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Boone Pickens: Russia 'new sheriff' in Mideast

The new military involvement by Russia in Syria could force OPEC's largest oil member to finally capitulate on production cuts, energy entrepreneur Boone Pickens said Thursday. Such a move could rescue battered crude prices, which have lost half their value in the past year.

The Mideast has a "new sheriff in town," Pickens told CNBC's "Squawk Box," with Russia making its most significant move back into the region since being kicked out in 1973, when then-Egyptian President Anwar Sadat broke an alliance with Moscow ahead of the Arab-Israeli war.

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Connecting the dots on how oil prices may be affected by Moscow flexing its military might is rather complex, with Russia, Syria, and Iran on one side and OPEC powerhouse Saudi Arabia on the other.

Since the bottom fell out of the oil market last year on demand and oversupply concerns, the Saudis have been holding the line on production, despite suffering a severe financial toll. The kingdom has refused to budge, in part, to shore up its market share, but also to maintain prices low in order to keep economic pressure on Iran.

Russia, a large non-OPEC oil producer, has seen its economy ravaged by the plunge in crude, in addition to the international sanctions for its aggression in Ukraine. While it wants the Saudis to reduce production, Moscow has refused to cut.

But Pickens, who's spent more than a half century in the oil and natural gas business, predicted changes ahead. The founder and chairman BP Capital Management said the Saudis have had enough. "You're going to see adjustments made. Russia will claim they're not adjusting, but force others to adjust."

Oil was higher in early trading Thursday, around $48 a barrel, resuming a recent upswing on reports and data signaling a rise in demand and fall in supply. U.S. crude rallied near $50 a barrel Wednesday morning, before settling lower. Prices surged 4.9 percent Tuesday.

With the U.S. reluctant to push for higher oil prices because of the positive consumer effects of lower costs at the gasoline pump, the Saudis might feel compelled to bend to Russia's will, said Pickens, who spent most of his career building Mesa Petroleum into a powerhouse. After selling Mesa in 1996, he started BP Capital.

Disagreeing with Pickens, oil analyst John Kilduff, founding partner of Again Capital, told CNBC Wednesday that the Saudis are "incredibly unhappy" with Russia and could express their displeasure by keeping pressure on crude prices, which would further hurt Russia's critical commodity sector.

Moscow's stated purpose of its week-old air campaign in Syria was to fight the Islamic State terror group. The U.S. and its allies have been waging a year-long bombing effort against the militants, while trying to diplomatically edge Syrian leader Assad Bashar from power.

But along with strikes against Islamic State fighters, Russia has also targeted other resistance groups, some backed by the U.S., in Syria's multifaction civil war, prompting questions about whether Moscow's true intent is to help Assad stay in power.

The rise of Islamic State militants in Syria and Iraq has made for strange geopolitical bedfellows, with Russia, Iran and the U.S. fighting a common enemy, but perhaps for different reasons.


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— The Associated Press and Reuters contributed to this report.