Crude Prices Mixed as Saudi Arabia Threatens Oil as a Weapon
Oil prices traded modestly on Monday after Saudi Arabia threatened to retaliate against punitive measures tied to the disappearance of Jamal Khashoggi, a Washington Post columnist who was also one of the kingdom’s most vocal dissidents.
Oil Markets Creep Higher
A combination of geopolitics, supply constraints and a weaker dollar lifted commodity prices at the start of the week. U.S. West Texas Intermediate (WTI) crude rose by as much as 1.9% on Monday, hitting a high of $72.70 a barrel. The contract would later reverse course to trade 0.3% lower at $71.20 a barrel in New York.
ICE Bent, the global crude benchmark, peaked at $81.92 a barrel. At press time, it was down 0.1% at $80.32 a barrel.
The U.S. dollar, which often trades inversely with commodities, fell 0.2% against a basket of currencies. The DXY dollar index is currently trading at 95.02.
Saudi Arabia is facing an international backlash over the disappearance of Jamal Khashoggi. The columnist was last seen entering the Saudi consulate in Istanbul, Turkey on Oct. 2 before disappearing. Turkish news outlets say they have evidence linking the Saudis to his disappearance.
According to Sabah, a pro-government newspaper, the moments of Khashoggi’s “interrogation, torture and killing were audio recorded and sent to both his phone and to iCloud.” The newspaper said conversations of Khashoggi’s killers were also recorded.
U.S. President Donald Trump will send Secretary of State Mike Pompeo to Saudi Arabia to discuss the situation with Crown Prince Mohammad Bin Salman. Trump tweeted on Monday that the King denied having any knowledge of Khashoggi’s whereabouts.
“Just spoke to the King of Saudi Arabia who denies any knowledge of whatever may have happened ‘to our Saudi Arabian citizen.’ He said that they are working closely with Turkey to find answer. I am immediately sending our Secretary of State to meet with King!” he said.
Trump has warned of grave consequences for Saudi Arabia if evidence emerged that the kingdom was responsible for Khashoggi’s disappearance. However, the president stopped short of threatening to block major arms deals to the kingdom as that would undermine U.S. jobs.
For the first time in 45 years, the Saudi regime has threatened to use oil as a political weapon to deter the West from attacking its economic interests. The Saudis issued a statement that the king plays “an influential and vital role in the global economy,” which is an implicit reference to its abundant oil wealth.
Following the disappearance of Khashoggi, several top business executives have pulled out of a high-profile Saudi investment conference, setting the stage for a bigger global backlash against the kingdom. According to CNN, the heads of J.P. Morgan Chase, Ford and BlackRock have cancelled plans to attend the summit.
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