Saudi Arabia Ready to Start Pumping More Oil

[Marina Schwarz + 1,576]

"Saudi Arabia “will work with major producers and consumers within and outside OPEC to limit the impact of any supply shortages,” a Saudi energy ministry official said on Wednesday, according to state news agency SPA."

It does my ole heart good to see how the Saudis care about the world's needs. So selfless. So generous. Excuse me while I wipe a tear.

[Tom Kirkman + 8,860]

Brushing up on my Oil Kingdom Official-Speak parlance, I think the non-official version of the announcement roughly translates to something like this:

Dear world consumers, we have been pushing for $80 to $100 oil prices to prop up our Aramco IPO.  But some hawks are pushing for $300 oil - that's crazy talk, as we tend to like having our heads firmly attached to our necks.

So we plan to push for weekly increases in oil prices, to see just how far we can go.  Next week we'll run the idea of $120 oil up the flagpole to see if anyone salutes. 

And the week after that, we'll push for $130 oil, because of risk of supply disruptions.  And stuff.  Risk stuff.

We want consumers to be happy with a balance of oil prices somewhere between $80 and $300, depending on what the market will bear, with us creating fear and highlighting risk.  Did we mention risk yet?  Because oil prices need to increase because of risk.

Trust us, we are doing what is best for us.  Have a nice day, consumers.

[HILLARY + 15]

Will Saudi Arabia go against the OPEC  Quota in her quest to ensure continuous supply of crude oil to the world economy ????

[cattleman + 29]

well Saudi arabia has problems with the houthies shooting missles at them and I would quess iran supports them so id bet its a little give and take

[Tom Kirkman + 8,860]

I adore The Tylers' wit and dry humor on Zero Hedge.  Yes, I know they are Russian financial trolls, but I respect their intelligence and viewpoints.

Wonderful turn of the verbal dirk, amusingly using Mainstream Media nomenclature  : )

Here Are The Countries That Buy Iran's Oil, And What They May Do Next

To summarize, while Goldman does not believe that the Iran deal alone will result in production declines, the bank concludes that elevated oil geopolitical risks exacerbate the upside risks to Brent forecasts and reinforce its view that oil price volatility will continue to increase.

 

 

[jose chalhoub + 388]

amazing, now that Iran is grabbing all the headlines, Venezuela kinda of vanished.. well in my view iran is 20 times more important than Venezuela today for oil markets and prices... and well Saudi Arabia will do whatever it wishes now in the OPEC in my opinion. 

[Rodent + 1,424]

9 hours ago, Tom Kirkman said:

Brushing up on my Oil Kingdom Official-Speak parlance, I think the non-official version of the announcement roughly translates to something like this:

Dear world consumers, we have been pushing for $80 to $100 oil prices to prop up our Aramco IPO.  But some hawks are pushing for $300 oil - that's crazy talk, as we tend to like having our heads firmly attached to our necks.

So we plan to push for weekly increases in oil prices, to see just how far we can go.  Next week we'll run the idea of $120 oil up the flagpole to see if anyone salutes. 

And the week after that, we'll push for $130 oil, because of risk of supply disruptions.  And stuff.  Risk stuff.

We want consumers to be happy with a balance of oil prices somewhere between $80 and $300, depending on what the market will bear, with us creating fear and highlighting risk.  Did we mention risk yet?  Because oil prices need to increase because of risk.

Trust us, we are doing what is best for us.  Have a nice day, consumers.

I think your Saudi-official-speak translation is pretty accurate. My Cliff Notes version reads a bit like this:

 

"Hey, Iran, HA! We'll take it from here."

Now Saudi Arabia will be able to ramp up its own production without feeling the ramifications of a blip in oil prices.

 

[William Edwards + 708]

12 hours ago, Tom Kirkman said:

Brushing up on my Oil Kingdom Official-Speak parlance, I think the non-official version of the announcement roughly translates to something like this:

Dear world consumers, we have been pushing for $80 to $100 oil prices to prop up our Aramco IPO.  But some hawks are pushing for $300 oil - that's crazy talk, as we tend to like having our heads firmly attached to our necks.

So we plan to push for weekly increases in oil prices, to see just how far we can go.  Next week we'll run the idea of $120 oil up the flagpole to see if anyone salutes. 

And the week after that, we'll push for $130 oil, because of risk of supply disruptions.  And stuff.  Risk stuff.

We want consumers to be happy with a balance of oil prices somewhere between $80 and $300, depending on what the market will bear, with us creating fear and highlighting risk.  Did we mention risk yet?  Because oil prices need to increase because of risk.

Trust us, we are doing what is best for us.  Have a nice day, consumers.

I am pleased to see that you haven't lost your touch, Tom. Fine comment.

[William Edwards + 708]

May I remind alll readers that Saudi Arabia is still the swing producer. Their production level will remain the difference between the supply from all other producers and the total demand. They do not set the number, they just respond to the buyers' wishes.

As to the price, the Saudis currently appear to obligingly accept as high a price as the futures traders will allow. Don't point the finger of blame for high prices at the Saudis, point it instead at the real price administrators, the futures markets. But always keep in mind that prices determined by speculative trading are no more stable than the altitude of a hot air balloon.

[Tom Kirkman + 8,860]

1 hour ago, William Edwards said:

I am pleased to see that you haven't lost your touch, Tom. Fine comment.

Thanks William : ) 

[Jason Lavis + 55]

14 hours ago, Tom Kirkman said:

I adore The Tylers' wit and dry humor on Zero Hedge.  Yes, I know they are Russian financial trolls, but I respect their intelligence and viewpoints.

Wonderful turn of the verbal dirk, amusingly using Mainstream Media nomenclature  : )

Here Are The Countries That Buy Iran's Oil, And What They May Do Next

To summarize, while Goldman does not believe that the Iran deal alone will result in production declines, the bank concludes that elevated oil geopolitical risks exacerbate the upside risks to Brent forecasts and reinforce its view that oil price volatility will continue to increase.

 

 

Russian? I never got that impression at all. RT obviously yes, but ZH? Are you sure Tom?

Edited May 10, 2018 by Jason Lavis

[Tom Kirkman + 8,860]

30 minutes ago, Jason Lavis said:

Russian? I never got that impression at all. RT obviously yes, but ZH? Are you sure Tom?

My bad.  I had mistakenly recalled a hit piece article against Zero Hedge, where Tyler is called a Russian agent.

First, here is the "real news" :

The real identities of 'Tyler Durden' and Zero Hedge have been revealed

And then here is the "fake news" hit piece that claimed Ivandjiiski was a Russian agent.  He's not, he's Bulgarian:

Zero Hedge’s Tyler Durden Outed as a Russian Agent

 

[Jason Lavis + 55]

13 minutes ago, Tom Kirkman said:

My bad.  I had mistakenly recalled a hit piece article against Zero Hedge, where Tyler is called a Russian agent.

First, here is the "real news" :

The real identities of 'Tyler Durden' and Zero Hedge have been revealed

And then here is the "fake news" hit piece that claimed Ivandjiiski was a Russian agent.  He's not, he's Bulgarian:

Zero Hedge’s Tyler Durden Outed as a Russian Agent

 

Well, thanks for those links I wasn't aware of either, or any real identity. I always got the impression that Tyler Durden was more likely to be a Michael Lewis or Max Keiser type, but was still in the industry. Cheers.

[Tom Kirkman + 8,860]

1 hour ago, Jason Lavis said:

Well, thanks for those links I wasn't aware of either, or any real identity. I always got the impression that Tyler Durden was more likely to be a Michael Lewis or Max Keiser type, but was still in the industry. Cheers.

"Tyler Durden" is the shared pseudonym of 2 or 3 people, from what I can deduce.  Which is why I generally refer to them as " The Tylers ".

I actually wish they hadn't been outed by others.  Worst thing you can do to an Anon is out their real identity. 

The ZH manifesto is a brutal dumping of a cold bucket of water on the head:

https://www.zerohedge.com/about

[Bhimsen Pachawry + 72]

18 hours ago, William Edwards said:

May I remind alll readers that Saudi Arabia is still the swing producer. Their production level will remain the difference between the supply from all other producers and the total demand. They do not set the number, they just respond to the buyers' wishes.

As to the price, the Saudis currently appear to obligingly accept as high a price as the futures traders will allow. Don't point the finger of blame for high prices at the Saudis, point it instead at the real price administrators, the futures markets. But always keep in mind that prices determined by speculative trading are no more stable than the altitude of a hot air balloon.

That was not the case really. Saudi Arabia keeps production quota to control oil supply. As the demand increases for oil, the price rises with the supply being fixed. Hence price hike occurs. If the supply kept up with demand, the price hike would be minimal. The future traders don't buy arbitrarily. When oil is not available at lower prices due to supply constraint, the oil price is bound to go high to reduce the demand.

The absolute value of oil is never reached in the economy. The reason why economy is booming is due to undervaluing of raw materials. The real value of oil is the price at which an alternative can be obtained. This may even run to $1000 or more per barrel. Oil essentially provides labour and the labour required to substitute oil will be too large. It is the cheap labour provided by oil that runs today's world.

 

[William Edwards + 708]

23 minutes ago, Bhimsen Pachawry said:

That was not the case really. Saudi Arabia keeps production quota to control oil supply. As the demand increases for oil, the price rises with the supply being fixed. Hence price hike occurs. If the supply kept up with demand, the price hike would be minimal. The future traders don't buy arbitrarily. When oil is not available at lower prices due to supply constraint, the oil price is bound to go high to reduce the demand.

The absolute value of oil is never reached in the economy. The reason why economy is booming is due to undervaluing of raw materials. The real value of oil is the price at which an alternative can be obtained. This may even run to $1000 or more per barrel. Oil essentially provides labour and the labour required to substitute oil will be too large. It is the cheap labour provided by oil that runs today's world.

 

Frankly speaking, Bhimsen, I believe that historical data and logic both agree that you are completely wrong in your assessesment. Please correct your thinking to reflect the inviolable fact that supply ALWAYS equals consumption.

[Rodent + 1,424]

1 hour ago, William Edwards said:

Frankly speaking, Bhimsen, I believe that historical data and logic both agree that you are completely wrong in your assessesment. Please correct your thinking to reflect the inviolable fact that supply ALWAYS equals consumption.

Tell that to Atari, who had to landfill over half of the ET videogames it produced.

 

[William Edwards + 708]

3 minutes ago, Rodent said:

Tell that to Atari, who had to landfill over half of the ET videogames it produced.

 

Touché!  I should have prefaced my comment with the disclaimer “excluding temporary short-lived aberations”. 

[Tom Kirkman + 8,860]

8 hours ago, William Edwards said:

Touché!  I should have prefaced my comment with the disclaimer “excluding temporary short-lived aberations”. 

William, it gives me a chuckle to see your carefully crafted and witty responses.  Great to see your comments on a forum again (it's been a while), and I'm looking forward to seeing your polite verbal dueling skills with others here, along with your careful nudging of others to rethink some dearly held sacred cow theories.

[William Edwards + 708]

1 hour ago, Tom Kirkman said:

William, it gives me a chuckle to see your carefully crafted and witty responses.  Great to see your comments on a forum again (it's been a while), and I'm looking forward to seeing your polite verbal dueling skills with others here, along with your careful nudging of others to rethink some dearly held sacred cow theories.

Another display of your silver-tongued encouragement, Tom. What you lack in veracity is more than adequately compensated by your kindness. I appreciate it. And your own verbal skills do not go unnoticed or unappreciated.

[Tom Kirkman + 8,860]

2 minutes ago, William Edwards said:

Another display of your silver-tongued encouragement, Tom. What you lack in veracity is more than adequately compensated by your kindness. I appreciate it. And your own verbal skills do not go unnoticed or unappreciated.

Heh heh, thanks for your kind words, William. 

I prefer to view my role as a moderator here as being a cheerleader, encouraging members to speak up.

If you look at my profile here on Oil Price, in the "About Me" section, I have this to say:

===============================

*** Important !   I do *not* expect others to agree with my opinions.  I tend to have rather unusual opinions about international Oil & Gas.  I *do* hope that readers will fearlessly voice their own views about international oil & gas.

As a former moderator on the Oilpro forum, (and now a moderator here on the Oil Price Community forum) I *encourage* dissent, and *encourage* Freedom of Speech, and *encourage* others to freely voice their views and convictions about oil & gas. 

A diversity of global views is what makes the world a special place.  Conformity is just a slow, painful death of not speaking your mind.  So SPEAK UP.  Please don't be a jerk about about it, though.  If you want others to consider your views, please be willing to consider the views of others.

Let's work together to make the Oil Price Community forum the Number 1 Oil & Gas forum on the internet.

Cheers, Mate.

[Bhimsen Pachawry + 72]

12 hours ago, William Edwards said:

Frankly speaking, Bhimsen, I believe that historical data and logic both agree that you are completely wrong in your assessesment. Please correct your thinking to reflect the inviolable fact that supply ALWAYS equals consumption.

Supply always equals consumption, but not demand at lower price. The price variation is caused by increasing demand and supply quota.

Edited May 11, 2018 by Bhimsen Pachawry

[William Edwards + 708]

5 minutes ago, Bhimsen Pachawry said:

Supply always equals consumption, but not demand at lower price. The price variation is caused by increasing demand and supply quota.

We are making progress. We agree that supply equals consumption. Now turning to the topic of fictional demand: that can be anything, and a fictional price can be anything, as well. But what place do fairy tales have in a business discussion? What am I missing?

And the meaning of your final sentence, "The price variation is caused by increasing demand and supply quota." completely escapes me. Can you re-phrase this statement?

[Bhimsen Pachawry + 72]

3 hours ago, William Edwards said:

We are making progress. We agree that supply equals consumption. Now turning to the topic of fictional demand: that can be anything, and a fictional price can be anything, as well. But what place do fairy tales have in a business discussion? What am I missing?

And the meaning of your final sentence, "The price variation is caused by increasing demand and supply quota." completely escapes me. Can you re-phrase this statement?

The industrialisation relies on cheap fossil fuel energy replacing muscle energy. Money is a way of measuring human labour (both quality and quantity) that one can buy. Fossil fuel is cheap because they are produced by natural forces and hence no human labour is involved. All one has to do is dig it out and then sell it. The only human labour involved is in the process of digging it out and transportation.

Lets take an example- 1 litre diesel can propel 2 tonne car for 20km. Taking the amount o diesel that can be made equal to 150 litre per barrel, at the cost of $75 a barrel, the cost of diesel comes to be $0.5 per litre. So, for travelling 200km with 2ton load, one will need $5 of diesel and 4 hours of time. Whereas if the same was done by muscle power (oxens pulling a 2ton cart), the labour involved will be much higher and the input requirement, logistics would be much higher.

So, the key to the improvement of standard of living is the price of fossil fuels being low and hence getting the work done with minimal cost. This pricing of fossil fuel is what leads to prosperity and high economic production in industrial society. With ever growing population and industrialisation of the developing and underdeveloped countries, the demand for more energy always exists. But, the supply is limited by the producers which in turn result in the price being hiked.

Since oil is always undervalued compared to the alternatives by tens of times, the potential break even price for oil and alternative may result in oil price reaching even above $1000. It is this "fictional" undervalued pricing that keeps the industrialisation going. If the oil is ever allowed to reach its actual price, then the recent hundred years would not have been so drastically different than the further past days.

The artificially low price of oil is the reason for today's large economy. Oil can never be sold at its true potential price and is not a market commodity. As I have said before, oil is a political commodity.

[Tom Kirkman + 8,860]

13 minutes ago, Bhimsen Pachawry said:

The industrialisation relies on cheap fossil fuel energy replacing muscle energy. Money is a way of measuring human labour (both quality and quantity) that one can buy. Fossil fuel is cheap because they are produced by natural forces and hence no human labour is involved. All one has to do is dig it out and then sell it. The only human labour involved is in the process of digging it out and transportation.

Lets take an example- 1 litre diesel can propel 2 tonne car for 20km. Taking the amount o diesel that can be made equal to 150 litre per barrel, at the cost of $75 a barrel, the cost of diesel comes to be $0.5 per litre. So, for travelling 200km with 2ton load, one will need $5 of diesel and 4 hours of time. Whereas if the same was done by muscle power (oxens pulling a 2ton cart), the labour involved will be much higher and the input requirement, logistics would be much higher.

So, the key to the improvement of standard of living is the price of fossil fuels being low and hence getting the work done with minimal cost. This pricing of fossil fuel is what leads to prosperity and high economic production in industrial society. With ever growing population and industrialisation of the developing and underdeveloped countries, the demand for more energy always exists. But, the supply is limited by the producers which in turn result in the price being hiked.

Since oil is always undervalued compared to the alternatives by tens of times, the potential break even price for oil and alternative may result in oil price reaching even above $1000. It is this "fictional" undervalued pricing that keeps the industrialisation going. If the oil is ever allowed to reach its actual price, then the recent hundred years would not have been so drastically different than the further past days.

The artificially low price of oil is the reason for today's large economy. Oil can never be sold at its true potential price and is not a market commodity. As I have said before, oil is a political commodity.

I adore reading these discussions, and look forward to William's carefully measured responses.

(I am quite familiar with Edward's views, and tend to agree with him on many topics of oil price fundamentals, but my job as a moderator is to remain neutral - yet encouraging - to everyone.  Have at it mates : )  This should be an interesting debate indeed.)