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Qatar crisis: It’s the oil stupid!

Saudi Arabia which has faced something close to an economic recession after years of plummeting oil prices, appears to be willing to do anything to retain its only major source of revenue.

Oil prices immediately increased as Saudi Arabia led the charge of Arab nations severing all diplomatic ties with Qatar.

The price of Brent Crude has jumped 32 cents and has achieved the crucial +$50 a barrel mark.

Qatar which like Saudi Arabia is a key OPEC member produces an average of 1.48 million barrels of oil per day. Qatar is also a key exporter of liquefied natural gas and a refined natural gas called condensate.

However, oil is still down globally since the 25th of May 2017 when OPEC along with Russia agreed to cut energy production in an attempt to stabilise prices. The move was supposed to help Saudi Arabia but experts say that ironically it was better for Iran and Russia than for the Gulf states.

Since Donald Trump entered the White House, US production of oil has gone up, further cutting the market share of Saudi oil.

One is therefore witnessing an attempt by Saudi Arabia to isolate a regional competitor in the energy market using political and security issues as the excuse.

Even the stated Saudi justification of Qatar being a sponsor of terrorism is duplicitous as Saudi Arabia if anything, sponsors even more terrorism than Qatar.

Saudi Arabia is trying to isolate Iran which the leadership of Qatar had recently reached out to and moreover is trying to destabilise its smaller energy producing neighbour.

The immediate results of a slightly higher oil price will play into Saudi’s favour, but the over all trends of global energy markets are not looking good for Saudi Arabia in the long term.

Saudi will almost certainly pull of more desperate moves as their share of the global energy market decreases and as prices continue to fall.

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