Posted on 01/13/2015 7:38:27 PM PST by shepardspie33
Another day, another selloff for oil.
The catalyst Tuesday was talk from the United Arab Emirates’ oil minister, who said the Organization of the Petroleum Exporting Countries would stand firm on its November decision to keep output steady.
The comments dashed investor hopes that OPEC would relent and cut production in the face of a rout that has slashed U.S. oil prices 14% in the first eight trading days of the year and 57% since June.
The selling spilled into other commodities and the currency market. The price of copper, a commodity about which investors hold many of the same concerns regarding excess supplies, sank to a five-year low. The Russian ruble weakened against the dollar, falling closer to the record low the oil exporter’s currency hit last month.
Oil’s mounting losses are increasingly proving a drag on other commodities. Raw materials become cheaper to produce when energy costs fall, increasing supply at a time when sluggish economic growth is holding back demand. Many investors say they are pulling back on commodities because the indexes they track are so heavily weighted toward energy.
(Excerpt) Read more at wsj.com ...
Saudi Arabia and a lot of these Muslim countries are trying to destroy the U.S. oil producing industry. Yes they want the market share but they also hate the USA anyway so they have 2 reasons to do keep the market oversupplied so that the U.S. oil industry collapses.
Saudi Arabia and a lot of these Muslim countries are trying to destroy the U.S. oil producing industry. Yes they want the market share but they also hate the USA anyway so they have 2 reasons to do keep the market oversupplied so that the U.S. oil industry collapses.”
Yes, and meanwhile Putin and Iran are depleted of cash.
As for the US producers of oil, they need to reduce cost of production to compete with Saudi Arabia.
And that is how the oil market and capitalism should work.
It won’t hurt the U.S. oil industry. I’m all for them pumping away ... it’s great and I love those low prices!
There’s no media spin I’m going by ... I like the lower prices and I don’t like cartels controlling output. Pump it all and let the market decide the price!
You don’t understand anything about the economy . If it collapses everyone goes down. oh happy day gas is cheap but the economy collapsed and there are no jobs/sarcasm
whatever. i don’t care what you think
The economy is going to benefit by these lower prices. That’s not going to be a problem. You sound more like a person who own ox is being gored ... more than anything else.
The economy is going to do great with these lowered prices!
whatever you type means nothing to me. and you know you are nothing .so go attack someone else personally that cares about your personal attacks
“Pump it all and let the market decide the price!”
It ain’t that simple pal! We’ve gotten all the “easily recovered” oil in this country. The problem for us is that while we still have a lot of it, the costs to get it are today substantially higher in many cases than it is for the ME producers. The high world price for oil is one of the major reasons that we now have what we have. While like you, I am certainly enjoying the current lower cost of fuel, unless we have some substantial process improvements, we will be back up to $4 again in the not too distant future. Market forces are only part of the story when it comes to oil. Production cost trumps market forces. We are already seeing the slowdown in places like North Dakota.
Below I’ll reveal some things you probably don’t know about oil pricing — an explanation from the only guy who seems to get this: Warren Mosler, a former banker and ace hedge fund manager. He is also a pioneer of the school of macroeconomic thought called Modern Monetary Theory, or MMT.
Mosler recently wrote a series of brilliant posts about oil pricing.
First, you have to understand that the Saudis are the world’s swing producer and price setter. They supply the last 9-10 million barrels of crude oil consumed every day. “The Saudis don’t sell at spot price in the marketplace, but instead simply post prices for their customers/refiners and let them buy all they want at those prices,” Mosler wrote. “And most recently, the prices they have posted have been fixed spreads from various benchmarks, like Brent.”
So if they decide, as they have done, to sell at a discount and let refiners buy all they want, this drops the price for everyone, as buyers key off of Saudi pricing. These demands require suppliers to meet that price or leave oil unsold as long as the Saudis can meet the demand. Either way, the Saudi action creates a downward spiral in price as they continue to offer a discount.
Meanwhile, the demand for oil has been steady, Mosler shows, indicating no “supply glut” but instead a reaction to Saudi pricing. Thus, oil prices won’t go higher, until:
1) The Saudis raise their price or
2) Physical demand goes up beyond the Saudis’ capacity to increase production.
“The Saudis never ‘cut production,’” Mosler notes. “They just set price and let the world buy what it wants at their price. No one seems to know that. As no one ever asks if they are going to raise the price.”
The Saudi oil minister, Ali al-Naimi, told the world exactly this.
He said the Saudis would not cut production “whatever the price is.” “Whether it goes down to $20, $40, $50, $60, it is irrelevant,” he said in a recent interview. Saudi Arabia and other Gulf oil producers have super-low costs of $4-5 a barrel.
The secondary effect of [lower oil prices] is that it helps make the U.S. dollar stronger.
The Saudis have the world’s oil markets by the tail. Unless one (or both) of those two things noted above happens, it is hard to imagine a scenario where oil prices get back anywhere near $100 a barrel, or even $80.
So I’d say plan for oil prices to stay lower for longer than you think
What attack are you talking about?
Production costs are part of market forces .... and in the end it will balance out on its own.
Yes I agree. good analysis and link
While that is true, the Saudis have a lot of money and are able to sell below their cost of production for an extended period of time, if it will destroy their competitors. And we are their competitors whom they want to continue to control for their own nefarious reasons. In order to make sure that our newly-found oil extraction technologies survive, we may need to have a two tiered pricing scheme so while we may not have rock bottom fuel prices, we will have the ability to continue to recover our own oil. Simplest mechanism would be to put an import tariff on ME oil. We are just starting to emerge from our twenty year sleep on oil E&P. We need to drive a stake in the ME oil countries ability to control our politics and use our money to fund Islamoterrorism. We should be at war with Saudi Arabia, not kissing their worthless fat-assed king's ring!
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