Saudi crackdown on corruption is helping OPEC drive up the price of oil
Crude resumed its rally as escalating tensions in Saudi Arabia and throughout the Mideast raised concerns about stability in the oil-rich region.It could just be a coincidence. I think the Saudis have legitimate concerns about Iranian attempts create a hegemony over the entire Middle East. Their support for the Houthis in Yemen is a direct strategic thrust aimed right at Saudia Arabia and the transport of oil from the Middle East through the Suez canal. Iran is also making trouble in Bahrain and Qatar.
Futures edged higher by 0.6 percent in New York. Saudi Arabia's elite were said to be scrambling to shift assets out of the region amid an expanding anti-corruption crackdown that's ensnared dozens of royals and investors. Separately, the kingdom advised its nationals to leave Lebanon, which is in the cross hairs of intensifying tension between Saudi Arabia and Iran.
At the same time, stored crude supplies at a key U.S. pipeline hub dropped by more than 1 million barrels, giving further impetus to rising prices.
"The news out of Saudi Arabia has really added to that bullish bias to prices," Rob Haworth, who helps oversee $150 billion in assets at U.S. Bank Wealth Management in Seattle, said by telephone. "You've got speculators who have been continuing to push their bullish position and that news flow -- fear of conflict with Iran, Saudi Arabia, the Yemen issue -- continues to underscore this market."
The Saudi anti-graft sweep that began on Nov. 4 threatens to overshadow a Nov. 30 Organization of Petroleum Exporting Countries' gathering at which an extension of production limits is expected to take center stage. Goldman Sachs Group Inc. said that a non-committal outcome from the meeting combined with accelerating drilling activity in the U.S. could push prices lower.
Conversely, additional escalation of recent geopolitical tensions could lead to another large rally, the New York bank's analysts said.
"Who wants to be short with everything that's bubbling in the Middle East, even though nothing has happened in Saudi this week to directly affect oil supply," Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures, said.