Crude at Fresh 2 Yr High But Can the Saudi Crown Prince Copy Xi Jinping?

The market is in crude health


Saudi “Corruption Crackdown” Boosts Crude Oil Prices

Saudi Arabia is the world’s largest oil producer and both Brent and US Crude are back to their June 2015 levels after the Saudi corruption crackdown.

We know that Crown Prince Mohammad bin Salman backs a prolonged OPEC production cut.

The political impact of the crackdown remains an unknown quantity though.

It certainly looks like something straight from Xi Jinping’s playbook, i.e. how the Chinese President has removed rivals under the guise of a purge of corrupt officials.

However, the Crown Prince’s control doesn’t look as strong as Xi Jinping’s.

Yes, the Crown Prince now controls the army but if he pushes the old school too far then his position, or the country, could become unstable.

It doesn’t help that a senior Saudi prince was killed in a helicopter crash just a few hours before the purge.


Further Short-Term Gains for Crude?

  • arrow_forwardBrent Crude oil has been trading above its 200-week moving average at $62.71
  • arrow_forwardUS crude is close to hitting its 200-day moving average at $58.58
If Brent Crude can hold above the 200-week ma and WTI can clear its 200-day ma then crude might be worth another look.


Opaque Medium & Long-term Picture

For the medium-term, it’s very difficult for most of us to understand Saudi politics.

Remember, this is a country where women are not allowed to drive (that may only change in June 2018).

Also, there are a lot of self-interested parties that may decide to fall in line behind Mohammad bin Salman. If so:

  • trending_upThere will still be upward pressure on crude oil prices from the prolonged production cut
  • trending_downIncreased political stability won’t help prices
  • trending_downThere’s still a huge amount of fracking that’s disrupting the energy markets
  • trending_downTechnology is constantly increasing energy efficiency
  • trending_downTechnology is constantly increasing the efficiency of renewable energy production e.g. on 7 June 2017 renewable energy supplied 50% of UK demand
Short-term, if you are spread betting on crude oil there could still be some upside to prices – see live crude oil chart.

Longer-term, the supply side of the equation really doesn’t suggest pro-longed high prices.


AuthorAlex Turner

Senior Editor, SpreadBetMagazine

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