And Russia's.
My thoughts are SA pushes this another 6 mos to 1 year.
Russia is also getting hurt by oil prices. 
Puty might just take things in to his own hands to affect oil prices.
Posted on 01/13/2015 10:39:27 AM PST by thackney
I've been in the oil patch for close to 30 years. During that time, I have seen oil price go down to about $10 per barrel, and I have seen the price rise to over $100 per barrel. I have seen the price swing for no reason at all. I have heard different bogeymen being blamed for changes in the oil price. Supply and demand are certainly part of the oil price equation, but speculation has been a major price driver for at least the last couple of years, beyond the S&D factors.
Right now, the Saudis are being blamed for, or accused of, intentionally dropping the price of oil to its present position.
Did no one listen to what the Saudi spokesman said? He said that Saudi Arabia is going to let the market set the price, and they will not unilaterally lower their production to stop the apparent free-fall of oil prices. In fact, he went further to say that Saudi Arabia won't cut production as part of a multilateral effort to stabilize oil prices.
I believe they are merely facing a grim reality. In the past, in order to moderate oil price swings, Saudi Arabia - as the world's largest producer - would drop oil production with promises from their OPEC partners to do likewise. The partners, time and again, were caught selling their product through clandestine channels, or even blatantly raising production publicly to increase their income before prices dropped further. The phrase "get while the gettin's good" comes to mind.
I believe that Saudi Arabia is just weary of being the only country/producer to attempt to moderate the swings, and that they are doing exactly what they said: They are letting the market set the price. After all, the Saudi Arabian oil production infrastructure is in place, and they can still make a profit even at half the price that oil is trading for today. The Saudi Arabian national economy may need higher prices, but the oil patch is still in the black, while other producers with higher production costs are going to feel the pinch long before the Saudis do.
One other item of note: US oil production is up about 1 million barrels per day, and the apparent world wide surplus is reported to be 2 million barrels per day. Why is no one suggesting that the US cut production to 2010 levels? Because the US is still a net oil importer is certainly one of the factors; however, if there is a world-wide oil glut, the increased US production must certainly take part of the blame for it.
Its the oil money that funds Islamic terrorism. Bomb their ass and take their gas.
Thanks!!! I greatly appreciate your willingness to answer energy questions here.
Fooooookin A!!! So now gasoline is going lo-sulfur too///with higher prices//// regulation for the sake of regulation/////just so these EPA numbnutz can justify their Federal paychecks
I always appreciate verifiable sources, so that later on, I can slap leftists down. :)
Reports I have read, place Saudi Arabias actual need for oil cost around $86-$88/bbl, to keep the government solvent.
I see it over $100 for income to match outgo. Less than that requires less government spending or continued spending of cash reserves, like they are now. It can only stay low so long before the reserves are gone.
http://graphics.wsj.com/oil-producers-break-even-prices/
Here’s a link to a similar chart... (I wished I’d noted the other one I saw... it was similar)
http://www.businessinsider.com/oil-cash-costs-2014-12
Nobody is going to shut production until they are losing CASH out of pocket. So far, the % of production under that threshold remains pretty small.
The SPR is nearly full.
How many days of OPEC imports do we need before it is enough?
My estimate of $141 BILLION was based on a $40/bbl deficit. Make it $60/bbl and it becomes $211 BILLION deficit a year.
Another $10/bbl drop in price would mean another $35 BILLION a year in deficit.
I've recently read that it was estimated that SA has about $900 Billion in cash reserves.
If we use your numbers of +$100/bbl need and see oil drop another $10/bbl, we could watch SA have a deficit of $21 BILLION A MONTH.
That eats into cash reserves rather quickly. In a little over 3 years time their reserves would be gone.
3 years might be a little ways away, but this dropping in oil has been going on for 6 months already.
I guarantee the bean counters are noticing.
3 years at this price will have Iran at war, Venezuela in rubble, and world demand over 100 MMBPD.
According to the website, the SPR currently has 696 million bbl. Capacity is 727 mmbbl
I call 95.7% almost full.
Do you disagree?
Good chart. Basically the marginal cost of production. Thanks.
And Russia's.
My thoughts are SA pushes this another 6 mos to 1 year.
Russia is also getting hurt by oil prices.
Puty might just take things in to his own hands to affect oil prices.
I meant the reverse. If production exceeds consumption someone is storing oil that is unsold to a final buyer. The sellers would seem to be courting buyers. The least friendly, least into long term purchase agreements, more remote producers would seem to be the ones needing storage. I’m just wondering who those might be.
One other item of note: US oil production is up about 1 million barrels per day, and the apparent world wide surplus is reported to be 2 million barrels per day. Why is no one suggesting that the US cut production to 2010 levels?
Nope.
I found this interesting, about 1-1/2 screens into the SPR page
Average price paid for oil in the Reserve - $29.70 per barrel
Most of it has been in there for a while.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCSSTUS1&f=W
For a while, it was filled by a Royalty-in-kind program. Instead of receiving 1/8 or so the value of offshore oil production, they took a share of the oil and put it into the SPR.
The Bush family?
I can't find anything real recent to show current numbers.
The downturn has been going on for about 6 mos now. It'll take a little while for todays production totals to become known. Also, it takes a little while for market conditions to affect the industry. We just started to see the beginning effects.
Until now, it's been a waiting game, to see what was going to happen. Companies have been reluctant to halt production in hopes that prices would rebound.
Once stopped, it's not as if production can be turned on to full speed in a matter of days.
Also, how much $$$ is invested into infrastructure and processing while prices are down??? It's kind of hard to pull the pin on multi billion $$$ projects, that are currently moving. But on the other hand, when prices are low, it's hard to spend capital that is no longer coming in.
A lot of gambling is going on right now. Everybody's watching to see who will blink first.
Shutting down now, could be costly if the downturn is short lived. On the other hand, the longer this goes on gets costlier.
US drilling, yes. Production from wells already drilled, no.
“I have doubts that all of Saudi’s production is really that low. They have started enhanced oil recovery on Ghawar years ago. They spent $17 Billion on Manifa for 900,000 BPD of heavy, sour (cheap) oil.”
They really are that low:
The Saudi oil minister al-Naimi’s interview in Argus Global Markets should send chills down the spines of oil producers. He noted that “sooner or later, however much they hold out” high cost oil projects such as wells in Brazil’s sub-salt offshore region, off the coast of west African, and in the forbidding Arctic would have to scale back in response to low prices. “Will this be in six months, in one year, two years, three years? God knows,” said Naimi. “I say Gulf countries, and particularly the kingdom, have the ability to hold out.”
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