from Rogue Money:
There are so many issues at play in the Kingdom of Saudi Arabia right now it is hard to find a starting point. The KSA is running at a deficit for the first time ever, a sharp decline in oil prices (that the KSA instigated in 2014 to bankrupt US and Canadian shale and tar sands industries), an increase in military spending by supporting Syrian rebels and continuing to ramp up the close to two year old war in Yemen are just the tip of the ice berg.
A sanction less Iran is making up for lost time, selling large quantities of oil and disputes over who will succeed King Salman are becoming more obvious to the whole world, as Crown Prince Mohammed bin Nayef (MBN) has clearly taken a back seat to King Salman’s favorite son, the thirty year old Minister of Defense/Deputy Crowned Prince Mohammed bin Salman (MBS).
Opinion on the “Arab Street” is in turmoil as age and experience have always been important attributes in the Islamic world and nobody can deny that Crown Prince Mohammed bin Nayef has these qualities. At age 57, he is the First Deputy Prime Minister and the Minister of Interior of Saudi Arabia. He is also the chairman of the new Council for Political and Security Affairs.
MBN is a Counter-terrorism expert and a strong ally of the United States in the war on terrorism. He graduated from Lewis and Clark University and intelligence provided by MBN and his intelligence network stopped an attack on Chicago during the 2012 U.S. Presidential Elections by Al-Qaeda via a slew of small bombs sent via Fed Ex and timed to go off upon arrival at a variety of election centers around the Chicago area.
MBN has two daughters, Sara bint Muhammad bin Nayef, Lulua bint Muhammad bin Nayef and this makes him no threat to Deputy Crown Prince Mohammed bin Salman’s eventual succession to the Saudi throne (giving the young prince time to mature and gain more experience, he is already the youngest Minister of Defense in the world).
While the ultimate decision is up to King Salman, the writing on the wall clearly suggests the young MBS will be the next King of Saudi Arabia and at a time when the kingdom will be facing a “perfect storm” of hard decisions.
November 30th, OPEC meets in Austria. While it would be rational for the KSA to decide to continue to drop prices in hopes of stabilizing the market, the conservative thing to do is keep policies and production as they are and see how the market reacts to a variety of new developments and this is what the Saudi’s will recommend, a conservative yet irrational approach.
On the 26th Al-Falih said, “We don’t believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us” and was reassured that the “market is moving in the right direction.” According to Reuters this resulted in “global marker Brent futures (giving) back some gains, slipping as much as 35 cents, or 0.7 percent, over 20 minutes, before recovering somewhat”. Just five days later Al-Falih said, “The market is now saturated with stored crude at beyond usual levels and we don’t see in the near future a need for the kingdom to reach its maximum capacity.”
The KSA and OPEC also need to consider that Texas oil firms have come across large new reserves of oil and natural gas. “Wolfcamp shale, located in the Midland Basin portion of Texas’ Permian Basin, contains 20 billion barrels of oil and 1.6 billion barrels of natural gas liquid.
The Permian Basin is one of the most productive oil and gas areas in the country, and more than 3,000 horizontal wells have been drilled in the Wolfcamp shale section, the USGS agency said in a statement. “The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” said Walter Guidroz, program coordinator for the U.S. Geological Survey (USGS) Energy Resources Program. The oil is worth around $900 billion at current prices and is the largest continuous oil and gas deposit ever found in the United States, Bloomberg News reported.
Meanwhile Dallas-based Caelus Energy Alaska LLC announced a find of 6 billion barrels of light oil on its state leases in the Arctic Ocean waters of Smith Bay about 450 miles northwest of Fairbanks. Chief Operating Officer Jim Musselman called the discovery exciting news for the state, which receives a majority of its revenue from the oil industry. “It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades,” Musselman said of the discovery in a prepared statement. “The Smith Bay development could deliver 200,000 barrels per day of light oil to the trans-Alaska pipeline, increasing volume and reducing the average viscosity of oil, which would help extend its viability”, the company said.
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