After a recent clandestine attack on a major oil processing facility and oil field, credible news sources reported that Saudi oil production had been reduced to 50 percent of normal levels. Saudi oil production is said to have returned to previous output levels, but given that Saudi Arabia is one of the largest oil producers in the world, many investors wondered if the scare would create a downturn in global markets.
But worries about a drop in the global economy aren’t limited to fears about instability within the Saudi oil industry. As the Saudi government looks for a culprit to blame for the recent attacks, many political analysts wonder if the US would be willing to back a Saudi-led war with Iran, the prospect of which could create a seismic shift in oil futures.
Indeed, in the wake of terrorist attacks in the Middle East, anxiety about a possible war with Iran, and fears of a recession under the George W. Bush administration, oil prices skyrocketed in 2008. Under President Jimmy Carter’s administration, tensions with Iran also caused oil prices to reach a crisis point. So far, however, crude oil prices have remained stable.
Undoubtedly, Saudi Arabia has the financial means to redress the current oil shortage, and with the United States competing for a top place in the world oil market, it does not look like the attack will be a body blow to investors.
For now, confidence in Saudi Arabia’s capacity to fix security issues with regard to oil holdings remains high. If investors can feel secure that the Saudi government will be able to prevent similar attacks in the future, those investors are unlikely to withdraw their funds from the market. In that event, the market would continue to remain stable.
What the future holds for US-Saudi relations is anyone’s guess, but most analysts do not currently see any reason to panic about a potential market drop. The tempestuous relationship between the United States, Saudi Arabia, and Iran remains a sensitive pressure point in the world of oil stock investing, but the idea of military intervention in the Middle East remains unpopular domestically and is likely to remain so for the foreseeable future. In that event, the market is likely to continue its current pattern of growth.