to review the above factors, what is different this time?
1. venezualan situation - but this is already built into the current price
2. low strategic oil reserve - this already built into current oil price
3. saddam destroying oil wells heads - last time it was seen as a possibility. This time it is seen as very high probabality. We now know that these well heads will take 6 to 9 months to repair. But they will be repaired. And the oil will eventually flow. Threfore to some degree this is already factored into the price.
I believe points 1,2 and 3 are the reason why oil price is now $36/barrel whereas it was only $20 barrel at start of last gulf war? (I stand to be corrected on this detail, I dont know exact price at time of gilf war)
4. Terrorism attack. Potential is built in to some degree in current price but due to unknown time and extent you would have to say plenty of upside exists.
5. Expansion of politcal uncertainty - either increased Arab involvement or North Korea escalating.
Consequently in my view, points 4 and 5 are the key.
Without point 4 or 5 occurring oil will fall sharply. With one of them oil could go through the roof.
Still a risky trade in my view. I would not call points 4 or 5 a highh probability, yet.
