MIDDLE EAST: Bush´s Saudi Visit is Bearish for Oil

With the United States' economy slowing and an OPEC meeting right around the corner on February 1, is President Bush doing a little horse-trading?

Bloomberg Reports:

President George W. Bush brought to Saudi Arabia today a promise to provide ``smart bomb'' technology for his host, as the U.S. leader made his first visit to a crucial ally in the Middle East. Saudi King Abdullah had his own gift for Bush, a heavy, gold necklace and medallion that is a sign of friendship and respect, a theme Bush is seeking to push during his two-day visit to the kingdom at a time when oil prices are hovering around $100 per barrel.

Maybe it went something like this:

So, how ya been King Abdullah, buddy, pal, friend. Thanks for the cool necklace, bling bling. Hey, now I'm working on them bunker busters you guys want, but I need a little help getting over this subprime thing, and ya'll know we got an election coming up. Ya'll could really help me make sure the new Sheriff sees things your way. $70.00 sounds like a good number. Just for a little while. I'd sure be beholden to ya.

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I don't know, maybe it is a coincidence that G.W. shows up in Saudi Arabia just now. Nevertheless, with an estimated 2 million barrels per day (bbl/d) in estimated excess capacity, Saudi Arabia is possibly the only single country able to materially impact the price of oil. It is lucky for the United States that we have something that they want-very cool bombs!

Moreover, beyond the military technology, the Saudi's have a lot of their petrodollars invested in the United States and they have an interest in protecting those investments. For example, Prince Alaweed, the King's nephew and world's 5th richest man by estimates, just took a big hit in his Citigroup investment and that had to hurt just a little bit.

Whatever you may think about the Saudi's "friendship" with the U.S., maybe the stars are lining up here in the short run. Maybe the Saudi's and a few other producers realize that it might be prudent to give the world a little markdown. I know the long-term supply\demand picture is bleak, but politics is never for the long-term.

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