Cyclone Gonu Spins Towards Oman, Effect on Oil Unclear

With winds of 160 miles per hour and gusts of 195 miles per hour, Cyclone Gonu, which is expected to be the strongest ever recorded in the Arabian Peninsula is heading toward the oil-rich Persian Gulf off of Saudi Arabia and southern Iran.

While it is unclear whether or not the storm will hit the region's important oil installations head-on, or lose momentum before getting to the Persian Gulf, our commodities guru, Kevin Kerr, is still a bit worried.

"Why might Gonu matter?" Kerr wrote us this morning.

"Well, that answer begins with the fact that the world production of petroleum plateauing around 85 mbbl/day, any slight blip in supply or exporting could be quite noticeable on the world markets. A sizeable portion of the world's petroleum exports go through the Gulf of Oman.

"Particularly, Oman matters in this because it produces 743,000 bbl/day; Oman is also a net exporter, non-OPEC, whose production peaked earlier in the decade.

"Of course, this storm also has the potential to affect Iran, UAE, India, and/or Pakistan for that matter - mainly because of shipping disruptions, but there could be some real effects on infrastructure and assets depending on track and landfall. There are also refining and other production assets in Southern Iran, especially in Chah Bahar.

 Accuweather reports:

"No cyclone has ever entered the Gulf of Oman. And there are no custom 'storm surge' models available for that area. This forecast is based on my experience and subjective analysis of the seabed slope and storm surge interaction with the sea floor. Considering the region has never experienced a hurricane, let alone a strong one it is highly unlikely the loading facilities or platforms were constructed to withstand the forces - both wave action and wind force - that they will experience. Significant damage will occur. How much long-term damage, and the volumes associated with it - can not be determined at this time."

Bill Bonner
The Daily Reckoning Australia

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