U.S. senators press Saudi officials to put oil cut in motion

Disir

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WASHINGTON (Reuters) - Republican U.S. senators from oil states who recently introduced legislation to remove American troops from Saudi Arabia said on Saturday they had spoken with three officials from the kingdom and urged them to take concrete action to cut crude output.

Saudi Arabia and Russia were close to finalizing a deal with other producers in the informal OPEC+ group to cut crude output by a record 10 million barrels per day (bpd), or about 10% of global output.

Oil prices had fallen to 18-year lows as the coronavirus outbreak has closed down economies across the world and after Saudi Arabia and Russia boosted output in a race for market share.

And we have another popcorn eating fun issue.
 

DOTR

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The supply side is terrible. But the demNdcside is worse.
 

initforme

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Gas prices are low heck I hope the price of oil keeps dropping and dropping. Let's get to 3 bucks a barrel.
 

Tom Paine 1949

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These excerpts are from an article published in the Russian RT web newspaper. I think they provide insight into the problems facing the U.S. shale oil industry. I would point out that if anything this article underestimates the combined influence that the U.S. "security state" and military industrial / domestic oil lobbyists have had in determining our disastrous Middle East policies, from sanctioning Iran, to bombing Libya, to encouraging Civil War in Syria, to occupying Iraq:

State Energy insecurity: Trump is a hostage to internal politics and an illusory ‘free market’ in the oil price game -- by Scott Ritter


"Having bragged repeatedly of America’s energy independence, President Trump must confront the harsh realities of a global oil market no longer able to sustain inefficient US oil producers ...

"The global economy struggles to adapt to the one-two punch of reduced oil demand brought on by the coronavirus pandemic and the Russian-Saudi Arabian price war, which has seen the oil markets flooded with cheap oil, threatening to drive the price per barrel to historical lows.... While both Russia and Saudi Arabia have tentatively agreed to massive cuts in their production, such a deal is contingent upon the US making similar cuts. Domestic political realities, however, may tie President Trump’s hands....

"The US has been riding the shale oil wave for more than a decade, taking advantage of new fracking technologies to exploit its vast shale oil reserves, and in the process propelling itself past Saudi Arabia and Russia to take the number one spot as the world’s largest producer of oil.... Any oil-derived indicator of US economic health, however, is largely illusory. Unlike Russia and Saudi Arabia, both of which have massive state-run oil companies whose operations can be dictated by the central government, the US oil industry is comprised exclusively of private corporations whose economic health is ostensibly driven by free market principles. But this ‘free market’ is itself fiction: the US fracking industry, which anchors US oil production growth, has benefited extensively from years of favorable legislation, tax breaks, and a supportive US foreign policy which has used sanctions to restrict oil production in Iran and Venezuela to free up global market share which has been seized by US producers.

"The reality is that the US fracking industry is incapable of surviving in a true free market. To survive financially, most US fracking operations require oil prices in the range of $40-60 dollars per barrel...."
 
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Shrimpbox

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As do most other producers in the world. You cannot separate oil from the economies of the countries that depend on them. Russia and Saudi Arabia are one trick ponies. Don’t be myopic, these countries cannot keep this up for long.

According to Fitch Ratings, Saudi Arabia needs oil prices at $91 a barrel in 2020 to balance its budget, all else being equal.
 

Tom Paine 1949

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As do most other producers in the world. You cannot separate oil from the economies of the countries that depend on them. Russia and Saudi Arabia are one trick ponies. Don’t be myopic, these countries cannot keep this up for long.

According to Fitch Ratings, Saudi Arabia needs oil prices at $91 a barrel in 2020 to balance its budget, all else being equal.
I don’t expect this oil war to continue forever, but the demand side is so reduced now that prices will remain low — unless there is war in the Gulf. No stable monopoly price level is possible at anything approaching previous levels. Many companies that produce high production cost oil, like small U.S. fracking producers with low profit margins, will certainly fail. New companies can return quickly if prices really increase, since the major logistics of transporting it have already been established.

The point I want to stress is that all this is important not just for economic reasons, not just for the hundreds of billions of dollars at stake. U.S. sanctions and militarism in the Gulf (also against Venezuela and Russian/German Nordstream2) all are part of U.S. geo-political calculations. If Iranian and Libyan and Venezuelan oil producers were not stopped by the U.S. government, the glut in the market would long ago have driven the price down and forced cutbacks in American production. Now, with a glut nevertheless here, Trump is considering tariffs to protect that U.S. oil industry, and the pressure on him will increase if agreement to artificially raise the oil price via “voluntary” output restraints fails.

The result may well be an increased likelihood of war with Iran. In the past, concern for avoiding disruption of Persian Gulf oil exports were an important element in staying the hand of the U.S. in the Middle East. That factor, at least, appears to be no longer so important. Equally, disruption of oil exports from the Gulf would not only help save U.S. oil exporters, but it would strike a severe blow against competitors in Asia, particularly China. This has been a threat the Chinese have long understood and feared. The cutoff of hydrocarbons to Imperial Japan of course led it to gamble on war.
 
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luchitociencia

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Very soon the price of oil per barrel will become so cheap that I will use the $1,200 check to travel all around the world...
 

Tom Paine 1949

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Not me. My car has been just sitting out there rusting, like me in here. Gotta drive it around the block a few times! Gotta do my "patriotic duty" to help our oil industry ... and pollute the planet.

"Stop the world! I wanna get off!"
 

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