Oil's Drop Puts Spotlight On Saudi Arabia -- WSJ -- August 25, 2015

These two stories came out yesterday (I was too tired to post earlier):

• Headline: Out in the Real World, Oil Market Is Much Better Than It Looks
• Headline:  Saudi Arabia Hit by Low Oil Prices, Faces Difficult Decisions 

Late last night, a most interesting WSJ article, oil's drop puts spotlight on Saudi Arabia.

The stories all have a very similar theme: for the US, it's a "cyclic thing." For the Saudis, it's an "existential thing."

And this article in The New York Times which we have talked about many times before: "From Venezuela to Iraq to Russia, Oil Price Drops Raise Fear of Unrest."

In oil-endowed Iraq, where an Islamic State insurgency and fractious sectarian politics are growing threats, a new source of instability erupted this month with violent protests over the government’s failure to provide reliable electricity and explain what has been done with all the promised petroleum money.

In Russia, a leading oil producer, consumers are now paying far more for imports, largely because of their currency’s plummeting value. In Nigeria and Venezuela, which rely almost completely on oil exports, fears of unrest and economic instability are building. In Ecuador, where oil revenue has fallen by nearly half since last year, tens of thousands of demonstrators pour into the streets every week, angered by the government’s economic policies.

Even in wealthy Saudi Arabia, where the ruling family spends oil money lavishly to preserve its legitimacy, the government has been burning through roughly $10 billion a month in foreign exchange holdings to help pay expenses, and it is borrowing in the financial markets for the first time since 2007. Other Arab countries in the Persian Gulf that are dependent on oil exports, including Kuwait, Oman and Bahrain, are facing fiscal deficits for the first time in two decades.

While the price has been declining for months, forecasts have always been hedged with the assumption that oil would eventually stabilize or at least not stay low for long. But new anxieties about frailties in China, the world’s most voracious consumer of energy, have raised fears that the price of oil, now 30 percent lower than it was just a few months ago, could remain depressed far longer than even the most pessimistic projections, and do even deeper damage to oil exporters.

“The pain is very hard for these countries,” said René G. Ortiz, former secretary general of the Organization of Petroleum Exporting Countries and former energy minister of Ecuador. “These countries dreamed that these low prices would be very temporary.”

Mr. Ortiz estimated that all major oil exporting countries had lost a total of $1 trillion in oil sales because of the price decline over the last year. 

Much, much at the linked articles.

Countries on the "watch list."

There are indications it has already begun in Venezuela. Be careful. The photo-essay does not provide any background to what is really going on -- although in the big scheme of things it may not matter. In these shortages (real or artificial) one can be assured the government and the military are running the show, take bribes, diverting food and medicine to their own "ports." My hunch is that the upper middle class and the rich are doing just fine; it's the lower middle class and the poor that will really get hit -- but regardless, it will lead to social unrest (already has, if one "believes" the pictures -- remember, this is a PBS link).

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Back To The Bakken

Active Rigs:

	8/25/2015	08/25/2014	08/25/2013	08/25/2012	08/25/2011
Active Rigs	75	194	184	189	195

RBN Energy: a 150-mile gap in the nation's natural gas pipeline system stymies propane shipments. This is a great article with a great graphic that paints the problem.

Coal?

Twitter: this is an interesting factoid. There are three major tight crude oil plays in the US -- the Permian, the Bakken, and the Eagle Ford. Yesterday, Twitter (mostly Platts) had multiple tweets on future of the Bakken; none on the other two.