Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is Saudi Arabia Leaving The U.S. Behind For Russia?

Politics / GeoPolitics Jul 07, 2015 - 11:57 AM GMT

By: OilPrice_Com

Politics

The news from the recent St. Petersburg Economic Forum, which took place from June 18 to 20, inspired a torrent of speculation on the future direction of energy prices.

But the real buzz at the conference was the unexpected but much publicized visit of the Saudi Deputy Crown Prince, as an emissary of the King. The Prince, who is also his country's Defense Minister, carried the royal message of a direct invitation to President Putin to visit the King, which was immediately accepted and reciprocated, with the Prince accepting on behalf of his father.



It would be news enough that the unusually high level delegation from a long-time ally and protectorate of the U.S., like Saudi Arabia, was visiting a Russian sponsored economic conference, in a country sanctioned by the U.S.

Some saw this well publicized meeting as the first sign of an emerging partnership between the two greatest global oil producers. If the warmth of the meeting was any evidence, it seems likely that Russia, a non-OPEC producer, might come a lot closer to the fold.

That could mean that, at the very least, Russia would have a voice in the cartel's policy decisions on production. And if so, it would be a voice on the side of stable but rising prices.

The great Indian journalist, M.K. Bhadrakumar (MKB), may have been the first to point out that there was plenty of reasons for the Saudis and Russians to come closer together. Among these are the U.S.' diminishing dependence on Middle Eastern energy, due to the momentous development of shale resources. There's also the over-riding goal of the U.S. to pivot toward the East, where a huge economic transformation is unfolding, while reducing the U.S. role in the Middle East. It's clear that the Saudis are going to have to make new friends.

MKB also makes the point that although the Saudis are wildly opposed to any form of U.S. entente with Iran, the clear-eyed Kremlin understands that there are many temptations for its erstwhile ally, Iran, to move much closer to the West.

Pepe Escobar of Asia Times saw the Prince's visit as harboring the first glimmer of light in ending the current global oil trade war, in which the Saudi's might turn down the spigot and lower production, enabling prices to rise: "Facts on the ground included Russia and Saudi Arabia's oil ministers discussing a broad cooperation agreement; the signing of six nuclear technology agreements; and the Supreme Imponderable; Putin and the deputy crown prince discussing oil prices. Could this be the end of the Saudi-led oil price war?"

Bullish oil traders thought they found some hope in the words of Ali al-Naimi, the famous and longtime President and CEO of the Saudi National Oil Company, Aramco, and current oil minister. Naimi publicly stated: "I am optimistic about the future of the market in the coming months in terms of the continuing improvement and increasing global demand for oil as well as the low level of commercial inventories." This, the minister said, should lead to higher oil prices by year's end.

Ali al-Naimi publicly praised the enhanced bilateral cooperation between Riyadh and Moscow, stating that, "[t]his, in turn, will lead to creating a petroleum alliance between the two countries for the benefit of the international oil market…"

This could be music to the ears of oil price bulls. But more skeptical minds were quick to clamp down excessive optimism. "Of course, we shouldn't read into any new developments outside political frameworks, because I can hardly imagine that Saudi Arabia has decided to turn against its alliances—but it probably wants to get out of the narrow US corner and expand its options," Abdulrahman Al-Rashed, the General Manager of Al Arabiya News Channel, wrote in a column after the summit.

At the meeting, the Saudis and Russians signed several memoranda of understanding including the development of nuclear power plants in the Kingdom, with the Saudis planning some 16+ plants.

The two sides also plan on setting up working groups to study other possible energy joint ventures in Russia. Russia also agreed to the construction of railways and metro subways for the Saudis. Russia is also believed to have agreed to supply advanced military defense equipment to the Kingdom, despite the Saudis being long time arms customers of both the UK and U.S.

However there is quite a bit of doubt that the U.S. is ready to just step aside and be replaced by Russia as the Saudis' main ally. Saudi Arabia and Russia are on opposite sides on a range of geopolitical issues, including Iran, Syria, and Yemen. These conflicts will likely put a limit on any potential entente.

Also, there is serious doubt as to whether it is so simple for the Saudis to raise oil prices. Flooding the markets with oil to crash prices only requires the Saudis to over-produce by some one and a half million barrels of oil per day, easily within their grasp, and something the Saudis can do on their own.

Bringing prices up is a different story, requiring global oil producers to comply in oil cutbacks.

At the same time, rising prices are a clear signal to global producers to increase production, worsening the current glut, so that any price increase may prove to be temporary.

And yet, the fact is prices have been rising since the first of the year, and many are convinced there is more to go. C. DeHaemmer, a well-known energy newsletter writer, is now predicting a price rise by WTI to a range of $73-$78, and a Brent range of $82-85, by years end. Not impossible, but long term, the issue becomes cloudier.

On a different matter, there was another surprise announcement at the forum, with India, a longtime U.S. ally, confirming that it will sign a free trade agreement with the Eurasian Economic Union (EEU), a Russian-led trade bloc including Belarus and Kazakhstan.

Russia and China have agreed on making the EEU a central part of the Chinese sponsored Silk Road, so by default, it would appear that India is moving towards joining the grand Chinese project.

As has become standard at the St. Petersburg Forum, a number of energy deals were signed, including a BP deal to buy a major stake in a Siberian oil field owned by Rosneft, a company suffering under international sanctions. BP, as a twenty percent stakeholder in Rosneft, says it is seeking to expand on its joint ventures with the Russian company

Another deal was signed with Gazprom to build a second pipeline under the Baltic, following the path of Nordstream to Germany, in partnership with Royal Dutch Shell, Germany's E.ON, and Austria's OMV. Apparently, Western Europe's oil giants find Russian sanctions to be no hindrance in dealing with Russian energy companies.

After his onstage TV interview with Putin, Charlie Rose, the well-known TV celebrity, was asked why he had decided to become a moderator at the Forum. He said, "I believe it's important to talk to people."

In the meantime, the U.S. reporter, with camera man in tow, found nothing of interest to report at the conference.

Source: http://oilprice.com/Energy/Crude-Oil/Is-Saudi-Arabia-Leaving-The-US-Behind-For-Russia.html

By Robert Berke for Oilprice.com

© 2015 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in