United States does not want Iran and Saudi Arab to become friends

It was a pleasure reading “Iran and Saudi Arabia have resumed key talks after negotiations were suspended last month”, a senior Iraqi official told AFP on Saturday.

“Talks resumed last Thursday in Baghdad,” the official said, without giving further details.

Iran’s Nour news agency also confirmed that a meeting was attended by senior officials from the secretariat of Iran’s Supreme National Security Council and the head of the Saudi intelligence service.

For me the biggest inspiration are the words of the Saudi Crown Prince. In early March this year he had said, Saudi Arabia and Iran are ‘neighbours forever’ and that it was better for both of them to work it out and to look for ways in which they can coexist.

However, the contentious selection of words in AFP is evident which says, “Shia-majority Iran and the Sunni kingdom of Saudi Arabia support rival sides in several conflict zones across the region, including in Yemen, where the Houthi rebels are backed by Tehran, and Riyadh leads a military coalition supporting the government. In 2016, Iranian protesters attacked Saudi diplomatic missions in Iran after the kingdom executed revered Shiite cleric Nimr al-Nimr.”

The selection of words reminded me the western mantra, “Iran is a bigger threat as compared to Israel”. This was used to instigate Iraq to attack on Iran over four decades ago. The war continued for nearly ten years, only because two Arab countries provided money and ammunition to Iraq.

The economic sanctions imposed on Iran for more than four decades and the refusal of United States to implement nuclear deal signed by world super powers with Iran are the testaments that the super power does not want Iran to export oil and attain economic prosperity. It is highly regrettable that Saudi Arabia has fallen prey to the US mantra and has been supporting economic sanctions on Iran.

“It is expected that a joint meeting between the foreign ministers of the two countries will be held in the near future,” Nour said, describing what it called the “positive atmosphere of the recent meeting, which raised the hopes of a resumption of bilateral relations”.

Talk about re-imposition of sanctions on Iran an attempt to create storm in a teacup

Lately, the western media, controlled and run by Zionists, has been talking about re-imposition of economic sanctions on Iran, as 12^th May is approaching. The move has been initiated by the US president and many ‘me too’ are trying to please him. The crusade is led by Israeli prime minister, who is licking wounds caused to Israel in Lebanon by Hezbollah. The US is also adamant at taking revenge of its defeat in Syria, where it also faced Hezbollah. The west is never tired of accusing Hezbollah being supported by Iran but it is in no way part of Islamic Revolutionary Grads of Iran.   

The US commentators have very cunningly convinced OPEC led by Saudi Arabia to curtail crude oil output which has resulted in 1) substantial increase in crude oil price and 2) significant hike in the output by the US and Russia. At present, Saudi Arabia has slipped to third position in terms of daily oil output. The US has also emerged as one of the major exporter of crude oil. Therefore, Iran with a daily export of 2.6 million barrel has become ‘of no consequence’. Even if export of oil from Iran is stopped completely completely, it would be compensated by other producers very quickly.     

As a daily ritual, I have to write a few lines on commodities market and factors driving their prices. The most bizarre part is writing about the factors driving crude oil prices. The usual jargons used are increase/decrease in rig count in the US, movement in US stock piles, turmoil in Venezuela and MENA (countries including Iraq, Libya, Nigeria). Little reference is made to investment by hedge funds.  

I still remember once taking part in a live panel discussion on factors driving crude oil prices (more than ten years ago) I had said, “The price of crude oil may be driven by any factor, but certainly not by demand and supply”.  I could see the signs of disgust on the face of moderator. After the show was over he even went to the extent of saying, “Mr. Kazmi, today you said something which sounded totally absurd and I could have responded. However, I kept quiet and gave you benefit of doubt.”

Moral of the story is developed economies, through hedge funds make millions of dollars through movement in crude oil prices. To achieve their target they often breach agreements. Super powers are notorious for breaching the agreements to achieve their ulterior motives. Therefore, re-imposition of sanction on Iran will not be a surprise but an example of yet another blatant violation. However, they must not forget that even stopping oil export from Iran completely will neither make an immediate difference for Iran nor sky rocket the oil prices.

Crude Oil: Maker and spoiler of fortunes

I just can’t resist sharing this Bloomberg story with the readers of my blog. 

Oil is so much more than a fuel. It’s a force even bigger than its $3.4 trillion market. It’s a weapon, a strategic asset, a curse. It’s a maker and spoiler of fortunes, a leading indicator and an echo chamber. All these roles have a part in setting oil prices. The result is a peculiar market that says as much about global economics and politics as it does about supply and demand.

The Situation

After four years when the highest average oil prices in history seemed to defy economic gravity, petroleum fell in mid-2014. It had risen to $107.73 a barrel that June, even as Americans and Europeans drove fewer miles in more efficient cars, curbing consumption of gasoline, the biggest source of oil demand. Meanwhile, supply expanded as the sustained higher prices made techniques such as deep water drilling and fracking pay off. Those fundamentals started to register in the summer, as Chinese imports sagged, Europe teetered on the brink of recession, and the stronger U.S. economy made barrels priced in dollars relatively more expensive. Instead of stanching the glut by pumping less oil, Middle East exporters engaged in a price war to defend their market share. The price had dropped to $42.03 in March, the lowest since 2009, as U.S. storage tanks brimmed with oil. Then came a rebound above $50 a barrel after the conflict in Yemen. The price collapse had forced high-cost drillers in North Dakota and Texas to idle rigs while international giants like BP, Shell and Halliburton cut thousands of workers and billions of dollars in spending. Those developments led OPEC to declare its strategy a success at its June meeting and to maintain current production levels. With several members eager to increase their own production, Iran poised to ramp up exports after reaching a nuclear agreement with six world powers, and shale output proving surprisingly resilient as drillers cut costs and focused on the best terrain, the supply glut showed little sign of abating.

Crude Oil: Maker and spoiler of fortunes

I just can’t resist sharing this Bloomberg story with the readers of my blog. 

Oil is so much more than a fuel. It’s a force even bigger than its $3.4 trillion market. It’s a weapon, a strategic asset, a curse. It’s a maker and spoiler of fortunes, a leading indicator and an echo chamber. All these roles have a part in setting oil prices. The result is a peculiar market that says as much about global economics and politics as it does about supply and demand.

The Situation

After four years when the highest average oil prices in history seemed to defy economic gravity, petroleum fell in mid-2014. It had risen to $107.73 a barrel that June, even as Americans and Europeans drove fewer miles in more efficient cars, curbing consumption of gasoline, the biggest source of oil demand. Meanwhile, supply expanded as the sustained higher prices made techniques such as deep water drilling and fracking pay off. Those fundamentals started to register in the summer, as Chinese imports sagged, Europe teetered on the brink of recession, and the stronger U.S. economy made barrels priced in dollars relatively more expensive. Instead of stanching the glut by pumping less oil, Middle East exporters engaged in a price war to defend their market share. The price had dropped to $42.03 in March, the lowest since 2009, as U.S. storage tanks brimmed with oil. Then came a rebound above $50 a barrel after the conflict in Yemen. The price collapse had forced high-cost drillers in North Dakota and Texas to idle rigs while international giants like BP, Shell and Halliburton cut thousands of workers and billions of dollars in spending. Those developments led OPEC to declare its strategy a success at its June meeting and to maintain current production levels. With several members eager to increase their own production, Iran poised to ramp up exports after reaching a nuclear agreement with six world powers, and shale output proving surprisingly resilient as drillers cut costs and focused on the best terrain, the supply glut showed little sign of abating.

Source: Bloomberg

The Background

Through the mid-20th century, a group of multinational oil giants known as the Seven Sisters (including the companies that became Exxon Mobil, Chevron and BP) dominated the market. Controlling the barrels from the wellhead to the gasoline tank, they traded mainly with each other on confidential terms; there was no open market. Countries with oil fields wrested more control with the formation in 1960 of the Organization of Petroleum Exporting Countries. The cartel’s Arab members used their power for political and economic ends, shocking the global economy with an embargo in 1973. Prices spiked again in 1979 because of the Iranian revolution. In the 1980s, OPEC infighting, the emergence of new suppliers and the development of futures exchanges gave rise to new market-based prices. Today the international benchmark is Brent crude from the North Sea. The U.S. benchmark, West Texas Intermediate crude, started trading at less than the Brent price in 2010 as supplies of shale oil became plentiful. In 2013, the European Union raided offices of Shell, BP and others to investigate possible manipulation of reference prices produced by the publisher Platts.

The Argument

As the world industrializes and consumes more energy, each new barrel of oil costs more because the cheapest and easiest oil has already been pumped. This observation gave rise to a theory called “peak oil,” which holds that world production will eventually max out and decline as oil fields deplete. Skeptics of this notion point to the technological innovations that let U.S. producers extract oil and gas from previously impermeable shale, unlocking vast new resources, albeit at greater expense; the issue isn’t quantity but cost. The other variable is demand; no one knows oil’s future as consumers grow more efficient and switch to alternative fuels such as natural gas and renewable power. Oil supplied 31 percent of the world’s energy in 2012, down from 46 percent in 1973. There may come a day when oil gets cheap because it’s unwanted. That’s the argument often advanced by advocates of divestment. They warn of a financial crisis caused by a bursting “carbon bubble” of inflated energy-company valuations after fossil-fuel prices rise to account for the costs of contributing to global warming.

 

Source: Bloomberg

The Background

Through the mid-20th century, a group of multinational oil giants known as the Seven Sisters (including the companies that became Exxon Mobil, Chevron and BP) dominated the market. Controlling the barrels from the wellhead to the gasoline tank, they traded mainly with each other on confidential terms; there was no open market. Countries with oil fields wrested more control with the formation in 1960 of the Organization of Petroleum Exporting Countries. The cartel’s Arab members used their power for political and economic ends, shocking the global economy with an embargo in 1973. Prices spiked again in 1979 because of the Iranian revolution. In the 1980s, OPEC infighting, the emergence of new suppliers and the development of futures exchanges gave rise to new market-based prices. Today the international benchmark is Brent crude from the North Sea. The U.S. benchmark, West Texas Intermediate crude, started trading at less than the Brent price in 2010 as supplies of shale oil became plentiful. In 2013, the European Union raided offices of Shell, BP and others to investigate possible manipulation of reference prices produced by the publisher Platts.

The Argument

As the world industrializes and consumes more energy, each new barrel of oil costs more because the cheapest and easiest oil has already been pumped. This observation gave rise to a theory called “peak oil,” which holds that world production will eventually max out and decline as oil fields deplete. Skeptics of this notion point to the technological innovations that let U.S. producers extract oil and gas from previously impermeable shale, unlocking vast new resources, albeit at greater expense; the issue isn’t quantity but cost. The other variable is demand; no one knows oil’s future as consumers grow more efficient and switch to alternative fuels such as natural gas and renewable power. Oil supplied 31 percent of the world’s energy in 2012, down from 46 percent in 1973. There may come a day when oil gets cheap because it’s unwanted. That’s the argument often advanced by advocates of divestment. They warn of a financial crisis caused by a bursting “carbon bubble” of inflated energy-company valuations after fossil-fuel prices rise to account for the costs of contributing to global warming.