Thanks To Trump, Oil May Spike To $100 – That’s Precisely What Putin Wants

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Apr 16 2018
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Business has been roaring for American shale producers. No matter how much and fast they drill, it appears they can’t beat the Arabs, whose production cut works marvellously. Crude oil prices continue skyrocketing with extremely strong support at US$60 a barrel. Global inventories have plunged. OPEC can actually imitate President Trump and says – “Mission Accomplished!”


The Brent crude oil has spiked to above US$70 a barrel – and stays above that level – after Trump administration, together with United Kingdom and France, fired a whopping 105 cruise missiles into Syria. At US$1.87 million a pop, the U.S. had burnt US$125 million on the 66 Tomahawk cruise missiles. Altogether, the US-UK-France had spent over US$200 million on missiles alone.


While Donald Trump’s primary agenda in bombing Syria was to divert attention from his domestic problems, as did British Prime Minister Theresa May and French President Emmanuel Macron, Russia has a different agenda. As the world’s biggest oil producer, President Vladimir Putin saw the missile strikes as an opportunity to boost Russia’s economy.

Brent Crude Oil Prices Chart - 15Apr2018

True, the latest conflict also provides an opportunity for Russia to promote and sell its defence equipments. Unlike the U.S., however, it’s harder to sell Russian military gadget due to incompatibility and niche market. There’s a reason why Japanese cars are selling like hot cakes in Asia but not continental cars. But there’s no such thing as American crude oil sells better than Russian oil.


Now that the U.S. and its allies have started the ball-rolling, the Syrian Crisis isn’t going to disappear overnight. The game has just begun. And you can bet your last penny that Russia is going to milk every drop of the crisis. Nothing is scarier than not knowing what’s in store. The “fear” of a potential retaliation from Russia means the crude oil prices would remain high.


And that’s precisely why Putin is laughing all the way to the bank. It doesn’t matter if Russia has no plan for a military retaliation at all. What Putin needs to do is to issue “warnings” from time to time. He doesn’t need a Russian rocket scientist to tell him how Trump would react. He knew the U.S. president cannot afford to lose a war of words, like the one he had with Kim Jong-un.

Russian Vladimir Putin Laughing

Crude oil prices are very vulnerable and sensitive to any crisis in the Middle East. Minor news about oil disruption could easily send its prices to the roof. That’s why Saudi Arabia will start babbling about rival Iran whenever they want higher price. But there’s only so much they could move the crude price with such amateur tactic. To move the price in a meaningful way, you need wars.


The lobbing of missiles into Saudi Arabia by Houthi rebels in Yemen has its fair share of strengthening the oil prices. But even that had little impact. So, when two military superpowers – Russia and America – clashes in the Syria conflicts, it’s a serious business to the global oil market. There are reports of new reinforcement of Russian military trucks and tanks heading to Syria.


Whether those Russian reinforcements are merely drama, or preparation to teach the 2,000 American soldiers currently in Syria a lesson, remains to be seen. U.S. Ambassador to the United Nations Nikki Haley has announced a new wave of sanctions is about to hit Russia on Monday. And Trump has threatened to bomb Syria again if Assad continues playing with his chemical toy.

United States Tomahawk Cruise Missile Launched

After its participation, now Britain fears that Russia will retaliate with a cyber attack against UK national infrastructure such as hospitals, air traffic control, nuclear power stations, water system and airports. Theresa May is facing criticism from her own people for authorizing the military action without a vote of approval in the House of Commons.


The next challenge is Iran. Newly named national security advisor – John Bolton – is expected to encourage and persuade President Trump to abandon the Iran nuclear deal architected by Barack Obama. Essentially, this would mean a new crisis in the Middle East as the U.S. is expected to slap sanctions on Iran’s oil production, not to mention its financial sector.


Had it not for the U.S. shale producers, which increased production has offset the decreased OPEC production, we might be looking at US$100 a barrel already. Francisco Blanch, global head of commodities and derivatives at Bank of America Merrill Lynch, said – “I think the escalation of tensions with Russia is a major factor that could impact oil prices.”

Crude Oil Rig


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