If the entire Middle East falls under radical control – we could be looking at $300-a-barrel oil and pump prices of $9.57 a gallon. Definitely a stunner.
U.S. oil prices yesterday (Tuesday) hit their highest levels since September 2008 as investors reacted to fears that Middle East tumult would spread from Libya to such key Organization of Petroleum Exporting Countries (OPEC) as Iran and Saudi Arabia. But never fear: Even if the Middle East melts down and oil prices soar, there are moves you can make to hedge away your risk.
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Global markets have climbed and the price of oil fallen after Hosni Mubarak stepped down as Egypt’s president.
“The market will be worried about the risk of contagion within the region and whether the Egyptian example will create a domino effect . They will be looking to be reassured that the region will remain stable over the coming weeks and months.”
On Wall Street, the Dow Jones iindex Dow rose 43.97 points, 0.4%, to 12,273.3, its highest close since June 2008. The Nasdaq index rose 0.7% to 2,809.4 points.
In London, the FTSE 100 shrugged off heavy losses to finish 0.7% higher at 6,062.9 points, while the key French and German markets also enjoyed late surges.
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The world is finally waking up to the fact that global grain prices are destined to head higher – much higher.
Nasty weather in key agricultural markets around the world has savaged the global grain crop, meaning worldwide supplies can’t help but be squeezed. Australia, for instance, is experiencing additional flooding in areas that were already battered by the torrential rains of November, December and January.
And as if the supply-related increase in agricultural commodities wasn’t enough, there’s also the U.S. dollar – and the so-called “race to the bottom” – to contend with. Make no mistake: The endless devaluations in the greenback are having a worldwide impact on agricultural commodity prices. Since commodities are priced in dollars, these devaluations translate into higher prices for grains and other food-related commodities.
Short supplies and rising prices are bad enough, but concerns about these first two realities are creating an additional catalyst that completes a trifecta for higher agricultural commodity prices.
And that third catalyst is panic buying – especially with rice, which is a basic table staple in Asian markets. For instance, The Saudi Gazette last week reported that Bangladesh recently tripled its rice-import target and Indonesia just purchased 820,000 tons of Thai rice, nearly five times the volume initially sought.
“This is only the start of the panic buying,” Ker Chung Yang, a commodities analyst at Singapore-based Phillip Futures, said in The Gazette report. “I expect we’ll have more countries coming in and buying grain.”
For global investors, there are five reasons why it’s definitely time to buy rice futures.
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The turmoil in Egypt is causing economic jitters across the globe, pushing up food and oil prices so far, but bigger worries are ahead.
The unrest already has affected U.S. energy prices.
The average price for a gallon of regular gasoline in the U.S. was $3.12 on Friday – up 2.4 cents just in the past week. Analysts expect prices to stay above $3 a gallon – the highest since 2008 – and probably go higher until the conflict in Egypt is resolved and Mideast tensions ease.
Oil prices hovered at about $90 a barrel over the past week. Some analysts predicted the Egyptian crisis will lead to $100 per barrel prices sooner rather than later.
Traders worry the unrest might spread to oil-producing countries in the region and even affect shipments through the Suez Canal. Egypt is not a major oil producer, but it controls the canal and a nearby pipeline that together carry about 2 million barrels of oil a day from the Middle East to customers in Europe and the United States.
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Stocks swaggered through the first four days of the past week with their usual devil-may-care attitude, then tripped into the final three hours on Friday amid scenes of civil unrest in Egypt. At the final count, the Dow Jones Industrials closed down Friday by 1.4%, theS&P 500 fell 1.8%, theNasdaq fell 2.5% and the Russell 2000small-caps sank 2.5%.
For the week, the Dow was only down 0.4%, though, while the S&P was off 0.5%, the Nasdaq was flat and the Russell 2000 small-caps were actually up 0.3%.
Click Here to see how the unrest in Egypt will drive the markets…
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