Market update: Oil companies on a roll as commodities keep moving higher, Saudi crackdown continues

7 Nov

by Mihály Tatár

 

Good Morning!

 

  • While in general, Western markets traded in a slow fashion on Monday (SPX +0.13%, DAX -0.07%, EURUSD 1.16), Asia kept rallying (Nikkei +1.67%, reaching the highest level since 1992, Shanghai +0.43%), as commodities kept moving higher (WTI 57.30, Brent 64.20 USD Iron Ore +2%, Nickel +2%) on the chaotic Saudi newsflow and the ’unstoppable global growth’ theme. Naturally, oil companies were on a roll (Shell +1.7%, Exxon +0.6%, Chevron +2%, Petrobas +3%, PetroChina +3%), but wary investors also bought up Gold (1280 USD) against the geopolitical risk, and were keenly watching the Saudi stock exchange (bouncing from -3% to +0.07%, protected by the ’national team’), and Citibank (-0.30%, while a major trouble is unlikely, the bank did lose its key Middle East contact with the arrest of Prince Alwaleed Bin Talal). The market estimates that with the arrests, Saudi Arabia is also confiscating about 33 billion USD from its richest people (’almost as arresting Bill Gates’), and Saudi banks have already began freezing accounts, disrupting several large global business transactions.

 

  • Veteran oil analyst John Kemp notes that the current events in Saudi Arabia fundamentally change the structure of the state as it has existed ever since the 1960s. The kingdom used to practice a form of collective leadership, with the royal families controlling different parts of the governments (foreign ministry, defense ministry, interior ministry, security forces), to avoid a concentration of too much power. This has been gradually removed by Mohammed Bin Salman, a process finished this weekend by the decapitation of the National Guard (Prince Miteb being arrested). While the purge seems to be popular among the youth (the majority of the population is under 30 years old!), the already long list of the mortal enemies of the Crown Prince just doubled, and the Saudi State will now depend even more on a crude oil price over 70 USD, and it will act accordingly.

 

  • Just as Trump is leaving Japan and heads for South Korea (before the critical China meeting), it was leaked that currently as many as seven (!) US carrier strike groups are on the move, with three of them starting timely naval exercises in Korean waters. For good measure, the US President also supported Mohammed bin Salman in his crackdown on Twitter – that Saudi Arabia Oil Company listing is heading towards the New York Stock Exchange, it seems.

 

 

Have a nice day,

Mihály

 

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