Saudi Arabia Will Let Oil Reach $120, As Truth Behind Saudi Motives Is Exposed

Tyler Durden's picture

All those naively hoping that Saudi Arabia has suddenly developed some altruistic bent and will act against its own interest by increasing excess production (which according to Jim Rogers it simply does not have), to keep oil prices lower, are advised to reevaluate. According to CBS, citing "the conclusion of an internal report prepared by a major investment firm based on information from its extensive and knowledgeable contacts within OPEC" Saudi Arabia won’t take "significant steps to bring down the price of crude oil until Brent, the grade traded most on the open market, reaches $120 a barrel, about 8 percent above current levels." More from CBS: "In the report, which was made available to MoneyWatch on the condition that the firm not be named because briefings with its contacts are off the record, the OPEC sources reiterate their earlier analysis of the oil market, which has proven to be on the nose. They contend that the delicate political situation  across the Middle East and North Africa - including the fragile state of affairs within Saudi borders - is preventing the kingdom from doing the sensible economic thing and increasing production to keep prices under control." Which simply means that Rogers and all those doubting the veracity of Saudi's motives, not to mention the kingdom's rhetoric that it has boosted output to over 9 million bbls/day, have been correct, and the supply/demand dynamics of the stock market have been largely unchanged since Libya took over 1.6 million barrels of oil from the market.

More from CBS:

Saudi authorities were reported to have raised output late last week to compensate for supply disruptions in Libya, but if the investment firm’s sources are right, as they have been since unrest in the region was in its initial phase, the Saudi move may not be as big or as prolonged as many expect. The firm’s report indicates that Saudi leaders have other concerns that would persuade them to take less robust steps than usual to stabilize oil prices:

“The main threat is . . . Saudi instability when the current king dies. We know he is very ill but obviously there is no indication of how critical that condition is. But it is acknowledged that the next transition will present a much bigger threat to internal stability. . . . Vested interest groups have been waiting for this transition to push their agenda. Saudi experienced considerable regional instability up to 10 years ago but bought it off with higher oil-based spending. Today the problem is as bad, if not worse. There have been only a few of the promised reforms. . . . Resentment towards the wealth gap with the royals is very high. . . . Even if/when the instability in other countries, such as Libya, settles, the Saudi succession threat is now firmly on the table. What happens in Bahrain could be very key. That alone will keep the oil market nervous for this year.”

The investment firm predicts that $120 a barrel will provide greater resistance for buyers to overcome than $100 did. Still, it warns that as the price approaches that level, Saudi Arabia will be inclined to increase production “cautiously rather than aggressively.”

The report does not address the impact of $120 oil on stocks and bonds, but it probably would be harmful to both. And what if oil doesn’t stop at $120? If Saudi Arabia is beset by a succession struggle and/or something similar to what has happened elsewhere in the region and oil prices shoot past that level, the reaction in financial markets is likely to be severe.

As this story spreads, look for Brent to not go much lower from here as total chaos appears to be the underlying geopolitical thesis yet again.

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slow_roast's picture

Black Gold bitchez!

unwashedmass's picture


unless the "unnamed source" with the extensive contacts is GS and they are just lining up some rape victims.

tsx500's picture

NOOOOO .......... they would NEVER do that  !    

brian0918's picture

I love how it takes an "internal report by a major investment firm" to confirm that people operate according to the profit motive.

tmosley's picture

Individuals do.

Governments, not so much.

brian0918's picture

Politicians are certainly out for profits - but they do it through coercive means.

Citxmech's picture

Of course Governments seem pretty willing to bend their respective populations over for certain individual's profits.

gwar5's picture

Been stocking up. That's why I have 55 gal barrels out back.

Slartebartfast's picture

Another rumor from hidden sources courtesy of the CIA.  OIL MUST GO OVER $200.  US DOLLAR MUST FAIL.  Signed, the Baron of the EE.

SheepDog-One's picture

Yea, but ya cant eat barrels of oil.

rocker's picture

Leaks out of a safe too.  Shit.

Joe Sixpack's picture

Just bury it in the backyard. That's what they did millions of years ago.

Gert_B_Frobe's picture

One step ahead. Bought a bunch of bags of Kingsford charcoal on sale at Home Repo and buried them in the backyard.

Yep. 1 billion years from now my decendents are gunna be sittin' pretty with diamonds.

Josh Randall's picture

Awesome - now we can justify all those crappy new go from Government Motors made in China

Vampyroteuthis infernalis's picture

Consumer Reports: GM's Volt 'doesn't really make a lot of sense'

Yep, no shit. I could have told you that a $40,000 car that can only go 400 miles per plug-in/fill up with extra parts to break is not going to work. Remember, they have to please the religious environmentalist crowd. Reality is pointless.

Popo's picture

$120 oil is going to put a serious dent in earnings...  (And of course, consumer spending)

Oh regional Indian's picture

Oil to $200.

USDX to 50...

The possibilities, on the up and down side, are limit-less.

Buy, hold, pray, exercise, focus, relax...



cossack55's picture

You forgot:

Dow 36,000

S & P  2900

NASDAQ  21,000

Oh regional Indian's picture

Cossack, having been in the heart of the .con bubble, in the Vally of silicone, back in the day, that Nasdaq 21,000 hurts the worst. I remember praying for it then... :-)


johnnymustardseed's picture

This will end badly, they will soon end the peg in dollars

BigJim's picture

Not with all that US military hardware pointing at them.

MachoMan's picture

They need protection...  What are they going to change to, gold?  How long will we be able to buy oil with that?  Then what?  They'll stay put until they're scared enough to leave...  then we'll have to convince a whole new set of people to let us take our liberties with their hind ends.

Judge Judy Scheinlok's picture

The Rally Monkey is long crude, video at 11:00.

the not so mighty maximiza's picture

Time to get a moped with a flashing orange light on top of helmet

MiddleMeThis's picture

If they would stop mixing ethanol in my petroleum, I wouldn't mind as much.  But the 90/10 petroleum/ethanol mix has decreased my MPG efficiency by 3-4 mpg.  Enough already.

falak pema's picture

If it was 'Monsanto' ethanol the drop would be the double. You would also find green GFM (genetically fabricated through modification)  trolls in your tank!

alter ego's picture

Hi my friends.

Watch out for those angry trolls who jump to

post every time there is a news related to Peak


This is truly an inconvenient truth, the type of

one that the powers that be don't want you to

discuss in important forums or main stream



For those universally ignorant that says we are

not running out of oil since there is deep

drilling in Russia that probes the otherwise, I

tell you one thing.

We are not running out of oil, we are just

running out of the oil that we can "afford" to



In order to have this non conventional form of

oil coming and flowing we need a type of

economics that allow you to invest millions and

millions of dollar to get that energy, it means

that triple digit oil prices has to happen in

order to maintain the flowing of the black stuff.

Those tripple digit oil prices are the ones who

produce energy shocks, therefore the

produce economic recessions. 

Pants McPants's picture

Thanks.  Please let me know when those, uh, trolls show up.

MolotovCockhead's picture

There's a conpiracy to drive the price of oil much higher. TPTB want to make sure that the jobless hungry mobs can't afford to buy the gas needed to make their molotovcocktail when all hell break loose. A hungry man is an angry man!

Quintus's picture

$120?  Seems fair.  The Bernank reduces the value of the dollar by 8%, so the Saudis ask for 8% more of them in return for a barrel of oil.  Who could quibble with that?

Shameful's picture

How about us poor slobs who are not getting pay raises or bonuses commensurate with Zimbabwe Ben's Wild Debasement Ride?

Quintus's picture

Sorry - I was attempting to be sarcastic.  This is just another confirmation that the Fed cares little, if at all, about the working people of the US, and indeed the world.  If the price of saving his Wall St. masters is $120 oil, or $220 oil for that matter, it's a price worth paying in his eyes.

Shameful's picture

Well that's just it I can't blame the oil producers for wanting more.  The easy oil is getting pumped and I totally understand wanting to get more debased dollars for it.  Problem is, like always, the serfs are getting caught in the crossfire.  I for one can't wait for the petrodollar to die.  Sure oil prices will sky rocket for the US and kick me in the teeth, but at least it will force the sleeping masses to stir in their slumber and ask "WTF just happened?!?!"

downrodeo's picture

At that point, I believe, we will see the perfect opportunity to truthfully explain exactly what did happen. There is no doubt in my mind that the TPTW will have a plethora of 'explanations' to choose from, and will attempt to insert their own narrative in order to make sure we keep on sleeping on. This will be the most dangerous time for them, and as a direct corollary, the most dangerous time for us as well.

samsara's picture

Wages goes up linear

Interest goes up geometric

Judge Judy Scheinlok's picture

You slobs need a .gov job or convert to jewish so the world is your oyster.

Meantime $120 crude means lots of potential investors for US debt. Yea! $120 crude is good for equities afterall.

Sudden Debt's picture

Higher oil will to wonders to the Chinese inflation :)


I wonder how long before they go ALL BRUCE LEE ON THEIR GOVELMENTS!!


falak pema's picture

The day you go RAMBO on yours. Don't forget you have an advantage over them : you have a maestro playing QE-forever, Benocide, who will not only create mega-inflation but definitely tank USD and economy for not going to change his the looks of it.

Larry Darrell's picture

Pretty sure our friend Sudden Debt is from Belgium, so he doesn't have the "maestro" Ben.  Also, I'm not even sure his country has a functioning government at the moment.

props2009's picture

Must read guys

Pentagon says: Financial Terrorism behind Wall Street collapse


They have blamed everyone except the insiders in US.


Sudden Debt's picture



Looks like Kadafi was right all along...


sushi's picture

It was the schwarma vendor with the hot pickle on Rector Street.

melachiro's picture

Man I miss schwarmas; it would almost be worth going back to the House of Saud just to have a few.........mmmmmmmmmmmmm

Citxmech's picture

Schwarmas are awsome - but they sure do give at both ends.  Worst gas I ever had was because of one of those things.  Buyer beware!

John McCloy's picture

Forget 120..I'm looking for a new all time high. Ben did not like the last selloff not taking down silver and commodities. 155 oil may be just his ticket to getting a QE3 out the door.
Expect another Selloff below 12,000 to try to supress Silver prices.
$50.00 silver makes for good mainstream headlines and we cannot let the serfs get any bright ideas about preserving their wealth. Remember we are dealing with the greatest price fixing experiment of all time.
Ben needs buyers of treasuries, lower input costs and Silver down. If he must he will take the market down.

Shameful's picture

Why not take the market down?  The Pigmen can get a heads up and go short into the maelstrom.  Zimbabwe Ben gets WE3, and the ponzi moves on.  While at the same time get to try to scalp the commodity (and PM) longs.  With QE3 can ramp the market back up, just need a convenient excuse to force a sell off.  With the current geopolitical situation I think that they can just pick one of the weekly crises to trigger the take down.  "We don't know what happened!  Early investigations point to Waddel and Reed selling some futures..." or "Oops butterfingers!  Sold billions not millions, but man B and M are so close..."