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Old OPEC game led by Saudi Arabia coming to end

Oil&Gas Materials 20 October 2016 16:23 (UTC +04:00)

Baku, Azerbaijan, Oct.20

By Leman Zeynalova – Trend:

Saudi Arabia’s policy of flooding the market with oil to try and squeeze out other producers from the market has failed, Sam Barden, the director of SBI Markets, an international commodity trading and advisory company, told Trend Oct.20.

He noted that Saudi Arabia’s budget is in disarray and they need a higher oil price.

The dynamics of the oil production have changed, said Barden, adding that Saudi Arabia is no longer the swing producer, instead the US shale oil industry is.

“I think the real issue, that no one seems to be talking about, and could be a talking point at the upcoming OPEC meeting, and the only real reason non-OPEC members might be interested in discussing, is the removal of petrodollar,” he said.

“As we know, petrodollar is an instrument, which was put in place in the early 1970’s by US and Saudi Arabia. Saudi would agree to only sell oil in US dollars and US would provide Saudi Arabia’s security,” said Barden.

This instrument is no longer useful or relevant in either the world or Middle East today, he said, adding that the US no longer can guarantee Saudi Arabia’s security alone, and Saudi Arabia no longer has enough muscle in the oil market to enforce dollar only in trading.

Barden pointed out that the likelihood that oil from Iran will soon hit the market priced in euros is high, and this will be supported by both China and Russia.

“This will set the stage for an entirely new pricing, supply and demand paradigm in the global energy markets,” he added.

The old OPEC game led by Saudi Arabia is exactly that old, Barden said, adding that a new game is emerging: multi-lateral, multi-currency, trade based and not military based economic system.

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