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The War That Won’t Happen & The War That Already Is

Even with dissident Iranian sources providing a form of confirmation that the Iranian leadership ordered the September 14th attack on Saudi oil facilities, there will be no war. The Saudi Crown Prince, MBS, has made that clear, calling for a political solution. A war, after all, would preclude an Aramco IPO that is now in full force, with the latest enticement to potentially skeptical investors being the oil giant’s promise to pay out a total annual dividend of $75 billion--up from the some $58 billion that Aramco paid the Saudi government in dividends last year. Riyadh has also moved to re-risk a bit over Aramco’s royalty payments, lowering royalties when oil falls below $70, but increasing royalties when oil is above that mark.

The dividend pledge comes after some more bad news for the Kingdom with Fitch’s downgrade of Saudi Arabia’s sovereign credit grade from A+ to A on fears it could be drawn into a deeper conflict, either with Iran or with its own allies.

The Saudi Crown Prince took to the airwaves this week to warn the world that if Iran isn’t deterred (preferably through a political, not military, solution) oil supplies will be further disrupted and oil prices will be “unimaginably high”.

That said, oil prices at this point aren’t even responding to Iran--they’re responding to macro-economic data, and particularly to demand fears over the US-China trade war. Those fears have been further exacerbated…




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