Oil prices in international markets can witness a steep upward spike after Saudi Arabia on Monday threatened to retaliate against any attempt by its Western allies to punish it over the disappearance and alleged murder of the regime’s critic Jamal Khashoggi at the Kingdom’s Istanbul Consulate earlier this month.
Oil prices have recently been stabilizing below 72 USD after last week’s fall because of fears of oversupply from Saudi Arabia and Russia after US sanctions on Iran comes into effect next month.
“The Kingdom affirms its total rejection of any threats and attempts to undermine it, whether by threatening to impose economic sanctions, using political pressures, or repeating false accusations. These will not undermine the Kingdom and its staunch positions and its stature at the Arab, Islamic and international level,” an unnamed Saudi official told the oil-rich country’s state media.
At the time of publishing this report, crude was worth 71.64 USD, according to Limit Forex markets screen.
US President Donald Trump spoke of a “severe punishment” if Turkish police’s allegations were true that the dissident journalist Khashoggi was killed inside the consulate on October 2, the day he entered the building from which he would never be seen to emerge.
Worries that oil prices may not reach 100 USD by the end of the year due to an expected oversupply seems to have been replaced with lower supply in the wake of comments from Riyadh.
“The Kingdom also asserts that if it becomes the receiving end of any action, it will respond with greater action. The Kingdom’s economy has an influential and vital role in the global economy,”” Saudi Press Agency’s government source said, implying that it can harm not only the US and other Western countries thanks to its oil-based leverage in an energy-hungry world.
Although Trump earlier pointed at Washington’s billion dollars-worth arms deals and its reliance on oil, the US Congress is preparing to take action with support from both sides of the aisle against the rule of the Crown Prince Mohammed bin Salman who American Senators may hold responsible for Khashoggi’s fate.
“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!” Trump tweeted following Saudi threats.
The European nations of France, United Kingdom and Germany, also urged the Saudis in a joint statement to conduct a “credible investigation” into the Khashoggi affair. Turkish President talked with King Salman over the phone about the formation of a joint working group to solve his disappearance.
On Sunday, the first day of the work week in Arab countries, Saudi stocks took a plunge unseen in years. The Tadawul All-Shares Index (TASI) lost all the gains it had made since the beginning of the year. TASI saw a decline of up to 500 points in its first session, about 7 percent its total value. It later stabilized with some buybacks after the initial shock that showed almost all the sectors in the red.
A downtrend in crude oil has been on record since the start of the month when it almost hit 77 USD.
It remains to be seen if the US can afford to cast aside one if its most stalwart allies in the Middle East and if Saudi Arabia in today’s can actually carry on with retaliation that could in effect create a 1973-like scenario when it led the OPEC in imposing a hard-hitting oil sanction on the Western camp for their support to Israel during the Yom Kippur War.
