Crown Prince Mohammed bin Salman, of Saudi Arabia, is suspected by some of ordering the alleged murder of Saudi journalist Jamal Khashoggi. President Donald Trump says it certainly looks like he is dead. Yet, was the murder carried out with the knowledge of the Crown Prince or was the murder carried out by some pauper making the type of decision that one would expect a prince to make? The answer can have a major impact on your wallet, as well as international relations and the future of oil prices.
The global markets got a shakedown when Treasury Secretary Steven Mnuchin tweeted that he was canceling his trip to the Future Investment Initiative summit in Saudi Arabia. This was a summit that was supposed to highlight Crown Prince bin Salman, or MBS as he is known, a vision of a modernized economy in Saudi Arabia. Mnuchin’s cancellation of his presence at what was being called “Davos in the Desert” raised concerns that the Trump Administration may know more about the alleged murder, and what they know is probably not very good.
At first, oil prices rallied a bit on the news but as stocks caved, they gave up gains. Yet, it is hard to believe that there is anything bearish about the Saudi murder mystery. The U.S. Saudi relationship goes back to World War 2 and this could strain that long-term relationship at a time when the U.S. needs that relationship now more than ever. Not just from a Middle Eastern stability standpoint but from an oil production standpoint. Despite the markets short-term bearish joy with a one-off surge in U.S. oil supply, the reality is that the world is counting on Saudi oil production to replace lost barrels from Iran and Venezuela. The call for Saudi Economic Sanctions would force the Saudis to pump less oil to drive up prices for economic reasons. They would need the money. On the other hand, if the world buys the rogue murderous pauper story, acting as the prince making the decision to commit the murder on his own accord, then the Saudis would try to pump more oil to try to keep the kingdom’s critics happy.
