For months, and since elections in Iran, Oil & Energy Insider has been telling its premium subscribers to watch out for Iran because it’s getting back into the oil game. This assessment has been met with great skepticism, with the most common sentiment being that Washington will never bring Tehran back into the fold—and the Hawks simply won’t let it happen.
We continue to believe that this is inevitable—and the geopolitical game that is the conflict in Syria continues to make our point for us.
Now the mainstream media is catching on, to some degree, though the dots are not necessarily being connected.
Courtesy of Reuters, we hear that Iran is “reaching out to its old oil buyers and is ready to cut prices if Western sanctions against it are eased.”
And people are indeed talking to Iran, since the geopolitical turnaround in Syria in which the US, Russia and Iran find itself with shared goals.
Indeed, OP Tactical, our global intelligence service, has a network in Iran that attests to the fact that informal talks with states and oil traders are blossoming fast, and the atmosphere is one of high expectation.
Iran’s nuclear “program” has always been a bit of a diplomatic red-herring in the sanctions game. This is the murky surface. The sub-waters here are geopolitical and much more informative.
Right now, only China, India, Japan, South Korea and Turkey are officially buying Iranian oil. The European Union stopped buying Iranian oil with sanctions, but it’s itching to dig itself out of this hole as its energy security is threatened by Russia.
The problem with Iranian oil re-entering the market is OPEC. This is where the Saudis come in—and they are very angry about the turnaround in Syria. If Iran re-enters the market, Saudi Arabia will either have to cut exports or accept a sharp drop in oil prices due to saturation.
Traditional US ally and weapons beneficiary Saudi Arabia has recently rejected a much-sought-after two-year seat at the United Nations and is threatening to rethink its relations with the US over Washington’s failure to play missile ball in Syria and its mounting flirtation with Tehran.
Washington has snubbed Saudi Arabia over Syria, and now the Saudi’s are fighting back—irrelevantly—by snubbing a seat on the UN that they had long coveted and spent tons of money lobbying to get. (There are plenty of details on this extent of Washington’s Saudi snub and its weaning off of Saudi Prince Bandar, the key troublemaker in Syria, in an excellent article in the Wall Street Journal.)
(If you haven’t had a chance to watch our latest presentation on the energy markets please do take a little while to see how we see the oil & gas sectors developing in the future: 5 Giant Game-Changing Energy Trends )
Qatar, while it would rather not see the Saudi version of jihad floating around Syria, will also not be pleased with Washington’s courting of Tehran. As we have mentioned before, and at length, the Syrian conflict was largely a pipeline battle. It was a race to see whether Qatar or Iran would get a pipeline through Syria (and onto European markets) first for gas from their shared Pars field.
Proving the inevitability of Iran’s geopolitical ascent and return to the oil market is as easy (or perhaps as confusing) as plotting the progress in Syria. A solution to the conflict in Syria is not far away, and Iran’s role in this will be significant. The bottom line is that none of the big players outside of Saudi Arabia want to see Syria fall to roving jihadist militias to become another Libya. There’s not enough oil in Syria to justify a Libyan-style jihadist chaos. As such, Syria is Iran’s ticket back to the real world, and the markets see it happening—perhaps gradually, but inevitably.
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In this week’s issue of Oil & Energy Insider, we offer an in-depth look at the chaos on several fronts in oil-rich Nigeria and investor alerts elsewhere in Africa, Dan Dicker take a look at how the current weakness in the oil markets is presenting investors with a golden short term opportunity.
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In fact you may be interested in seeing Dan’s latest interview where he speaks with The Daily Ticker in response to an earlier interview by Al Gore who believes the energy resources held by oil companies could have a devastating effect on the environment if exploited and burned (I’m afraid you’ll have to watch a little bit of Al before the video gets to Dan.) You can see the interview here
James Stafford
Editor, Oilprice.com
