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The War That Would Transform Oil Markets

Public Policy

The oil pipeline resumed operations in a matter of hours, but the war of words is heating up. Bahrain’s Foreign Minister Khalid Al-Khalifa said on Twitter that the “attempt to bomb the Saudi-Bahraini oil pipeline is a dangerous Iranian escalation that aims to scare citizens and hurt the global oil industry.” A spokesperson for Iran fired back, saying that the Bahrainis “need to know that the era for lies and childish finger-pointing is over.”

The incident comes only days after a missile was fired from Yemen into Saudi Arabia, which the Saudis pinned on Iran.

Meanwhile, a web of intrigue has enveloped Lebanon, the small country in which all the regional powers hope to exert their influence. Earlier this month, Lebanese Prime Minister Saad al-Hariri resigned and decamped to Saudi Arabia, blaming Iran and Hezbollah for putting his life and his family’s safety at risk.

But, Hezbollah said Hariri is actually being held captive by the Saudis. Riyadh, in turn, warned Saudi nationals to leave Lebanon. Israeli leaders have said they would bomb Lebanon back to the Stone Age.

To further confuse matters, Hariri said he could withdraw his resignation and continue on as prime minister, so long as Hezbollah quit interfering in regional conflicts. “I am not against Hezbollah as a party; I have a problem with Hezbollah destroying the country,” he said.

The bizarre events, many believe, are part of a broader proxy battle between Iran and Saudi Arabia—a conflict that only seems to be heating up. Crown Prince Mohammad bin Salman’s internal purge of rival members of the Saudi royal family has also raised tensions. MBS, as he has become known, is pursuing an aggressive foreign policy that is often downplayed in the western press, as news outlets tend to cast a positive light on his economic reform efforts.

However, MBS is the principal driver in the disastrous war in Yemen, the destabilizing blockade of Qatar, and the heightened tensions with Iran. With his domestic opponents out of the way, it seems he has an iron grip over the Saudi government right now. Many oil analysts view this as slightly positive for oil, as an extension of the OPEC agreement seems more likely with MBS in total control.

But the upside risk to prices is even greater if MBS’s belligerence leads to a more serious clash with Iran.

Middle East conflicts tend to send oil prices in one direction: up. In recent weeks and months, we’ve seen a return of Middle East geopolitical tension, such as the Kurdish independence referendum and subsequent seizure of Kirkuk oil fields by the Iraqi government. Also, instability in Nigeria and Libya have led to temporary oil supply interruptions. To date, these events have added some upward pressure on oil prices, but the markets have largely shrugged off those flashpoints.

A Saudi-Iranian struggle is another matter.

“Most of the political risk has been smaller-scale,” Michael Lynch, president of Strategic Energy & Economic Research, told Bloomberg. “But when you start talking Saudi Arabia and Iran, that gets people’s animal spirits flowing.”

Hedge funds and other money managers increased their bullish bets on crude oil to a fresh record last week. The Iran-Saudi Arabia clash, which is playing out in proxy battles in Yemen and Lebanon, could widen into something much more serious. While the likelihood of such a hot war breaking out remains remote, it no longer seems impossible.

A few months ago, Brent trading in the mid-$60s would have been considered unsustainable by most oil analysts. Now Brent seems to be on solid footing, and Tehran and Riyadh are on the verge of pushing things even higher.

“I wouldn’t be surprised to continue seeing this kind of movement as long as we’re not getting any negative news from the OPEC members until the meeting,” Ashley Petersen, lead oil analyst at Stratas Advisors, said in a Bloomberg interview.

As it happens, OPEC just announced that its collective output fell in October by 151,000 bpd, with drop offs in Iraq, Nigeria, Venezuela, Algeria and Iran. The “high conformity levels” with the production limits, combined with heightened tension in the Middle East, could put a near-term floor beneath crude prices.

oil price

14 Comments on "The War That Would Transform Oil Markets"

  1. makati1 on Tue, 14th Nov 2017 5:39 pm 

    ANY REAL WAR will destroy oil production and shipping.

    Now, where do I pick up a check for writing the obvious?

  2. makati1 on Tue, 14th Nov 2017 5:49 pm 

    This is more important for the US than oil:

    “Whether the financial elites of the West know it or not, they are sending us down the path of defeat. Will this happen next week, next month, or even next year? This is highly unlikely, but what is most certainty assured, is the slow decline of the West’s power and its geopolitical influence over the rest of the World.

    As I have written about numerous times in the past, our financial and political leaders in the West are creating an unholy alliance between Russia and China, two super powers that now have the ability to oppose the West, flip the switch and de-throne the King Dollar whenever they want. The question is not if, but when at this point.

    Sadly, it appears that it is unavoidable at this point that the torch will eventually be passed from the West to the East, as Western governments continue to spit in the face of the “golden rule”, while the Eastern officials embrace it. He who holds the gold, makes the rules.”

    Vast resources (Russia) and manpower (China) makes a very strong enemy.

  3. Davy on Tue, 14th Nov 2017 5:56 pm 

    mad kat, China and Russia have very little bilateral trade. Until they do their alliance ain’t shit. China is very dependant on the US on the other hand with trade. One day your little mind will understand that.

  4. MASTERMIND on Tue, 14th Nov 2017 7:05 pm 


    I am going to be breeding your daughters post collapse..Right wingers have some fine looking kids. Especially those blonde hair blue eyed dutch teenage barbies..Ill have more kids than Stanford!

  5. MASTERMIND on Tue, 14th Nov 2017 7:06 pm 


    Correction. I won’t be doing that but goons will be for sure.. esp all the brothers you know how they love their white girls.

  6. Sissyfuss on Tue, 14th Nov 2017 8:34 pm 

    Could all this posturing be a WWE cage match soley for entertainment purposes and to keep the oil price climbing. A war would be disastrous for SA and Iran but cage rattling is right out of the CIA Cheney playbook.

  7. Creedoninmo on Tue, 14th Nov 2017 9:47 pm 

    Jim Rickards says that every time the Chinese devalue their currency there is a drop in the American stock market. The Chines are currently devaluing to max or lower. Apparently Wall street is dependent on the Chinese.

  8. makati1 on Wed, 15th Nov 2017 2:04 am 

    This is what will “Transform oil markets”:

    “Visualizing $63 Trillion Of World Debt”

    According to the latest IMF estimate, the US makes up about 1/3 of the TOTAL world debt.

    US: 31.8%
    Japan: 18.8%
    China: 7.9%
    Russia: 0.3%
    Ps: 0.2%


  9. deadlykillerbeaz on Wed, 15th Nov 2017 4:41 am 

    2016 974,612 2,663 178,927 -3.00% 14.88 n/a
    2015 1,004,774 2,752 193,807 11.58% 14.20

    As you can see, Texas had a decrease in production in 2016 by about 30 million barrels. Wells decreased by almost 15,000. So those wells that went dry or were plugged were producing 30 million barrels in one year. 15,000 divided into 82191.78=5.479 barrels per day for each well. Gots to shut ‘er down, too much bother for 5 barrels a day. They add up, but not until the price per barrel is 100 dollars does it pay to pump five barrels per day per well.


    Down 82 thousand barrels per day.

    So the glut decreased by at least 30 million barrels in 2016.

    Somebody else will find some more oil out there somewhere and haul it away to the refinery, there are buyers.

    Can’t just grab some crude oil and pour it into your gas tank, it won’t work. Oil needs to be refined. Refining capacity is all important.

    Iraq found more oil because Texas lost some production.

    When there is 80 million barrels of crude being burned each day, it is not hard to find room for another 100,000 barrels. Haul it to a refinery and deliver the 49,000 barrels of gasoline to the gas stations in Iran. No matter where you go, there you are.

    Texas lost them, somebody else finds them someplace else.

    As long as the world keeps spinning, that is what is going to happen day after day.

    You can bomb Lebanon back to the Stone Age, I don’t care, but please be careful and do not destroy the cedars.


  10. Cloggie on Wed, 15th Nov 2017 5:18 am 

    US: 31.8%
    Japan: 18.8%
    China: 7.9%
    Russia: 0.3%
    Ps: 0.2%

    DE + FR + IT + UK + ES = USA = 16%

  11. Shortend on Wed, 15th Nov 2017 8:32 am 

    WAR…what is it good for? MONEY/Profits!
    United States WAR budget 700 Billion $$$$.

  12. Anonymouse1 on Wed, 15th Nov 2017 2:11 pm 

    The unisted snakes of delusions. ‘Iran’ didnt attack anyone’s pipeline. The ‘saud’ clan, just arbitrarily blamed Iran, and uS propaganda dutifully picked up the lie, and has been repeating it endlessly to any retard that will listen. Remember, reports like this originate from the same group that continue to insist Russia ‘interfered’ with the joke uS ‘elections’.

    Something about repeating a lie over and over comes to mind. Right cloggen-kike?

    uS media lie so often, it has become standard operating procedure. Neither the barbie doll ‘news’ reporters in the uS, or the fat retards that hang on every word barbie on the fat-screen TV says, would know an honest statement of fact if one hit them over the head.

  13. fmr-paultard on Wed, 15th Nov 2017 2:41 pm 

    anontard you understand it’s the intardweb and your ilks inhabitate it, right? I’m a former paultard and i’m trying to enjoy my stay here. it’s what supertards built for me, you know this right? Most of the sofware that runs intardweb was possible because supertard ((richard stallmann)) defended the freedom to create software.

    I don’t need to tell you about jamming of radio frequencies from former communist bloc. Ever heard of Pravda?

    I long for the day we declare alt-tard media enemy combattants …i’m sure we got a few spare drones and enough bunk beds at guarntanamo for you type

  14. fmr-paultard on Wed, 15th Nov 2017 2:45 pm 

    yoru idol eurotard has a tiny amount of culture compared tosupertard and zero common sense. he’s has zero common sense compared to a meretard like myself.

    he opened his sewer and said fuhrer mean to occupy holland “temporarily”…OMA (figure thisout)….talk about the mouth of babe.

    answer me this…why do America send fighter escort if russia cross our airspace? OH geeze perhaps maybe if they gain a foothold they may want to stay permanently?

    stop recruiting my supertards i beg you

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