By John Galt
June 8, 2011
Another day, another bombshell in the news (from Reuters):
Oops. The renegade nations who used to act subservient to the Saudis basically told the King that he no longer wields the power he once had, despite having the backing of Europe and the U.S. The bigger story though, is the back story as the nations who have been quietly aligning themselves with the Russo-Chinese power bloc in the world were the parties responsible for blocking this increase. The world’s axis is tilting away from the U.S. and the West and towards China, Russia, and India. This is extremely bearish not for the oil markets but for any hope of avoiding a double dip recession in my opinion. The projected increase in Saudi production will do nothing to resolve the price and supply issues because they can only increase their exports of heavy sour crude, not the light sweet most refineries are configured for in Europe and the U.S. Look for a summer of price extremes once the Gulf of Mexico hurricane season begins in earnest in August and September.
The price reaction was not totally unexpected as this chart from FinViz.com demonstrates: