Why is Brent crude rallying in the face of a new Iran nuclear deal? Two words might explain it: Saudi Arabia.
No one was more upset, save for the Israelis, by the recent agreement between the Iranians and the US than Saudi Arabia, the Iranians natural enemy in the Middle East. By the number of visits that Secretary of State John Kerry made to the Kingdom and the appearance of Saudi sovereign investor Prince AlWaleed here in the US, it was clear that the message that the Saudis were sending to the US government went unheeded: the US inked a 6-month agreement relieving much of the financial pressures built up by sanctions over the last 3 years.
Don’t be fooled by the public statements of approval delivered by the Saudis – they’re mad – hopping mad.
And what do the Saudis have as leverage to make the point of their dismay at this new agreement with a President who decided not to listen to the only two remaining allies in the Middle East? Only oil.
The Saudis have tried to deliver stability into the oil market through the many geopolitical issues that emerged in the last 6 years, filling the gaps in production caused by the Iraq shutdowns, Libyan revolution, Iranian threats of closing the Straits of Hormuz and the Egyptian Arab Spring. With total production of over 10 million barrels a day today, they control all the swing barrels of production and have literally the world price of oil…