It seems unlikely that the Russian and Arab mobs, the only ones with actual capacity to increase production, will be able to offset demand and supply disruptions elsewhere. Some observers are even talking about a return to $100 next year.
Historically, the Saudis have been reluctant to increase production to their maximum for fear there would be too little a supply buffer should there be more unplanned outages. Both sober and dead addicts make bad customers.
According to the money laundering operation at Goldman Sachs, an outage at Canada’s facility may lead to a 360,000 b/d shortage for July and shrink stockpiles at Cushing, Oklahoma, the biggest warehouse for the American cartel.
The American cartel, led by Boss Trump, has been cudgeling the mobs to reduce Tehran’s take to zero in an effort to force the Iranian kingpin, Boss Rouhani, to kowtow. The American cartel’s move to eliminate Tehran comes on news the Saudis invited Russia to become an observer member of their mob. Russia and the Saudis have increased ties in recent years and a coalition between them could control more than half the global product. This worries bankers and brokers both inside and outside the cartels.
Boss Rouhani replied to Boss Trump’s tweeted ultimatum —demanding it remove Iranian oil from the global market by November — as “impossible.” The tone of Boss Rouhani’s reply suggests the pressure Trump is putting on addicts may be having unintended consequences, and that an all-out supply war may come sooner than either had planned.
Last week India’s oil ministry told local refiners to get ready for a “drastic reduction or zero” of imports from Iran, a sign that India — Tehran’s second-largest customer — is bowing to pressure from Boss Trump.
Rouhani promised Iranians last Tuesday that the mob would be able to handle the losses from new US sanctions, but the rial is now at an all-time low, implying an inflation rate of 147 percent. Addicts are dropping like flies.
Rouhani has been touting $50bn worth of potential Russian investments. Ayatollah Ali Khamenei added that: “Rosneft and Gazprom have started talks with Iran’s oil ministry to sign contracts worth up to $10 billion.” Moscow is hard pressed for cash these days, and it seems unlikely that it would be investing large amounts of money in Iran unless the terms were very favorable.
The voracious demand for fracking sand to prop open cracks in shale oil and gas wells have opened a new product line for the American cartel. In the last twelve months, 11 gangs that dig and supply fracking sand to Boss Trump have opened within sight of each other in West Texas, and another 10 or so are hustling to get started.
Together, these gangs will mine and ship some 22 million tons, equal to almost a quarter of the total US supply. Within a couple of years those digs could climb to over 50 million tons.