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The Saudi Game of Thrones

Written by Keith Kohl
Posted November 10, 2017 at 2:56PM

The marriage between Saudi Arabia and the United States occurred decades ago, when two old men met on Valentines Day in 1945.

Sitting in their respective wheelchairs, Franklin Delano Roosevelt and King Ibn Saud sat down aboard the USS Quincy and formed a friendship between the two countries that has shaped our lives more than most people will ever truly realize.

Whether or not they officially broached the topic of oil may never be known.

Don’t worry, that topic has come up more than enough times since that fateful meeting.

One thing of which FDR did assure King Ibn Saud is that he would “take no action, in my capacity as Chief of the Executive Branch of this Government, which might prove hostile to the Arab people.”

It's now 72 years later, and that relationship is only getting stronger.

But rather than receiving Valentine’s Day cards, Saudi Arabia is getting even more — like $350 billion worth of arms over the next 10 years!

At least we now know where those weapons will be pointed.

The Saudi Game of Thrones

A few days ago, my cubicle cellmate Christian DeHaemer laid out the incredible events that took place inside the Saudi Kingdom last weekend.

“So you’re telling me the Middle East is a little volatile,” I asked him lightheartedly after reading his piece.

WTI has moved another 1.8% higher since then and is now trading around its two-year high… and it’s only going higher from here.

Look, consolidating power in Saudi Arabia isn’t the most surprising story for us. Perhaps the most intriguing aspect to this is that President Trump openly supported the Crown Prince’s crackdown and consolidation of power.

We just witnessed a red wedding in the Middle East, except there’s only one house playing this game.

But what’s even more shocking than this Saudi Game of Thrones is that crude prices have only moved this high, or that people are just now finding out that Saudi Arabia is embroiled in a proxy war against Iran in Yemen.

It’s as if the Saudis haven’t spent the last two years bombing Houthi rebels in Yemen.

Don’t worry, things are about to get worse before they get better, especially as this Saudi-Iranian conflict escalates to the point of no return.

You have to wonder if the Saudis have an endgame strategy planned.

Oh, they do...

OPEC 2.0

OPEC as you know it today will dissolve in the next decade.

Even today, this isn’t the same powerful cartel that has wielded oil like a weapon since it formed in 1960.

No, OPEC right now is a shell of its former self.

Just look at its founding members to give you an idea of the state of chaos it's in (behind closed doors, of course).

We just talked about the conflict snowballing between Saudi Arabia and Iran.

Iraq’s Kurdish region voted in September for independence, clashing with Baghdad and threatening to split the country in two.

And then there’s Venezuela.

Amidst all the turmoil going on with Maduro’s government, the country’s state-run oil company PDVSA reportedly hasn’t made a debt payment to India for the last six months.

More sanctions were placed on Venezuelan officials by the U.S. recently, and any financial help it receives from Russia will be a drop in the bucket compared to its overwhelming mountain of debt.

Point is, the clock is ticking, and it’s simply a matter of time at this point.

The blockade against Qatar; allowing net oil importers like Indonesia to briefly join OPEC’s ranks; Ecuador begging for an exemption from the production cut agreement... take your pick.

The Saudis can see the writing on the wall, and they’re looking for an exit.

At some point, we’re going to have to ask, “How far is the House of Saud willing to go for higher oil prices?”

Yesterday they announced plans to cut oil exports by another 120,000 barrels per day next month.

I told you a week ago that oil would never crash to $10 per barrel.

To think otherwise is foolish.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.


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