OPEC’s Biggest Fear Is Becoming A Reality

U.S. oil drillers are no longer sitting in the trenches, waiting for the pandemic storm to pass. They are once again in growth mode, according to the first-quarter energy survey by the Dallas Federal Reserve. As oil prices rebound, activity in the oil patch is expanding, respondents to the Dallas Fed Energy Survey said. And it is expanding strongly: from a reading of just 18.5 for the fourth quarter of 2020, the business activity index of the survey soared as high as 53.6 over the first quarter of this year.

The data supports evidence from other agencies: the number of active drilling rigs is steadily rising. So is production: according to the latest weekly report by the Energy Information Administration, oil production last week averaged 11 million bpd. That’s still 2 million bpd below the average for this time last year, but above the average for a week earlier and the four-week average for the period ending on March 19. The signs seem to point to what OPEC feared the most: U.S. shale is returning.

Capital spending is returning, the Dallas Fed reported in its survey. From an index of 12.5 for the fourth quarter of 2020, it has now gone up to 31. What’s more, the industry is upbeat about the future, too, planning to boost spending further next year.

In a bit of bad news, costs are also on the rise, the Dallas Fed said. On the flip side, jobs are returning to the oil patch, mostly in oilfield services, thanks to renewed drilling activity. The index for OFS jobs stood at 23.5 in the first quarter, although for exploration and production companies, it stood at just 1..

I meant that

1. The USA is self-sufficient in petrol. This cuts off a huge market for Saudis/Iranians
2. India and China aren’t self-sufficient, but if they move faster into renewables, they will not need the Saudis/Iranian oil.

Win-win

China may well be investing in these things but ultimately this will not effect the course that SA and Iran were already on due to the Chinas BRI & 21st Century Maritime Silk Road plans.

Russia has been increasingly providing oil and gas to China and as an allied and supporting player in the BRI will likely ramp up deliveries to meet whatever Chinas energy demands are going to be. China is not likely to reneg on present plans nor is Russia likely to throttle supplies as both are engaged in a plan to undermine the dollar as the worlds reserve currency. Foreign Minister Lavrov has openly discussed this with the media with their efforts costumed as self defense against possible American sanctions.

Iran is also a supporting player in the BRI and China and Iran have already signed an 25 year oil agreement between them with Iran likely to increase supplies as necessary to support any long term interests of the Chinese. As a major BRI hub Iran is planning on flourishing awash in Chinese money. As the BRI is anticipated to support and develop Africa through the MSR it is likely that any Iranian surplus production beyond what China needs will increasingly be sent to those nations to supplement Chinese development in Africa.

Whether intentional or not, SA has had no future for a long time which is likely part of the reason for Trumps visits to them and SAs efforts to change the goods and services their economy is built on.

While the BRI is normally thought of as a Chinese plan it is in fact the efforts of a new Triple Axis that most of the world is pretending doesnt exist.

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