Saudis Pressing Oil Prices Down
Financial Intelligence with John Browne
(via Newsmax email)
Oil prices are hitting recent lows. Today, oil slid to $50.28 a barrel. That?s a 20-month low.
What?s behind the sudden oil price decline? There are a number of factors, including a slowing global economy, rising inventories, and warmer than usual weather. But another is political, largely involving Saudi Arabia and Iran.
We believe that 2007 will herald times of turmoil. In times of trouble, investors naturally become afraid. We urge our readers not to panic, but to be alert.
Last week President Bush spoke to the nation. During his speech he announced the deployment of yet another aircraft carrier battle group to the Persian Gulf.
Evidently, it was to be a "precautionary measure" to protect our armed services already deployed in Iraq. But from what?
Could it be that our President fears reprisals against our forces from Iran? If so, why, unless we attack them?
This week, a British Golden Globe award winner (the screenwriter of the movie "The Queen") stunned his audience in his words of acceptance. Referring to the large number of ordinary people it took to persuade Queen Elizabeth II to express mourning for the dead Princess of Wales, he asked just how many people will it take to make the head of an elected government sit up and listen. He was referring to President Bush and the Iraq war.
In the first Gulf War, the Allies stopped short of destroying Saddam Hussein. There was much criticism, with allegations of snatching defeat from the jaws of victory.
However, whether by luck or good judgment, the Allies left Saddam (a Sunni Muslim minority leader) as an effective buffer against Shiite Muslim Iran. Furthermore, with allied over-flights agreed, he was under heavy surveillance form both aircraft and space.
The present ill-conceived war in Iraq was fought despite British recommendations to the contrary. Our troops were subjected to quite appalling bungling by our politicians.
The result is that the world may be a far more dangerous place.
As an example, the delicate balance of power in the Persian Gulf (the source of a vast proportion of the world?s oil) has been destroyed and Iran now threatens the whole area, including Israel and our oil supplies.
[Editor?s Note: A 2007 global recession is in the cards. Here's how to position yourself now for monster profits before the panic headlines begin.]
Tuesday, The New York Times ran an article about Condoleezza Rice?s visit to Egypt. It read, "It was clear that the United States ? facing chaos in Iraq, rising Iranian influence, and the destabilizing Israeli-Palestinian conflict - has decided that stability, not democracy, was its priority . . ." (No such key strategic change in mission has been declared to the American people.)
The destabilization of the Middle East is a massive, but largely underreported problem now facing the world, including all our investors and readers.
All in the area, especially Sunni Muslim countries, like Saudi Arabia, are deeply concerned.
It is of interest that King Abdullah bin Abdulaziz al-Saud "required" Vice President Cheney visit Saudi Arabia just a few weeks ago. Reportedly he expressed worry that Iran will become the dominant power in the Mid East.
With the world?s largest oil field (al Ruwais), low lifting costs and a capacity of some 12 to 14 million barrels per day, Saudi Arabia is the key swing producer in the international oil market.
In today?s finely balanced oil market, the Saudis are pumping only 8 million barrels a day (less than two thirds of their capacity). By raising their production, they could swamp the market.
It is interesting to note that in November of last year, Nawaf Obaid, an adviser to the Saudi Arabian government, wrote in the Washington Post that Saudi Arabia would not sit idly by as Iraq?s Sunni population was mistreated by the current Shia majority backed by the Iranians.
Obaid warned, ominously, that the Saudis could boost oil production, cutting oil prices by 50 percent or more.
Obaid suggested this move would harm Iran, which has less financial reserves that the Saudi kingdom.
Interestingly, the price of oil has fallen rather precipitously since Obaid?s column.
"To me, it was kind of striking how immediately the additional weakness in oil prices followed that article," said Mellon Financial chief economist Richard B. Hoey. "It raises the question of what are the real intentions of Saudi Arabia about oil prices."
It appears that the Saudis, no longer confident of American protection (as agreed in their 1944 treaty with America), are attempting to take matters into their own hands by coaxing the world oil price downwards.
We feel that the Saudis are trying to "bleed" Iran of oil revenues and partially stifle the vital funding of the Iranian (Shiite) threat.
Israel also is particularly worried about the increasing prospect of a repeat of the holocaust, this time at the hands of Islam. Losing confidence in America?s political will and looking at an aggressive Iran - with its terrorist arm (Hezbollah) on its northern boarder ? Israel feels it must act.
We understand that Israel has long planned an air assault on Iran?s nuclear facilities. Indeed, we are led to believe that the system of repeated precision bombing (each bomb digging deeper into the crater of those dropped previously) of Hezbollah positions dug deep in Lebanon was a rehearsal of the bombing methods to be deployed in Iran.
Of course, Israel can expect covert help from the United States with logistics, intelligence, and diplomatic damage control.
Our sources tell us that this attack will be made before the November 2008 American election.
[Editor?s Note: FIR says oil prices could fall to $40 a barrel in the next 12 months. Get a free copy of "Four Ways to Profit from the Oil Bust of 2007" and prepare yourself today.]
This scenario is bad enough and could send oil and gold prices to unexpected heights as stock and bond markets tumble, in near panic.
It is not wise to invest on speculative events that may or may not happen in the future.
But we do encourage investors to always keep some cash and gold as insurance.
Of even more concern is the fact that the world reaction to such an Israeli attack means that, politically, they will have only one chance. In short, they must ensure absolute and total success, in one multi-sortie raid.
Since WWI, history shows many instances of almost miraculous survivability against massive bombing, amongst those well "dug-in" especially in concrete surrounded by sand.
In order to make absolutely certain of success in one short duration operation (probably five rapid precision sorties to reach down to the required level), we believe the Israelis will be forced to think the unthinkable - Nuclear!
The Times of London recently reported the Israelis are preparing for such an option.
We believe there is a high probability that the final Israeli precision sortie will be of small, relatively clean nuclear bombs (5kt, or even less, but nuclear none the less.)
If so, this will be the first use of nuclear weapons since 1945. It will cause a firestorm of protest all over the world.
Part of the firestorm may well be a desperate, even suicidal response by Iran against our forces in Iraq. We believe it is this fear that inspired the President to deploy yet another carrier group to the Persian Gulf and even the "troop surge" in Iraq.
We believe an Israeli attack is pending. It is just a question of when.
For obvious reasons, our government has been coy in preparing us for such an event. Therefore, when it happens it will cause turmoil, not just diplomatically, but in all major world financial and commodity markets.
We expect such turmoil to be deep, but for some items, possibly short-lived.
The problem will be to determine how much the basic and essential confidence has been shattered in some of those markets. That will be part of the long-term damage.
It is a most worrying thought, but we feel our readers will benefit from being alerted. That means to be forewarned, physically and mentally prepared and not to panic, when, as Rudyard Kipling said, all about you are doing so.
Many of our readers may wonder just when such an Israeli attack might happen. Our frightening conclusion is that, if such an attack must take place, the sooner the better. This will lessen the constant toll of Allied casualties in Iraq. It will allow time for both America and the Republican Party to re-establish credibility.
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