Saudi Arabian Minister Of Energy Has Reason To Worry -- July 12, 2016

Updates

July 13, 2016: COP's break-even price is $45, over at SeekingAlpha --

The price of oil is expected to rise going forward on the back of a conducive demand-supply environment. This will help ConocoPhillips achieve positive cash flow since the company had forecasted neutral cash flow at a Brent price of $45/barrel on the back of its capital budget reduction and dividend cut. In comparison, Conoco's earlier cash flow neutrality point was at a Brent oil price of $60 a barrel.

July 13, 2016: Reuters is reporting Saudi Arabia starting to talk the talk to drive up prices; no evidence of any action however. 

OPEC delegates say comments from top exporter Saudi Arabia, which two years ago led the group to drop its historic role of supporting oil prices, are a change in tone and a sign the kingdom is looking - verbally for now - to prop up the market.

Khalid al-Falih, who took over this year from longserving Saudi oil minister Ali al-Naimi, told German newspaper Handelsblatt that an oil price higher than $50 is needed to achieve a balance in oil markets in the long term. 

There is certainly no sign yet of an actual policy shift by Saudi Arabia, or of the kingdom cutting supplies to support prices. Indeed, Riyadh told OPEC it raised its output in June to within a whisker of a record high reached a year ago. 

But OPEC insiders say Falih's comments, and a remark he made last month raising the possibility Saudi Arabia may return to its role of balancing oil supply and demand, contrasted with previous statements from Saudi oil officials. 

"This a change in the Saudi position," an OPEC delegate from a major Middle East producer said of Falih's remarks. "Before, they did not mention a range of prices they were looking for."

It seems Saudi Arabia's sense of "balance in the oil market" is different than my sense of "balance in the oil market."

Original Post

 

Earlier today there was a news report that suggested the Saudi Arabian Minister of Energy was "worried." He felt oil needed to be priced above $50, somewhere between $50 and $100. Good luck.

Three hours ago it was reported that WTI tumbled (in price) due to a smaller draw than expected:

The latest American Petroleum Institute (API) report on Tuesday showed crude oil supplies rose to their highest point in ten weeks despite expectations of a 3 million barrel draw.

The API said crude oil defied the anticipated draw, recording a 2.2 million barrel build instead. Gasoline and distillates also reported major builds of 1.5 million barrels and 2.6 million barrels, respectively.

Investors had expected a 900,000-barrel draw for supplies at the Cushing Oil Hub in Oklahoma. However the API said it was a much smaller figure at 166,000 barrels.

Yes, I would say the Saudi Arabian Minister of Energy has a lot to be worried about. It looks like American producers are making money on $40 oil.