Posted on 03/06/2020 9:52:04 AM PST by Oldeconomybuyer
VIENNA - A three-year honeymoon between OPEC and Russia ended in acrimony on Friday after Moscow refused to support deeper oil cuts to cope with the outbreak of coronavirus and OPEC responded by removing all limits on its own production.
Oil prices plunged 10% as the development revived fears of a 2014 price crash, when Saudi Arabia and Russia fought for market share with U.S. shale oil producers, which have never participated in output limiting pacts.
Brent has lost about a third of its value this year, tumbling towards $45 a barrel, its lowest since 2017, putting oil-dependent nations and many oil firms under heavy strain as the global economy reels due to the virus outbreak, which has dampened business activity and stopped people traveling.
“From April 1 neither OPEC nor non-OPEC have restrictions,” Russian Energy Minister Alexander Novak told reporters after marathon talks at the OPEC headquarters in Vienna on Friday.
The failure of talks may have more far reaching implications as OPEC’s de facto leader Saudi Arabia and Russia have used oil talks to build a much broader political partnership in the last few years after effectively supporting opposite sides in the Syrian war.
“Russia’s refusal to support emergency supply cuts would effectively and fatally undermine OPEC+’s ability to play the role of oil price stabilising swing producer,” said Bob McNally, founder of Rapidan Energy Group.
(Excerpt) Read more at reuters.com ...
Novak pulls Reagan on Gulf states and US frackers. That’s unorthodox.
Hopefully the days of OPEC ruling over us, regarding energy, are over. And $2 gas may only be 2 weeks away.
There are a number of possible consequences actually, but cheap gas short to medium term is expected.
Winning.
How or why any person would say that Russia favored a Trump presidency is beyond me. It is beyond ignorant.
By unleashing fracking and American energy, Trump has effectively changed the world order that revolved around energy prices and OPEC.
Russia is very dependent on energy as the primary driver of their economy. Trump has weakened them because they have less ability to price to market today than they did only 3 years ago.
it’s every man for themselves time....
Did you read the article?
It’s already $1.92 here in Central Texas ... probably lower than that now ...
Prices will go up some for refineries making changes for summer blend.
When was the last time the price of oil dropped $4 in a single day? I don’t follow it too closely, that seems pretty volatile. The Dow Yo-Yo ing day to day with sub 1000 point swings is kinda wacky too. The 2008 debacle was pretty unnerving I remember that.
A three-year honeymoon between OPEC and Russia ended in acrimony on Friday after Moscow refused to support deeper oil cuts to cope with the outbreak of coronavirus and OPEC responded by removing all limits on its own production.
The last time we experienced a serious price crash after a long period of pretty high prices, a bunch of indie and small-chain stations vanished for good. The smaller drillers and frackers are going to vanish this time, and getting rid of fracking is an important goal for OPEC and Russia.
OPEC Has Already Turned to the Euro
GoldMoney Alert
February 18, 2004
...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.
2001
As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.
The world economy is weak while ours is strong and both will take a hit from the panic that is being generated by the media pimps.
The USA is far better positioned to withstand a financial hit than any other country.
Look at the job numbers for the past three months...outstanding.
With all of the crap, impeachment, virus, constant media bashing, the Trump economy just keeps rolling along.
American have always voted their wallet, and regardless of short term blips, they know that biden cannot keep the economy going like Trump has PROVEN he will do it.
Wish indices were as optimistic as you.
And in 2012 they were trying to tell us we were at peak oil...0
Economic hits are bad regardless of where you are, BUT if you are in the middle of an American economy, jobs growing, unemployment at all time low you can withstand a hit.
Will it be pleasant, hell no, but we will get through it.
The media generated panic is planned and they are trying to weaken America's will and hoping we will dump Trump.
I refuse to join in the panic.
[OPEC Has Already Turned to the Euro]
* Technically, buying oil in dollars vs euros is slightly cheaper because we don’t have to do a currency conversion - which costs an infinitesimal amount. A recent exchange rate for large amounts was 1 euro for 1.1182 dollars if we’re buying euros, and 1.1181 dollars for 1 euro if we’re selling euros. But the % difference/transaction fee is tiny - (1.1182-1.1181)/1.1182 x 100 = .009%. On $3 a gallon gasoline, the difference is literally .027 cents per gallon.
The mechanics of an oil purchase, if oil were priced in euros? We pay currency traders their foreign exchange fee of .009% of a transaction to buy euros in exchange for the dollars we possess. We pay OPEC in the euros we just bought. We take delivery of the oil we purchased from OPEC.
OPEC simply has long had a policy of keeping their oil price-stable in the EU. That's what is documented there. Period.
Watch for the sanctuary states, who are in danger of losing Federal funds, to try to raise their gasoline taxes to recover that money. - Tom
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