Some analysts' interpreted OPEC's decision last week not to cut its oil production as an attack by Saudi Arabia and the other OPEC members on U.S. oil producers.
The idea is that the Saudis are happy to push oil prices lower — they hit a five-year nadir Monday — to make it uneconomical for U.S shale oil production.
But Stephen Schork, editor of The Schork Report, is having none of that explanation. "I'm highly skeptical that Saudi Arabia is targeting North American production," he told the "Steve Malzberg Show" on
Newsmax TV.
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"First and foremost, Saudi Arabia runs a $2 billion monthly trade surplus with the United States. Why they would want to pick a fight with their greatest trade partner is beyond me."
If there's a conflict, it's between Sunni OPEC (Saudi Arabia) and Shia OPEC (Iran), Schork said. "We have a balance of power that could potentially tilt from the Sunni-Arab dominated part of the Middle East along with Israelis to a nuclear Shia Iran," he said.
"So Saudi Arabia is not going to do any of the heavy lifting for Iran. Why should they seed market share to Iran when Iran puts more money into their nuclear program rather than their oil program?"
U.S. oil prices touched a five-year low of $63.72 a barrel Monday, and the January WTI contract settled at $66.88 Tuesday on the Nymex.
A combination of weak demand and mushrooming supply has sparked the price move, Schork noted.
"Libyan production is back to 1 million barrels a day. Iraqi production never went missing, and Iran has walked away from the nuclear talks," he said.
On the demand side, "Japan is in recession. China is dragging with the property slump there. And Germany and France — the two largest drivers in the European economy — are on the cusp of recession," Schork said.
Japan's economy shrank 1.6 percent year-on-year in the third quarter, and China's economy grew 7.3 percent year-on-year, the slowest pace in 5½ years. Eurozone GDP expanded only 0.6 percent annualized during the period.
"We have too much supply on the market, and there's legitimate concerns with regard to economic growth going forward. Hence, now we got the tremendous pullback in oil prices," Schork said.
That pullback represents a big roadblock for oil-producing economies that already were suffering, he said.
"The have-nots of the oil producing countries — Venezuela, Nigeria and Iran — are in tremendous trouble at this point," he said. "In Venezuela, there are a lot of bonds trading at 50 cents on the dollar."
Russia is sitting on billions of dollars in its sovereign wealth fund "for [President Vladimir] Putin to fall back on," Schork said.
"We see the cash sitting aside, and mother Russia has been the largest buyer of gold in the world over the past two months. Clearly, they're positioning themselves for an [oil price] fall and the ability to sustain this price decline."
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