A Different Kind of "Influencer" - Saudi Arabia's Influence on Oil
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A Different Kind of “Influencer” – Saudi Arabia’s Influence on Oil

by | published January 19th, 2019

I’ve recently been introduced to a new word, one that spawned from the Age of the Internet, not to mention the age of (at least in my view) egoism.

This word is “Influencer.”

I admit, although I do try to keep track of the various technological advances online like Twitter, Facebook, and YouTube, the mysteries and intricacies of Instagram were lost on me.

Well, I’ve recently been schooled in the ways of the social media “Influencer.”

So called because they can “influence” the business of a particular company by advertising for it on their pages.

Apparently.

Disregarding my personal stance on social media, I can tell you that when I learned what this word meant, something other than modeling came to my mind.

One country in particular, in fact.

Saudi Arabia, the de facto leader of OPEC.

For all intents and purposes, Saudi Arabia is the “Influencer” of the oil world.

Despite the fact that the U.S. is now the largest oil producer in the world – regardless of the Saudis’ claim to the biggest oil field in the world – Saudi Arabia has the ultimate influence over the price of oil.

Think about it this way.

The last time Saudi Arabia wanted to influence the price of oil to their benefit, it plummeted down when they wanted it to go down, then back up when they wanted it to go up.

In other words, Mohammed bin Salman (MbS), the Crown Prince of Saudi Arabia, can do whatever he fancies to the price of oil and it will bow to his will.

And these days, his “Influencer” status is reaching new heights…

Panic! in the Market

As readers of Oil & Energy Investor will know, the price of oil has been highly volatile in recent months.

Back in October 2018, we saw the biggest drop in oil prices since 2015, and the market reacted accordingly.

And by that I mean it panicked.

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Most market pundits were convinced we were about to experience the “silver bullet” that would end oil.

But I can tell you that that’s certainly not the case.

As of this writing, the price of oil is hovering around $60 a barrel – far ahead of the $47 we were seeing just last week.

And there’s every indication that this trend will continue.

Which brings me back to Saudi Arabia.

The “Talking Heads” Were Wrong

The concern of a global shortfall in oil as U.S. sanctions on Iran went into effect took over the market in the last three months or so of 2018.

Leading to some overcompensation in supply from the Russians and the Saudis when the sanctions failed to result in the expected undersupply.

An eleventh-hour exemption of the sanctions from the White House was the cause of that – the eight main importers of Iranian crude were provided a 180-day exemption from the sanctions.

Which led to Iran continuing to export most of its oil into what then became a heavily oversupplied global market.

The market became the most oversold I’ve seen in my entire 40-year career in the industry.

However, the tides are beginning to turn.

It has been reported that the Saudis are planning to cut its crude exports to approximately 7.1 million barrels a day – down from 7.9 million barrels a day in November – by the end of the month.

This is after the country cut its oil production in December.

According to OPEC officials, this is a blatant move to lift prices to above $80 a barrel.

And I have no doubt that they’ll manage this price change.

Especially since this Middle Eastern oil country desperately needs to maneuver its economy away from its primary source of income for the last several decades. It may not seem so, but the Saudis are heavily in debt, after spending more than it had for years.

It plans to more than triple its non-oil revenue by next year.

And to get the funds to do this, oil prices need to be higher.

Well, what Saudi Arabia wants in the world of oil, Saudi Arabia gets.

This, of course, could lead to some significant upside moving forward, particularly in oil investments.

Not just in oil, either.

The oil market tends to influence other sectors in energy, including this one, which is fast becoming one of the biggest and most important.

In fact, there could be a huge opportunity just around the corner, as the price of natural gas tends to go up in tandem with oil.

And regular folks – not just the high risers like Warren Buffet or Jeff Bezos – could take advantage of this too.

Folks like you.

If you’d like to learn more about this huge opportunity, just click here.

Sincerely,


Kent

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