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IIn the big game that is the international oil industry, you can not tell players without a scorecard. There is Iran (the world's largest sponsor of terrorism), its mullahs have joined Russia (international distributor of exotic poisons), as part of an alliance to preserve the Assad regime in Syria. Then there is Saudi Arabia (Iran's sworn enemy) with advanced weapons provided by Iran's ally, Russia. Iran and its Saudi enemy meet regularly, if not with friendship, at the rally of the 15-member OPEC oil cartel, of which Russia is a traveling companion.
Oh yes, and America is in the mix, in three ways.
First, the President (and tweeter-in-chief) Donald Trump has decided to impose a regime of sanctions so strict on Iran that most companies and countries doing business with the # Iran is afraid of ending its trade relations with the Islamic Republic.
Second, oil production in the United States is so high, because of the success of the fracturing technology that allows the industry to extract oil from shale rock, no longer being a passive consumer of oil. above.
Third, the US President believes he can refrain from raising OPEC's production restrictions.
What he's trying to do is to avoid a spike in gasoline prices just before the November parliamentary elections. A spike that voters could blame on the president's policy of banning Iranian crude from world markets. "We are protecting the countries of the Middle East, they would not be safe [from Iran] for a very long time without us, yet they continue to push for higher and higher oil prices! The monopoly of OPEC must bring down prices now. . . [and] stop tearing the rest of the world. . . . I do not like it.
This threat concerns less the oil producers than the possibility of a collapse in oil prices if they open their faucets, as requested by Trump. Still under the shock of the last period of open production that has dropped prices from $ 100 a barrel to $ 35, producers are worried that the economic slowdown expected in 2019 will reduce the demand for crude oil. They believe this could more than offset the decline in Iran's oil flow and push prices below their targets by about $ 70 for the US benchmark and $ 80 for the Brent crude, the global benchmark.
Thus, the Saudis, who still follow the line between rising oil prices and Trump's antagonism, are increasing output slightly (by 500,000 barrels a day) and the Russians, who are desperate for liquidity, have added 250,000 barrels to their customers. from his ally, Iran.
But this is not enough to offset the more than 1.6 million barrels per day (mbd) decline expected in Iranian exports. Trump will not be happy. Crude oil prices now exceed $ 73 and $ 83 for the benchmark, comfortably – for the cartel, if not for Trump – above the OPEC targets. Worse still for the president, gas prices, at around $ 2.88 a gallon, already exceed last year's levels and will likely reach the $ 3 level soon, a national average that includes significantly higher prices. high eleven states.
Trump was counting on the words of Saudi Prince Mohammed bin Salman, who would have personally promised him that the kingdom would increase production if prices went out of control – a promise that Saudi oil minister Khalid al-Falih cautiously repeated at the rally. cartelistes. earlier this week. (The alternative being an extended visit to a public facility that might not be a 5-star hotel.)
Small problem: Most informed observers do not think that the Saudis have sufficient spare capacity to increase their production, which went from 10.4 million barrels to 12 million barrels promised.
It was not the best week for Trump. It has not sufficiently feared the oil producers who rely on its protection to help ease the pressure on prices. He still has not obtained confirmation from his Supreme Court candidate, and will not do so before the start of the new term, Oct. 1, though he is confirmed. The latest inconvenience for Trump: being forced to listen to mocking laughs when he declared at a UN meeting that he had accomplished more in two years than almost any other American President – take George Washington, Abraham Lincoln, Franklin Roosevelt, Ronald Reagan and a host of other past presidents whose accomplishments seem to have been omitted from the historical texts Trump studies on when preparing his speech.
The President can console himself for the devastating effect of the threat of sanctions on the already morbid Iranian economy, on the brink of the collapse of corruption, mismanagement and misappropriation of resources to finance terrorism around the world. a nuclear program that Israeli President Benyamin Netanyahu told the United Nations that this week went well beyond that reported.
And secondary sanctions will be applied, in the absence of waivers, to any country or company doing business with Iran, and include denial of access to the global financial system. This led to the dismantling of Iranian companies, including the French energy giant Total, which abandons a $ 4.8 billion contract to develop the Iranian natural gas field of Pars, the largest in the world, despite the pressures of the EU. do not do it.
Patrick Popyanne, CEO of Total, said that if he continued to do business with Iran, "the US could decide that I could not have access to US funding. It is impossible. . . to run an international business. . . without access to US funds or US shareholders.
Then there is India, the second largest Iranian market for its oil after China. Reliance Industries, the country's largest refiner, will soon stop buying Iranian crude. And the State Bank of India, the main lender of the country, will block any payments that refiners would seek to make for Iran's crude. There is more, but you have the idea: secondary sanctions sting strong.
Therefore :
● The rial lost about half of its value: at the beginning of the year, it only took 43,000 rials to buy a US dollar; now, more than 100,000 are needed on the open market;
● The youth unemployment rate is about 30%.
● Some 40% of the unemployed are university graduates; and
● According to Trading Economics, the inflation rate is 24.2%, although the Central Bank of Iran puts it at half.
But the Trumpkins may well wait before a round of self-congratulation (a restraint whose president will surely escape). If the US and global economies continue to grow, demand for oil will increase. If the Saudis do not have the capacity to pump much more oil of the desired quality, and if American gunsmiths, constrained by the lack of capacity in the Permian Basin, can not market more oil, the price spikes thing of the past.
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