WTI Tumbles To $48 Handle After Iraq, Iran Refuse To Freeze Output; OPEC Admits "It's Getting Complicated" More below. This is simple, really it could not be simpler. Both Iran, and Saudi are at war, but the war is a proxy war. The price of oil has fallen, a lot. The international sanctions on Iran have been lifted. Saudi has no economy but oil.
What was happening just a few months ago was Saudi was comfortable in the proxy war because Iran's total economy was limited by international sanctions with those sanctions lifted, Iran has been making headway in its economy, and in the proxy war, especially in Central, and North Africa. This has unnerved Saudi. Add to that the fact that Saudi is running out of money to continue to provide the welfare payments to keep its population of lazy dilettantes from revolting. It is down to about 4 years of cash. Iran, on the other hand is allowing its economy to return to normal, this means once again making money. Both need to pump oil - Iran to help build its non-oil real economy, which will allow Iran to gain the upper hand in the Islamic proxy wars for good. Saudi needs to pump oil to keep its restive people from revolution, and to keep its position as controller of the Sunni/Wahhabi/Salafi coalition. There will be no actual implemented agreement to limit oil output from these participants. Plus, Russia needs all the money it can muster as well, since it is in recession, and will likely proceed to depression soon. This is the real reason Putin is yammering about war, to focus his people on the enemy, the West, and America. This is also the key reason Hillary will be more likely to trigger a war, she is a bull in a china shop when it comes to foreign relations. Everything she touches turns to dross. She will likely become belligerent with Putin, and he needs to control his people war can help him do that, although he would rather find some easier mechanism. The outcome is a likely new cold proxy war. Anyway, the price of oil is highly unlikely to rise in this environment. The players need to pump, they need the money. The US is a huge swing player, and if oil prices rise we will pump damping the price. Last, the world economy is not good enough for demand to actually fill the current supply overhang. This is not going to change anytime soon. Even a radical increase in the US economy is unlikely to have any significant effect on world demand for quite a while. I expect no changes in the price of oil absent spot problems like refinery fires, or geopolitical oil stoppages, and I expect these to be of limited duration. Every player out there wants the money, and they are willing to do anything to keep the oil flowing. Expect these idiotic oil bulls to continue trying to push this rope uphill until they are completely dead broke. Sigh!
Comments
|
AuthorMaddog Categories
All
|