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 ...
There trying to get Russia and Iran to cut production...and get the price up..
Saudia Arabia needs the high price to keep the country going..
Yeah. The pressure on the petrodollar is very worrying.
Once that ends, the game is up.
It needs to be $60 or fracking disappears. What am I missing?
Russia needs oil high as well. They are getting pummeled by this.
On the bright side oil at this price will make the green energy sector disappear. No need for windmills, solar panels or a Tesla.
The world oil producers will soon limit production, believe be, this is as much an over supply issue as it is based on a perceived economic slowdown.
$1.30 per gallon sounds good to me
Funny how China and Iran are getting beat up with the disease, and Russia is getting creamed with the oil. And North Korea is pretty much silent (short of a few missiles.)
It’s as if all of the “enemies” of the US were “taken out” at the same time.
Funny how these things happen.
I went long on some XOP calls this morning for the 19 June and 18 Sep contracts. They were dirt cheap and I figure - eventually - I will make a small fortune off of them. If XOP falls this week I plan on adding to them.
But it is devastating to parts of the economy - especially here in Texas.
Texas economy is much more diversified than it was in the 80s.
I’ve thought the same thing for about a week.
Now if only we’d start making our OWN antibiotics again I’d breathe a great sigh of relief!
This where import tariffs must be imposed immediately. We must protect our domestic producers. This is in effect predatory pricing and it’s highly illegal here in the states. I don’t give a crap if the supposed fight is true or not and for the record I don’t believe this BS. Slap a tariff on oil imports IMMEDIATELY! This is being done as as attack on our domestic producers. It’s time to put SA out of business.
Counting how long it takes until a commentator mentions the word “Recession.” After that, the media will lead with “the world recession.”
Rigs get stacked. They’re spun up again if oil goes up.
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