalued.
On the assumption that the Yemeni oil threat was real, don’t be surprised if the terror group strikes at oil facilities in the near future. It might not happen, but the plan and idea is out there. Factor it in. Just another exercise in pattern recognition.