Monday, March 5, 2018
Saudi's Foreign Exchange Reserves Take An Unexpected Dip -- March 5, 2018
Updates
March 9, 2018: Kemp must be reading the blog. I assume he has posted this data before but if he has, I have not seen it before. But now, after my monthly reporting of this data, his most recent post jumped out at me:
Story lines:
- Saudi reserves were already dropping significantly by the time Saudi reacted with flooding the market with oil, hoping to "break" US shale
- we will never know how "bad" it would have gotten for Saudi if they had not announced they were going to open the spigots
- it is interesting: I think "we've" all forgotten the reason Saudi said they were opening their spigots; I do distinctly remember that the Saudis said it was not in reaction to US shale, and that they were not doing this to "break" US shale; I think they said they were trying to get the attention of the Iranians, which, in hindsight, seems an incredibly weak argument
- look how long it took for the "recovery" even after Saudi said they would cut production
- even with the cut in production and the "shakedown of the sheiks," the recovery is not particularly noteworthy
March 6, 2018: Saudi Arabia cuts price on its oil. Trying to re-grab market share. Good old "free markets." From Bloomberg via Rigzone:
Saudi Arabia cut pricing for Arab Light crude to Asia for the first time in eight months, a sign that the world’s largest oil exporter is fighting harder for sales in its biggest market.
State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude for April shipment by 55 cents to $1.10 a barrel more than the Middle East benchmark, the company said Monday in an emailed statement. It’s the first cut since August. Aramco had raised its January pricing to the highest since 2014 and kept it there for the next two months. The producer, known as Saudi Aramco, was expected to lower pricing by 45 cents a barrel, according to a Bloomberg survey.
Original Post
Well, well, well, isn't this interesting. Just when it appeared that Saudi Arabia had turned the corner with regard to "foreign exchange reserves," a small hiccup, as they say.
In September, 2017, Saudi's foreign exchange reserves hit a recent low but then gradually increased (coincident with a number of things, including a shakedown of a hundred or so Saudi princes, but that's another story for another day).
Saudi's foreign exchange reserves showed a small increase over the next three month, but then, in January, 2018, the most recent month for which we have data, foreign exchange reserves fell. Considering that the price of oil has trended upward this past month, the decrease was unexpected. See chart below at this link:
Foreign Exchange Reserves in Saudi Arabia decreased to 1854380 SAR Million in January from 1861588 SAR Million in December of 2017. Foreign Exchange Reserves in Saudi Arabia averaged 2209808.62 SAR Million from 2010 until 2018, reaching an all time high of 2796941 SAR Million in August of 2014 and a record low of 1569145 SAR Million in April of 2010.
Update On Shell's Whale Of A Discovery -- March 5, 2018
On February 1, 2018, this post at the blog:
Peak oil? What peak oil? I assume this is a different "major" oil discovery than the one reported earlier today. From a press release:
Shell today announced one of its largest U.S. Gulf of Mexico exploration finds in the past decade from the Whale deep-water well. The well encountered more than 1,400 net feet (427 meters) of oil bearing pay. Evaluation of the discovery is ongoing, and appraisal drilling is underway to further delineate the discovery and define development options.
Today, from oilprice.com:"Deep water is an important growth priority as we reshape Shell into a world-class investment case," said Andy Brown, Upstream Director for Royal Dutch Shell. "Today's announcement shows how, through exploration, we are sustaining a strong pipeline of discoveries and future projects to sustain this deep-water growth."Whale is operated by Shell (60%) and co-owned by Chevron U.S.A. Inc. (40%). It was discovered in the Alaminos Canyon Block 772, adjacent to the Shell-operated Silvertip field and approximately 10-miles from the Shell-operated Perdido platform.And, look at the thickness of this play: more than 1,400 net feet. Compare that to the earlier story being reported by Chevron: 670 net feet of play.
Shell’s aggressive bidding, especially on the blocks in the Perdido area next to the U.S. border, puzzled some analysts and observers.
But Shell knew something that its competitors did not. Six months earlier, Shell had made a large deepwater oil discovery on the U.S. side of the Perdido area. Since oil firms are not legally obliged to announce discoveries, Shell postponed the announcement of the discovery until the day of the Mexican auction, as it wanted to secure the adjacent blocks in the Mexican waters.
While the cat was out of the bag as early as in July 2017, Shell issued the official announcement about the Whale discovery in the U.S. Gulf of Mexico on January 31, 2018—the day on which Mexico held its deepwater auction and all bids had already been submitted.
In the six months following the Whale discovery—which Shell described in the January release as “one of its largest U.S. Gulf of Mexico exploration finds in the past decade”—the oil major had the time to additionally study the geology of the Whale. It was also such good fortune that Mexico was offering Perdido areas in its deepwater auction. So Shell—hoping that the Mexican blocks would have geological characteristics similar to Whale’s and could hold more oil—moved on to secure most of the adjacent blocks.
Commenting on the timing of the Whale announcement, Andy Brown, Upstream Director at Shell, told Reuters:
“Post the Whale discovery we had some geological insights. It is not by accident we didn’t announce it until the day of the bid.”
The Political Page, T+5 -- March 5, 2018
The top cable cable news shows for February, 2018: this is a watershed report considering all this going on. Two takeaways:
From the linked article:
- Rachel Madcow dropped to 3rd place in the "demo period" after being #1 in the prior period
- Fox & Friends (6 – 9 a.m.) marked 196 straight months as the most-watched morning show on cable news.
From the linked article:
The telecast, nearly four hours long, stumbled 19 percent from the previous year to 26.5 million viewers. That's easily the least-watched Oscars in history, trailing 2008 by more than 5 million. Overnight returns had the lengthy ABC telecast averaging a 18.9 rating among households between 8 and 11 p.m. ET. Compared to the same stat for 2017, the night the wrong best picture winner was named, that was down a more modest 16 percent.
The 2017 Academy Awards, which earned a 22.4 overnight rating, ultimately fetched 32.9 million viewers for ABC — as well as a handsome 9.1 rating among adults 18-49. Still, those numbers reflected the second-lowest in Academy history. (ABC did not immediately report the adults 18-49 rating for Sunday's Oscars, and Nielsen won't widely distribute that information until Tuesday.)
The night was not as political as many recent award shows, with showings of partisanship few and far between. [But the damage was already done. Like NFL football games, the anticipation of the event outdoes the event itself.]Ten top reasons why the Oscars crashed and burned:
10. Very few A-list actors actually bothered to attend
9. Families no longer dare watch (as families): parents never know when PG will go to R (or worse)
8. Quick! Name three of the best movies nominated
7. Best actress nominee likely to win: her character, non-stop x-rated language
6. Meryl Streep
5. Meryl Streep
4. #MeToo -- that's not why we tune in
3. Way too political; Trump now has 49 - 50% approval ratings; half the audience that might have tuned in, tuned out
2. Kimmel: can see him every night on late night television
1. Kimmel: no pizzazz (think Billy Crystal)
So Much For All That Talk That A "Trade War" Would Kill Oil Prices And The Equity Market -- March 5, 2018
Making America great again: heavy-duty truck orders soared 76% in February. Analysts raise production targets for the year (and this is only February data) as strong shipping demand boosts outlook for truck makers. Seventy-six percent rounded up is one-hundred percent, and a one-hundred percent increase in anything is a "doubling." We've talked about this a number of times in the past few months. From The WSJ:
The anticipated four "Fed" rate increases will have a bigger effect on the equity market than the cost of aluminum foil wrapping Hershey Kisses. Beer? The cost of aluminum in an aluminum can? Half a cent. Price for a 12-ounce can of beer: $1.50+ (north Texas, 6-pack, neighborhood stores)
The latest GDP forecast for 1Q17 jumped from 2.6% to 3.5%. Previously posted.
"Arctive" rigs:
Four new permits:
No permits canceled.
No producing wells (DUCs) reported as completed.
That's all.
State employees were released at 3:00 p.m. due to Arctic storm bearing down on north-central US.
North American fleet owners last month ordered 40,200 Class 8 trucks, the vehicles used to haul goods long distances, a 76% jump compared to the same month in 2017, according to preliminary figures from freight analysts FTR.
Trucking companies that held back on deciding whether to upgrade or expand fleets in the fall, as freight demand accelerated, now are racing to reserve slots on production lines. Truck orders hit a nearly 12-year high in January, when freight prices soared as shippers scrambled to find capacity amid the tightest trucking market in years.Fake news: I guess folks didn't believe the news that a 10% tariff aluminum would kill off aluminum-wrapped Hershey's Kisses and Life-Savers (or perhaps they know Congress will thwart Trump's plans).
The anticipated four "Fed" rate increases will have a bigger effect on the equity market than the cost of aluminum foil wrapping Hershey Kisses. Beer? The cost of aluminum in an aluminum can? Half a cent. Price for a 12-ounce can of beer: $1.50+ (north Texas, 6-pack, neighborhood stores)
The latest GDP forecast for 1Q17 jumped from 2.6% to 3.5%. Previously posted.
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Back to the Bakken
"Arctive" rigs:
| $62.61↑↑ | 3/5/2018 | 03/05/2017 | 03/05/2016 | 03/05/2015 | 03/05/2014 |
|---|---|---|---|---|---|
| Active Rigs | 61 | 45 | 35 | 113 | 192 |
Four new permits:
- Operators: WPX (3): Eagle Operating
- Fields: Spotted Horn (McKenzie); Wildcat (Renville)
- Comments: Eagle Operating's wildcat is Popinga 32-16, a vertical well; a Madison well; back in 1990 a dry well was drilled in this same section; Eagle Operating has another "location" in the section immediately to the north;
No permits canceled.
No producing wells (DUCs) reported as completed.
That's all.
State employees were released at 3:00 p.m. due to Arctic storm bearing down on north-central US.
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