Saudi's War Of Words -- The Definition Of Insanity? -- Not So Sure -- August 22, 2020

 Earlier this week this post:

• Definition of insanity:
• I'm beginning to like this guy: this is the second time in about as many weeks that I've linked an article by this oilprice contributor; Saudi Arabia refuses to learn from its two failed oil price wars;

From the linked article:

Having failed to achieve the slightest semblance of success in the two oil price wars that it started – the first running from 2014 to 2016, and the second running from the beginning of March to effectively the end of April this year – it might be assumed that key lessons might have been learned by the Saudis on the perils of engaging in such wars again. 

Judging from various statements last week, though, Saudi Arabia has learned nothing and may well launch exactly the same type of oil price war in exactly the same way as it has done twice before, inevitably losing again with exactly the same catastrophic effects on it and its fellow OPEC members. 

At the very heart of Saudi Arabia’s problem is the collective self-delusion of those at the top of its government regarding the Kingdom’s key figures relating to its oil industry that underpins the entire regime. These delusions are apparently not discouraged by any of the senior foreign advisers who make enormous fees and trading profits for their banks from Saudi Arabia’s various follies, most notably oil price wars. 

It is, in the truest sense of the phrase, a perfect example of "The Emperor's New Clothes", although in this case, it does not just pertain to Crown Prince Mohammed bin Salman (MbS) but to all of the senior figures connected to Saudi Arabia’s oil sector. 

One of the most obvious examples of this is the chief executive officer of Saudi Arabia’s flagship hydrocarbons company, Saudi Aramco (Aramco), Amin Nasser, who said last week – bewilderingly for those who know even a modicum about the global oil markets – that Aramco is to go ahead with plans to increase its maximum sustained capacity (MSC) to 13 million barrels per day (bpd) from 12.1 million bpd.

Several comments:

• Saudi's words mean nothing; let's see what happens; 
• along that line, has Saudi ever succeeded in maintaining maximum sustained capacity at 13 million bbls?
• Saudi is firing a warning shot across the bow of the other OPEC members; if they don't fall in line with agreed-upon quotas, Saudi is ready to open the spigots again;
• Saudi is in a corner, in deep doo-doo; with Brent at less than half what Saudi needs to meet its government's budget, it doesn't have many options;
• this is the scary part: I'm not as sanguine as the writer of the linked article; I'm pretty sure "three's the charm" and a third opening of the oil spigots by Saudi and the US shale industry would pretty much be dead;

So, we'll see. 

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I'm No Good

I'm No Good, Amy Winehouse