Saudis did not discount to spite Russia. April contract price $58.50. Friday spot price $45.27. Difference - $13.13 drop. Buyers commit March 10th for April delivery.

[BLA + 1,666]

There are millions of barrels floating offshore China in Asia without a home. Saudis had no option.

Do you think Saudis clients were going to pay $58.50 bbl ? It's matter of survival. 

*  April contract price set 3rd Friday in February the 21st.  @ $58.50.

* Fridays spot price @ $45.27

* DROP OF $13.13

* BUYERS HAVE TO COMMIT ON MARCH 10th for APRIL DELIVERY.

These are scary times for the industry.  As for pricing dropping further you ain't seen nothin yet.

Already TOO MUCH OIL.  Russia and Saudis have cut very little if any over last few years.

The only one that has seriously cut production is President Trump ie Iran and Venezuela.  Then add in Libya.

TOO MUCH OIL.

This shakeout was inevitable.  Coronavirus just accelerated the process.  

There is a good chance OPEC is finished.  If Russia agreed to the cuts they would not have held up and exposed the OPEC CARTEL for what it is . . .  a joke

Most are confusing free market competition for a price war.  The MARKET will work this out.

Have to cull the shale herd. 

Nobody makes money with oil in $30s

The virus created at least a 4mm bbl/day oversupply.  That's all that is needed to create a free market competitive market. Saudis have practiced predatory pricing against U.S. oil industry over the last 50 years. It's changing.

The market will work it out.  The oil industry prices has been artificially held high for years.  It's hard to change demand.  Oil producers can change supply.  If too much oil prices drop. High end producers go away.  It's only natural.  As producers go away prices rise. 

In the U.S. we have antitrust laws against Predatory Pricing.  But guess that doesn't apply against Saudi Arabia.  Maybe it should.  Maybe it's time has come. 

Edited March 10, 2020 by BLA

[Zhong Lu + 845]

Hopefully that's how the markets will see it on Monday. But I doubt it.

EDIT: Again, it doesn't matter what you or I think.  The only thing that matters is what the price does.  

Edited March 8, 2020 by Zhong Lu

[BLA + 1,666]

On 3/8/2020 at 5:32 PM, Zhong Lu said:

Hopefully that's how the markets will see it on Monday. But I doubt it.

EDIT: Again, it doesn't matter what you or I think.  The only thing that matters is what the price does.  

The price was going down Monday either way.  Cuts or no cuts.

My point being Saudis had to discount prices to meet the spot price . . . .  Just wants to survive.  They had to discount or their exports would drop much more.  

MBS stating ARAMCO will increase production up to 12mm bbls/day is just a bluff to get Russia's attention and maybe U.S. too.  It was stupid tactic.  MBS not too bright. Now that he said it he'll probably double down.

Trump always goes easy on MBS.  He thinks MBS can deliver a ME peace deal.  Donald should give it up. Not going to happen.

The virus is getting worse worldwide.  Dr. Fauci said does not look good for U.S.  He sees quarantines in U.S. like China and Italy.  

How much more will excess supply grow.  

Edited March 10, 2020 by BLA

[Zhong Lu + 845]

I'm just pissed I bought on Friday.  Then again, couldn't have known the weekend OPEC news, but still "falling knives" and such.

Overconfidence after making lots of money.  Now I'm going to lose a chunk of money. Gaaaaaaaaarrrrggghhh.  

Edited March 8, 2020 by Zhong Lu

[El Nikko + 2,145]

The virus is just the catalyst and one brought on by the MSM in my opinion and I think I will still believe this until we see this 'virus' actually is something serious.

There are a lot of people who saw a recession coming in 2020 and I personally thought we'd see one around now more than 2 years ago yet I had no idea the virus was going to appear. I could probably find many cases where I've said as much on other forums and social media...I'm not an economic expert I just had that gut feeling.

Virus isn't the problem the global economy and changing political landscape including some economic warefare is.

Giant nothing burger and nothing to worry about unless you are very old or have some fairly serious health problems.

Let Russia and Saudi fight it out, yeh it's going to hurt some shale drillers but surely most of them have had enough warning that things were going to get nasty for the last year and they should have acted.

[BLA + 1,666]

12 minutes ago, El Nikko said:

The virus is just the catalyst and one brought on by the MSM in my opinion and I think I will still believe this until we see this 'virus' actually is something serious.

There are a lot of people who saw a recession coming in 2020 and I personally thought we'd see one around now more than 2 years ago yet I had no idea the virus was going to appear. I could probably find many cases where I've said as much on other forums and social media...I'm not an economic expert I just had that gut feeling.

Virus isn't the problem the global economy and changing political landscape including some economic warefare is.

Giant nothing burger and nothing to worry about unless you are very old or have some fairly serious health problems.

Let Russia and Saudi fight it out, yeh it's going to hurt some shale drillers but surely most of them have had enough warning that things were going to get nasty for the last year and they should have acted.

You saw a recession coming in the U.S. ?

Did you see the blockbuster employment report last Friday.  Overshadowed by virus.  Rightfully so.

Disagree re shale industry.  Weak producers will be destroyed.  Shale business will be around for decades just going to the strong hands.  

My opinion.

Edited March 8, 2020 by BLA

[El Nikko + 2,145]

1 minute ago, BLA said:

You saw a recession coming in the U.S. ?

Did you see the blockbuster employment report last Friday.  Overshadowed by virus.  Rightfully so.

I think we could be seeing the start of a recession in many parts of the world but my belief was always that the US and UK would be insulated from it to a degree if there was capital flight from other countries including (and especially) the EU. I believed that the rise of nationalism globally was an economic indicator that nationstates would stop giving a hoot about their partners and start doing things in their own interest. Look outside the US and UK and it looks to me like the wheels are coming off regardless of the virus. I'm not sure we've ever seen anything like what is happening in the world, probably since before WW2.

Look outside the US and you can see absolute chaos going on all over the world, there are many reasons for it but yeh at this time the US and UK will probably do ok.

Right now China isn't doing so great, the glorous EU is falling appart and there are uprisings happening in many places, how can we not see some economic problems with all of that going on?

[El Nikko + 2,145]

I'd also be interested in what people think about the 23 trillion national debt the US has and it's budget defecit....does anyone thing this is going to get fixed and if it doesn't does it matter?

 

Edited March 8, 2020 by El Nikko

[Zhong Lu + 845]

If the interest is 0%, it doesn't matter how much debt you owe.

[El Nikko + 2,145]

Have some markets opened? WTI reading at $32!

What a shitshow

[El Nikko + 2,145]

2 minutes ago, Zhong Lu said:

If the interest is 0%, it doesn't matter how much debt you owe.

Until you have to pay it back?

I should have studied economics because I always tried to not have any debt and that's why I never had a fancy car or anything

[Roberto.Brazil + 8]

I am from Brazil and lost some money in  PBR stocks. Brazil produces today 3 mm barrels per day and 90%  of this is for internal consume. PBR stocks fell 10% last friday. XOM lost 30% of market value this year. What do you think about CVX, XOM and other american oil companies stocks in short terms? 

 

[Zhong Lu + 845]

2 minutes ago, El Nikko said:

Until you have to pay it back?

I should have studied economics because I always tried to not have any debt and that's why I never had a fancy car or anything

But do you? If the interest rate is zero, you can simply sell more debt to pay back the debt to the old holders.  

[El Nikko + 2,145]

1 minute ago, Zhong Lu said:

But do you? If the interest rate is zero, you can simply sell more debt to pay back the debt to the old holders.  

Can I do this with my mortgage? 😂🤣

 

[Zhong Lu + 845]

Only large nations can do it.  

[George8944 + 128]

32 minutes ago, Zhong Lu said:

Only large nations can do it.

Nations can go deeper in debt for a longer period of time than companies.  Companies can go deeper in debt for a longer period of time than individuals.  However, the day of reckoning comes to all.  The amount of debt a country, company or individual can take on is based more upon their ability to pay the loan back, than the absolute interest rate charged.  (Typically they are inverses.  The people who don't need the money get the best rate.)    Once the lenders realize your debt load is too large for your income, it doesn't make a difference if you are a country, company or indivual.   Look at Greece a few years back.  The world forced them into austerity measures to secure new debt.  I believe Ireland was in a similar boat 25 years ago, but got their fiscal house in order and is more of a model for small nations.   I could go on.  

Go counter-culture.  Live debt free.   In 2009 I lost my job and was out of work for 20 months.  During that time I made my last house payment (on time) and continued funding my kids college tuition with an home equity line of credit.  When I got a job my wife and I kept living on our unemployment budget for two more years. In mid-2012 we become completely, 100% debt free, and have been so ever since.  

[Old-Ruffneck + 1,242]

Holy Shite Batman, crude WTI is at 33.08 right now. Between now and when US markets open I have bad feeling. Russia and KSA going toe to toe now in a slugfest. This is going kill all shale for the time being. Contracts will be fulfilled but long term 30's range even the Permian will get screwed by flooding the markets......sheeeesh. Didn't see this coming!!!

[George8944 + 128]

57 minutes ago, Roberto.Brazil said:

What do you think about CVX, XOM and other american oil companies stocks in short terms? 

Hello Roberto!   One thing I like about this forum is people post from different countries.  The same issue can have many different view points depending upon where you live.  I like hearing all these.   "The truth is out there."

I probably hold a different view of stocks than most people here.  I generally don't hold stocks for short term gains.  More often than not, I play the long game.   (  Well,  80% of the time. )   I would NOT consider any oil stock right now for short term gains, unless you like day trading or can live by your computer to jump out on a moments notices.  XOM and CVX as companies take a different view on the world.  Even though they are both "oil majors",  they spend their profits in different ways so which one is more correct really depends on you.   Right now, I am avoiding both.   When a stock is in free fall and making 52 week lows,  I never buy it until it gets 10-15% above its 52 week.  I don't buy them at this point, I start considering them.  With the Saudi's lowering prices, XOM and CVX will both be hurt.  Personally, I would sit on my sidelines.

As for PBR.   I am interested in knowing why you think its NOT a good buy?    Do XOM and CVX trade in Brazil in local currency or is their some kind of currency exchange someplace?    The US Dollar and Brazilian Real have moved 15% against each other since the beginning of the year.  If XOM and CVX trade in dollars you need to make a double guess on both their movement and the exchange rate. 

Again,  I would wait patiently for now.   Other's will probably disagree.

[Roberto.Brazil + 8]

Thank you so much of take your time to give me a light. I guess Brazilian and American middle class who invest in stock market because of low rate taxes are getting worried because of high osciilation of prices. I put my savings at stock market as millions of people do around the world and suddenly Vladmir Putin or Donald Trump, or even Saudi Arabia Prince can made it vanish.

 

[0R0 + 6,251]

3 hours ago, Zhong Lu said:

If the interest is 0%, it doesn't matter how much debt you owe.

It matters when you need to refinance it at a higher interest rate.

[0R0 + 6,251]

2 hours ago, Old-Ruffneck said:

Holy Shite Batman, crude WTI is at 33.08 right now. Between now and when US markets open I have bad feeling. Russia and KSA going toe to toe now in a slugfest. This is going kill all shale for the time being. Contracts will be fulfilled but long term 30's range even the Permian will get screwed by flooding the markets......sheeeesh. Didn't see this coming!!!

I am pretty certain that neither Russia nor Saudi can make up for the 20% loss in price with an increase in volume of production. 

Didn't expect this outcome either, nor did I expect the acrimony between Saudi and Russia.

I am sure the Rosneft CEO will be changing his tune in a few days and asking for a new output cut deal. 

[Old-Ruffneck + 1,242]

2 minutes ago, 0R0 said:

I am pretty certain that neither Russia nor Saudi can make up for the 20% loss in price with an increase in volume of production. 

Didn't expect this outcome either, nor did I expect the acrimony between Saudi and Russia.

I am sure the Rosneft CEO will be changing his tune in a few days and asking for a new output cut deal. 

WTI now down to 30.71$. I am thinking that Russia doesn't like being told what to pump because the Saudi Oil Ministry needs 85$ and trying to get everyone to comply with a quota. Even though Venz, Iran, Lyb oil is choked we still have serious glut and the KSA were wanting more. The Russians aren't too keen. I am sure your right, all will play out in few days but if it extends any amount of time a lot of money evaporating.

[Gerry Maddoux + 3,627]

5 minutes ago, 0R0 said:

I am sure the Rosneft CEO will be changing his tune in a few days and asking for a new output cut deal. 

Nope, this is all on MbS. He threw a temper tantrum. I'm no fan of the butcher Putin but this guy MbS is a man-child who has no historical perspective and no control over his emotions. Russia can wait this out, especially with that huge Yamal Peninsula strike. He can just mind his p's and q's and wait. The Russian economy can actually absorb this. The Saudi economy cannot. I look for MbS to be assassinated in the next month. The House of Saud has tired of his escapades and this, I believe, will be the final straw. The Thanksgiving Massacre cost the royal family $500 billion that is gone for good. This will mount up very very fast. I look for oil to lose down to $20 tomorrow, another $5 the next day, and finally settle around $15. The KSA can't tolerate that sort of financial excision for very long. The long knives are already out. He has pissed off way too many people. Trump is going to throw his ass to the wolves, because Trump needs Big Oil and Richard Kinder and the Permian Highway pipeline and he will do more damage to this guy than the dogs could. 

[0R0 + 6,251]

3 hours ago, George8944 said:

Nations can go deeper in debt for a longer period of time than companies.  Companies can go deeper in debt for a longer period of time than individuals.  However, the day of reckoning comes to all.  The amount of debt a country, company or individual can take on is based more upon their ability to pay the loan back, than the absolute interest rate charged.  (Typically they are inverses.  The people who don't need the money get the best rate.)    Once the lenders realize your debt load is too large for your income, it doesn't make a difference if you are a country, company or indivual.   Look at Greece a few years back.  The world forced them into austerity measures to secure new debt.  I believe Ireland was in a similar boat 25 years ago, but got their fiscal house in order and is more of a model for small nations.   I could go on.  

Go counter-culture.  Live debt free.   In 2009 I lost my job and was out of work for 20 months.  During that time I made my last house payment (on time) and continued funding my kids college tuition with an home equity line of credit.  When I got a job my wife and I kept living on our unemployment budget for two more years. In mid-2012 we become completely, 100% debt free, and have been so ever since.  

US Federal debt is also the basis of the dollar system and serves as a proxy for cash since FDIC is now capped as is deposit insurance elsewhere, starting with the Euro bail in demo with Cyprus and Iceland losing large depositors up to 30% of their funds and holding them up for months. Large cash holders can't hold bank deposits any longer so have to buy portfolios of repo eligible securities like Treasuries and other sovereigns. It was after observing how the fiasco with deposit insurance failure and bail ins brought EMU sovereign rates to 0 and below that the IMF members decided that all governments would like to pay negative interest rates and thus decided that they all should repeal their deposit insurance. So they did/

Stupid decision. It has restrained bank and general market liquidity in money markets, repos and all levels of credit and hurt banks that have lost their best and largest depositors. The reliance on treasury portfolios for cash means much greater repo volumes are necessary. Particularly in the Eurodollar system. So reserve volumes required are orders of magnitude greater than before. Considering that Central Banks are so concerned about deflationary risks, this was about as deflationary as you can get, as you literally took bank deposits down. The inverse of repos is cash and the other side of cash is reserves, so the Fed has to be able to inject at the drop of a hat, up to the size of what used to be the non-M2 portion of M3, "large deposits" and "institutional accounts" which were up to 25-30% of GDP  before the crisis, when corporate CFOs get a move on. 

Governments love this for their own accounts, as it allows them deficit spending without (immediate) remorse. We should remember that the IMF is a government monetary cartel to prevent governments from competing on the basis of stable currencies and finances. 

Hyman Minsky warned nearly a century ago that when the financial system resorts to using debt for money it is an indication that it is on its terminal trajectory before failure. 

We learn from history how to mimic failures of the past with great precision.

Edited March 9, 2020 by 0R0

[Zhong Lu + 845]

18 minutes ago, Gerry Maddoux said:

Nope, this is all on MbS. He threw a temper tantrum. I'm no fan of the butcher Putin but this guy MbS is a man-child who has no historical perspective and no control over his emotions. Russia can wait this out, especially with that huge Yamal Peninsula strike. He can just mind his p's and q's and wait. The Russian economy can actually absorb this. The Saudi economy cannot. I look for MbS to be assassinated in the next month. The House of Saud has tired of his escapades and this, I believe, will be the final straw. The Thanksgiving Massacre cost the royal family $500 billion that is gone for good. This will mount up very very fast. I look for oil to lose down to $20 tomorrow, another $5 the next day, and finally settle around $15. The KSA can't tolerate that sort of financial excision for very long. The long knives are already out. He has pissed off way too many people. Trump is going to throw his ass to the wolves, because Trump needs Big Oil and Richard Kinder and the Permian Highway pipeline and he will do more damage to this guy than the dogs could. 

 

No, Mbs's move is classic desert thinking.  Eye for an eye.  Very manly by Middle East standards.  Sends a clear message to Russia; don't f- with us.  Clear example of cultural disconnect between the Arab world and Russia.  Now, it's lose lose for both.  

Putin's badly miscalculated.  

Edited March 9, 2020 by Zhong Lu