|Up and Down|
Russia, we gather, was one of the major players behind the Iran deal, and they certainly have no interest in a materially softer price of oil. This DTel piece paints a pretty grim picture, and repeats the received wisdom that Russia needs an oil price of $110 to balance its budget (others have quoted a higher figure). They remain uncomfortably stuck as a raw materials economy, despite their fervent longings to be a manufacturer: I've recorded here before that they have tried several times to sell gas and oil into the far eastern markets in packages with manufactured goods, 50:50 by value. You can imagine where the Chinese have told them to stuff their useless trucks; and I read with amusement a couple of weeks ago that their new LNG export deal with South Korea works the other way around. In this package, the Koreans will build the LNG ships for the Russians. This is the sort of reality that has Putin tearing at what little hair he has.
But it's not all bad news for Russia. They must relish the leading role they've taken with Syria and Iran (it's their back door, after all) - and what about the Ukraine !? Their pulling out of EU accession negotiations must send the expansionist tendency in Brussels ranting up and down their luxurious corridors. (I could wish the estimable Hatfield Girl was blogging just now; she writes interestingly on these matters.) When will Turkey decide it's not worth the effort ? That really would be a turning-point.
Who else is seriously long oil ? Why, the Saudis, of course, who at the same time are none too chuffed about the Iran deal. One particularly daft comment suggests that "Riyadh may try to 'rap America’s knuckles' by flooding markets with enough oil to puncture the US shale oil revolution. Production costs at the US Bakken shale field are around $80". Yes, the USA is long oil as well: but I have a feeling that 'something' would happen long before the price fell that far. There has long been the theoretical potential for a genuinely significant oil-price reversal: it is the truly epic quantities of oil reserves everyone knows are present in Iraq. But somehow it never gets developed ...
One also reads that the Iran deal is bad, bad news for the Syrian 'opposition'. Assad-supporters Russia and the Iranians are now riding high and surely command at least several months of goodwill in the West - so woe unto the enemies of Assad ? Well maybe: but the perennial enemies of Iran are not appeased.
Sometimes, big-power diplomacy really does put the lid on a boiling pot. Remember North Korea ? Ah yes, that's right, a few months ago they were threatening a first strike on Seoul and Seattle. It was headlines on every news channel for days and days. And then suddenly ... nothing. Oh, to have been a fly on the wall when the Chinese took Fat Boy to one side and read his fortune for him.
However. When it comes to Iran, those perennial enemies probably have the means to keep the pot boiling for a while yet to come. Price of oil on 31 December this year ? Predictions in the comments, please.