Here's what Russian intervention in Syria means for oil

Russia intervened militarily in Syria in a major escalation of the 54-month war around late September, turning an already thorny situation into something significantly more complex.

Notably, many of the geopolitical players directly and indirectly involved in the Syria conflict also happen to be the world's leading oil producers.

Accordingly, it's worth considering what Russia's intervention in the Syrian civil war means for energy producers and for global oil prices.

In a recent note to clients, Helima Croft, the global head of commodity strategy at RBC Capital Markets, suggests that two important things to watch here will be: 1. What this means for the Saudi-Russia relationship, and 2. How this could affect Saudi Arabia's already battered finances.

"The escalated conflict could ... make it more difficult for Russian and OPEC officials to reach any agreement on a coordinated production cut in the near future," writes Croft. Additionally, "we believe that one of the most important oil market implications of Putin's Syria gamble is that it will likely force the other foreign sponsors - particularly the Gulf energy producers - to double down on their support of their Syrian proxies and put additional pressure on their already beleaguered budgets."

After a year of dumpy oil prices, it looked like there might have been some budding cooperation between the Saudis and the Russians.

The Saudi deputy crown prince Mohammad bil Salman visited Russia several times over the summer to coordinate on economic and security issues with Russia, and Saudis repeatedly said that they would cut production if Russia, too, would cut back.

But "the fledgling Saudi-Moscow reset is likely to stall out because of Syria, making it more difficult for the world's two largest producers to reach an agreement on cutting production," writes Croft.

"Even if Putin were inclined to seek relief from low oil prices by taking the offer for joint action, it may no longer be on the table in the wake of Syria. Even if it were, it will require significant diplomatic dexterity on the part of both Moscow and Riaydh to be able to fight it out in Syria while coordinating on oil policy. Given the passions that are at play at the moment, that may simply be too tall an order," writes Croft.

Furthermore, the escalation of the Syria conflict could put additional pressure on the already strained Saudi budget.

Although the Saudis were sort of okay with lower oil at first because they were able to tap into resources, now they're starting to feel the strain due to the past year's aggressive spending binge on military campaigns and their aim to keep citizens "content."

Increasing financial and military support for the Syrian conflict would certainly add to the strain.

"Saudi Arabia has been one of the most vocal critics of the Russian offensive and there are signs that the Kingdom is prepared to significantly step up its financial and military support for the anti-Assad rebels as part of a broader campaign to roll back Iranian influence," writes Croft.

But "with Saudi Arabia's own military campaign in Yemen nearing the six-month mark, Syria could prove to be an increasingly costly second front and comes amidst increasing signs of financial distress, including up to $70 billion in withdrawals from overseas asset managers."

As a somewhat related end note, it's worth adding that there's also "a chance of an oil price spike on the back of the contagion risk posed by any possible accidental confrontation between Russian and American forces engaged in air operations in the country," according to Croft.

For what it's worth, an oil price spike could be good news to oil-dependent Russia, who has been struggling with lower prices in the past year.