An expected? Saudi Arabia Would Need Oil At $80-$85 A Barrel To Balance Budget

[Auson + 123]

2 hours ago, Tom Kirkman said:

Agreed, agreed, and agreed with all 3 paragraphs.

Highs approaching $80 later this year should counterbalance the sub- $60 oil in the beginning of this year, to roughly average out to around $70-ish for this year.  Just my opinion.

Thanks Tom but all this agreement is no good I guess we will just have to find something else we can argue about now !

Price of Gold perhaps ?

[shadowkin + 584]

On 3/5/2019 at 9:24 AM, Auson said:

I am pleased I am not the only one who thinks that shale is a state backed geo political strategic play ( I think the same of Tesla ). I get the feeling that the banks lending to shale know they are backed by govt. Any losses will be underwritten by govt. and profits will be kept by the financiers

Agree. But state backed doesn't mean direct subsidies AFAIK. I think it's why no one's concerned (except media hype) about indebtedness of the smaller shale players. I think the banks are told in so many words that they should lend to them. Don't forget banks themselves are state backed geopolitical plays especially central banks. If it wasn't for the state (re taxpayers) they all would have went under in 08-09.

As far as Tesla sure there are EV credits which are peanuts and will expire soon. You could argue Tesla is even more a Chinese strategic power play since China secured low interest loans for GF3 and is being built by a government construction company. Makes sense since China is oil poor and surely doesn't want to continue to be dependent on unstable ME for oil.

[mad-trader + 25]

On 3/5/2019 at 9:24 AM, Auson said:

mad-trader,

I am pleased I am not the only one who thinks that shale is a state backed geo political strategic play ( I think the same of Tesla ). I get the feeling that the banks lending to shale know they are backed by govt. Any losses will be underwritten by govt. and profits will be kept by the financiers. The US becoming the worlds largest producer of oil is far more important than the profit or losses involved in it doing so ! So in answer to your question of how much is it subsidised the answer is by whatever it takes !

With all your experience can I ask where you see Brent going this year ? 

I heard a little green socialism in those words..  The GREAT things are built ONLY  by risk taking SUPER MEN  and CAPITAL..   Why would I work 80 hr weeks if I don't plan to get rich.  Founders, Stock holders and Banks all can lose their money..  Employees risk little and collect regular pay checks.. Employment contracts can include stock but there is no legal claim except checks come.  It's very capital intensive just to hire a staff of 20..  The GOV want's it's tax  money up front even before people get paid. 

JC's numbers say no subsidies are needed.. There's a lot of potential profit in those numbers. Tax incentives are not people wrapping $10 bills around Barrels. 

Tesla was not subsidized.    GREEN  WAS>.  Tesla got a nice big loan same as did other car manufacturers..Electric cars was a dream so gov helped.  Tesla paid for all their R&D then TESLA PAID off the loan in record time with interest.  Solar panels, windmills, recycling,  all this has had money thrown at it..   GREEN WAS FAR FROM FREE and  I'd bet 90% of the current operations are in the RED as it was all financed  20 years.  There was no doubt lots of don't pay taxes in all of that.  

Prius was the main beneficiary of green car subsidies.  State, local and Fed gave added benefits.  ~ 9K per car just to purchase price as I remember.  Solar City ( Musk was smart to buy )  benefited by  Gov  incentives to owners of panels, but so did all the others and they employed a lot of people.     Giga plant etc  for sure got state and Local.    My thoughts.

[ronwagn + 6,290]

3 hours ago, shadowkin said:

Agree. But state backed doesn't mean direct subsidies AFAIK. I think it's why no one's concerned (except media hype) about indebtedness of the smaller shale players. I think the banks are told in so many words that they should lend to them. Don't forget banks themselves are state backed geopolitical plays especially central banks. If it wasn't for the state (re taxpayers) they all would have went under in 08-09.

As far as Tesla sure there are EV credits which are peanuts and will expire soon. You could argue Tesla is even more a Chinese strategic power play since China secured low interest loans for GF3 and is being built by a government construction company. Makes sense since China is oil poor and surely doesn't want to continue to be dependent on unstable ME for oil.

China will not be oil poor, natural gas poor, or energy poor forever. They have the oil and the natural gas in the ground. They have the technology and are rapidly developing the industrial resources to produce more oil and natural gas. They are more motivated to get off of coal than most other countries because of their dire need to do so. They are trying to keep the Chinese people employed, and somewhat satisfied with their lives as worker bees who have little in the way of Western freedoms or middle class lifestyles comparable to the West. (Those who have lived in China please correct me if you think I am wrong. Just include the rural Chinese in the analysis}. 

References 

https://oilprice.com/Energy/Crude-Oil/China-Faces-An-Uphill-Battle-For-Energy-Independence.html

https://oilprice.com/Energy/Crude-Oil/China-Says-Massive-Shale-Oil-Reserves-Found-In-North.html

https://en.wikipedia.org/wiki/Energy_policy_of_China

 

[vdesh + 1]

Oil has to go up. It went down from WTI - 76 to 42 . It will go up in next 32 months.

[ronwagn + 6,290]

2 hours ago, JJCar said:

Watch Chevron CEO video interview on Bloomberg  this afternoon. He explains it all.  Said for them shale profitable at $35 oil while only getting 10% of the oil out of the shale.  He said new technology will greatly improve that incoming years. VERY INFORMSTIVE VIDEO .... a must watch.

A teaser. How about the link? New oil, natgas, and biogas will be coming from many new areas. The technology just keeps getting better. The lowest priced producers will dominate the market and those who require high prices will suffer greatly. I have been saying this for years and it has come true. 

[ronwagn + 6,290]

3 hours ago, vdesh said:

Oil has to go up. It went down from WTI - 76 to 42 . It will go up in next 32 months.

If it does, it will be shortlived. I say no. 

[Stavros Hadjiyiannis + 1]

On 3/5/2019 at 11:10 PM, JJCar said:

The high Break evens published for US shale plays is 2016 numbers.  Read Hess 10K 55% return at $50.00 oil.  Its only getting better.

Listen to Shell Oil . . . .  Deepwater now and going forward under $30.00 bbl oil.

Also watch out for demand decline.  Smart money sees Electric Vehicles taking off FASTER than any prognosticators can imagine.  Its just starting.  The automobile industry is no longer an Industrial company,  they are becoming Tech companies.  Do your research on Rivian.  A whole new auto design from bottom up.  You wont recognize the Auto Industry 5 to 10 years from now. 

In US oil consumption 1/3 gasoline, 1/3 diesel,  1/3 other (Marine, Air, Petrochemical).  Think about it in todays world as little as 1 million extra barrels a day can trash oil prices.  Yes there is some new demand in Air Transport, Emerging Markets, maybe pertochem  . . .  but nowhere near enough to make up for increase supply and electric vehicle growth. 

Why haven't these companies ever made any profit then? Shale companies have been losing lots of money every single year since this process begun. Lots of wild claims are being made for their ever increasing efficiency, but little (if anything) of the sort appears in their bottom lines. The only reason these shale companies have been able to stay in business for so long, is the ultra lax monetary policy of the US Fed, as well as the epic bull-run in the financial markets since around 2010. As always, however, these speculative investment drives will have to reckon with reality at some point. By then, only a massive government bail-out will be able to save US oil production from a massive and sudden implosion. That is, if the USG is in a position to do so in the first place. 

[AcK + 50]

18 hours ago, JJCar said:

Watch Bloomberg interview with Chevron CEO to see where oil prices going. 1. Chevron Shale is profitable   profitable  in $30's. That's today with only recovering 10% of oil and gas shale . Said we are leaving 90 % in the ground today. That will change. I saw reports that will triple in 3 to 4 years .  Where does b/e drop to then ?  Watch informative video (March 6) You will learn a lot.  New pipelines and export terminals will unleash US shale on world market by Q1 2020. Major consolidation coming to today's 500+  shale operators as small and medium shale co's can't afford to keep up with new shale technology and oilfield digitization.  OPEC may be able to prop up oil prices this year with their PR campaign but that will end by next year.  Big oil has figured out the shale industry.  OPEC will not fare well when oil "balances" and "stabilizes" at $45 to $55 per barrel.

Plz post link.

[AcK + 50]

8 hours ago, Stavros Hadjiyiannis said:

Why haven't these companies ever made any profit then? Shale companies have been losing lots of money every single year since this process begun. Lots of wild claims are being made for their ever increasing efficiency, but little (if anything) of the sort appears in their bottom lines. The only reason these shale companies have been able to stay in business for so long, is the ultra lax monetary policy of the US Fed, as well as the epic bull-run in the financial markets since around 2010. As always, however, these speculative investment drives will have to reckon with reality at some point. By then, only a massive government bail-out will be able to save US oil production from a massive and sudden implosion. That is, if the USG is in a position to do so in the first place. 

See Dallas fed survey for breakeven point data (click on special questions) for 2018 - for both existing wells (opex) and new wells (opex + capex) Of course assumes companies are telling the truth to Dallas Fed. Also oil prices have been very close to new well breakeven points - might explain the poor returns. Havent see company annual reports myself. Quite good wti price last year - how did balance sheets/ cash flows look in 2018??

https://www.dallasfed.org/research/surveys/des/2018/1801.aspx

Next survey report to come in end of this month - should provide for a good comparison and latest trend.

Edited March 7, 2019 by AcK

[shadowkin + 584]

53 minutes ago, AcK said:

Plz post link

Don't know about Chevron but on this website there's an article where Exxon claims they can make 10% return even if oil went to $35.

https://oilprice.com/Energy/Energy-General/Oil-Majors-Are-Taking-Over-The-Permian.html

[Old-Ruffneck + 1,239]

17 hours ago, JJCar said:

Chevron CEO Video on Bloomberg

Google https://www.bloomberg.com/news/videos/2019-03-06/chevron-ceo-michael-wirth-on-buybacks-oil-demand-venezuela-video. 

 

there are a few videos recommend the full interview.  A little over 16 min.      A lot of shale costs toward the end

 

 

Watched the videos. What he is explaining and saying is not new information in the oil-patch, mainly for the investors that are not in the know about what is going on. I fully expect 'em to hammer the crap outta the Delaware which has begun in full earnest from other producers. They will get cheap oil and a lot of wells but will be long haul (few years). Meanwhile..………………….

[Anuj Gupta + 1]

Gone are the times when America & Arab countries would exploit the world with dollar & crude. Electrification is now a reality! Solar & wind based power projects are taking over thermal too fast too broad. Its about time that America & Saudi brace up for the beginning of both the dollar & crude bear markets.

Edited March 9, 2019 by Anuj Gupta

[Jovito Catungal + 6]

MBS is the realization of the dreams of young Saudis, circa 80's when I started working there until I rose to become a trainer in early 2000. I said such idealistic leader may appear someday and may achieve their wishes if  other culture or other nations.. will sleep along the way..

[Boat + 1,323]

Curious about the fascination with what it takes for the Saudi to balance their books.   A more interesting question is what oil price would solve a trillion dollar deficit and 22 trillion of debt. Some think cutting taxes works. Lol

[t566480 + 4]

Anything above 65 $,per barrel will start ruining World and USA economy and the 2008 may happen again. USA has to do everything to stop the price sliding above 65 $. Otherwise expect new disasters.

[John Foote + 1,135]

20 hours ago, Boat said:

Curious about the fascination with what it takes for the Saudi to balance their books.   A more interesting question is what oil price would solve a trillion dollar deficit and 22 trillion of debt. Some think cutting taxes works. Lol

Price of oil is a bit irrelevant to the US deficit. There are no feasible economic models I know of where the price of oil could stimulate the US economy to grow out of the problem.