Istanbul: in front of the Saudi Embassy today. (Reuters/Osman Orsal)
Quartz: Look for oil prices to spike if hostility between Iran and Saudi Arabia gets worse
If friction between Saudi Arabia and Iran persists, in addition to attacks on targets such as embassies, look for oil’s first move of the new year to be a spike.
A furor has erupted in both countries, and across the region, in the aftermath of Saudi Arabia’s execution Jan. 2 of Nimr al-Nimr, an influential Shia cleric who had denounced discrimination against Saudi’s Shia minority. An Iranian mob ransacked the Saudi Embassy in Tehran, and Ayatollah Ali Khamenei forecast that God would smite Saudi Arabia.
Angry rhetoric and demonstrations across the region probably won’t move oil prices: oil traders would likely take these, more or less, in their stride. The price of international benchmark Brent crude plunged by 35% last year, ending the year at $37.28 a barrel. Most analysts expect the price to remain more or less there through most of this year—perhaps falling to $20, perhaps rising to $45—before rising higher at the end of 2016.
WNU Editor: If Iran and Saudi Arabia start to bomb each other .... yes .... oil prices are going to go up. But if they do not .... which is what I believe is what will happen .... the fundamentals still remain the same .... there is too much oil, and when Iran's sanctions are lifted there will be more .... Oil Prices 2016: Saudi Arabia, Iran Rivalry Fuels Grim Outlook Amid Slow China Economy, US Export Ban's End (IBTimes). My prediction .... the Saudis are going to keep on flooding the market .... they do not want there to be a market for Iranian oil.
Update: Rift Between Saudi Arabia and Iran Complicates Bid to Calm Oil Markets (Wall Street Journal)
3 comments:
If they can close the Bab al Mandeb to Saudi sea traffic for only a month Iran might just get them to capitulate. That's what they've been going for for the last two months.
WNU,
As far as mediation goes, don't forget Mr. Putin. He's sitting in a pretty good place right now.
James. I talked to a friend in Moscow earlier today .... he cannot believe what is happening right now. Decades of U.S. diplomacy with Saudi Arabia (and he also added Egypt) diminished and ineffective .... and all of this breaking since the U.S. - Iranian nuclear deal.
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