Posted on 08/07/2015 10:49:54 AM PDT by bananaman22
Saudi Arabia has long enjoyed the status of being the top crude oil exporter in the world. With record production of 10.564 million barrels per day in June 2015, Saudi Arabia has been one of the major driving forces behind the current oil price slump.
The Saudis have kept their production levels high since last year in order to drive other players (especially U.S. shale drillers) out of business. Equally clear is the fact that this strategy of maintaining the glut and driving out rivals hasn’t worked so far.
Even when we look at the refining sector, we see that the oil kingdom has been following a similar strategy of flooding the markets with refined fuel. The Saudis have already sparked an oil price war with the Asian refiners downstream by offering close to 2.8 million barrels of low sulfur diesel to the European and Asian markets. This has caused Asian refining margins to fall drastically, the effects of which can ironically now be seen on Saudi Arabia itself.
(Excerpt) Read more at oilprice.com ...
good
It could implode and crush the royal family soon
The Sauds have now another reason to keep the price down and that is to minimize Iranian oil income now that Obama has opened up the market to the Iranians again.
Not soon. It would take a couple years at today’s “low” oil prices and their spending to use up their cash reserve.
Several other oil producing countries will fall apart first.
When a country is facing economic ruin and perceives another country to be responsible, do you know what happens?
They don't go down without a (literal) fight.
You’re spot on there.
Russia is feeling a lot more pain than Saudi Arabia does. Their foreign currency reserves are still enormous
Conventional wisdom is that “The Saudis have kept their production levels high since last year in order to drive other players (especially U.S. shale drillers) out of business.”
That is a very simple way of looking at it, there is an alternative theory that the Saudis are keeping prices low to destabilize the Iranian economy and weaken there insurgency actions in the regions, specially in Syria and Yemen.
I agree with your view.
Russia and Iran have governments and economies that are more dependent on higher oil prices than the Saudis.
I think Venezuela will fall apart first. Russia has other incomes. Nigeria may fold up, but I’m not sure we will be able to tell the difference.
“It could implode and crush the royal family soon”
Never happen. The Royal Family will be living high in Vienna with the family cash safely stashed when the kingdom is overrun by Allah’s army.
While I agree with what you said, I don’t believe it is going to come to that in the next decade. Long before Saudi would “fall”, others would collapse dropping oil supply and increasing prices.
This is a from late last year I think, but most of this is still in reason.
http://graphics.wsj.com/lists/opec-meeting
Algeria
Oil price needed to balance fiscal 2015 budget:
$130.50
Angola
Oil price needed to balance fiscal 2014 budget:
$98.00
Ecuador
Oil price needed to balance fiscal 2015 budget:
$79.70
Iran
Oil price needed to balance fiscal 2015 budget:
$130.70
Iraq
Oil price needed to balance fiscal 2015 budget:
$100.60
Kuwait
Oil price needed to balance fiscal 2015 budget:
$54.00
Libya
Oil price needed to balance fiscal 2015 budget:
$184.10
Nigeria
Oil price needed to balance fiscal 2015 budget:
$122.70
Qatar
Oil price needed to balance fiscal 2015 budget:
$60.00
Saudi Arabia
Oil price needed to balance fiscal 2015 budget:
$106.00
United Arab Emirates
Oil price needed to balance fiscal 2015 budget:
$77.30
Venezuela
Oil price needed to balance fiscal 2015 budget:
$117.50
Note that in addition to the cash flow issue created by spending and oil price, you also have to consider financial strength before the price drop including cash reserves. That is where Saudi Arabia is strongest of the bunch.
As usual, I agree with your assessment.
My point is that the Royal Family is independent of the country inasmuch as their wealth is guaranteed over the past 40 years of imposing ridiculously high prices for a commodity that is intrinsically worth far less than its price sold on the market, a phenomena we are now witnessing firsthand.
“Russia has other incomes.”
Other than the export of resources, what incomes does Russia have? I have not heard of any.
Oil is 40% of their exports, but refined products another 15% and Gas almost 10%. Those total a bit higher than I expected but significantly more “other” incomes compared to the OPEC nations I would expect to fall apart first.
https://atlas.media.mit.edu/en/profile/country/rus/
- - - - - - -
The Russian federal budget deficit for 2015 is expected to be $40 billion — equivalent to 3 percent of the country’s gross domestic product,
https://www.stratfor.com/analysis/budget-debates-reveal-russias-weakness
Moreover, according to the state-owned Vnesheconombank, the Kremlin is skimming $12.6 billion from the Russian state pension fund
Sorry, I meant to include with the first link:
Russia is the top exporter of Raw Aluminium, Semi-Finished Iron, Nitrogenous Fertilizers, Sawn Wood, Mixed Mineral or Chemical Fertilizers, Copper Wire, Raw Nickel, Rough Wood, Precious Metal Compounds, and Pig Iron.
those seem to be all natural resources, other than the small amount of working to generate fertilizers, copper wire and pig iron.
Russia is totally dependent upon its resources, so someone must purchase them in order for it to remain solvent.
There is not middle class, or software companies, or elite manufacturing centers like the USA or Europe or Asia(except middle class) have.
Pretty much the case for all business all over the world. Maybe I'm missing your point.
Exporting raw aluminum is in a sense the export of energy, since aluminum is one of the most abundant elements in Earth’s crust, but takes a huge amount of energy to convert to metallic form.
Not quibbling with you here. Great info as usual, thanks. Just making an observation.
The tell will probably be an increase in Nigerian government ministers asking via email for help moving cash out of the country :-)
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