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Why Oil Is Plunging: The Other Part Of The "Secret Deal" Between The US And Saudi Arabia
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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I don't find the thesis convincing Capt. Kirk. Logic tells me the humans are behaving foolishly. It's a strategy of a weak adversary; many factors can enter into this calculation; failure is certainly possible.
Russia should buy if this get more cheap and fill out those
Strategic Petroleum Reserve as USSA dowhen the right moment come it could use it as a bargaining political tool
Good idea. Let the frackers pump it out and sell below cost, while borrowing to make up the difference. Capitalize on another Fed induced mal-investment.
Rising production, lack of demand.
this has to be the lousiest analysis for why oil prices are falling that I've seen... especially for why Brent is falling
I've already posted why this is happening over a month ago, and it has nothing whatsoever to do with bullshit like "oh conspiracy it's being dropped on purpose wahh wahh poor Pooty Poot"
it has everything to do with global demand drop and ICE Brent price manipulation finally being unwound out of the trades... bye bye London loophole... Brent has been controlled upward with supply chain investment by the ICE boys since 2005 but now the party's over
ironically, it was Saudi Aramco that tried to fight this back in the day... they ended up getting shouted down by the finance vampires at Davos who needed chicken littles yelling "peak oil peak oil" to whip up volatility in their trades
ask yourselves this... why was the Brent price in the driver's seat all this time, when Brent production only accounted for 10% of the market but OPEC accounted for well over 50%? things that make you go hmmm...
there's no account for the timing of things, the world is a complex place, but when you look at price history and realize that until the ICE boys got in the game we had an OPEC price band of around $20-$30 a barrel, watching it drop from where it is now tells us it can certainly drop farther
Nice post. Why is brent selling at a premium over WTI, when WTI is the standard fr light, sweet oil? Why does D&O end up the red-headed stepchild of the benchmark clan?
Or, even more basic, who set the benchmarks, (Brent, WTI, D&O) for oil production that accounts for such a small percentage of total barrels produced?
City of London bitchez. Where price discovery goes through the looking glass.
great exchange, thank you both for posting.
to add a related note... gold and oil prices pretty much follow each other, with only a recent disconnect during the 2007-2008 crisis... that's been corrected... if oil is going down, guess where gold is going... get ready to watch miners shut..down..everything over the coming year
"Obama has helped keep the price of our gas low!"
-Heard on the street in DC
Killing two birds with one stoner.
Oh..., you are twisted... ;-)
you know how fucking hard it is to throw a stoner at two birds?!?!?!
what with all the heights and timing between bong rips and perching and jeesuz!!
I'd rather herd cats!
.....and buy stawks.
People like that need to be euthanized.
Absolutely correct.
Saudis can't allow bank lobby take control of oil price due to derivatives along with bank lobby/obama trying to ally with Iran which is trying to annihilate Saudi Arabia
And forget about $50-60
It will go to $20 for a couple weeks, so over leveraged parties get liquidated and then go back up to $50-60
It is practically a margin call
Pentagon + Saudi alliance is the glue that holds together the whole Western World
And of course, Saudis do not give a flying excrement about the so called "powerful bankers" and "powerful Federal Reserve" which are basically zero absolute for them.
All they fear is Iran
I wonder if those chinese missiles that the Saudis purchased really work,,wouldn't it be a shit if they failed to function as advertised
When 'Western' countries buy BRICS weapons . . .
I'm a buyer at $20. Wake me when it is time to buy.
Roger that, Rip Van Winkle.
If Pentagon and Saudis think that oil at $20 will destroy Iran's economy, they will do it. Only Obama and Bank Lobby got in the way, but eventually Pentagon + Saudi alliance doesn't really care about any president anyway when the excrement hits the fan.
Note that Obama has not fired any generals recently regardless of the open revolt from all generals in unison.
Unlike when he fired James Mattis in 2012 because he wanted ........(waited for it).......to attack Iran Quds.
Now Mattis is back in demand. Even Feinstein quotes him.
Also note that the so called "iran nuke deal" keep getting postponed and postponed because Pentagon, Kerry, Hagel are sabotaging it against Obama.
Dude, you are whacked. Financial assets (USD) are not scarce. China had $5T between USD and UST. Can and will support Russia, who will support Iran. Chinese control cash and gold. They are in control. And Russia will instigate within SA.
Most of our oil production would fail well above $60. So you are arguing Pentagon is working on domestic collapse... interesting charge. It would be a very effective way to undermine US economic and security over the medium to long term. scurry
Oil creates money
Money does not create oil
Oligarchs who own financial assets can become poor instantly
Oligarchs cooperating with a military and owning energy and commodities are the real rulers
Money can be created just by typing up on computers and can vanish just by pressing 'delete' on computers
That is the case on both sides now, with China supporting Russia (which also happens to have a military stronger than most in this world). We ate better off letting SA fend for itself. Let oil prices rise. We will innovate and adjust. There's much more we could do to further reduce our dependence upon oil. Not much SA could do to build its capacity elsewhere. It would have to invest its financial assets somewhere in a hurry and that would likely be the US... maybe even in those technologies that will help to transition. Higher energy prices will actually encourage REAL investment, which does create value and eliminate inefficiency and deadweight loss. It will also put people back to work on the right stuff.
Who the fuck upvotes this gibberish? $20 oil? Laughable. That would literally destroy oil production in the US and Canada, not just Iran. And the bank lobby is as strong and powerful as ever. Get a fucking grip dude. You are all over the board.
No, It won't.
Gov can create money on computers and they do
Gov can make any company profitable regardless of what the price is, just by typing numbers on computers.
It won't stay at $20. It will bounce back up again to $60
I keep getting amused as to how people believe that there is actually rule of law. No, there isn't. QE created $4 trillion on computers. Does that look like rule of law to you?
What are you talking about? I have no idea where you get your information but is sounds completely bizarre. Do you understand the cost of production? The basics of supply and demand? The tar sands will collapse well before $20 and they don't even break even at $60. Why would the US want to destroy the domestic oil markets in the US and Canada? I fail to see any rational or logical argument that supports your claims.
Bay of Pigs, I think you are absolutely on-target with this.
Many people in the peanut gallery are entirely unaware of a very simple fact. Page 70 of OPEC's current monthly report tells us that the US received just over 37% of its crude oil from Canada. Whatever their break-even price is, it is very important for the US.
You mentioned that they won't break even at $60. I think you are being way too generous.
Here is something way better than an arbitrary break-even number some "expert analyst" pulls out of his ass. This is a no-shit real world example that illustrates where the break-even price really is.
With the West Texas Intermediate benchmark sliding to just above $90 per barrel earlier this month, the outright price of Canadian crude is at, or very near the breakeven cost for some oil sands projects. One good example of this is that Norwegian energy heavyweight Statoil said it will postpone development of its 40,000 barrel per day Corner oil sands project in Alberta, Canada, for at least three years and cut about 70 jobs at its Canadian unit. Statoil is the first company in recent years to delay a thermal project because of uncertainty over costs and oil prices.
Keep in mind that Alberta's oil sands are are no small, flash in the pan deposit, they are world's third largest crude reserve.
Also keep in mind that thermal developments, which pump steam into the ground to liquefy thick bitumen deposits, are much cheaper to build than the large-scale mining projects also used in the region.
The West Texas Intermediate Crude benchmark is sitting right around $85 or so as I write this.
I suspect there will be quite a few other examples of this in the near future.
Or maybe it's because China, Japan, Europe, and Latin America are falling apart. Oops, forgot Africa. Not much demand for jet A. Also the painfully slow conversion to Natty in the States.
Where are you all coming from tonight?
The world is as peaceful and economically healthy as its ever been, said Dear Leader.
You guys gotta lighten up.
Do you realize that cynics live longer than regular people? That's a proven fact.
So why would you want to live so long if it's all so bad as you keep saying?
You guys gotta take upon yourselves to improve your outlook, be happy, don't worry, start watching Bertha Big Butt on the Kardashians crying about their mascara running, American Football, Dancing with the Quadriplegics (great comedy reality show) read the NYT and learn that everything is gonna be all right.
Stay calm and jerk off more.
Walk around with a dumb ass grin on yer face.
Enjoy the used car commercials on VHF long about midnight.
It's all good
One last thought... a question? How did all those Arab dudes get my mom's (God rest her soul) old dishrags to wear on their heads?
What kind of weed are you getting? How much?
Those 'Dish Rags' are finest cotton made in the Lappet Mill in Calder Vale, Lancashire, England.
Well worth a visit if you are in the UK.
http://en.wikipedia.org/wiki/Calder_Vale
As for the price of oil, it is simply overproduction/underdemand.
About 30% of oil is consumed as a neccesity (inelastic), the rest is consumed as luxury (elastic), there is little capability/demand for luxury amongst the majority of consumers as they are trying to keep their heads above water.
Those to whom the price doesn't matter don't increase their consumption just because the price has decreased.
All capital accumulates which leaves the rest with insufficient capital. (capital being a finite good)
Nothing a good uprising in SA cannot fix. If the CIA can play the revolution game so can the FSB.
That was exactly my thinking. If I were Putin, I would be looking for any way possible to cause problems for the Saudi's. Rest assurred, too, that Putin has not forgotten or forgiven the Bandar threats to destabilize his Olympics.
Most times the "reasons" for price manipulation is as murky as the dark pools in which the the hideous misshapen creatures of finance swim. But this move of oil to these low prices is as clear as alpine air: get back at Putin. Scary these people, even (especially?) when their intentions are evident.
Or maybe its because the House of Saud holds Swift Boat Kerry in such high esteem.
Naw, I think it's because Cuntus Maximus bowed to the King;)
Saudi pressure on oil prices during the 1980s is what ultimately brought down the USSR. It's a different world today though, with US producers being as much at risk to low prices, if not more so, than Russian producers.
Very true - debt service in the bakken is a bitch
Putin knew this chess move when the trade needed to be made for Assad would be for US bombing
US cant win on the ground in Ukraine so this is natural response - china sees the game as well so will prepare and act accordingly
Putin has less than $50 billion balance debt outstanding so he can service easy
need to look at marginal cash flow ex natural gas - it may not be a problem for a long time - and SA cant do this forever
key is Iran not Russia for marginal cash flow - what willl happen there? - but blowing up Iraq oil fiels could be a game change for Iran and everyone else
The solution is just a few Russian bombers away. Would not want to be the Saudis.
Would the US go to war with Russia if the House of Saud is wiped off the face of the Earth?
No.
Yeah they would. So too would China and Europe. The entire civilized world would turn on Russia in an blind instant if Russia fucked up the only thing that matters... Oil.
how is oil in asia $60??
besides, how can anyone not expect exporting nations to not sell forward and be hedged when oil was at $100+ for so long!?
I'm not sure which person looks more retarded - John Kerry or the guy dressed like a wizard.
You Sir, will never get any feminist pussy talking like that.
Good planning.
You're gettin' me worried now, Kaiser....
John Kerrys tricks are shit, ill take the wizard
The Wizard
Misty morning,clouds in the sky
Without warning,the wizard walks by
Casting his shadow,weaving his spell
Funny clothes,tinkling bell
Never talking
Just keeps walking
spreading his magic...
They're not tricks, they're illusions. Tricks are something a whore does for money... or cocaine. ~ GOB
Unfortunately (for them), the Saudis cannot afford cheap oil either. Their current population (something over 27 million people) is almost double of what it used to be in the good old '80s (around 15 million people back then). The "extended" royal family seems more numerous than ever, while the welfare payments (required to keep the rest of their subjects calm) are rather onerous. I don't believe that Saudis can afford a 90 USD/barrel for too long... That, and the fact that such a price would kill the fracking industry first, and long before the Russians would suffer of any headaches...
Saudi inflation runs around 5%. They are tied to the hip to the USD, therefore, their revenue has to rise by 5% in USD every year just to stay even.
Perhaps if Putin saw this coming, he took on a hedge against it.
That's what he's been doing with G-S!
More likely USA can't support petro-dollar with fake money
But they can support it with an all too real military. See post by EKM1 above.
ekm1 is trolling hard sometimes, so i don't believe him at all
No need to believe at all. However, at times it is good to consider at some.
People tend to underestimate these cocksuckers aka TPTB. One nugget that has been bounicg around my melon is what if the US is the one who goes back to a gold standard first...or some other commodity basket? Fucked up as playing chess with Kim Kardashian but it could be a move.
Fort Knox, ha! May I present Kim Kardashian's Douche Bag? The crowd sits in awe.
SA has a population of 14M the 13 to add up to 27, are Gastarbeiter and hence in SA animals.
Exactly article is one big psy-op.
Yes. As it was when the media decided to allow gold manipulation to be conspiracy fact. When you lose control, you try to make people think you still have it.
According to the soulless infra-humans at the IMF, Saudi Arabia needs $87.63 a barrel to balance its budget.
low oil price is good for china, so i don't see a solution for USA here.
Good for Russian farmers and industry too. Western sanctions plus low oil price means lower costs and more domestic market share for both. Russians buying Russian products means more Russian jobs, more Russian savings, more Russian investment in Russia.
Capital flight out of Russia has a flip-side. Western aligned capital leaves, opening the door for eastern alligned capital (BRICs) to invest at attractive prices using dollars which can then support the ruble at the new low price. Lower ruble increases exports to nations that ignore or reject sanctions, offsetting loss of western aligned markets.
I'm sure there are more angles to this than I've mentioned, but on balance the sanctions and general hostility towards Russia is a much needed push towards greater self-sufficiency, reindustrialization, and a better domestic and worldl trade position somewhere down the road.
In short, they are doing Putin's work for him.
it's pushing financial segregation in the world
in the short term, it'll hurt Russia
in the long run, it'll wash western capital out of the east and send them home, furthering the ditch that's now being dug between east and west in the financial sphere
as part of financial war, we are going from conducting raids against each other to digging trenches now.
China can also accomplish that by dumping USD and UST for gold. RMB skyrockets, Chinese people have huge wealth and income effect, increasing stability and jumpstarting consumer led growth, while oil gets more expensive for G3.
It all comes back to the black cube
i would love to see the entire House of Saud beheaded in the public square...
fucking pieces of shit..all of them.
Join the club. take a number.
They lie .
the petroleum price per se is http://andreswhy.blogspot.com/2013/04/petroleum-price-and-clathrates.htm...
Forget fracking .
But a new tech breakthrough :
http://andreswhy.blogspot.com/2014/09/rogue-swan-weapons.html
makes it all meaningless .
What you are actually seeing is a well managed rush for the exit .
Oil futures have already declined . This is why .
The resulting pulse of wealth will far exceed previous ones .
See http://andreswhy.blogspot.com/2005/12/jethro-tull-super-hero.html
A mere 4X increase .
cheap , mass energy will blow most of these pretentious pipsqueaks right out of the water .
See http://andreswhy.blogspot.com/2009/10/ansari-gens.html
Hold on ... the fall in oil prices is not due to collapse in demand as the global economy implodes on the way to vanishing forever?
Oh, okay then. Nevermind.
It's a conspiracy theory with no evidence offered; and it's not terribly convincing. Well, I guess I'll find out; maybe I'll be taking a loss on my tank cars of Feb.'15 Crude; I'll know for sure by this time next week.
Doesn't seem like a conspiracy to me....I smelled foul!
Ebola is going to crater demand, that's for sure.
Oh yeah!
And some dipshit on CNBS is gonna try to call it a Black Swan nobody saw coming.
Betcha betcha betcha
"Ebola is going to crater demand"
Depends on the severity. Fewer people taking bus and train to work, more people driving own car, is one possible outcome. Fewer people actually going to work is another. Too soon to tell how this plays out.
I wonder if Kerry showed the King his Silver Star and Purple heart? Oh wait...that's right..he chunked them off a bridge somewhere way back in the day.
He can buy more.
If I were Iran, Russia, Venezuela, Equador and China, I'd do 3 things IMMEDIATELY:
1. INDEX ("price") Oil to Gold (e.g., 1 Barrel = 2 grams of Gold), thus avoiding the USD.
2. PAY/BARTER Real Assets with Real Assets, thus avoiding the USD altogether.
3. Create the EPEC (Energy Producing & Exporting Countries) cartel, which avoids using the USD and BIS, and where Energy is from Carbon fuels (oil, gas, coal) or Electricity (hydro, nuclear, solar, wind). Note the obvious: That there is a LOT more demand for Energy (in all its forms) than for Oil alone, which makes the basis for Energy-backed currency a true Universal Currency.
p.s. China and Russia had better be at Defcon 3 preparedness for Bio-wars, given the extreme measures and desperation that the US-Saudi alliance is willing to deploy, and that Piecemeal-WW3 just keeps ratcheting up.
They're already doing all of that and a bag of chips
They just need to move faster now
But if Putin is calling the shots they're also already doing that too
He's no slouch but his golf game is suffering
hard to avoid the dollar when it's your national currency (Ecuador).
Ecuador's a minor oil producer BTW. What happens there has little impact on world price.
All governments love fiat. I am a big fan of an energy backed coin but it wont happen thru any of todays governments. Bankers run pretty much all of them as best as I can tell.
It would have to start with the honest folks that are truly productive. They are the ones it would work best for. Fiat works much better for modern governance types. Fiat gives them far more control over everything. Full spectrum dominance is not possible if you are limited by a coin with an actual measurable value.
Just think how much smaller our gov would be if they had to pay as they went. The extent of corruption has a cost that can only be covered by fiat. Fiat is the real backstop of this shitshow not the taxpayers. The tax payers dont have that much money never did.
Take away the fiat and all the markets would be allmost unrecognizable. TBTF would have failed or never happened in the first place.
True Andy I agree
Fiat money makes for big gov and big planners and big plans
But I dont think WW2 could have been won against the Socialist goverments, who were great at fiat, without the "free" world democraies fiating even more.
So it progressed until we have come back to the problem our founding fathers had with taxation. Before Fiating became an art form. The problem being that the Gov takes over,
At the expense of those governed.
We ( the US working man) have to figure out a way to explain the situation
A good place to start is the old declaration and old constituition given to us the people not to them the Gov
I doubt ww2 could have even happened were it not for fiat.
All that is required for governments to "pay as they go" is to properly tax the 5% that hold 90% of the wealth, but pay only 40% of the taxes.
Btw, 30% of national income in America is not "earned" at all. It is collected by the holders of wealth, who in many cases inherited that wealth. Your understanding of the economic puzzle is missing quite a few pieces. Massive inequality has a huge negative effect on growth, because it causes millions of people to be vastly under-utilized.
Please fill in the missing pieces for me. I agree our tax system is effectivly busted. An honest reform of it from top to bottom is going to be needed. This could be done better with integrity as a core rather than to gain advantage. The gold thing wont work well, on this I agree with you.
I say we try free market capitalism. It could actually work. Regulatory capture in my opinion is a big part of what is holding back growth. Its the little guys that do most all the inovating that generate real growth. Level the field for everyone and watch as small buisiness does what it does. Produce very competitive high quality goods and services. It is hard to beat a company thats well run from ground level. Just remove the shackles them folks know what to do.
Their economies would immediately collapse.
No gold-based economy has ever experienced the kind of growth required to have a modern state. You need a system of credit for that kind of growth. Pre-fiat societies grew at rates something like 0.1% per year. That's 30 times slower than modern rates.
Gold is indeed barbaric, in the sense that only an uneducated barbarian would suggest using it for money. Ayn Rand, for example.
About growth. The growth rate without massive amounts of credit would in my opinion be more sustainable. These huge growth rates do more damage than good. By pulling forward demand reducing future spending gives a deminishing return down the road. This is bad. Pay as you go has a much better chance of not being wasted because of the risk involved is on the shot callers. With credit it seems to fall on tax payers who get nothing if its proffitable. That is a major advantage for those that have access to the fiat. Fiat credit crushed real competition in every sector it touches.
Saudi Arabia is a tinderbox that can be set on fire, should they wish to start fires elsewhere.
During the summer they stop working when the sun is high.
Calculate, after ice cube effect, a rise of 10 degrees that factors in dry heat from the stopped airstream and Suadia Arabia is un-inhabitable.
Until they build an Almeria like http://andreswhy.blogspot.com/2014/06/humping-rock-is-hard.html
These societies are Darwin Award winners .
Breakfast to the various Champs of competing societies . See
http://andreswhy.blogspot.com/2013/10/russian-and-chinese-immortality.html
Believe it or not , the guys really in charge cannot get humans to take charge of their own affairs.
They have much better things to do than babysit a planet of squalling infants .
Compare oil production to a Farmer's Crops. Except this farmer can grow 24/7/365. Winter crops, summer crops, all year long. After he gets his wells drilled, you're telling me his 1,000,000th barrel costs as much as his first 1000?
These people in the pictures have $0.00 cost on the NEXT barrel that comes out of the ground, any money they get is FREE money to them.
Here's the problem: They won't be getting $100 bills from the USA because we can now KEEP all that USD to OURSELVES, we are overflowing with WTI.
Forget about QE and The Fed giving 50% of the money to foreign banks, we are no longer giving USD to Middle Eastern nations. Talk about a back door bailout, its been going on for years. How does this arrangement fund the US Military when we are supposedly protecting our oil interests?
That's why the U$D is rising in FX markets, and it will screw Super Mario in more ways than he could imagine (not to mention he hasn't done anything anyway).
In the immortal words of Sean Connery on SNL, "Suckit, Trebeck".......
"These people in the pictures have $0.00 cost on the NEXT barrel that comes out of the ground, any money they get is FREE money to them. "
You left out the depletion rate. Water cut on Ghawar is 50% by some accounts (state secret). Meanwhile, they're running budgets based on former production costs, plus have squandered major capital on military goods, royal sinecures and pointless luxuries.
Where is Saudi steel manufacture and heavy industry? Where is their electronics, software, aviation, automotive, consumer durables, basic research and development and so forth?
History will record this as the greatest wasted opportunity of all time.
They own manufacturing worldwide.
They even have American nukes through our lend-lease program.
They have F-16's an Abrams tanks, why would they want to get their hands dirty building stuff, when they can just buy it?
Ownership is subject to nationalisation.
It's better to have your own industry.
Gentlemen ,
You are assuming humans are rational .
Just when you've got this living thing licked , you die .
Been picking up March options while WTI is stupid suppressed.
Ah, I read the title again, "The OTHER Part of the Secret Deal"... so true, yet this one is a double cross. All the USDollars that Saudi has today, that's all they will ever get if we don't need their oil anymore.
Take it to $60, take it to $40. Who cares?
WE DON"T NEED IT.
(So does the FIRST part of the secret deal come unraveled? That 9/11 thing?)
[In response to the comments warning of a Russian response...]
Given Putin's total lack of any response to the U.S. heading back to Syria, and bombing Assad with impunity in order to make way for the new natural gas pipeline, I am thinking that the "Russia will sit back and endure" angle may be correct.
When the U.S. threatened Syria last time, both Russian and Chinese ships showed up pretty quick sending Obama running with his tail between his legs. I understood why Syria was a "line in the sand" for Russia. I cannot imagine that just because the U.S. has moved a few pieces around on the chess board (into Ukraine) that Russia's position has changed so much. Why was defending Syria worth risking all out war before, but not now? What has changed? If anything, I would think that Russia is now in a stronger position given it's more solidified relationships with the BRICS and the fact that financially it has distanced itself more from U.S. control.
Why isn't Russia doing anything? I'm stumped. Anyone have any insight?
When exactly did the Americans start bombing Assad's troops ? So far they touched only ISIS occupied areas...
Ooops...we missed? Damn. We'll have to do better next time.
Actually the House of Saud is more concerned about being overthrown by ISIS. Thus the Saudis are acting in SELF INTEREST.
Russia is not the primary target in this price supression. I disagree Tyler.
ISIS is the primary target.
I know that the Russians may feel as if they are the primary target. But I am also sure that the Bakken Frackers will also feel like the Saudis are attempting to force them into BANKRUPTCY as well.
Well you sometimes have collateral damage when firing rockets. Surgical strikes are not all that surgical after all, are they?
Because there is another plan that wasn`t ready to go before, but is about ready now, is my best guess. I wonder if the initial establishment of a Eurasian Alliance trading block is ready to scale up.
I have a dream that this battle with ISIS is actually the US and friends strategically getting into position to encircle the source of all the world's problems. In my many hours perusing comment sections and articles, every now and then I read "The calvary is on the way" in so many words. I can only hope this is someone with inside information giving us some hope. Seeing a hand shake between P and O, in which Putin had his hand over Obola's hand, which has some significance in power .... Putin with power ...almost a photo op with a message as they are looking intently and seriously into each other's eyes. Yes, the world is a stage and if any sane men remain on our planet, this should be happening as we speak.
Good question, imho basically because those air strikes are another muppet show.
Israel treads a very narrow path here, cant hit IS too hard, and cant hit SA too hard either, its a wonder there are planes in the air at all.
Also, is IS totally under control? I doubt it.
But, hit IS too hard and Assad thanks US publicly and rolls the FSA to Baghdad.
Hit Assad too hard, and Russia/China react, and they`ve shown they can.
The whole show stinks of desperation, imo their best option would be to mount a false flag on Turkey, then let turks invade and clean Assad all by themselves, but then the Kurds would go crazy like in the eighties all over again.
I said it here months ago, Putin traded parts of Ukraine for parts of Syria. The rest is theater for the masses....
Putin talks and walks the walk in the his own backyard.
Russia, China have no capability of engaging in multiple conflicts worldwide simultaneously.
Putin is busy is Ukraine. Jinping is busy expropriating competition in China
Only USA has that capability
Assad will be out soon. He is lonely now
shades of 83/84 and Reagan/Fahd deal when Saddam was going bam-bam in Iran for his mentors.
And the Saud Family believes it is in their interests to have a victorious ISIS gov't in Damascus? Then Iraq, then Jordan or vice versa?
Once IS is victorious in completing genocide across the ME, we will fund another group to take them out.
That's how a country whose sole manufacturing output is weapons creates end-user inventory turnover. SSDD.
If that is the case, then the US apparatus is betting on very long odds indeed. Somehow, I don't think the State Department and affiliates really like to throw Hail Marys, but I could be wrong.
They threw the Ebola Right Wing Reverse Screen just before the end of the first quarter.
We've got a ways to go. Have a Gatorade and some nachos.
O'tay, but I sure don't know who the hell the "right wing" is.
The complusive down arrow was born a pussy and is even more a pussy sitting at his keyboard. Sck meee penis boy
Wow, you're awfully sensitive about down-votes. Maybe you should stick to Disqus, where only up-votes are possible, so that whineyboys don't need to feel bad about themselves.
Iran's break even point is 140? That's hard to believe in the extreme. Don't they possess an enormous proven reserve?
Those numbers are nonsense. I think they mean something like, "In order to finance 100% of government expenditure with domestic oil production, here's what the price would have to be."
But no country runs their finances that way, they have many other sources of income, including financing -- so the chart is pure horse shit. Also, why is Russia not even on the chart?
What is the USSA's break even point? Would be nice to compare. How bout it author?
Does it really matter? Fiat paper $$ playing games with paper gold and paper stocks unrelated to absolute values of anything. So why should I waste my mental energy on studying the relativistic bullshit? TPTB can punch a button and set anything they choose, including elections.
If I'm even in the ballpark on this, why give a big huckly fuck? Get ready to stack moar, that's all my pea brain can rationalize as fact. Rationalization is a grand therapy. That and betting college football, but of course.
The question is nonsensical, since oil is not a significant part of government revenue in the U.S.
The U.S. economy is maybe 7% oil production, even though we're the world's largest producer. This is because the US economy is 25% of world GDP. So even with oil at $0, the government can finance itself. Not so with poor nations like Russia.
Sanctions killed Brent premium, crushing the value-at-float, another unintended consequence of the Ukraine and the Levant incursions.
A bunch of pussys who are totally misjudging the strength, intelligence and resolve of Russians.
Russian Gov't. I doubt their people want to be cannon fodder either.
Moar evidence the debt-money Keynesian Ponzi scheme is the real driver of the fate of humanity and has everybody backed into corners with no peaceful way out.
But if Saudi break-even is $93, then if they sell at $50 - they won't last a year. Unless Uncle Sugar is making up the difference. Hey hey SA, we saved you from Saddam overrunning you and taking your oil, but if you'd like to overrun Iraq now and "save" their oil from nasty ISIS maybe that would be a good thing?
Who says the Saudis are manipulating oil down? I can see why they would want people to think that, but I think it's the other way around. The stalling global economy is affecting demand, and the Saudis are reacting by lowering prices to drum up sales.
Also, making it sound like the Saudis plan all along detracts from the spectre of tanking oil prices, which would be seen as DEFLATION, unless you can convince everyone you MEANT to do that as part of some grand strategy.
Every single OPEC member has serious internal fractures. It is counterintuitive to believe any; whether it is the Family Saud or the Ayatollahs, or the bus driver from Caracus, want the already 20% plus dip in the price or more. It is Not in their interests. jmo
at the price of $60 the sea platforms can stop production and fracking as well.
Means Petrobras, Shell Exxon UK and norway can stop their production, US with the fracking as well.
This will decrease the supply by good 20%. Let us sit down and wait.
"Let us sit down and wait."
Better yet, charter some VLCC's and park 'em somewhere full of $60 crude.
Rashid Abanmy?...anyone have a track record on this "analyst"?
I'd like someone a little less obscure ;-)
Pssst... nmewn...
His mane is an anagram of "Horseshit Anybody"
well, kinda
Rawsheet? I keel you!
Allloooooo akbar! ;-)
When you wage war with Russia....you try to crush gold & oil
Russia will win not because they have deeper pockets but balls to use nukes to defend their own territory and people.
EU do not pass go, do not collect $200
EU eats shit on US sub-prime debt
anyone who doesn't believe that russia believes they come out the winners in the "ultimate" showdown is a fool.
"Anyone who" believes that information in any media about any government or secret deal, is true; is living the dream.
Anyone who thinks that conspiracy theories and alt news sites riddled with teenagers is any more accurate, is living an even more absurd dream.
You're silly. Nobody is going to "use nukes."
The only nukes that will ever be used, have already been used.
Nonsense. A nuke was used in Bali, for example. They will be used again. They are the ultimate terror tool of Mossad, CIA, MI6 and of the Russians too, if they ever decide to get back into the terror business again.
Multi megaton nukes will probably not be used though.
alright. this isstupid. in the entire history of oil trading, with the exception o f the few years opec actually had some influence in the market, and even during the most recent years when traders who have no intention of ever taking delivery of their orders for oil in an age where derivatives can be constructed to minimize the effect upon cash flow caused by the fluctuation in market price,(and peak oil) the price of a barrel of oil is a real time guage of economic activity.
obviously, the price is saying everything is slowing down everywhere. the silver lining is the money saved from the resulting lower price of fuel is spent in other places which ultimately stimulates the economy. in this current environment a caveat must be added, unless it doesn't.
I just don't believe that crap.
Paging EKM. The "House of Saud" isn't hedging supply. They're trying to off load it, and save face.
They are the supply> They set pricing mechanisms, for the derivitives market through OPEC.
You use too much math YC
That is not the main ingredient of the current oil equations.
The main ingredients defining the price of oil now are:
- hate of arab sunni vs iran shia
- Saudi fear of Iran
- desire of Saudi Arabia to destroy Iran's economy and anybody allying with Iran, like currently bank lobby is doing
Forget math. Look at History. It is very bloody
Saudis/Gulf do not care about Buffett, Gates or dead rothchilds and rockefellers.
They simply kill to survive and Pentagon has a 40 year alliance with them. It's win-win.
No world oligarchs could beat Saudis.
Pentagon + Saudi alliance rules. Period. They watch each other's back
That is how we are surviving as Western World, due to Pentagon + Saudi alliance for 40+ years already
Yes, but the old alliances are crumbling together with the US economy.
The house of Sa`ud is a basically a bunch of old arab degenerates, sitting with their whores and various toys upon a huge pile of gold, surrounded by a sea of hatred and misery.
Their continuous existence depends on the stability of the US, and they will do everything to insure USN continues to patrol the seas and protect them.
Its a situation comparable to Israel, though Israel can survive a few years even if US falls imo.
Hous of Sa`ud does not have that luxury.
Well, thank you.
At least you know what you are talking about.
We can agree/disagree on details, but at least both you are defining the real actors and the real reasons.
Saudis are mistaken. China has Russia's back because Russia had more than just oil. Lots more natural resources and greater ability to supply natural gas via pipeline as well. China had $4T USD ForEx, more than enough to bridge Russia through anything. China and Russia call gold bluff and it is all over. All these games simply make China a diplomatic force as it uses its USD to overcome our abuses.
That's laughable. China as a "diplomatic force?" They are surrounded by enemies and people that hate them. They have border disputes and territory disputes with just about everyone. They hate the Japanese. They have a huge looming demographic crisis. There is no love between the Chinese and the Russians, or the Chinese and the Indians. Their recent South Sea bullying has made the Vietnamese livid. The Vietnamese would now rather befriend the U.S., with whom they fought a decade-long war, than the Chinese.
China has peaked. You can always count on the commentary to be years behind the reality. Remember the 80s, when we were all supposed to be terrified of the Japanese? Whatever happened to the big bad all-powerful Japanese juggernaut-boogeyman? No, silly me, of course you don't remember the 80s, you're probably 14 years old.
".....Their continuous existence depends on the stability of the US"........
They are Not Alone in that Regard.....
This could mean a future opportunity to purchase Big Oil at a discount, to reap some future capital gains and good dividend yields. Oil won't stay cheap forever, but I think it will need to get cheaper than now for Russia and Iran to cry uncle so I will wait a bit to buy.
It could. It's been tried before.
You need to be able to service those tanker and insurance contracts.
There's a reason why this opportunity has presented itself.
Relax and enjoy the show. You'll know when it's time to get active.
It is clear that the Saudis want to maintain a low oil price to discourage the development of unconventional oil extraction and the development of alternative energy. This is a long standing policy of theirs going back decades. But what is the US doing supporting this program when the US itself needs a high oil price to recover the costs of expensive fracking. What price does the US need to continue the fracking boom in the US?
I suspect there's some truth to your statement about the House of Saud, but they have an internal imperative to keep up the prices to pay off their restive population. Of course, I have no idea how well off is their balance sheet, their true budgetary reserves, or even their petroleum reserves. The lower the price, the more OPEC members will sell add'l outside of their agreed upon quotas to make up for their declining revenues due to the price declines. jmho