Saudi Aramco Fire to be Bullish Oil?
If you have not heard, Saudi Aramco refineries apparently got hit by a drone attack and are now in flames. The US has come out and blamed Iran for this attack.
This should be bullish oil, I am looking for a break above the 58.75 zone. I am bearish on oil given the fundamentals and the fact that we are likely heading to a recession. However, anything geopolitical will keep oil buoyed.
To be honest oil needs to be kept up. A lot of western oil companies took out loans from banks during the recent fall in oil. If oil falls and these oil companies feel the pinch once again and cannot afford to pay their loans to the banks...the banks will also fall. Oil seems like it needs to be 'managed' above 40 or 50 to keep these companies from falling.
If you have read my work on the US Dollar, I have outlined why the Dollar going HIGHER will exacerbate the world problems. You can read that post linked below.
Russia and China are attacking Dollar demand. Right now the US has what the French called 'exorbitant privilege' meaning as long as the Dollar remains the reserve currency, there will always be artificial demand for it. Meaning the US can print as much dollars they want without having to care about their debt and deficits.
Once US Dollar demand takes a hit, the Chinese can sell off their treasuries and do some damage ( especially when interest rates are cut and moved lower). But they are targeting the Petro Dollar: the US Dollar being used for oil payments.
Iran is key for Russia and China. As the US Dollar gets stronger, nations such as South Korea, Japan, Turkey, India and some European nations have chosen to purchase oil from Iran because Iran accepts any currency besides the US Dollar for their oil. Japan, South Korea and some European nations have chosen to lessen or halt their imports due to US pressure. However Turkey and India told the US to mind their own business.
The Indian Rupee and the Turkish Lira have been decimated due to the US Dollar strength. These nations essentially cannot afford using the Dollar to buy Oil. Iran is convenient for them because they can use their own currency to purchase oil.
As the US Dollar gets stronger, more nations will want to ditch the petro dollar and purchase Iranian oil. On a side note, Russia and China have put a lot of money into Venezuela and backing Maduro...it is likely they have told him that when Venezuelan production comes back to par, Venezuela will NOT accept US Dollars for their oil. Whereas the US backed Guaido would essentially only accept US Dollars for Oil. We have seen this situation occur with Saddan Hussain in Iraq and Gaddafi in Libya where it was likely they were taken out due to the fact they were beginning to accept other currencies besides the Dollar.
The Russian and Chinese plan is simple. To get more nations to drop the US Dollar as the Dollar price goes up. In fact with their large Gold reserves, they may be telling dark pools to keep buying the dollar. Yes, there currency will fall against the US Dollar, but their gold priced against their currency increases so they avoid damage. This is how the Russian central bank pretty much fought off US Sanctions.
So as the Dollar gets stronger, more nations will elect to purchase oil from Iran. This means that Saudi Arabia begins to lose market share because their customers are going to Iran. This would force the Saudi's to drop the Dollar in order to entice customers...but there is another thing.
Putin has been getting close with Mohammed Bin Salman (MBS) who is expected to be the next King. We have all seen that Putin-MBS and Trump watching from behind high five meme.
It is likely that when MBS becomes King, he will drop the US Dollar with a guarantee that the Russian military will offer Saudi Arabia protection from any US responses.
Right now Saudi Arabia can influence American foreign policy greatly. I am sure they have told the US to deal with Iran otherwise they drop the Petro Dollar. They are in a very strong position.
For the Americans, I think they know that Iran is the key. They know they need to take Iran out. Of course Iran is no pushover. But the military will have to strike Iran in order to protect US Dollar demand. The US military is the armed branch of the Federal Reserve and the US will have to use the military to force every nations to accept and use the US Dollar and punish those that do not.
This should be bullish oil, I am looking for a break above the 58.75 zone. I am bearish on oil given the fundamentals and the fact that we are likely heading to a recession. However, anything geopolitical will keep oil buoyed.
To be honest oil needs to be kept up. A lot of western oil companies took out loans from banks during the recent fall in oil. If oil falls and these oil companies feel the pinch once again and cannot afford to pay their loans to the banks...the banks will also fall. Oil seems like it needs to be 'managed' above 40 or 50 to keep these companies from falling.
If you have read my work on the US Dollar, I have outlined why the Dollar going HIGHER will exacerbate the world problems. You can read that post linked below.
Russia and China are attacking Dollar demand. Right now the US has what the French called 'exorbitant privilege' meaning as long as the Dollar remains the reserve currency, there will always be artificial demand for it. Meaning the US can print as much dollars they want without having to care about their debt and deficits.
Once US Dollar demand takes a hit, the Chinese can sell off their treasuries and do some damage ( especially when interest rates are cut and moved lower). But they are targeting the Petro Dollar: the US Dollar being used for oil payments.
Iran is key for Russia and China. As the US Dollar gets stronger, nations such as South Korea, Japan, Turkey, India and some European nations have chosen to purchase oil from Iran because Iran accepts any currency besides the US Dollar for their oil. Japan, South Korea and some European nations have chosen to lessen or halt their imports due to US pressure. However Turkey and India told the US to mind their own business.
The Indian Rupee and the Turkish Lira have been decimated due to the US Dollar strength. These nations essentially cannot afford using the Dollar to buy Oil. Iran is convenient for them because they can use their own currency to purchase oil.
As the US Dollar gets stronger, more nations will want to ditch the petro dollar and purchase Iranian oil. On a side note, Russia and China have put a lot of money into Venezuela and backing Maduro...it is likely they have told him that when Venezuelan production comes back to par, Venezuela will NOT accept US Dollars for their oil. Whereas the US backed Guaido would essentially only accept US Dollars for Oil. We have seen this situation occur with Saddan Hussain in Iraq and Gaddafi in Libya where it was likely they were taken out due to the fact they were beginning to accept other currencies besides the Dollar.
The Russian and Chinese plan is simple. To get more nations to drop the US Dollar as the Dollar price goes up. In fact with their large Gold reserves, they may be telling dark pools to keep buying the dollar. Yes, there currency will fall against the US Dollar, but their gold priced against their currency increases so they avoid damage. This is how the Russian central bank pretty much fought off US Sanctions.
So as the Dollar gets stronger, more nations will elect to purchase oil from Iran. This means that Saudi Arabia begins to lose market share because their customers are going to Iran. This would force the Saudi's to drop the Dollar in order to entice customers...but there is another thing.
Putin has been getting close with Mohammed Bin Salman (MBS) who is expected to be the next King. We have all seen that Putin-MBS and Trump watching from behind high five meme.
It is likely that when MBS becomes King, he will drop the US Dollar with a guarantee that the Russian military will offer Saudi Arabia protection from any US responses.
Right now Saudi Arabia can influence American foreign policy greatly. I am sure they have told the US to deal with Iran otherwise they drop the Petro Dollar. They are in a very strong position.
For the Americans, I think they know that Iran is the key. They know they need to take Iran out. Of course Iran is no pushover. But the military will have to strike Iran in order to protect US Dollar demand. The US military is the armed branch of the Federal Reserve and the US will have to use the military to force every nations to accept and use the US Dollar and punish those that do not.
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