Why Oil Is Plunging: The Other Part Of The "Secret Deal" Between The US And Saudi Arabia

Tyler Durden's picture




 

Two weeks ago, we revealed one part of the "Secret Deal" between the US and Saudi Arabia: namely what the US 'brought to the table' as part of its grand alliance strategy in the middle east, which proudly revealed Saudi Arabia to be "aligned" with the US against ISIS, when in reality John Kerry was merely doing Saudi Arabia's will when the WSJ reported that "the process gave the Saudis leverage to extract a fresh U.S. commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority."

What was not clear is what was the other part: what did the Saudis bring to the table, or said otherwise, how exactly it was that Saudi Arabia would compensate the US for bombing the Assad infrastructure until the hated Syrian leader was toppled, creating a power vacuum in his wake that would allow Syria, Qatar, Jordan and/or Turkey to divide the spoils of war as they saw fit.

A glimpse of the answer was provided earlier in the article "The Oil Weapon: A New Way To Wage War", because at the end of the day it is always about oil, and leverage.

The full answer comes courtesy of Anadolu Agency, which explains not only the big picture involving Saudi Arabia and its biggest asset, oil, but also the latest fracturing of OPEC at the behest of Saudi Arabia...

... which however is merely using "the oil weapon" to target the old slash new Cold War foe #1: Vladimir Putin.

To wit:

Saudi Arabia to pressure Russia, Iran with price of oil

 

Saudi Arabia will force the price of oil down, in an effort to put political pressure on Iran and Russia, according to the President of Saudi Arabia Oil Policies and Strategic Expectations Center.

 

Saudi Arabia plans to sell oil cheap for political reasons, one analyst says. 

 

To pressure Iran to limit its nuclear program, and to change Russia's position on Syria, Riyadh will sell oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, says Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center. The marked decrease in the price of oil in the last three months, to $92 from $115 per barrel, was caused by Saudi Arabia, according to Abanmy. 

 

With oil demand declining, the ostensible reason for the price drop is to attract new clients, Abanmy said, but the real reason is political. Saudi Arabia wants to get Iran to limit its nuclear energy expansion, and to make Russia change its position of support for the Assad Regime in Syria. Both countries depend heavily on petroleum exports for revenue, and a lower oil price means less money coming in, Abanmy pointed out. The Gulf states will be less affected by the price drop, he added.

 

The Organization of the Petroleum Exporting Countries, which is the technical arbiter of the price of oil for Saudi Arabia and the 11 other countries that make up the group, won't be able to affect Saudi Arabia's decision, Abanmy maintained.

 

The organization's decisions are only recommendations and are not binding for the member oil producing countries, he explained.

Today's Brent closing price: $90. Russia's oil price budget for the period 2015-2017? $100. Which means much more "forced Brent liquidation" is in the cards in the coming weeks as America's suddenly once again very strategic ally, Saudi Arabia, does everything in its power to break Putin.

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Fri, 10/10/2014 - 18:25 | 5316442 Kirk2NCC1701
Kirk2NCC1701's picture

Expect "Asymmetric Responses", bitchez.

Fri, 10/10/2014 - 18:26 | 5316446 summerof71
Fri, 10/10/2014 - 18:32 | 5316479 kaiserhoff
kaiserhoff's picture

I have a hard time believing old Horseface Ketchup Monster had a hand in anything,

  that didn't immediately turn into a steaming pile of Wookie Doo.

Fri, 10/10/2014 - 18:45 | 5316535 COSMOS
COSMOS's picture

All the Russians have to do is sink one or two tankers with their stealth subs.  Or declare Saudi Arabia a nation that supports terrorists and Strike their refineries in revenge for Beslan massacre.  Oil at 300 per barrel and there is nothing the USA can do because they have created the precedent.

Fri, 10/10/2014 - 18:48 | 5316544 Latina Lover
Latina Lover's picture

Saudi Arabia can only play this game for so long before their finances are affected. Meanwhile the USSA fracking  stock prices are taking on the chin.  

Russia will suffer in the short term, but they will endure. The alternative, of western control over their economy, with a repeat of the disastrous 1990's, is deeply engrained in modern Russian memory.

Fri, 10/10/2014 - 19:40 | 5316765 Not Too Important
Not Too Important's picture

Long borscht and cheap vodka.

Fri, 10/10/2014 - 20:04 | 5316858 knukles
knukles's picture

Wait wait wait wait wait a minute hold on holdjer horses....
Does this mean everything I came to believe about Fracking and the Bakken Bits being the energy independent future of perpetual free shit for America is wrong?

    ...sigh...

Fri, 10/10/2014 - 20:34 | 5316952 I MISS KUDLOW
I MISS KUDLOW's picture

free market capitalism is the best path to prosperity

Fri, 10/10/2014 - 20:44 | 5316973 knukles
knukles's picture

By the way, I can read lips.

Kerry is saying to that dude; "I mean you shoulda seen the size of my left teste before they lanced the boil.  Sure glad I got that done before the circle jerk tonight.  I can't wait.  Didju get those little dancing boys, again?  I brought you some more great Richard Simmons workout tapes you like, Kingsy!"

What the fuck do these people talk about?

Fri, 10/10/2014 - 20:53 | 5317012 Bangalore Equit...
Bangalore Equity Trader's picture

Listen are you sure about this?

Didn't Kerry allow Saudi Arabia access to all NSA records for phone, Internet, other communications so that they could monitor USSA citizens to "HELP" the "HOMELAND"?

Fri, 10/10/2014 - 22:09 | 5317215 SafelyGraze
SafelyGraze's picture

cheap oil means no need for those molten salt thorium facilities

 

Fri, 10/10/2014 - 23:45 | 5317519 Anusocracy
Anusocracy's picture

This is what they did to the Soviet Union, isn't it?

Only the government in the Soviet Union was bankrupt from top to bottom. This time the West is far deeper in debt than Russia.

End the petrodollar and the West is a goner.

Fri, 10/10/2014 - 23:53 | 5317534 wee-weed up
wee-weed up's picture

No "secret deal" will overide what will happen to the price of oil when the Israelis hit Iran.

Sat, 10/11/2014 - 03:09 | 5317780 Shropshire Lad
Shropshire Lad's picture

And the Russians take out Tel Aviv, as they have already promised to in the event of an Israeli Terror attack on Iran.

Sat, 10/11/2014 - 03:30 | 5317784 TahoeBilly2012
TahoeBilly2012's picture

Putin will never strike first, he is a Christian. The Jews know this (and Satanic Royal buddies Bush/Kerry et al).

People you need to see what is going down. Putin will not strike first no matter what. The dark forces will continue to work against this as they see it as a weakness. Wrong! He is simple following his own Christ, that simple. He will fight back when he feels he must and he will spare civilian lives as any Christian would. 

The Jews have shown their hand a long time ago. They hold no element of surprise. 

Sat, 10/11/2014 - 04:54 | 5317839 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

You are delusional if you think men who hold such positions base any decision on stone-age fantasies.

Sat, 10/11/2014 - 05:20 | 5317847 Manthong
Manthong's picture

“at the end of the day it is always about oil, and leverage.”

OK, cool.. but don’t forget about the gold.

.. the very wealthy do not have a lot of crude in their vaults.

Sat, 10/11/2014 - 07:45 | 5317942 GetZeeGold
GetZeeGold's picture

 

 

 

The cool thing about gold is if you spill it....it doesn't stick to you.

Sat, 10/11/2014 - 08:46 | 5317993 Keyser
Keyser's picture

A little late on this article, but better late than never... The intent to cripple Russia with low crude prices was obvious when SA increased production months ago when world demand was down... The unholy alliance of the arabs and their oil, along with the US and it's military being used to maintain the petrodollar standard while waging economic war on Eurasia...  Oceana vs Eurasia, just as Orwell foretold in 1984...

 

Sat, 10/11/2014 - 12:23 | 5318282 Surly Bear
Surly Bear's picture

Doesn't really seem to be market pricing at work, does it. Not that I am surprised....

Sat, 10/11/2014 - 14:07 | 5318470 Divided States ...
Divided States of America's picture

Basically the saudis are driving down the price of oil now because winter is upon us and europe needs cheaper energy to keep warm without the gas from russia. Saudi is definitely on the side with the West against putin and want to single out russia for as long as possible, financially and ppolitically. Luckily for russia, the chinese is willing to side with them over the West.

Sun, 10/12/2014 - 04:07 | 5319935 rocker
rocker's picture

Peak Oil is a symptom of years of Brainwashed sheeple. You have part of the answer. Just not the whole story. The Saudis understand that the U.S. can produce enough oil @75 to supply the U.S. for years. So now their make believe empty fields have more than enough to supply everybody. Most do not get just how much Haliburton and others raped U.S. taxpayers suppying the military with all that oil to run around the middle east as cops of their land. It is not free oil that supplied the 5 mile per gallon military vehicles and aircraft carrieres including all that overpriced jet fuel to fly around too. It was Saudi Oil. That party is over for the better part.

Now they will push others out of production to maintain their own interest as the only major supplier of product. Basically, the Saudis and U.S. companies, (like Haliburton), of no bid contract suppliers to the military have raped America as much as possible for years and now must do what they do to validate Saudis as being the king of supply. Part of the Deal for sure. Petrobas will most likely not happen in our lifetimes and forget piping sand, (LOL), from Canada to U.S.A. because nobody will fund it now. The "Peak Oil Party" is over. Personally, I can't believe it took this long. That said, Greed is Good, (LOL Again) for the thieves who profited from this mockery. It has to be the biggest farce that nobody will tell. Even the smartest of the dumbasses bought the charade. 

Sat, 10/11/2014 - 13:43 | 5318413 tradebot
tradebot's picture

"The cool thing about gold is if you spill it....it doesn't stick to you."

 

Nah...but it will mash the shit out of your toe

Sat, 10/11/2014 - 05:24 | 5317848 Incubus
Incubus's picture

Glad to see that there's some bright people around this place.

Conventional scripts are for the masses.  The architects don't believe the same shit you're trained to believe: different programming.  People will remain slaves because their minds make them so, exactly as stated in the Matrix. 

Us: programmed to be slaves

them:  know and run the reality of the world.

 

Sat, 10/11/2014 - 13:32 | 5318392 Keyser
Keyser's picture

It is rather ironic how the film, The Matrix, metaphorically mirrors our societal reality... Is it art immitating reality, or vice versa?

 

Sat, 10/11/2014 - 13:45 | 5318419 tradebot
tradebot's picture

"It is rather ironic how the film, The Matrix, metaphorically mirrors our societal reality... Is it art immitating reality, or vice versa?"

 

Art imitates life

Sat, 10/11/2014 - 17:36 | 5318892 The Phallic Crusader
The Phallic Crusader's picture

I don't think you've read many political biographies.

Sat, 10/11/2014 - 20:01 | 5319226 MontgomeryScott
MontgomeryScott's picture

What was that one book?

'The House of Bush; The House of Saud'?

'No One Here Gets Out Alive'?

'The Report From Iron Mountain'?

AUTOBIOGRAPHIES are so much better.

'Why A Duck?' by Groucho Marx is so much more introspective (for example).

People writing shit about other people is all good and well, I suppose, but something is lost in the translation of the human aspect. 'He lived, he died, he did some stuff' is the general theme of a biography. Biographical authors tend to try to try to interject the 'what he did versus what I would have done' theme into their writings; thus sullying the individual they are attempting to describe.

If I WAS HIM, I would have done thus-and such...

Political History classes are FULL of 'biographical' things. They lack any real substance, though. How did Abraham Lincoln feel when he was bedding Mary Todd? When Brezinski turned his parents in to the Nazis, did he feel any sense of remorse? When the Secret Service agent Andrew Card whispered into Bush the Younger's ear that day, did he feel panicked, or was he reassured that all was going to plan; in that Florida elementary school?

I KNOW (I don't 'THINK') that you haven't thought out your comments.

FIVE WEEKS. Yup...

 

Sat, 10/11/2014 - 18:50 | 5319059 Calmyourself
Calmyourself's picture

How is that rape culture working out for you, dirti scandi..

Sat, 10/11/2014 - 12:04 | 5318245 quadratic_equation
quadratic_equation's picture

Why are you including Bush in this blame when Bush is so friendly with Putin back when he was the President?  Remember Putin use to visit Bush in Crawford, TX back in those days.

You are also ignoring Obola who's the main petpetrator of what's going on now.  He started with Syria then with Russia knowing Syria is protected by Russia.  It may seem like a conspiracy theory but they're doing this because it's so obvious that people wouldn't believe it.

Sun, 10/12/2014 - 03:40 | 5319938 rocker
rocker's picture

Russia is just another farce to feed the sheeple. We want to get the Russian speaking Ukranians to join Europe when they voted to stay with Russia. The more important question is will they ever push back and want Alaska back as the U.S. stole that from them in the day. They are actually a very rich resourse nation. So those who believe in finite resourses take notice. Just ask Germany and Europe.

Sat, 10/11/2014 - 03:29 | 5317785 Lore
Lore's picture

Things would sure be a lot simpler if Israel would just move.

Sat, 10/11/2014 - 06:46 | 5317902 StormShadow
StormShadow's picture

...into the Sea?

Sat, 10/11/2014 - 07:44 | 5317939 Incubus
Incubus's picture

into a dee-lux apartment (in the sky)

Sat, 10/11/2014 - 08:48 | 5317996 Keyser
Keyser's picture

They could all move to the desert in west Texas and no one would know any better... Plus, they should feel right at home... 

Sat, 10/11/2014 - 09:04 | 5318013 StormShadow
StormShadow's picture

Or maybe a Nevada proving ground? They'd truly feel right at home

Sat, 10/11/2014 - 00:34 | 5317605 fudge
fudge's picture

End the petrodollar and the West is a goner.

Tick Tock

Yuan Euro Direct Trading Begins on 30-09-2014

http://www.bloomberg.com/news/2014-09-29/yuan-euro-direct-trading-begins...

India’s readiness to join the SCO

http://www.telegraphindia.com/1140913/jsp/nation/story_18830846.jsp

Iran and Pakistan are looking for full SCO membership.

http://in.rbth.com/world/2014/09/15/india_and_pakistan_expected_to_becom...

http://en.ria.ru/world/20140910/192803369/Iranian-Diplomat-Tehran-Seeks-...

In June of this year the members of S.C.O. commenced discussion of a merger of the Shanghai Cooperation Organization with the Collective Security Treaty Organization = Military Alliance to match the BRICS trading bloc and a counter to NATO.

Iran joins the BRICS and with the German YUAN exchange in Frankfort the _BRICS_ acronym then becomes _BIg RISC_ for Petro$$$

Tick Tock WW3

Sat, 10/11/2014 - 07:47 | 5317943 supermaxedout
supermaxedout's picture

Fudge,

cant't upvote you. Its somehow blocked.

 

 

Sat, 10/11/2014 - 17:17 | 5318853 robertocarlos
robertocarlos's picture

right click tab tab enter or tab tab tab enter if you don't like his name.

Sat, 10/11/2014 - 20:07 | 5319243 MontgomeryScott
MontgomeryScott's picture

I can't, either, so I upvoted YOU instead.

Sat, 10/11/2014 - 08:44 | 5317989 rbg81
rbg81's picture

It's almost like Obama WANTS the petro-dollar to die.  He likely does.  Deep down, he hates America more than just about anybody--at least White America.

Sat, 10/11/2014 - 10:23 | 5318108 InjectTheVenom
InjectTheVenom's picture

yup.  CLOWARD.PIVEN.STRATEGY.   (google it if not familiar)

Wed, 10/15/2014 - 10:03 | 5333736 BigJim
BigJim's picture

Oh FFS, what Obama wants is about as relevant to the plot of this story as the dermatitis on Jim Henson's hand was to Kermit's love for Miss Piggy.

Sat, 10/11/2014 - 03:48 | 5317798 pcrs
pcrs's picture

You can't repeat the same trick twice anyway. Parties are prepared for this now. Sovjet union was like killing an already dead horse. Oil market is also bigger and Saudis have less spare capacity.

It might be that the western rulers kill their own economies. That will maybe get oil down if Asia can be dragged along.

Sat, 10/11/2014 - 22:39 | 5319622 Amerikan Patriot
Amerikan Patriot's picture

The only reason the US is further in debt than Russia is because no one will lend to the Russians, except at punitive rates.  Why?  Because Russia defaulted on and devalued the ruble in 1998 and has a poor debt repayment record.  Just recently Russia floated some bonds and had to pay almost 10% to get them sold.  With Russian energy costing less and less with each passing week, Russia's deficit will continue to rise.  It's going to be a long winter for Europe, but an even longer one for Russia.

Sun, 10/12/2014 - 03:52 | 5319945 rocker
rocker's picture

Never thought about it that way. Your right. In the end, they will be better off for it though. We, (the U.S.) will not.

Our devaluation will start as interest rates rise. Until then, it is a bubble of other asset prices like stocks until the FED stops printing and monetizing all that debt. 

Fri, 10/10/2014 - 23:47 | 5317524 jeff montanye
jeff montanye's picture

saudi arabia has more oil than the u.s. has gold but selling either cheap is really not an advantage in the long run.

however in the short run it may suggest to russia to buy a few score million dollars worth of silver futures and stand for delivery.  just to see what happens.  cheaper and arguably safer than sinking tankers or bombing oil fields.

Sat, 10/11/2014 - 11:58 | 5318228 layman_please
layman_please's picture

will never happen. putin is welcomed to make war with the west, but even he knows not to fuck with the overlords - the bankers.

world war is stimulus for the economies, while another financial meltdown is good for nobody, not even for russia.

 

some things are just off-limits. it's all kabuki, if you haven't noticed yet.

Sat, 10/11/2014 - 12:30 | 5318295 Anusocracy
Anusocracy's picture

You're missing the fact that banksters are not a uniform group. Same as with mafia bosses.

For the most part they share Keynesian beliefs, but not necessarily political goals.

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