Saudis Set Sights On $80 Oil. I still think that $70 is a better relative balance than $80

[Tom Kirkman + 8,860]

So, no need for me to launch into my ad nauseum comments about how I expect oil prices to recover shortly, that $80 oil [Brent] is not sustainable (too high), and my hope for a relative balance between oil producers and consumers at around $70 this year.

That said, the Saudis seem a bit more optimistic lately.  While my own preference for a sustainable oil price is $70 instead of $80, we seem to be generally heading back in the right direction. 

Saudis Set Sights On $80 Oil

Hoping to drive oil prices back up to $80 per barrel, Saudi Arabia is preparing deeper production cuts this month.

Saudi Arabia plans on lowering oil exports to 7.1 million barrels per day by the end of the month, according to the Wall Street Journal. The Saudi budget does not breakeven unless Brent crude prices average in the mid-$80s per barrel, vastly higher than today’s spot price. The WSJ reports that Saudi Arabia plans on cutting exports 800,000 bpd below November levels, which appears to be a larger reduction than required as part of the OPEC+ agreement.

... WTI is now close to moving back above $50 per barrel, and could be heading higher if Saudi Arabia goes beyond what it committed to in Vienna. Most investment banks see strong price gains in 2019, even if many of them do not see WTI and Brent returning to the highs seen last October.

[Joseph Scarafone + 20]

I agree, I like the range 40 to 80.  Boy I guess it sucks when you're only export is Oil, ie Saudi Arabia.  What are they doing about that?  I'm surprised MBS isn't taking steps.  

[John Foote + 1,135]

1 hour ago, Joseph Scarafone said:

I'm surprised MBS isn't taking steps.  

And what steps would he take? He can cut production to a point, but others will backfill. 

He has far more control over the spend side of the equation. Not spend as in relates to oil exploration or production, but mega-spend projects of various sorts, and foreign policy. 

[Joseph Scarafone + 20]

Steps meaning, steps to add other types of industry to their exports.  I'm actually glad MBS is cutting production because I don't like the idea of American Energy Companies toying with break even cost of goods sold.   $70 oil is/was not the reason the market has pulled back.  

It seems like Agriculture would be great but then there is the water issue.  I don't understand why they can't build tons of desalinization plants and grow more food for export or?  I don't know enough about it but they need more diverse industry.   Maybe there is and I don't know about it?   Or grows cows?  What kind of fisheries are they running?  

[John Foote + 1,135]

On 1/8/2019 at 8:18 AM, Joseph Scarafone said:

  I don't understand why they can't build tons of desalinization plants and grow more food for export or?  I don't know enough about it but they need more diverse industry.   Maybe there is and I don't know about it?   Or grows cows?  What kind of fisheries are they running?  

They have lots of desal plants, but using that water that expensive to grow crops is crazy. They had one of the great underground aquifers on the planet, but largely drained it growing wheat for export. There are industries that can happen there, and they do have world class dairy farms. A buddy of mine was working a fishery project, as far as he could tell it's main objective was to transfer money out of the Kingdom. They even produce caviar, in a the largest land mass in the world without a year round river, pure lunacy.  Naimi lambs are truly special if you like lamb. I've seen more than a few computer science wizards there. I don't believe in trying to engineer economies by directive, but if I was in a position, I'd have KSA target software, social media, services, and wean myself off of imported labor.

Just yesterday I met with an individual who's tasked with the ARAMCO/SABIC merger. All the things a merger normally provides, efficiency synergies, they are off the table. What he was describing was worse than I feared.

[Top Oil Trader + 469]

80 wont happen if they are lucky maybe 55, so much oil being pumped now, canada almost giving it away for free, alaska will start drilling at the ANWR at the shore, there will be so much oil, even if saudi stops producing they wont be able to bring up the prices. this is no longer the 70s.when they had control.