Iraq, Saudi Arabia, Oil

A reader, who has long been a very acute observer of world markets, sees a looming spike in oil prices that make our current troubles seem mild:

"When a successful attack is mounted on Saudi oil fields, there is no telling where the price of oil might end up, but at a minimum, the premium which has been built in to oil prices from the risk of supply interruptions, is likely to rise.

I am sending this to you as I read the newspaper reports are of an attack on the Abaqiq oil refinery in Saudi Arabia. This will not be the last attack. The Eastern province of Saudi Arabia is a Shia hotbed. Given the events in Iraq in recent days which were directed at Shia, the timing of this attack is important. Whether the Saudi security forces were able to foil this attack or not almost does not matter. If we have learned anything from what has happened in Iraq, it is that there is no shortage of suicide bombers, no end to their ingenuity and they are tenacious in achieving their objective. When suicide bombers start targeting Saudi energy infrastructure we assume there will be more attacks. My feeling is this is not in oil's pricing structure given the immediate jump in oil prices which took place on the news. I also think it is something else to consider when assessing the aftermath of the bombing of the Golden Shrine in Iraq. The price target I have for oil later this year is $85-$95."

We have to consider the possibility that Iraq's already depressed oil production may be halted by civil war in the near future.