Vladimir Putin is pulling the strings on oil

Underestimated: Vladimir Putin. Pic: AP

When shorters are caught out it is always a good time to open the champagne. This time in the oil market the shorters underestimated the talents of Vladimir Vladimirovich Putin.

And so it was that the traders who shorted world oil shares including BHP and Santos were expecting the Algiers OPEC conference to collapse in disarray. When it did not happen they were forced to buy back their shorted stock, causing significant rises in Australian oil companies. Last night in London the bullish trend for oil stocks continued.

Like him or hate him, have no doubt that the person pulling the strings in the Middle East and in the oil market is Russian President Vladimir Putin.

I first became aware of the Putin agenda in October last year after my visit to St Petersburg and explained that the US blunders in the Middle East and Europe had set the long term stage for a totally new order in the oil market.

Over the next few years Putin wants to duplicate the oil cartel that was signed in Scotland some 90 years ago involving Exxon (then the Rockefeller’s Standard Oil), BP (then the Anglo-Persian Oil Co), Rothschild’s, Shell and others.

That cartel has long gone but the new one required a Russian co-ordinated agreement involving Iran and Saudi Arabia as well as Syria and Iraq.

First step in the establishment of the oil cartel was success in the Middle East war.

To achieve that aim, Putin backed Syria’s President Assad to retake control of most of Syria. At the same time Putin hoped Iraq, with US help, would remove Islamic State from Iraq. Under the plan Russia rather than the US becomes the dominant power in the Middle East. Its allies are Iran, Syria, Lebanon and even Iraq is sympathetic to the cause.

Saudi has a different agenda but had to be brought into the oil plan. In Syria the combination of Assad and Putin was ruthless and the human toll horrible. But despite the brutality on the military front Russia and Iran are winning in Syria while Iraq is performing much better.

On the oil front the agreement between Russia and Saudi Arabia at the G20 was the essential ingredient for progress in this month’s OPEC meeting.

The shorters did not understand the significance of what was happening in Syria and of that Russia-Saudi agreement. At Algiers Saudi then made the concessions that were required to move forward. They needed to act because their country was in trouble. Always remember that Russia needs a higher oil price as much as the Saudis.

Putin is too smart to allow the oil price to skyrocket, which would cause American shale oil production to rise. Nevertheless the likely higher oil price created by the looming cartel will help our LNG producers.