The Energy Report for Monday, February 27, 2006 The market's worst fears were almost played out on Friday when al-Qaeda suicide bombers attempted to destroy the Abqaiq oil processing plant in Saudi Arabia. Despite the fact that the early reports of the attack were confused, the market seemed to react not with panic but with a very calm rally considering the circumstances. In fact the market seemed to almost act as though a terror attempt of this magnitude was not shocking but almost expected.
Yet the attack on the Saudi facility does answer the question as to why oil prices don’t collapse when US inventories are running at 7 year highs. It's very simple: the market does not view the excess supply as a luxury but as a real necessity.
You really have to give the Saudi security forces credit for thwarting the attack. There were reports of two or maybe 3 cars full of explosives and only one car got through the first security parameter. And it was reported that overnight Saudi security forces killed at least five suspected al Qaeda members believed to be connected with the attack. It Seems the Saudi’s don’t mess around when terrorists attack them.
The energy complex is on high alert as the threat from terror and oil disruptions are on high. But word of progress in the Iran-Russian talks and the fact that the Saudis eliminated some terrorists are sending prices lower in early trade.
Closer to home, Venezuelan President Hugo Chavez is doing his best to spark a confrontation with the United States. Now Mr. Chavez will ban all US airlines from landing in his country.
Buy April Crude at 6000 - stop 5970. Buy April Heating oil at 16600 - stop 16500. Sell April unleaded at 16400 - stop 16500. Buy April natural gas at 720 - stop 710.
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