Posted on 03/09/2020 8:40:09 AM PDT by Hojczyk
The big news over the weekend was not the coronavirus, contrary to what you might think from watching the news. The most consequential story of the weekend is the oil price war that has broken out between Saudi Arabia and Russia. Saudi Arabia has decided to increase its production and slash its price to punish Russia for not going along with OPEC quotas designed to prop up the price of oil, which has fallen by more than half over the last few months including today’s price collapse.
(Can’t help reminding that all the certified “smart people” like John Kerry and Al Gore were telling us 15 years ago that we had reached “peak oil,” and more specifically that Saudi Arabia had likely reached its production peak and would be unable to increase its production over 10 million barrels a day. Heh.)
On the surface this Saudi move will impose significant pain on Russia, which depends on high oil prices to prop up its economy, and will also increase pressure on Iran for the same reason. Likewise American consumers, and oil-consuming sectors like the airlines, can likely look forward to some lower prices
And while the story of the Saudi-Russia feud may be entirely true, keep in mind that a protracted period of low oil prices is going to devastate America’s oil production from fracking in Texas and elsewhere. A lot of the smaller and mid-sized independent producers who have been behind a lot of the increase in domestic oil production were already under a lot of pressure from falling oil prices.
If the price stays down around the $30 level it is near today, a lot of the highly leveraged firms will default on loans or head to bankruptcy. Production will start to fall in a few months.
(Excerpt) Read more at powerlineblog.com ...
descending roller coaster gif....
Wasn’t that on the science show about Joe Biden’s declining mental faculties? Really looks similar.
Gutsy move. I think you’ll be rewarded as better news on the virus front is probably coming soon. Right now, for the time being, everything is negative.
I’m looking at buying some XLK.
Energy Independence is the highest matter of national security.
Let’s stop leveraging our economy onto potential enemies.
SA did this back in the 90’s as well. The goal was to ride out the low prices knowing that WE and OUR production couldn’t.
Once a lot of our guys went out of business and the industry went TU, OPEC raised prices again.
When oil and natural gas prices are low, only less energy intensive methods of extraction are viable. That means the industry becomes more energy efficient, and outputs far less pollution.
The chaos and panic of that period gave us a muslim jr. senator from IL with and unknown background just ~7 years removed from 9/11 as the usurper president.
I remember when cheap oil was a good thing.
Yes it will now impact the American oil industry and fracking but it will be great for car owners and factories, air travel and energy costs.
And, in fact, it’s a double boon as this effectively destroys the Middle East cartel and hurts Russia too (if anything you’d think a smart leftist would be writing articles about how Trump and Putin are colluding to destroy the oil industry!)
One side effect: Gasoline is $2.139 in Wesley Chapel, Florida this morning. Chances are, it will dip below the $2/gallon mark.
Commerce is MARKEDLY reduced across the world, as supply chains are drying up, and much less product is being moved. Also, many airlines are grounded or greatly curtailed.
Many of the small drillers have been bought up by the biggies. Exxon, etc. They can absorb the short-term loss. Yes, some will go under but if they did not see this coming.. that is unfortunate
When Cramer forecasts doom and calamity, that probably marks the market bottom. The guy is a carnival barker.
look at the volume of puts compared to open interest for this weeks expiration at 9.5
Wonder if someone sold them to open a position.
lol, he certainly can be.
I agree. Russia might be the target but the ulterior motive is to hurt the US oil exploitation industry.
Canada is already weak (thanks to Turdo) so now on to the US, making OPEC great again (to borrow a phrase)
That’s right. SA has done this MANY times in the past and we let the get away with it every time. President Trump needs to take immediate action. This is one case where we MUST have import tariffs.
We're a net exporter of crude and petroleum products.
You want to tax Americans and transfer the money to the drillers, but in the process you're killing our export business.
Once the well is finished, the rig is moved to the next site.
A key number in the oil industry is percentage of rigs in use. During boom times, the percentage would be near 100%. If a rig is not in use, someone is losing money.
Producing wells have operating costs. At $30 per barrel, some wells become uneconomical and will be shut down. In most instances, a well that is shut down will not be restarted.
They did the same thing in 2015 (?) and the America oil market survived. They can’t press the oil price down for too long. The Saudis will pay for it too.
Kings Island (OH) “The Beast” rollercoaster?
We WERE oil exporters but that will end real quick with oil prices in the twenties.
You are way over thinking this. SA is driving the price down to put pressure on US oil production. We would not be transferring anything to domestic producers we would be protecting them from being driven into bankruptcy and making us once again dependent on SA.
This virus panic is all about hurting Trump..I 10000000000 percent believe that..in 2009 H1N1 killed more people and not a peep about it in the media, 19000 Americans died and I didnt know a damn thing about it..this entire thing is being blown out of proportion its a VIRUS yes its bad but the world isnt going to end..what the commie left is doing is using a virus to try to destroy Donald Trump..the question is, will people allow that to happen
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