Saudi Arabia cuts May oil prices to Asia, raises US rate after Opec+ deal

[Dan Warnick + 6,100]

3 hours ago, Tom Kirkman said:

Yep.  Now considered NSFW.

Oops!

[Douglas Buckland + 6,308]

9 hours ago, Dan Warnick said:

Er, like this one:

And for you, Douglas:

A man after my own heart! You are refreshing my faith in humanity!😂

[Rob Plant + 2,610]

21 hours ago, Rob Plant said:

Yes I agree its a time for pulling together as we havent done since WW2 and for like minded countries to stand together as we have done many times. Economically we are all headed for a world of pain and that's just a fact unfortunately, how bad nobody knows at this point.

Coronavirus: Veteran, 99, raises £12m for NHS and vows to keep walking for as long as people donate

https://news.sky.com/story/coronavirus-veteran-99-who-has-raised-9m-for-nhs-to-keep-walking-while-people-donate-11973802

@Gerry Maddoux

It seems the WW2 vets are still showing us the way!

This guy is incredible!

P.S. He has a just giving page if anyone wants to help.

[pisstol + 48]

I have a nonprofessional guess based on reading as to why the United States puts up with Saudi Arabia. The American administration is waiting day by day for the Iranian government to collapse. The menu at Voice of America has had a separate menu item for news on Iran for a long time. There is no separate menu item for Russia or China or Venezuela. I think it is there because the administration has been watching, working and waiting for the collapse of the Iranian government for a long time. The administration is surprised that the government hasn't collapsed.

Shiites live over a disproportionate amount of the world's oil. Sunni-controlled countries sometimes have large Shiite populations. Here is one old article with some statistics on this:

https://www.resilience.org/stories/2008-12-23/shia-islam-and-oil-geopolitics/

Without resistance, the Iranian government will export Shiite revolution all over the Persian Gulf the same way they are doing in Iraq and elsewhere. The Iranians know that if they go too far in their attacks on the small number of American forces in Saudi Arabia or Iraq, they will have a war with the United States.

Saudi Arabia and the United States combined restrain Iran. If the USA moves out now, Iran might quickly control most of the oil in Persian Gulf countries, including in Saudi Arabia. To Washington, Iran is problem #1. Saudi Arabia is #2. When problem #1 is out of the way, the USA will work on problem #2. And then US forces will move out.
 

[wrs + 893]

34 minutes ago, pisstol said:

 

Saudi Arabia and the United States combined restrain Iran. If the USA moves out now, Iran might quickly control most of the oil in Persian Gulf countries, including in Saudi Arabia. To Washington, Iran is problem #1. Saudi Arabia is #2. When problem #1 is out of the way, the USA will work on problem #2. And then US forces will move out.
 

Except this has been the case since about 1980.  Problem 1 and 2 have just gotten bigger and bigger over the years.

Edited April 16, 2020 by wrs

[Dan Clemmensen + 1,011]

On 4/13/2020 at 11:01 PM, Douglas Buckland said:

Okay, stop selling KSA arms, equipment and spares for both and let them buy from Russia or China, their choice.

Douglas, We have sold arms to the Saudis for half a century. The implicit agreement is we buy their oil and elevated prices, thus extracting money from gasoline consumers. KSA then takes a portion of this money and buys a whole lot of expensive stuff from the US defense industry. The defense industry quietly lobbies for KSA by telling all the congressmen how many defense jobs in their districts are attributable to KSA.  And here you thought it was the oil majors who are being threatened by US shale.

[Dan Clemmensen + 1,011]

On 4/13/2020 at 3:28 PM, Ward Smith said:

Help me with my math here. Aramco can maybe deliver 900k bbls per day to the entire US. That assumes they fill Motiva, which can output 600k bbls/day (but has nowhere to ship that product) and can deliver the other 300k to California via the East route over the Pacific (about 40 days travel). They don't own refineries in California to my knowledge like they own Motiva. So lowest prices win, which just might be Russian? 

During lockdown, California has had massive inventory builds in both crude and refined products and has cut back refinery throughput. We have no place to put new Saudi oil. We still pump some oil, and we still get a lot from Alaska.  Pre-lockdown, we used about 800,000 bbl/day, and about half of that is foreign, with KSA being about 25% of the foreign crude.  During lockdown, we are refining only about half as much. I have no idea when storage will fill up, or what those tankers are going to do with that oil.

Edited April 16, 2020 by Dan Clemmensen
corrected amount

[dennis smith + 2]

Do the math. War is expensive. When all you have is oil, you pump oil, humanity be damned.

[M Carafino 0]

 

I hate dumb mother fuckers.

 

 

 

Edited April 19, 2020 by M Carafino

[Dan Warnick + 6,100]

Silly first paragraph and TL;DR

IMHO & DILLIGAS

[Douglas Buckland + 6,308]

35 minutes ago, Dan Warnick said:

Silly first paragraph and TL;DR

IMHO & DILLIGAS

What the heck is DILLIGAS?

[RSD + 41]

1 hour ago, Douglas Buckland said:

What the heck is DILLIGAS?

I can assure you that DILLIGAS has absolutely nothing to do with the gas coming from the Greater Sunrise field off the coast of Dili which is the capital of East Timor (there is today's geography lesson for you) - instead DILLIGAS stands for Do I Look Like I Give A $h!t - derived from DILLIGAF which I'm sure that you can now work out the meaning of?

Edited April 18, 2020 by RSD

[Douglas Buckland + 6,308]

36 minutes ago, RSD said:

I can assure you that DILLIGAS has absolutely nothing to do with the gas coming from the Greater Sunrise field off the coast of Dili which is the capital of East Timor (there is today's geography lesson for you) - instead DILLIGAS stands for Do I Look Like I Give A $h!t - derived from DILLIGAF which I'm sure that you can now work out the meaning of?

This digital shorthand stuff is a pain in my tush!😂

[Dan Warnick + 6,100]

1 hour ago, RSD said:

I can assure you that DILLIGAS has absolutely nothing to do with the gas coming from the Greater Sunrise field off the coast of Dili which is the capital of East Timor (there is today's geography lesson for you) - instead DILLIGAS stands for Do I Look Like I Give A $h!t - derived from DILLIGAF which I'm sure that you can now work out the meaning of?

You win the prize!  I just use an S instead of an F because this is an Oil & GAS site:  DILLIGAS!

[Dan Warnick + 6,100]

1 hour ago, Douglas Buckland said:

This digital shorthand stuff is a pain in my tush!😂

(‿ˠ‿)

[Dan Warnick + 6,100]

1 hour ago, Douglas Buckland said:

This digital shorthand stuff is a pain in my tush!😂

(‿!‿) ԅ(≖‿≖ԅ) Touchy butt!

[RSD + 41]

This article hits the nail on the head - putting tariffs on Saudi oil is a bit like pissing in a wetsuit - its going to give you a warm fuzzy feeling but no one is going to notice - except the Saudis and frankly pissing the Saudis off could lead to all sorts of unintended or unanticipated consequences.

https://oilprice.com/Energy/Crude-Oil/Do-US-Shale-Drillers-Deserve-To-Exist-In-Free-Markets.html

[Dan Clemmensen + 1,011]

6 hours ago, RSD said:

This article hits the nail on the head - putting tariffs on Saudi oil is a bit like pissing in a wetsuit - its going to give you a warm fuzzy feeling but no one is going to notice - except the Saudis and frankly pissing the Saudis off could lead to all sorts of unintended or unanticipated consequences.

https://oilprice.com/Energy/Crude-Oil/Do-US-Shale-Drillers-Deserve-To-Exist-In-Free-Markets.html

The article starts from a faulty premise and reaches a faulty conclusion. Short answer: No, Shale does not "deserve to exist" in a free market. But KSA is the driver of OPEC, and OPEC  is a cartel. "Cartel" is the antithesis of "free market". If oil producers within KSA and OPEC had been producing in a true free market, the US shale revolution would never have occurred and oil would never have exceeded about $20 a barrel. But OPEC does exist, and they got so greedy that they created a market for $80 oil. In an attempt to regain their control of the market, they crashed the price in 2014. This effectively drove shale to find ways to remain profitable at $45, and OPEC gave up. In late 2019 (pre-pandemic) The US became a net exporter and OPEC panicked and began planning to try again. This demonstrates that OPEC does not sell the product we need and are willing to pay for: secure oil. Secure oil costs about $45-50. OPEC sells insecure oil, and they can sell it profitably for as little as maybe $30, but it is not the product we want or need.  Shale "deserves to exist" in a free market for secure oil, but not in a "free market" for OPEC oil. Note that the demand crash caused by the pandemic completely supersedes OPEC's panic maneuver, which is now completely irrelevant. We will not be able to evaluate the OPEC maneuver and react to it until consumption recovers from its current 30% crash. In that regard, we should rephrase our response to imported oil. We are not attempting to fight OPEC, we restricting imports to preserve what little is left of our storage capacity to use for domestic oil until consumption resumes. Trying to play by the pre-pandemic rules is like continuing to play shuffleboard on the promenade deck of the Titanic.

[Gerry Maddoux + 3,627]

1 hour ago, Dan Clemmensen said:

If oil producers within KSA and OPEC had been producing in a true free market, the US shale revolution would never have occurred and oil would never have exceeded about $20 a barrel. But OPEC does exist, and they got so greedy that they created a market for $80 oil.

Just a second here. Roll a 42 gallon oil drum into Starbucks and fill it with latte. It'll cost you . . . $3,700. Yet coffee beans are raised by people with an eighth-grade education, grow readily under the sun, and roasting them and making a latte is nothing. Oil has to be kept at an exacting temperature and pressure for a million years, then it is hard to get up. It is important to keep commodities in a tidy line, Dan. This is not coffee, damn it! I realize it is pile-on time but please, people, let's not turn into scolding old ladies, okay?

[Dan Clemmensen + 1,011]

3 minutes ago, Gerry Maddoux said:

Just a second here. Roll a 42 gallon oil drum into Starbucks and fill it with latte. It'll cost you . . . $3,700. Yet coffee beans are raised by people with an eighth-grade education, grow readily under the sun, and roasting them and making a latte is nothing. Oil has to be kept at an exacting temperature and pressure for a million years, then it is hard to get up. It is important to keep commodities in a tidy line, Dan. This is not coffee, damn it! I realize it is pile-on time but please, people, let's not turn into scolding old ladies, okay?

I hope this is sarcasm. As I understand it, the lifting cost of oil in KSA, Iraq, and Iran is about $7/bbl, and the total cost of transport to a US refinery is about $1/bbl. In a truly free market, This would leave about $12 of gross profit at $20/bbl. The only reason anybody else is pumping oil is cartel pricing.

[Gerry Maddoux + 3,627]

2 minutes ago, Dan Clemmensen said:

I hope this is sarcasm. As I understand it, the lifting cost of oil in KSA, Iraq, and Iran is about $7/bbl, and the total cost of transport to a US refinery is about $1/bbl. In a truly free market, This would leave about $12 of gross profit at $20/bbl. The only reason anybody else is pumping oil is cartel pricing.

The lifting cost is low but the living cost is high. The "REAL" cost of producing a barrel of oil in the wonderful kingdom of Saudi Arabia welfare state is about $70. At $20 oil, the Saudi sovereign wealth fund is going broke to the tune of about $70 (breakeven cost to live)-20 (selling price)=$50 (deficit per barrel) X10,000,000 barrels per day=$500,000,000.

At $500,000,000 a day, it's going to take them, what, two years to go bankrupt?

But you're right in a way: they can say to their entire population, go piss up a rope, and their lifting costs drop immediately to about five bucks (counting their water-flooding project). Of course, they've got several million mostly young, really pissed-off tribal men ready to storm the palace gates. MBS would finally get a taste of what he's been dishing out. 

No, Dan, there is nothing sarcastic about this. Just this morning, to move a barrel of LTO from one of my old wells was next to impossible. The net on the whole process was less than a dollar a barrel. That tends to put things into a rather pinpoint focus, if you know what I mean. 

16 minutes ago, Dan Clemmensen said:

The only reason anybody else is pumping oil is cartel pricing.

And this is bullshit too, while we're at it. 

[Dan Clemmensen + 1,011]

5 minutes ago, Gerry Maddoux said:

The lifting cost is low but the living cost is high. The "REAL" cost of producing a barrel of oil in the wonderful kingdom of Saudi Arabia welfare state is about $70. At $20 oil, the Saudi sovereign wealth fund is going broke to the tune of about $70 (breakeven cost to live)-20 (selling price)=$50 (deficit per barrel) X10,000,000 barrels per day=$500,000,000.

At $500,000,000 a day, it's going to take them, what, two years to go bankrupt?

But you're right in a way: they can say to their entire population, go piss up a rope, and their lifting costs drop immediately to about five bucks (counting their water-flooding project). Of course, they've got several million mostly young, really pissed-off tribal men ready to storm the palace gates. MBS would finally get a taste of what he's been dishing out. 

 

KSA has gotten itself into this state over the last 50 years of cartel pricing. I was speaking of the free market in a historical sense, not the current situation. If not for OPEC, this nominal $12/bbl gross profit would have allowed for the orderly development of a true market economy. South Korea is an example of a country that started from nearly nothing in 1950 and is now a first-world country.

You are absolutely correct: we cannot magically go back and fix this, and I did not propose to do that. the rest of my post was about the current situation that has resulted from OPEC cartel pricing (i.e., our need for secure oil).

[Dan Clemmensen + 1,011]

21 minutes ago, Gerry Maddoux said:

... Just this morning, to move a barrel of LTO from one of my old wells was next to impossible. The net on the whole process was less than a dollar a barrel. That tends to put things into a rather pinpoint focus, if you know what I mean.

Gerry, as you know I'm an ignorant outsider. I started posting here about a month ago and I have learned a lot from you  guys. Thanks. If you recall, a month ago I was concerned because I saw the near certainty of  a consumption collapse, and I wanted to know what would happen when storage filled up. I speculated that the physical backup would flow back toward the producers and require that produdtion be stopped at the wells. Your experience seems to be an example of that.

[Gerry Maddoux + 3,627]

Most of us here, even the ones who like to think they have the inside straight on everything oil, are "ignorant outsiders" in some form or another of the complex oil and gas business. 

The Saudis have a welfare state that eats money. This is their fault: they didn't want the common (non-royal) people to have much ambition or drive, because laziness begets laziness and lazy people don't rise up. 

The Saudis are panicked. They are pretending none of us know about their welfare state, that all of us believe their lifting cost is two bucks, and that their wells are doing just fine. 

After some period of tranquility, they once again have a psychopath at the wheel. He seems to want to drive them into a ditch. Fine with me. Truth be told, if the KSA disappeared from the face of the earth (and it may, the way they're going), it would make little difference in the world of oil. OPEC- could make up the difference. The ME would reset. Life would go on. And that simple fact seems to drive this psychopath MbS up the wall. 

Edited April 19, 2020 by Gerry Maddoux
to fit the post that just came in

[wrs + 893]

4 hours ago, Dan Clemmensen said:

I hope this is sarcasm. As I understand it, the lifting cost of oil in KSA, Iraq, and Iran is about $7/bbl, and the total cost of transport to a US refinery is about $1/bbl. In a truly free market, This would leave about $12 of gross profit at $20/bbl. The only reason anybody else is pumping oil is cartel pricing.

When you and others continue to repeat this you diminish your perception of the oil market.  KSA isn't the only producer, they only export 7-8mmbbl/day in a 100mmbbl/day market.  That is 7-8% of the total oil market.  They simply cannot flood the whole market or even come close.  They also can no longer constrain the market on their own because of shale and that is what they don't like.  Their attempt to flood the market can only affect the price at the margin and they don't produce enough to have a long lasting effect.  They won't be able to keep the price low on their own, the COVID mess is what's causing the low prices and no, KSA can't handle this.