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A Billion-Dollar Ransom Deal Caused the Crisis in Qatar     

This is a syndicated repost published with the permission of Money Morning. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

The crisis in Qatar that played out before the world’s eyes on Monday (June 5) was provoked by a billion-dollar ransom payment Doha made earlier this year.

Specifically, the now-ousted little brother in the Middle East paid off two of the most divisive entities in the region this past April: Iran and an al-Qaeda affiliate.

While nations in the OPEC territory have long criticized Qatar for actively supporting Islamic terrorists, Doha’s ransom payment to both Shiite Iran and al-Qaeda extremists was “the straw that broke the camel’s back.”

Here’s what happened…

The Crisis in Qatar Spurred by the Quiet Kidnapping of the Royal Family

crisis in Qatar

A Middle Eastern falcon hunter.

In December 2015, 26 members of the Qatari royal family’s falconry party were kidnapped by Shiite militants closely allied with Iran and members of the al-Qaeda-affiliated group Tahrir al-Sham.

The hunting party, which had crossed into Southern Iraq legally, was nabbed in the mountains while on a hunt with falcons, reported The Financial Times on June 5.

It wasn’t until this past April that these 26 hostages resurfaced in Doha again. News immediately spread locally that Qatar had paid $930 million to the kidnappers and $400 million to the al-Qaeda fighters for their release, FT also stated.

Energy Breakthrough: One gallon of this new “crystal fuel” could get you from New York to L.A. and back… seven timesRead more…

The news of the Qatari ransom spread globally only after Saudi Arabia, Egypt, the United Arab Emirates, Bahrain, Yemen, and a powerful military leader in Libya all severed ties with Qatar on Monday.

The rift sparked international concern over the future well-being of OPEC, of which Qatar still is an active member alongside many of the Middle Eastern nations that have shunned it.

This kidnapping, however, isn’t a detriment to OPEC so much as more proof of its resilience. You see, kidnappings between OPEC members are not uncommon incidents.

For example, Iran’s militias have a long history of kidnapping in Iraq, especially of Americans after the 2003 invasion. The kidnapping of the falconry party in December 2015 came around the same time as two other abductions involving citizens of Turkey and the United States.

Indeed, Money Morning Global Energy Strategist Dr. Kent Moors told readers this past Monday just how little these conflicts affect oil prices…

Keep Calm and Let OPEC Carry On

“While this latest spat between OPEC member countries has the potential to give short-term oil prices a hit, it won’t fundamentally reshape the oil market,” Moors wrote, adding that, no matter what, “the OPEC agreement will work to push oil prices higher this year.”

Indeed, news of Qatar’s formal ousting sent oil prices dipping on Monday:

  • Brent crude prices reversed initial 1% gains after the news, trading down 1% to $49.45 a barrel by 2:34 p.m. ET.
  • WTI futures ended Monday’s session at $47.40 a barrel, down $0.26, or 0.6%.
  • U.S. gasoline futures led the sector’s largest fall in the afternoon, down 2.4% to $1.54 a gallon.

But Moors, who’s a 35-year expert in global oil and gas policy, remains steadfast in his 2017 oil price forecasts

WTI Crude Will Hit $54 Range Mid-June

Moors expects WTI crude oil prices to hit $54 to $55 by the middle of June, and $56 to $58 by September. That would be a 22% gain over Monday’s WTI price of $47.40 a barrel.

Moors’ confidence in his prediction, which he first noted on May 22, stems from the fact that no matter what kind of internal cartel feuds arise, the oil cartel has a common goal to keep oil prices high…

“OPEC members need higher oil prices, especially Saudi Arabia,” he wrote. “Last October, the Saudi deputy economic minister said the country could go bankrupt in three years if the global economy doesn’t change. Since oil sales make up 70% of the Saudi budget, that means they need higher oil prices to stay afloat.”

But just in case oil investors are still skeptical of OPEC’s production deal in light of recent in-house feuding, Moors has another profit play as well…

The Perfect Play for Wary Oil Investors

Moors recommended Magellan Midstream Partners LP (NYSE: MMP) on May 31.

Magellan Midstream Partners LP (NYSE: MMP) is a master limited partnership (MLP) – a company that makes 90% of its total revenue from oil or other natural resources and that usually operates in the midstream sector. In other words, it stores and transports oil instead of producing (upstream) or selling (downstream).

Because MLPs only rely on transporting and storing oil, they make money regardless of how oil prices are performing. As long as the oil keeps flowing, companies like Magellan keep raking in revenue.

 

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The post A Billion-Dollar Ransom Deal Caused the Crisis in Qatar      appeared first on Money Morning – We Make Investing Profitable.

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