Replies to This Discussion

Permalink Reply by Clyde T. Williams on December 18, 2014 at 7:06

It is not all of OPEC

KSA (Saudis), Kuwait, and UAE are killing several competitors (Russia/Nigeria for European markets) and "enemies" (=Iran and lesser Iraq/Kurdistan)...

When in KSA, Kuwait, and 12 years in UAE commonly mentioned costs of crude on board in Gulf was $10-12/bbl plus inflation let's say $20/bbl now in the tanker ready for transport...so the Arab Gulf OPEC members have had the historic problem of income redistribution and they invested ALOT outside of the Gulf.  

By holding prices down, 1.  they are hammering IRAN and punishment for their various adventures in Sunni countries , 2.  punishing the Iraqi Shia and Kurds, and 3. re-capturing European markets from the Russians and Nigerian suppliers....and OBTW they are probably hammering some of the US-Shalers low cost competitors that they don't own or bank-roll...especially as the Fed starts talking interest rate increases...OPEC has a sword with many edges when they decide to swing it...

and don.t worry - they have lots of stacked conventional plays and they are learning all about fracking and are experienced with who are best HFers in Eagleford, Barnett, and Bakkens...but at $20/bbl why worry about that til the market recovers.

• ▶ Reply

Permalink Reply by DellP on December 18, 2014 at 11:20

CTW,
  I don't see Saudi recovery at all, due to fracking making entire nations & regions energy independent.

• ▶ Reply

Permalink Reply by William C. Morrison on December 19, 2014 at 6:30

Of course, Nigeria, Venezuela and Iran are active members of OPEC.  What he means to say is that Saudi Arabia, UAE, etal are taking on all the rest of the players including the US, Russia and Brazil.  No love lost for the Russians which are in the toilet now, others like Venezuela are on the edge.  Nigeria will be hurt, but they hurt themselves all the time with constant warring factions and petty satraps running the place.  Small operators will be hurt, fail or be gobbled up.  Drilling will slow down (and maybe that is a good thing to conserve a bit of our resources).  The economy should go up.  Washington took energy out of the inflation formula and now wish they had left it in. 

I would call this a petroleum correction, like the stock market calls their retrenchments.  Part of the cycle.  Do I like it, no.  But its happening.

• ▶ Reply

Permalink Reply by Clyde T. Williams on December 19, 2014 at 6:47

Really no love lost on the effects on Iran just across the Gulf from KSA, Kuw, and UAE.   Iran has been and now is even more of a basket case than Russia...worked in UAE for 10+ years..

Gulf arabs are probably concerned about short-timers and competitors for the European market

I think that it is natural and good for getting rid of the FlyByNights and giving better position for more efficient and better companies, ala George Mitchell's concerns on frackers.

Feds and low interests helped 5 years ago...and now the ???? is Fed repeals of the Jones Act/USFlagTankers and Crude Bans...Any ideas???

I kind of like the corrections in that stock prices are better than 90 days ago and can better bottom-feeding for those that have survived...  Tom

• ▶ Reply

Permalink Reply by William C. Morrison on December 19, 2014 at 9:42

Yes, I am well aware there is no love lost between KSA, Kuw and UAE and Iran.  That is why we sold long range F-16s to the UAE.  Those jets can reach out a very long way and had the most advanced fire control and avionics suite of any F-16 including US and Israeli versions.  KSA has F-15s.  Iran has aging F-4s and maybe some F-14s that can still fly.  Kind of a balance of power over the Straits of Hormouz,

No idea where this current drop in oil prices is going.  Saudis started it, it is said they can last a long time with the reserves of cash on hand.  Iran can not, Venezuela can not, Russia can not and who knows what goes on in Nigeria.

A true monkey wrench has been thrown into the mix.

• ▶ Reply

Permalink Reply by DellP on December 19, 2014 at 11:13

Add to that that the drilling in Ukraine and Egypt will likely go forward as planned, using latest technologies.

• ▶ Reply

Permalink Reply by Lerret on December 19, 2014 at 16:52

Venezuela is likely to collapse into civil war.  If it cuts off their oil supply prices will rebound somewhat.  And Obama just saved Cuba's heinie by opening more trade potential as Venezuela was providing aid to Cuba which is likely not possible now.

• ▶ Reply

Permalink Reply by DellP on December 19, 2014 at 17:05

 OPEC cuts production or raises cost, then they'll lose market share (stiff competition). 

• ▶ Reply

Permalink Reply by John Brewster on December 22, 2014 at 4:17

I agree with Boone and that is why I cannot see this dramatic downturn continuing for many months. In 3 more months, those economies will be suffering greatly and the public outrage will approach rebellion levels. OPEC will be under tremendous pressure to cut production or face deadly retribution - especially from Russia.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on December 22, 2014 at 7:41

Saudi Arabia has a big cash cushion and some of the lowest cost to produce a barrel.  They can go several years at current prices, and lower.  They will not cut production until others, OPEC or non-OPEC countries, do.  The others can't afford to cut production.  It will take many months for the current over supply to be balanced by economic recovery in the major consuming countries that make up the global crude market.

• ▶ Reply

Permalink Reply by William C. Morrison on December 22, 2014 at 7:51

It is said that Saudi Arabia has reserves that will cover them for two or more years.  Their big concern is market share and they will do what they have to do maintain that market share.  They also have no love lost for Iran, so if it hurts Iran, well that is good thing.  We do know it is hurting Russia (no love lost by any body), Venezuela, Nigeria.  Nigeria is already unstable and Venezuela could fall into civil war at any time.  It is an industry wide shake out and the US is the beneficiary with the exception of the oil patch.

• ▶ Reply

Permalink Reply by DellP on December 22, 2014 at 14:19

Think maybe Saudis are scared to death of losing US-NATO protection and security, falling into the hands of radicals, therefore cutting prices to the bone, now threatening to hike production, in order to try and resolve the marriage? 

• ▶ Reply

• ‹ Previous
• 1
• 2
• Next ›
• Page