[ad_1]
Saudi Arabia is deeply convinced that to obtain the price per barrel it wants, it can afford to jeopardize its unprecedented market share.
The ability to come back from the brink twice in his battle against the American shale – the first between 2017 and the middle of last year, and since the beginning of this year, with Russia at his side both times – a gave Riyad the confidence that he can possibly earn $ 80 or more with a barrel of oil.
Political history is also on the side of the Saudis. The murder of journalist Jamal Khashoggi has dealt a heavy blow to the reputation of Crown Prince Mohammed bin Salman more than to the fortune of the Kingdom, at the relatively low price that he has paid up to now for his role in the war in Yemen. Saudi Arabia has been encouraged to believe that it can press the reset button just about anything.
Bold oil game
This explains the bet the Kingdom is currently wagering on oil – one of the most daring of the last six decades in which it runs the oil producers' club, OPEC.
Although crude oil production in the United States has declined in recent months, the implicit threat to Saudi Arabia's market share does exist. The press complains of 3.6 million barrels per day of exports and large Asian customers like Indian Oil (NS 🙂 who buys in the United States, while Saudi production is expected to drop by about 30 % compared to the standard next month, to reach less than 7 million bpd.
Yet Energy Minister Khalid al-Falih, in his speeches, only talks about the need for a "rebalancing of the market," which is a Saudi phrase for higher oil prices.
John Kilduff, founding partner of Again Capital, an energy hedge fund in New York, says Falih's response is a mix of bluster and blindness to the potential of the shale's reach. The US Energy Information Administration predicts that the United States will produce more oil than Saudi Arabia and Russia gathered by 2025, a forecast that Riyadh has so far held in silence elegant. Falih, for its part, announced a historic record of proven reserves of oil and Saudi reserves early in the year.
Kilduff said:
"At the present time, the Saudis continue to believe that they have the power to become the alternating oil producer and manage its price. But they take a big chance here with the competition coming from shale. "
For example, Kilduff cites the Louisiana Offshore Oil Port, which loaded 11 VLCCs in its first year of direct exports, with 60% of these shipments going to India and 23% to China.
He added:
"We are not just talking about light crude oil. Exports of the LOOP would include condensates and higher grades in US crude, such as Mars, comparable to Middle Eastern oil. "
The rivals in the shale include Big Oil
Then, the specter of tougher rivalry from industry giants like Exxon Mobil (NYSE :), which claims the ability to generate double-digit profits with prices as low as $ 35 per barrel in the most prolific basin of American shale, the Permian.
Exxon, who along with his counterpart "Big Oil" Chevron (NYSE :), plans to extract 1 million bpd each from the Permian, is also looking to find shale at $ 15 a barrel – a price possible up to present only in the Middle East.
But some, like Phil Flynn of the Price Futures Group in Chicago, think that the potential of shale is overexploited.
Flynn said:
"I do not think the Saudis are worried at all. They can recover market share by offering crude at the right price in the markets they want. "
He added:
"The Saudis know that they and the Russians are still the biggest players in the sector and can turn off the pins at any time and send the price flambé. They have no limits to how shale producers have to produce. "
The economy, Venezuela and Trump could decide the bet of the Saudis
Brent Daily Table
Whatever the case may be, there are three things over the next year that could decide whether the Saudis will reach the world's benchmark oil price at their desired maximum price of $ 80 to $ 85 per barrel, or at least $ 70. These are the economy, the political crisis in Venezuela and US President Donald Trump.
Fear of the recession in the United States and fears of an economic slowdown from Asia to Europe drove down oil prices earlier this week as investors worried about energy demand. Global macroeconomic data have been eroding steadily since the beginning of the year, but they could improve over time if China releases adequate stimulus, despite its trade war with states. -United.
A resolution on Venezuela could also send back to the United States the heavy oil needed by domestic refineries to counter some of the OPEC reductions.
The asset factor is more complicated.
After resuming political relations with Russia during its 2016 election campaign, the president may be again inclined to fight for OPEC to fight again to fight high oil prices. And its range of responses could span the gamut, ranging from its preferred tweet option to granting generous sanctions exemptions for Iranian oil buyers, even through the sale of urgent US oil stocks.
Trump has a comfortable and delicate relationship with the Saudis, highlighting the need for the United States to defend its important ally in the Middle East, including by not acting against Riyadh for the murder of Khashoggi. However, the president must be careful to keep oil prices at the pump low enough to appeal to his base before his candidacy for reelection in November 2020.
It's almost 20 months and it's been a long time on the oil market.
[ad_2]
Source link