President Vladimir Putin’s steep sell off on Monday the 9th of March 2020, will surely be a day to remember.
Global Equities, stocks and commodities reached unpleasant low sessions. Oil in particular, was losing 20% of its value in one day, while the Dow Jones lost 2000 points in one day of trade. Although the sell was blamed on the ongoing #Coronavirus, I found it hard to believe.
Furthermore, the recent #Coronavirus infection rate decreased drastically in recent weeks and the Chinese people are starting to go back to work. However infection rates, are still on the rise globally, but not at the pace of China. To the contrary, why the markets and analysis are still blaming the #Coronavirus for recent sell-offs, doesn’t make any sense. The real problem is definitely not #Coronavirus, but Vladimir Putin.
Monday’s steep sell-off in oil was all thanks to a disagreement between Russia and the Kingdom. OPEC members are desperate to balance the oil price and wanted to cut oil production by 1.5 million barrels per day. The much needed cut is a very simple exercise, by driving supply down which will lead to an increase in price. To the contrary, reducing oil supply will lead to a high unemployment rate in the different OPEC regions, which can also lead to political tensions. Against the backdrop, cutting oil supply is not a win-win situation, but a clear win for USA oil producers.
Every time OPEC countries cut oil production, oil move up and more US drilling companies come on stream in no time, but if oil prices crash, it can wipe out US shale drillers.
Moreover US shale drillers need on average a $60 p/b oil price to breakeven, anything far low or at the current price can cripple the industry. To the contrary Russia need on average a $19 oil price to breakeven and the Kingdom need a mere $8 dollars p/b to breakeven. Which means OPEC members can be sustainable with low oil prices, but who is fooling who?
Currently headlines points out a “all out war, with Russia against the Kingdom” but is the war among these nations or is it against a common Enemy? Yes, Russia and the Kingdom needs a higher oil price to hold it’s countries together, but is this a short term pain for long term gains? US shale drillers or independent oil producers disturb the oil market and became the world’s largest oil producer.
The US brings around 13 million barrels of oil per day on stream and surpassed Russia and The Kingdom. The USA’s oil capacity is by far the largest in the world, because maximum capacity for Russia and the Kingdom, average around 11.5 million barrels per day. Against the back drop, these figure above mentioned does not sit well with the Russian’s especially not with the Former KGB Lieutenants colonel. Since 2014 the Russian’s wanted to wipe out the US shale drilling, but failed. This time around there is an oil glut due to #Coronavirus and producing more of black gold will definitely finish off US oil. Most importantly, Vladimir Putin knows, it is now or never to take out the US shale drilling companies and crash the Western Powers.US shale drillers are already on the back foot for numerous amounts of years and are defaulting on debt. A heavy push by Putin and The kingdom could lead to end of US shale, but I doubt that is the only prize he wants. Small gains for Vladimir Putin, would be a loss for Russia. The embattled economy have been struggling for years under heavy sanctions and low oil prices. Not agreeing with OPEC members is a huge gamble to take out US oil companies, but for Putin it is necessary. Vladimir Putin is just not after US oil, but to destabilize the hole entire Western World. If US oil collapse, it will plunge USA banks, which will lead to a recession. If the USA’s recession hit before the general election it could cost President Trump his position and the end of Western domination. To the contrary, the sound of socialism is getting louder in the USA and in favour of the democratic hopeful, Bernie Sanders. An ideology that USA tried to avoid for centuries, but a collapse in President Trump’s election campaign could open the door for Bernie Sanders, socialist ideology.
A recession or an orchestrated recession by Vladimir Putin will be the perfect medicine to change America from capitalism to socialism. A Socialist USA, led by Bernie Sanders, would be the perfect revenge for Putin to regain his imperialistic Soviet Union stance. Since the demolition of the Berlin Wall, President Putin wanted his old Soviet Union but failed on numerous occasions. With socialism on the helm in the USA, it would be the gate way to invade Eastern European area’s and regain it’s Soviet union power. The Former KGB Lieutenant colonel, always claimed that the collapse of the Berlin Wall was an insult to the Russian Federation. Vast amounts of land, companies, infrastructure and culture was literally ripped away in-front of his eyes.
Whether Soviet Union was wrong or right, President Putin’s hate towards Western interference in Russia’s affairs are still an open wound and by all means he is ready for revenge.