Friday, February 15, 2019

The Big Story: Saudia Arabia On The Ropes -- February 15, 2019

March 6, 2019: Saudi Arabia foreign exchange reserves.

February 20, 2019: God smiles on the US Gulf Coast refiners.

February 15, 2019: it's all going wrong for OPEC, Bloomberg via Rigzone:
Even as oil producing states in OPEC and beyond begin implementing the output cuts they agreed in December, the world’s need for their crude is shrinking further, suggesting that they will need to extend the deal through the second half of the year.
The latest forecasts from supply-and-demand studies of the oil industry’s most-watched organizations – the International Energy Agency, the U.S. Energy Information Administration, and the Organization of Petroleum Exporting Countries itself – show the need for OPEC crude diminishing as demand forecasts are trimmed and U.S. supply outlooks are increased.
The industry’s three main agencies are unanimous in reducing their assessments of the volume of oil the world will need from OPEC countries this year compared with what they were forecasting last month. The average level of the reduction from the January forecast is 300,000 barrels a day, that’s about the combined production of OPEC’s two smallest members Equatorial Guinea and Gabon.
Of greater concern for producers, two of the three agencies see the world needing less OPEC crude in the second half of the year than the first. Only the IEA currently sees the demand increasing as the year progresses. The differences aren’t big, the EIA and OPEC see the need for OPEC oil falling by another 50,000-60,000 barrels a day in the second half compared with the first. The IEA sees a similar sized shift in the opposite direction. None of the agencies sees the need for the group’s crude rising enough to allow them to end their current supply management deal.
What has driven the fall in the need for OPEC crude? A mixture of lower demand growth projections and higher non-OPEC supply, in particular from the U.S.
February 15, 2019: A380 Superdumbo: collapse. The story that is not being reported. Remember: this is the reason Airbus pulled the plug on the Superdumbo -- United Arab Emirates slashed their orders. That speaks volumes. The Mideast is in deep doo-doo. And lookee here -- Bloomberg via Rigzone:
The oil crash came and went but the debt pile it left across the Gulf is still growing, leaving the region’s energy-dependent economies more vulnerable next time a crisis strikes.
All but debt-free before crude prices nosedived in 2014, many Gulf governments tried to borrow their way through while making only cautious and halting efforts to cut spending and diversify their economies.
Meanwhile, a Saudi-led blockade of Qatar has split the six-state Gulf Cooperation Council and complex regional dynamics mean it’s no longer a foregone conclusion that the strong will bail out the weak with no strings attached.
If oil prices crash again, the pain could be greater than five years ago, raising the risk of a regional recession because governments would have to slash spending while markets would be more reluctant to lend, according to Bloomberg economist Ziad Daoud.
“Gulf economies are more vulnerable to a collapse in oil prices today than during the last rout in 2014,” Daoud said. “Debt is higher, foreign exchange reserves are lower and the chance of pooling resources is smaller. A sharp drop in oil prices could prove more damaging this time around.”
The worst oil crash in a generation was a moment of truth for energy juggernauts around the Gulf, which include the world’s biggest exporters of crude and liquefied natural gas.
After splashing petro-wealth on generous state handouts during more than a decade of surging oil prices, Gulf governments, suddenly cash-strapped, spent the past few years carefully trimming benefits to citizens and cutting subsidies while trying to avoid a popular backlash.
Saudi Arabia and the United Arab Emirates have imposed excise and value-added taxes for the first time. But the prospect of slimming bloated wage bills is fraught with political peril, and they remain the biggest-ticket item on Gulf budgets. [And UAE slashed their big-ticket items, like the Airbus 380.]
While Oman and Bahrain stand out, the experience of the bloc’s two smallest economies might be less an exception than a warning for what could lie ahead if governments don’t diversify -- and fast.

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