Peace in Bahrain is key to stopping oil prices from surging

22 February 2011 22 February 2011

BonTrade

With unrest in several Middle Eastern countries pushing up oil futures, a peaceful solution to protests in Bahrain is going to be key to stopping crude oil prices from surging out of control.

Bahrain – Tuesday Protests

More than a hundred thousand protesters poured into Bahrain’s central Pearl Square tdday in an unbroken stream stretching back for miles along a central highway in the biggest antigovernment demonstration yet seen in the Persian Gulf kingdom.

In a nation of only a half a million citizens, the sheer size of the gathering was astonishing. The protest, organized by the Shiite opposition parties, began in the central Bahrain Mall, two miles from the central square and seemed to fill the entire length of the highway between the two points.

Bahrain, Saudi Arabia and the US

Bahrain is a close ally of the United States in the region, and the Navy’s 5th Fleet is based here, helping ensure the flow of oil through the Strait of Hormuz and the gulf and safeguarding American interests.
The tiny island kingdom is linked to Saudi Arabia by a 16-mile causeway and has a majority Shiite population who are ruled by a Sunni royal family.

Sunni and Shiite differences are stirring up continued uncertainty for the future rule of Bahrain, and what that would mean to relations with Saudi Arabia, and the US.

Although Saudi Arabia is mostly Sunni, its own Shia minority mainly live in the oil rich east of the country adjacent to Bahrain and historically have shared some of their neighbours anger over religious discrimination and lack of opportunities.

Saudi Arabia supports Bahrain’s economy by supplying crude oil to its oil refinery and by sharing the proceeds of the offshore Abu Safa oilfield. The economic support gives Saudi Arabia some leverage over the smaller country’s response to the crisis.

Meanwhile, Saudi Arabia’s oil minister says the oil powerhouse has ample spare capacity to offset any oil supply disruptions. Tuesday’s comments by Ali Naimi came as Libya unrest sent oil markets surging for a second day.

The official Saudi Press Agency quoted Naimi as saying that Saudi’s production capacity of 12.5 million barrels per day can help “compensate for any shortage in international oil supplies.”