According to the UK Telegraph Russian warplanes targeted the one million barrel per day BTC pipeline with 51 rockets on Sunday but incredibly all missed. Deep craters straddled the pipeline with shrapnel littering the area. Fortunately none hit their target.
Is it possible that the pilots of the Russian warplanes are such bad shots or is it also possible that Russia wanted to seed a strong message that a failure to pull out of South Ossetia would result in a serious blow to the countries oil income. Could these have been only warning shots? If they were just a warning then why 51 rockets when 5-6 would have accomplished the same thing. Why 56 when any one could have accidentally hit the pipeline? I am going with the bad shot theory until proven wrong.
Oil tankers waiting to load at the Georgian port of Batumi moved farther out to sea to wait for the conflict to be resolved. Tankers moved as far as 15 miles out to sea according to the shipping agent at TeRo Co. who manages port and loading traffic. The nearby port of Supsa still appeared to be operating with one tanker waiting to load.
Political rhetoric was flying around the world as countries called on Russia to halt the attacks. President Bush and Vice President Cheney both were active in the press. Cheney warned that Russian aggression must not go unanswered and its continuation would have serious consequences for Russian relations with the United States. The U.S. ambassador to the U.N. said during the fourth Security Council meeting in four days that the U.N. would have to act since the aggression is a "direct challenge to a UN Security Council mandated mission." Russia said it would talk about ending the attacks if the Georgian troops left the area and pledged not to return.
All of the political squabbling, warnings and attacks failed to hold up the price of oil. Prices fell to $112.72 before rebounding late in the day on the pipeline news. As of 11:PM ET they are declining again to under $114. Helping pus prices lower was the continued rise in the U.S. dollar to another six month high.
On Tuesday the IEA will release its monthly oil report and that is sure to increase volatility. Expectations are for higher production in July and lower demand estimates for the future.