Oil plunges about 30% after Saudi Arabia slashes prices, opens taps

[heybruce]

32 minutes ago, rabas said:

Though I agree, you may underestimate the power of shale. $23.35 to $75 is a price range for different locations and operators, in part due to different technologies. That means you can't kill shale (as Putin would love to do) at lower prices, you only trim it back. Since shale is much easier to turn on and off, it just comes back as prices rise again. Even with new operators who just rent the same old equipment. 

 

Shale is the black virus, they can't kill it off so it serves as a permanent cap on global oil prices.

 

This is why Putin brags he can survive with $25-$30 oil for many years as he drains reserves. But Putin is a master of deception. I have good Russian friends and Russia is already a basket case with strange goings on. I think Saudi Arabian princes can buy fewer Lamborghinis and diamonds easier than Putin can further squeeze the Russian people.

 

 

Like you, I have doubts about Putin's claim.  He may be able to eek out a small profit from existing wells at $30, but I doubt that he can develop new fields, continue his military adventures in Syria and Ukraine, maintain a sufficient social safety net to keep average citizens content with his corrupt government, etc. without a significantly higher price.

 

Saudi Arabia can last longer with low oil prices, but they too have problems that require lots of oil money in the near to mid term  in order to (maybe) achieve greater independence from oil money in the long term.

Edited March 10, 2020 by heybruce

[RuamRudy]

1 minute ago, heybruce said:

Like you, I have doubts about Putin's claim.  He may be able to eek out a small profit from existing wells at $30, but I doubt that he can develop new fields, continue his military adventures in Syria and Ukraine, maintain a sufficient social safety net to keep average citizens content with his corrupt government, etc. without a significantly higher price.

 

Saudi Arabia can last longer with low oil prices, but they too have problems that require lots of oil money in the near to mid term too achieve greater independence from oil money in the long term.

New fields are not financed by the state, even in Russia. The government may have significant interests in both Rosneft and Gazprom, but they are private companies and raise their finances the same way that other companies do. 

 

Admittedly before this current crisis, Rosneft announced their intention to move forward with the Vostok development, currently estimated north of $150 billion but bound to overrun significantly. 

 

In terms of production, the article below and another couple I have read talk about 2 million boe per day which seems incredible to me, although that would take years or even decades to reach. Of course, lifting costs will be higher here than in the Siberian plains, but the potential upside, in times of fat, will be a massive draw for investors. 

 

Russia's Rosneft seeks Japanese investors for giant Vostok oil development

[Eric Loh]

12 minutes ago, heybruce said:

Like you, I have doubts about Putin's claim.  He may be able to eek out a small profit from existing wells at $30, but I doubt that he can develop new fields, continue his military adventures in Syria and Ukraine, maintain a sufficient social safety net to keep average citizens content with his corrupt government, etc. without a significantly higher price.

 

Saudi Arabia can last longer with low oil prices, but they too have problems that require lots of oil money in the near to mid term  in order to (maybe) achieve greater independence from oil money in the long term.

Saudi does have a production cost advantage as most of their fields are onshore. US productions are mainly from deep waters and shale which are much costly. Russia will probably able to survive on their onshore production and less from their Arctic fields which are high production cost. But you right that the low price will curtail investment in exploration and set off other problems. 

[Tug]

I wonder if MB’s knew the firestorm he help to creat with stocks and all or did he just react to Putin without really understanding the repercussions fully

[CGW]

4 hours ago, Cryingdick said:

What do you do when they cut the dividends? 

Doubtful as they never have in ~30 years, I don't exactly have huge amounts of either stock, so not an issue.

[CGW]

54 minutes ago, heybruce said:

Saudi Arabia can last longer with low oil prices, but they too have problems that require lots of oil money in the near to mid term  in order to (maybe) achieve greater independence from oil money in the long term.

This is a good overview of the current situation IMO.  https://seekingalpha.com/article/4330721-why-russia-killed-opec-deal

[samran]

55 minutes ago, Tug said:

I wonder if MB’s knew the firestorm he help to creat with stocks and all or did he just react to Putin without really understanding the repercussions fully

I’m actually wondering if the arrests of other royal family members were also aligned with this. 
 

It makes sense that they were. The weaker oil prices would weaken MB with less candy to throw around, so best lock up his opposition before they used the downturn to undermine him. 

[CGW]

11 minutes ago, samran said:

I’m actually wondering if the arrests of other royal family members were also aligned with this.

Good thinking, they were probably opposed to "the plan"? for good reason as appears to have kicked them in the butt!

[Berkshire]

51 minutes ago, CGW said:

This is a good overview of the current situation IMO.  https://seekingalpha.com/article/4330721-why-russia-killed-opec-deal

Interesting article.  So US shale companies were already losing money even when oil was $50+.  I just wonder if the US GOV will bail them out at some point to maintain oil producing supremacy....aka socialism.   

[lannarebirth]

4 minutes ago, Berkshire said:

Interesting article.  So US shale companies were already losing money even when oil was $50+.  I just wonder if the US GOV will bail them out at some point to maintain oil producing supremacy....aka socialism.   

At the very least the US should vote to reinstitute the ban on US oil exports.

[samran]

8 minutes ago, Berkshire said:

Interesting article.  So US shale companies were already losing money even when oil was $50+.  I just wonder if the US GOV will bail them out at some point to maintain oil producing supremacy....aka socialism.   

It’s only socialism if you are helping poor people...

[CGW]

3 minutes ago, lannarebirth said:

At the very least the US should vote to reinstitute the ban on US oil exports.

That would be self defeating due to refining limitations with the types of crude they produce.

[rabas]

26 minutes ago, samran said:

I’m actually wondering if the arrests of other royal family members were also aligned with this. 
 

It makes sense that they were. The weaker oil prices would weaken MB with less candy to throw around, so best lock up his opposition before they used the downturn to undermine him. 

Exquisite timing supports your point.

 

Saudi Arabia would have known and understood Russia's intransigence to further large oil cuts. MBS would want to quiet his opposition before Russia made the announcement, and he did, what, the day before? But where to now?  Lower prices was MSB's counter response to Russia's refusal to cut production. Both are now threatening to raise production and flood oil markets. If corona really catches on, I can't see them flooding the world with oil that no one needs.

[metisdead]

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