You Can't Make This Stuff Up

[Chris Coles]

Re: You Can't Make This Stuff Up

If they need dollars, they can get from the Fed.

Personally my instincts tell me that they are beginning to experience dry wells and everything else requires investment of income that is also drying up.

[thriftyandboringinohio]

Re: You Can't Make This Stuff Up

Personally my instincts tell me that they are beginning to experience dry wells and everything else requires investment of income that is also drying up.

I am willing to argue the other side, just as a way to examine the premise.

Last year there was discussion that the Saudis were increasing production and accepting lower oil prices intentionally.
That thinking pointed to new supplies coming online elsewhere and declining growth in global petroleum demand per capita.
At that time it was said the Saudis felt they had so much oil in reserve that some of it might never ever be sold. KSA was willing to move it out of the ground now at a low price rather than never sell it all.
That thinking painted KSA as sitting on vast reserves with very low lifting costs, putting them in the position to undersell every other producer and maximize total revenue.
Here's a Bloomberg article from 2018 that's related https://www.bloomberg.com/news/artic...duction-pledge

I'm not an oil industry expert, and wouldn't know where the truth lies. But it's interesting to see these two hypotheses back-to-back.
They can't both be true.

[Chris Coles]

Re: You Can't Make This Stuff Up

I am willing to argue the other side, just as a way to examine the premise.

Last year there was discussion that the Saudis were increasing production and accepting lower oil prices intentionally.
That thinking pointed to new supplies coming online elsewhere and declining growth in global petroleum demand per capita.
At that time it was said the Saudis felt they had so much oil in reserve that some of it might never ever be sold. KSA was willing to move it out of the ground now at a low price rather than never sell it all.
That thinking painted KSA as sitting on vast reserves with very low lifting costs, putting them in the position to undersell every other producer and maximize total revenue.
Here's a Bloomberg article from 2018 that's related https://www.bloomberg.com/news/artic...duction-pledge

I'm not an oil industry expert, and wouldn't know where the truth lies. But it's interesting to see these two hypotheses back-to-back.
They can't both be true.

Agreed, my thoughts are entirely instinctive. Almost every tanker passing through the Straits of Hormuz, since the 1950's, has carried Saudi oil. At some point the wells must run dry. Admittedly, just an instinctive thought that stemmed from watching these people talking about anything other than the production of oil.

[thriftyandboringinohio]

Re: You Can't Make This Stuff Up

Agreed, my thoughts are entirely instinctive. Almost every tanker passing through the Straits of Hormuz, since the 1950's, has carried Saudi oil. At some point the wells must run dry. Admittedly, just an instinctive thought that stemmed from watching these people talking about anything other than the production of oil.

Thanks Chris. There are other plausible explanations. The conversations you overheard may be a result of something else entirely.
KSA can run out of spare cash despite receiving typical oil revenue levels.

Thanks for your fascinating first-hand reports of unguarded comments from Saudi insiders .

[santafe2]

Re: You Can't Make This Stuff Up

More than a decade after this thread was started, Saudi Arabia, even with it's celebrity "reformer ()" Crown Prince, continues to be a source of amusing material. Who knows maybe the fawning Friedman might write an Op Ed column on such remarkable progress in our now flat world?

It's progress I suppose when your system stops dismembering women for not living up to marital expectations and saves that honor for a WAPO reporter and anyone involved with the WAPO reporter's demise or anyone opposed to the WAPO reporter's dismembering. Yup, amazing progress.

[GRG55]

Re: You Can't Make This Stuff Up

I am willing to argue the other side, just as a way to examine the premise.

Last year there was discussion that the Saudis were increasing production and accepting lower oil prices intentionally.
That thinking pointed to new supplies coming online elsewhere and declining growth in global petroleum demand per capita.
At that time it was said the Saudis felt they had so much oil in reserve that some of it might never ever be sold. KSA was willing to move it out of the ground now at a low price rather than never sell it all.
That thinking painted KSA as sitting on vast reserves with very low lifting costs, putting them in the position to undersell every other producer and maximize total revenue.
Here's a Bloomberg article from 2018 that's related https://www.bloomberg.com/news/artic...duction-pledge

I'm not an oil industry expert, and wouldn't know where the truth lies. But it's interesting to see these two hypotheses back-to-back.
They can't both be true.

As some of you will know from prior posts I have long maintained OPEC has no ability to prop up oil prices on a sustainable basis, and the power ascribed to the cartel was vastly overblown.

After the OPEC+ meeting yesterday Saudi will have an opportunity to show us how they want to play this. It is going to have great difficulty with the current price of oil on global markets. And one should not underestimate the USA's technical, financial and political responses to whatever Saudi Arabia decides to do.

https://www.nytimes.com/2020/03/06/business/opec-oil-prices-russia.html

Oil Prices Nose-Dive as OPEC and Russia Fail to Reach a Deal

Oil prices plummeted on Friday after major producers failed to reach an agreement to reduce production, as concerns about coronavirus’s impact on the economy spread across the globe.

The meeting was supposed to reflect Saudi Arabia’s deft management of an oversupply of oil on world markets. But Russia’s unwillingness to go along with a take-it-or-leave-it offer threatens to unleash a gusher of oil on world markets — good news in the short term for consumers, with severe financial costs for the industry...

It's progress I suppose when your system stops dismembering women for not living up to marital expectations and saves that honor for a WAPO reporter and anyone involved with the WAPO reporter's demise or anyone opposed to the WAPO reporter's dismembering. Yup, amazing progress.

Hmmm. Charges of treason. I wonder if the bone saws are going to be reactivated...
Reports coming from the Gulf that other senior officials and military officers are also now being rounded up.

https://www.aljazeera.com/news/2020/...044407462.html

Saudi Arabia detains king's brother, nephew in crackdown: Reports

Reported detentions mark latest crackdown by Crown Prince Mohammed bin Salman, the kingdom's de facto ruler.

Saudi Arabia has detained two senior members of the royal family - Prince Ahmed bin Abdulaziz, the younger brother of King Salman, and Mohammed bin Nayef, the king's nephew - according to reports citing sources with knowledge of the matter.

The Wall Street Journal reported the detentions of the two royals on Friday and said they related to an alleged coup attempt. Bloomberg also reported the detentions, quoting a source as saying that the pair were accused of "treason"...

[Polish_Silver]

GRG bullseye!

As some of you will know from prior posts I have long maintained OPEC has no ability to prop up oil prices on a sustainable basis, and the power ascribed to the cartel was vastly overblown.

A

Oil Prices Nose-Dive as OPEC and Russia Fail to Reach a Deal

Have to say I agree totally with this based on the last 10 years of experience.
It seemed like when EJ was touting "peak cheap oil" that GRG did not speak up enough.

OPEC seemed high and might during 1971-1979, but that might have been a very exceptional time.
I once asked GRG if oil supplies were less elastic to price than other mineral commodities, and he said no, they were not less elastic.
Last 10 years seems to prove him right.

A year ago I talked with co-worder from Columbia. He told me that, by some measures, Venezuela has more oil reserves than Saudi Arabia. (much of these are "non conventional". ) The current government is so inept they cannot operate the oil wells, the result of which is to plunge the nation into poverty and create a refuge crisis in the region. ( so much for physical resources making a nation wealthy)
Interesting to think what oil prices would be if Venezuela was back at full mast !

I invested based on "peak cheap oil" and lost money that way. I'll try to never invest based on a "resource scarcity" thesis again!

[GRG55]

Re: You Can't Make This Stuff Up

As some of you will know from prior posts I have long maintained OPEC has no ability to prop up oil prices on a sustainable basis, and the power ascribed to the cartel was vastly overblown.

After the OPEC+ meeting yesterday Saudi will have an opportunity to show us how they want to play this. It is going to have great difficulty with the current price of oil on global markets. And one should not underestimate the USA's technical, financial and political responses to whatever Saudi Arabia decides to do...

And here we go...

One thing that may come out of this is the world will get to see just how much "production in reserve" KSA really has. If the Saudi's actually see this through this will be the last flush down for the cyclical decline in crude that started in May 2008. One of the most interesting times in Middle East politics. Russia and Saudi Arabia are on opposite sides of both the Iranian and Syrian situations. The Great Game, 21st century version, is afoot.

https://www.bloomberg.com/news/artic...-off-price-war

Aramco Slashes Crude Pricing, Starting Oil War as OPEC Flops

Saudi Arabia kick started an all-out oil war on Saturday, slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in an effort to push as many barrels into the market as possible.

The cuts in monthly pricing by state producer Saudi Aramco are the first indication of how the Saudis will respond to the break up of the alliance between OPEC and partners like Russia. Talks in Vienna ended in dramatic failure on Friday as Saudi Arabia’s gamble to get Russia to agree to a prolonged and deeper cut failed to pay off.

In the first major marketing decision since the meeting, the state producer lowered April pricing for crude sales to Asia by $4-$6 a barrel and to the U.S. by $7 a barrel, according to a copy of the announcement seen by Bloomberg...

...Pricing to Northwest Europe and to the Mediterranean region will be cut by between $6-$8 a barrel. Aramco made the biggest cut for crude delivered to northwest Europe, where the $8 a barrel reduction in most grades to the region amounts to a direct challenge to Russia, which sells a large chunk of its flagship crude Urals in the same region.

With Aramco selling Arab Light at an unprecedented $10.25 a barrel discount to Brent in Europe, the kingdom is mounting a direct challenge to Urals...

[jk]

Re: You Can't Make This Stuff Up

And here we go...

One thing that may come out of this is the world will get to see just how much "production in reserve" KSA really has. If the Saudi's actually see this through this will be the last flush down for the cyclical decline that started in May 2008. One of the most interesting times in Middle East politics. Russia and Saudi Arabia are on opposite sides of both the Iranian and Syrian situations. The Great Game, 21st century version, is afoot.

https://www.bloomberg.com/news/artic...-off-price-war

Aramco Slashes Crude Pricing, Starting Oil War as OPEC Flops

Saudi Arabia kick started an all-out oil war on Saturday, slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in an effort to push as many barrels into the market as possible.

The cuts in monthly pricing by state producer Saudi Aramco are the first indication of how the Saudis will respond to the break up of the alliance between OPEC and partners like Russia. Talks in Vienna ended in dramatic failure on Friday as Saudi Arabia’s gamble to get Russia to agree to a prolonged and deeper cut failed to pay off.

In the first major marketing decision since the meeting, the state producer lowered April pricing for crude sales to Asia by $4-$6 a barrel and to the U.S. by $7 a barrel, according to a copy of the announcement seen by Bloomberg...

...Pricing to Northwest Europe and to the Mediterranean region will be cut by between $6-$8 a barrel. Aramco made the biggest cut for crude delivered to northwest Europe, where the $8 a barrel reduction in most grades to the region amounts to a direct challenge to Russia, which sells a large chunk of its flagship crude Urals in the same region.

With Aramco selling Arab Light at an unprecedented $10.25 a barrel discount to Brent in Europe, the kingdom is mounting a direct challenge to Urals...

grg, am i right to say "there goes the shale industry"?

[GRG55]

Re: You Can't Make This Stuff Up

grg, am i right to say "there goes the shale industry"?

The bifurcation that was already underway will be amplified. The overleveraged independents are going to suffer mightily. XOM, Chevron and the others with solid balance sheets are going to consolidate the play and set themselves up to be in the drivers seat in the Permian for the inevitable next upswing. Exxon may curtail spending a bit, but they are investing $ Billions, and the short term price cycles don't change their plans in big ways.

You might remember I posted that the XTO shale division of Exxon has a target of $15 per bbl to develop and produce in the Permian. They will get there quicker now. Most of OPEC can't survive at $20 crude (that's why MbS is turning Saudi back into a police state). Exxon will.

[jk]

Re: You Can't Make This Stuff Up

on when to buy:

https://adventuresincapitalism.com/2...y-goes-no-bid/

[GRG55]

Re: You Can't Make This Stuff Up

More progress!

From the May 2 edition of The Economist:

https://www.economist.com/middle-eas...stops-flogging

Reform, Saudi style
Saudi Arabia stops flogging
And vows no longer to execute people for crimes committed as children

...on April 25th the government banned flogging as a punishment, to the relief of blasphemers, adulterers and liberals. A day later it said it would stop executing people for crimes committed when they were children.

[shiny!]

Re: You Can't Make This Stuff Up

More progress!

From the May 2 edition of The Economist:

https://www.economist.com/middle-eas...stops-flogging

Reform, Saudi style
Saudi Arabia stops flogging
And vows no longer to execute people for crimes committed as children

...on April 25th the government banned flogging as a punishment, to the relief of blasphemers, adulterers and liberals. A day later it said it would stop executing people for crimes committed when they were children.

Well they're just going to hell in a handbasket now, aren't they? At least they're maintaining order with beheadings.

Seriously, it's about time!

[jpatter666]

Re: You Can't Make This Stuff Up

on when to buy:

https://adventuresincapitalism.com/2...y-goes-no-bid/

Fast comment on this. Harris Kupperman came to my attention via Bill Fleckenstein who once upon a time was a fan. After several very bad calls, Fleckenstein basically says do not believe *anything* that he claims. Having watched Kupperman's recommendations for several years (yes, I saw that post as well) I have to say there might be some interesting points in there, but leaven with a huge amount of salt.....