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Goldman Drives Oil Prices Down

The hope is to sink Russia

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The author is an influential Russian journalist and economist and an anchor of Odnako (However) commentary program on national 1TV network. His views reflect the thinking of conservative Russian protectionist oriented elites. 

Oil prices seem to be moving irresistibly toward zero, based on expectations of China increasingly being in a slump and Iranian oil flooding the world markets, causing an increase of supply over demand.  At least this is what they want us to believe. Brent crude fell below $30 a barrel and continues to get cheaper. The OPEC oil basket dropped to $ 25 per barrel, Mexican Pemex has been losing a dollar a barrel, Canadian crude fell to $15. "Our business is dying at its core" - wrote the Wall Street Journal quoting the owner of an Illinois company, and referring to Barclays’ analysts forecast of industry costs being reduced by 20%, after falling by a quarter in 2015.

Oil prices, adjusted in relation to current fluctuations, have essentially been a straight downward line since last September, when they fell from $ 50 a barrel to the current $ 29. What was so momentous that happened in the world market in September? That was when "Goldman Sachs" lowered expectations for the average oil price for 2016 to $ 20 a barrel, echoed by Merrill Lynch, Bank of America and others.

The $20 quoted by Goldman Sachs was not a forecast, it was the target. Economy Ministries make forecasts, while Goldman Sachs makes the markets. Oil contracts are only 2% percent of the raw materials market, the rest being speculative securities, futures and other derivatives. Prices for futures are not determined by supply and demand, but by “expectations”, with the market controlled by the largest US banks, using rating agencies, "independent" experts and the media.

Actually, the main reason for the fall in oil prices was the shale revolution in the United States that increased American  production by half. The number of US drilling rigs has declined  to 2/3 of its 2014 peak, although production was kept at a stable level - around 9.2 million barrels per day.

The American shale phenomenon transcends price. The banks supplied the credit that allowed shale companies to stay afloat no matter what, supporting American production, whose decline could ruin the game.

When prices began to fall, Saudi Arabia announced it would not cut production, paralyzing OPEC’s efforts to control the market. From this point on, with each statement from the monarchy, prices went down.. Saudi Arabia ended the year with a budget deficit of 100 billion dollars, after actual production decreased by 400 thousand barrels per day, or about 4% over the last six months. "We will meet customer demand, and will no longer limit production", - said the Saudi Minister of Oil in early January.”A genie can cast a spell, but there is no need to exaggerate the sovereignty of Old man Hottabych (Arab magician from a Russian fairy tale - ed). For every Hottabych has a Wolf.

If "China is slowing down", why would it restart the process of growth at years end? For any gamble to be successful, you need to know when to quit. I’d say it’s time.

 



Source: 1TV
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