HOUSTON, Sept. 18 -- Concerns over when and where US military forces will retaliate for last week's terrorists attacks will keep energy prices volatile while President George W. Bush tries to build international support, especially among Muslim countries, for a strike, energy and strategic analysts said this week.
"Several key countries, including Germany, France, and Egypt, made it clear that although they condemn the attacks and support a strong American response, they would not welcome a campaign that costs massive civilian casualties," said a website report published by Strategic Forecasting LLC (Stratfor), an intelligence analysis firm based in Austin, Tex., that began as a think tank called Center for Geopolitical Studies in 1995.
Police are rounding up suspects in Germany, which apparently served as a way-station for terrorists en route to the US to participate in the attacks on the World Trade Center in New York and the Pentagon in Washington, DC.
Yet, Stratfor analysts reported, "Germany's Social Democratic government, whose leaders were shaped by the anti-Viet Nam war movement of the 1960s, are viscerally opposed to broad bombing campaigns and remain uneasy about the air campaign against Kosovo."
France, which has a large Arab population within its borders, is "unwilling to write a blank check to the Americans under any circumstances, and after a graceful interval, are making clear the limits of their support," the analysts said.
Egyptian President Hosni Mubarak has cautioned against broad US attacks on civilians.
"For Mubarak, the native Islamic movement simmering beneath the surface of Egypt's secular society represents a constant threat. Some of the Sept. 11 attackers were Egyptians; Mubarak understands there are limits to what he can commit his country to do," the Stratfor report concluded.
In its monthly oil report Monday, the London-based Centre for Global Energy Studies (CGES) said, "Iraq remains the greatest uncertainty on the supply side of the oil balance" following last week's attacks.
"In its wider war against terrorism, the US will certainly seek to impose tighter sanctions on Iraq, at the very least, while military strikes cannot be ruled out," CGES analysts said.
Either move would prompt Saddam Hussein to suspend oil exports again, they said.
Other members of the Organization of Petroleum Exporting Countries have already pledged to boost production as necessary to maintain current world markets for oil.
However, CGES officials said, "Some of these countries may encounter popular opposition in the region to such a move. The US must act with extreme care to ensure that it retains the continuing support of moderate Arab states."
Meanwhile, market fundamentals have been weakened by the attacks, analysts said. Increased security measures and frequent television replays of the airliner smashing into the second tower of the World Trade Center are expected to sharply reduce commercial air traffic for many months.
That could reduce demand for jet fuel by as much as 400,000 b/d through the winter, although that drop may be partially offset by increased consumption of a different category of military jet fuel, said CGES analysis, who foresee greater risks on the demand side vs. supplies.
In their base case scenario, CGES analysts assume global oil demand will decline by 300,000 b/d through the last quarter of this year and the first quarter of 2002. With no major disruptions of supplies during that period, they said, oil prices should remain comfortably within OPEC's target range, requiring the cartel to boost production only in the second quarter of next year to keep its basket price around $25/bbl.
Like many financial analysts, however, CGES officials fear a major downturn in US consumer confidence that will "almost certainly" delay the previously anticipated economic recovery.
In that case, they said, "(T)he world is likely to slip into a global recession. The implications for oil demand are dire, even if the economy begins to recover as early as (the third quarter of 2002)."
Contact Sam Fletcher at email@example.com