Thursday, March 9, 2017

Fight's On! -- March 9, 2017

From SeekingAlpha but reported almost everywhere:
  • Senior Saudi energy officials told top U.S. oil companies this week that they should not assume OPEC would extend production curbs to offset rising production from U.S. shale fields, Reuters reports.
  • Saudi Energy Minister Khalid al-Falih said this week that there would be no "free rides" for U.S. shale producers, and senior advisors reportedly went a step further at the meeting on Tuesday in saying that OPEC would not "take the hit" for the rise in U.S. shale production.
Let's see:
  • global production: 100 million bbls / day (rounding in the land of big numbers)
  • rising US shale production, growth: 1 to 2 million bbls / day
Cry me a river.

The data shows that OPEC shipped more oil in February than January, two months into the "OPEC cut."

Cry Me A River, Mad Dogs and Englishmen


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Fight's On

This is sort of interesting.

When the Saudis announced they were going to flood the global market with oil, it was a bit unclear what Saudi was up to. Saudi Arabia said they were protecting their market share: their enemies? Fellow OPEC members with unconstrained production. On the other hand a lot of folks thought Saudi Arabia was out to "break" the US shale industry, which the Saudis denied.

This time around the charade is over. Saudi Arabia, it appears, has explicitly notified the US shale industry that the kingdom won't stand idly by if the US shale industry "tries" to take advantage of the OPEC cuts.

It certainly seems Saudi Arabia does not understand how the market works.

One more thing: Saudi Arabia could be treading on very thin ice. President Trump and many others are very much in support of a border-adjustment tax, i.e., a tax on imported oil. President Obama suggested the same thing: $10/bbl on imported oil. 

2 comments:

  1. With market conditions that rule, just how is Saudi Arabia going to "not take the hit." Lets see they could open a new military front against Iran, no that wouldn't work camels can't swim. They could shut off the oil spigot, that won't work they would have to turn off their air conditioners and close the Mecca theme park. Well maybe they will have to learn the lesson the rest of us infidels had to learn, to live within your means and not your dreams.

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    1. Agree completely.

      The worse thing that comes out of this for the Saudis is that no one trusts them. They said the OPEC cuts were working ... until it was shown the cuts weren't working. The fact that February exports exceeded those in January told traders everything they needed to know about OPEC. OPEC hasn't changed.

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