The Saudi Arabia-Russia deal earlier this month to fix production at January levels, which also includes Qatar and Venezuela, is the beginning of a process which will take several years to increase oil prices to somewhere around $60/barrel, a new stable.
Saudi Arabia Has An Agenda, A Geopolitical Motive
Fadel Gheit of Oppenheimer told Bloomberg in this video that the Saudi government crashed oil prices globally purposefully to hurt Iran and Russia for meddling in the Middle east.
It is known that the Sauds backed Syrian opposition groups including AlQaeda and ISIS to topple Assad. The plot however failed as the Assad Syrian troops proved resilient and with support from Iran and Russia, the tide finally turned against the terrorists after most of Syria was destroyed.
#Saudi Arabia Crashed Global Oil Prices To Punish #Russia, #Iran
Posted by NewsRescue on Monday, February 22, 2016
Fadel Gheit said that the Saudi mission to punish Iran and Russia has not yet been accomplished and so Saudi Arabia is not yet going to allow oil prices rise as they will keep over-flooding the market.
Only Saudi and the Gulf states are producing at the max or more than their OPEC stipulations. Other nations produce less than their quota.
See: Related from 2014- Saudi Arabia using its oil as a weapon to punish Russia and Iran
Saudi Arabia is once again using its “oil weapon” — as it did during the 1973 oil embargo — to pressure its political rivals. But instead of driving up prices and cutting supply, the Saudis are doing the reverse. In the face of a global slide in oil prices since June, the kingdom has refused to cut its production to drive prices back up. At the last Organization of Petroleum Exporting Countries (OPEC) meeting on Nov. 27, the Saudis led the charge to prevent the cartel from cutting production.
The House of Saud’s oil policy is even more opaque than its foreign policy. But the kingdom has two targets in its latest oil war: It is trying to squeeze US shale oil — which requires higher prices to remain competitive with conventional production — out of the market. The Saudis are also punishing two rivals, Russia and Iran, for their support of Bashar al-Assad’s regime in the Syrian civil war. Since the Syrian uprising began in 2011, regional and world powers have played out a series of proxy battles there. As Saudi Arabia and Qatar armed many of the Syrian rebels, the Iranian regime — and to a lesser extent, Russia — have provided the weapons and funding to keep Assad in power.
The consequences of Saudi policy are impossible to ignore. After two years of stable prices at around $105 to $110 a barrel, Brent blend, the international benchmark, fell from $112 a barrel in June to around $65 today. “What is the reason for the United States and some US allies wanting to drive down the price of oil?” Venezuelan President Nicolas Maduro asked rhetorically in October. His answer? “To harm Russia.”
Russia and Iran are highly dependent on stable oil prices. By many estimates, Russia needs prices at around $100 a barrel to meet its budget commitments. Iran, facing Western sanctions and economic isolation, needs even higher prices. Already Iran has taken an economic hit from the Saudis’ actions. On Nov. 30, as a result of OPEC’s decision not to increase production, the Iranian rial dropped nearly 6 percent against the dollar.
The kingdom believes it can protect itself from the impact of the price drops. It can always increase oil production to make up for falling prices, or soften the blow of lower profits by accessing some of its $750 billion stashed in foreign reserves. Read full
The oil price drop that has dominated the headlines in recent weeks has been framed almost exclusively in terms of oil market economics, with most media outlets blaming Saudi Arabia, through its OPEC Trojan horse, for driving down the price, thus causing serious damage to the world’s major oil exporters – most notably Russia.
While the market explanation is partially true, it is simplistic, and fails to address key geopolitical pressure points in the Middle East.
Oilprice.com looked beyond the headlines for the reason behind the oil price drop, and found that the explanation, while difficult to prove, may revolve around control of oil and gas in the Middle East and the weakening of Russia, Iran and Syria by flooding the market with cheap oil. Read full