WTI Just Went Under $40 --1 Hour Ago; Saudi Arabia Already In A World Of Hurt -- Protecting Their Market Share -- August 1, 2016

I took down the poll about three hours ago, in which we asked if we would see $39 oil this week. The votes exactly split:

• yes: 50%
• no: 50%

Since there was nothing to lose, I would have expected close to 100% to say they expected to see $39-oil this week.

A talking head -- some years ago -- said we would see $100-oil before we saw $200-oil. After that call, he joined the rest of the talking heads over at CNBC.

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Saudi Arabia

Updates

September 25, 2016: Saudi Arabia injects $5.3 billion to stabilize banking amid crunch. 

August 2, 2016: Saudi Arabia Oil Demand Growth at 6-Year Low on Slowdown.

Oil consumption in Saudi Arabia, the world’s biggest crude exporter, is expanding at the slowest pace in at least six years as low energy prices hurt economic growth.

The kingdom’s demand for oil increased by an average of 24,000 barrels a day in the first five months of 2016, the slowest growth rate for that period since at least 2010.

Why?

Demand has been crimped after governments in the oil-rich region cut or removed fuel subsidies. 

Original Post

 

Over the weekend I spoke about Saudi Arabia getting slammed by low oil prices and said I would be looking for stories on Saudi Arabia and how bad things are getting for them.

First, my blog of only a couple of weeks ago: update on Saudi Arabia's cash reserves. If you look closely, there was a slight "improvement" for the Saudis in May. Didn't last long:

Most folks are just going to look at the one-year graph. Those folks who are really paying attention will note the incredible drop from May  (2016) to June (2016) -- the one-month drop.  I don't have the time, and I can't easily see the numbers, and I really don't care (at this moment -- I'm feeling really, really sick. I have whatever Sophia had yesterday and is recovering from today. I am deteriorating. Maybe I'll do the numbers later).

But, note: the drop from May, 2016, to June, 2016, look's like a 50% drop off the baseline. Of course, the graph is screwy -- with the baseline at 2,100,000 SAR million -- instead of at zero -- it's not really a 50%.

The interesting question is whether this website will have to set a new "y" axis next month. Enquiring minds are asking.

The other big story, of course, is whether the KSA Finance Minister and/or the KSA Energy Minister have had any of their fingers, toes, feet, or hands cut off in the past 72 hours.

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Shoot-Out In The OPEC Corral

From The [London] Telegraph:  Texas shale oil has fought Saudi Arabia to a standstill. Bad, bad news for Saudi Arabia. No excerpts; one needs to read the entire article. I've archived the article.

Texas shale oil has fought Saudi Arabia to a standstill. Don't forget about Russia. This is called a Mexican standoff -- the name of the Ennio Morricone's "song" in this scene -- either "Mexican Standoff or The Trio. When you view the video, think of these three guys as representing the US, Russia, and Saudi Arabia in the current oil environment.

The Trio, from The Good, The Bad, and The Ugly, Ennio Morricone

My hunch is that Hillary Clinton will ban fracking -- not on global warming concerns, although that will be the message -- but rather, due to global social unrest that will make ISIS look like a kindergarten event. There is a real, real fear that the Mideast will implode due to social unrest; Venezuela will become a failed nation; Turkey will be identified as an Islamic state (connect the dots). Joe Kennedy, Sr, saw the 1929 stock market crash coming and -- most likely an apocryphal story -- and got out. He was one of the few lucky ones.

Warren Buffett can see this and that's why he's backing Hillary. $5 gasoline is a small price for Americans to pay to prevent total global meltdown, and the possibility of the Russian bear being backed into a corner and lashing out with the threat of nuclear missiles.

I've not read any books on this scenario (there are plenty) but reading The Oil Kings certainly puts things into perspective. For those who haven't been paying attention, this is what I would recommend:

• watch VEEP from the beginning
• watch House of Cards from the beginning
• read The Oil Kings while watching the above

Those who fail to read and understand history will be forced to live through it again.

VEEP and House of Cards are both Emmy-winning shoes.  The Oil Kings is not particularly well-written but it's a great reference book.