Oil Price Off The Cliff
Oilprice development over the last 2 year
What is happening here? Two hypotheses:
- Saudi-Arabia deliberately flooding the oil market to wipe the competition out (Iran, Russia, US fracking business)
- Demand destruction; world adapting to the high oil prices over the recent years
William Engdahl and others assume that Saudi-Arabia has increased oil production on request of global embarrassment USA in order to attack Russia, lower Russian income and hope for regime change in Moscow so they can loot the joint again, like during the Jeltsin & oligarch years.
Our educated guess is that it is mainly the first factor. Consumer behavior doesn’t change that fast. But we tend to think that this price dip will be short-lived, because likely victim #1 will be the US and its fracking business, wiping out production there in no-time, although Russia also will be severely hit. The winners of course are the consumers, to begin with in Europe:
[spiegel.de] – Ifo-Ökonomen heben Wachstumsprognose kräftig an
Very upbeat expectations for Germany. 1.5% growth in 2015 expected and record low unemployment of 6.6%.
[telegraaf.nl] – CPB: export én consumptie trekken aan
Netherlands, same story. 1.5% growth, reduced unemployment
Meanwhile, Iran is not amused:
[myfoxny.com] – Iran: Fall in oil prices is ‘treachery’
TEHRAN, Iran (AP) – Iran’s President Hassan Rouhani said Wednesday that the sharp fall in global oil prices is the result of “treachery,” in an apparent reference to regional rival Saudi Arabia, which opposed production cuts.
[telegraph.co.uk] – Saudi Prince says Riyadh won’t cut oil unless others follow
Saudi-Arabia admits that it could decrease production to give a boost to oil prices, but that it won’t:
“The kingdom is not going to give up market share at this time to anybody and allow – whether it is Russia, Nigeria, or Iran or other places – to sell oil to Saudi customer,” said Prince Turki, who has also held Saudi Arabia top overseas diplomatic post as the kingdom’s ambassador to the US.