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Global Energy Advisory 8th January 2016

Politics, Geopolitics & Conflict

This week, there is nothing more critical than the extension of the Sunni-Shiite conflict into a much more significant proxy war between Saudi Arabia and Iran. As many will have already noted, the outlook for oil prices in light of this is bearish because for the first time in decades, OPEC has no chance of coming together in a unified position and we cannot get past the supply glut for now. But on a conflict level, this proxy war indicates more than anything that things have spiraled out of control. We have noted in previous briefings that while the Shi'ite radical groups can largely be controlled by Iran, the Sunnis can be controlled by no one--they have no real master at this point, which makes them the more dangerous. Saudi Arabia is panicking because it cannot control its own monster, but also because it has run out of friends, with the Americans having largely cut them off, Russians applying immense pressure and Iran far too strong to go to war with in any other way than through proxy manners and venues.

This will add another grueling element to the already catastrophic Syrian conflict, which is one of the key venues for this proxy war--and also a topic that Oilprice will be covering in-depth in the coming weeks in its news section. The beheadings of key Shi'ite figures by the Saudis--after languishing in prison for about a decade--shows the Saudis weak hand in this conflict, and the Iranian response will be much stronger…

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