Saudis Plan Big Oil Output Hike, Beginning All-Out Price War

[safeinOhio]

Source: Bloomberg

Saudi Arabia plans to increase oil output next month, going well above 10 million barrels a day, as the kingdom responds aggressively to the collapse of its OPEC+ alliance with Russia.


The world’s largest oil exporter started a price war on Saturday by slashing the prices it sells crude into foreign markets by the most in at least 20 years, offering unprecedented discounts in Europe, the Far East and the U.S. to entice refiners to purchase Saudi crude at the expense of other suppliers.


At the same time, Saudi Arabia has privately told some market participants it could raise production much higher if needed, even going to a record of 12 million barrels a day, according to people familiar with the conversations, who asked not to be named to protect commercial relations. With demand being ravaged by the coronavirus outbreak, opening the taps like that would throw oil market into chaos.


Read more: https://www.bloomberg.com/news/articles/2020-03-07/saudis-plan-big-oil-output-hike-beginning-all-out-price-war

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Hope those futures investors lost their shirts.

[yaesu]

1. Oil prices are already crashing do to the economic downturn, this could get interesting

hella cheap gas & no place to go.

[Maxheader]

19. Is that a bad thing?

[paleotn]

25. One of their motivations...

is protecting IQ45 from a serious economic downturn. He's a valuable Saudi asset and they'd like to keep him on the job.

[oldsoftie]

27. I doubt it would save trump; we're not at a point of high gas prices nationwide.

I paid 2.09 yesterday. Dropping that to 1.59 isnt going to save the economy if its in trouble!

But Trump would certainly crow about "people are saying lowest prices in decades!!!!"

[paleotn]

31. Like much of economics, the impact is psychological...

Even if in real terms it doesn't save private households much money, it makes them feel better off, thus they spend more. We're bombarded daily with psychological cues, both positive and negative, that drive Americans to spend or not spend. Prices at the pump are just one of those cues, and one oil producers can affect directly.

[oldsoftie]

32. True; for many, perception is reality

[yaesu]

30. not for the consumer but for the push for green energy its bad and bad for the climate also nt

[Xipe Totec]

36. Bad for Texas, Oklahoma, Alaska, and other oil producing states.

Could crash their economies.

Watch the rig count.

[docgee]

2. Let me guess, IQ45 takes credit for low gas prices.

[safeinOhio]

4. Might not want to take credit and

have Putin find that pee tape.

[IronLionZion]

5. It would be sweet if Putin turns against him over oil prices

[Dios Mio]

14. Russia

Very interesting.

[paleotn]

26. And it helps ward off a serious recession...

or at the very least, delays it until post election.

[mitch96]

3. This is gonna kneecap Russia (Putin's) income

As Rachel mentioned in her book, that Russia is a one commodity income...... oil and gas.
Flood the market, drop the price and Russia has less income...... Dasvidaniya booobie....
m

[IronLionZion]

6. A week ago they claimed they would cut production

this seems like a very interesting turn of events. Going against Russia will have some consequences

[ToxMarz]

7. Maybe Jared can broker a peace plan between them.

[Miguelito Loveless]

12. I am guessing Russia will see if it can get a war going against Iran

so the will attack Saudi fields and close the Straits of Hormuz.

The Saudis will stir up terrorist problems for Russians.

[htuttle]

8. "Putin Dumps MBS to Start a War on America's Shale Oil Industry"

https://www.bloomberg.com/news/articles/2020-03-07/putin-dumps-mbs-to-start-a-war-on-america-s-shale-oil-industry

But the OPEC+ deal also aided America’s shale industry and Russia was increasingly angry with the Trump administration’s willingness to employ energy as a political and economic tool. It was especially irked by the U.S.’s use of sanctions to prevent the completion of a pipeline linking Siberia’s gas fields with Germany, known as Nord Stream 2. The White House has also targeted the Venezuelan business of Russia’s state-oil producer Rosneft.

“The Kremlin has decided to sacrifice OPEC+ to stop U.S. shale producers and punish the U.S. for messing with Nord Stream 2,” said Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank. “Of course, to upset Saudi Arabia could be a risky thing, but this is Russia’s strategy at the moment – flexible geometry of interests.”

Trouble in Paradise?

[hedda_foil]

10. Release the pee tape!

[paleotn]

29. Read that and thought...

good luck, Putie. OPEC tried that, lost and were forced to adapt. For better, or worse, fracking operations in the US are incredibly nimble and resilient. They've had to be to survive. And as soon as oil prices recover, those who survived, along with shiny new fracking operations no one's ever heard of, pour into the oil patch, riding a new wave of capital investment. The only folks seriously hurt by this are OPEC and Putin's gas can masquerading as a country. Maybe the Russians still don't quite grasp how American capitalism works.

[MarcA]

33. It also hurts the people and other living things where the fracking occurs. n/t

[paleotn]

34. Umm, yea....

thus my ..."for better, or worse"... caveat in my post. It sucks nearly as bad as tar sands, but until we electrify our transportation system and get power production off of nat. gas, it isn't going away.

[MarcA]

35. True. n/t

[roamer65]

9. For once in a blue moon I agree with Riyadh.

Fuck Putin. Fuck him good.

[Miguelito Loveless]

11. No matter what oil producers do, they are screwed

Saudis dumping oil on the market drives down the price everywhere and hurts other producers, especially frackers, who need the price at $60-$70+ to sell at a profit. Frackers are hemorrhaging money and Wall Street is cutting off the money supply. This will result in popping the carbon bubble, massive collapse in the industry, and massive loan defaults crashing the financial sector.

Even if they were somehow able to drive the price back to $100+/bbl, this would just hasten the move to EVs in the transportation sector, causing a drop in oil demand and collapse in oil price, resulting in the first scenario.

It is going to get VERY ugly.

[roamer65]

13. We are on the edge of a second Great Depression.

I expect the stock markets to lose another 10 percent this coming week.

[maxrandb]

15. I'll take your Great Depression

and raise you WWIII and Armageddon.

[safeinOhio]

16. I love irony.

Kock brothers may soon be broke. Russia won't be able to afford to screw up other countries. Money equals speech will help the Left for a change. What next? The soon to be White minority will be marching for equal rights?

[gab13by13]

17. Next month is a long time away,

I say the Saudis are bluffing. Putin won't allow a war with Iran. Maybe Trump should go back to SA and touch its glowing orb again?
Saudis are basically cowards, if reports are proven, it and the UAE funneled millions of dollars of dark money into Trump's election campaign, Russia and SA have a US puppet president, they aren't going to endanger that relationship.

[beachbumbob]

18. great for consumers as we will see $30 bbl oil, not so good for markets

or economies dependent on the oil sand and shale production as it will stop. Good for environment though

[durablend]

37. Trump thinks it'll get him re-elected

"YUGE BUMP IN THE ECONOMY! GAS PRICES DOWN BIGLY! DO NOTHING DEMOCRATS CRYING AGAIN!

[beachbumbob]

39. market will not go up, trump is an idiot

we have lots of "corrections" instore

[bucolic_frolic]

20. Use it or lose it

Post-petroleum energy makes monetizing assets in the ground now a very rational endeavor

[gab13by13]

21. Yes but consumers aren't going to use it.

Yes, use it or lose it but what happens if people stop travelling? There are tankers now sitting full of oil.

[safeinOhio]

22. When it gets to a buck a gallon,

I'll be going for a nice Sunday drive again.

[moreland01]

23. And why not.

We've got a plague, why not a war too?

[Lonestarblue]

24. Lower oil prices may save our national parks and Alaskan wilderness.

Trump has given the green light to oil companies to explore in some national parks and in Alaska’s wilderness. Low prices mean the costs are not worth it. I hope this pushes us into green energy faster.

[modrepub]

28. Oil Economic Model

Step 1: Find a new large oil deposit
Step 2: Estimate the recoverable amount of oil in new reserve and use future predicted prices to assign a value to new reserve
Step 3: Go to very large bank for a loan, issue additional stock to raise capital, float bonds
Step 4: Use raised capital to develop oil field
Step 5: Pump oil and sell to pay back any loans and explore for new reserves

That's how it works. Oil shocks that lower the the value of the oil coming out of the ground will make paying back loans more difficult, especially if the predicted oil price used to raise capital was much higher than the current price.

These boom-bust cycles have been going on in the oil market since crude was first pumped out of the ground in the 1850s. The issue now is that the energy companies make up a very large part of the working economy. Most of us who own 401ks or other stock indexes own energy stocks/bonds. While having lower oil prices means we pay less at the pump, it also has economic repercussions through lower stock values, loan/bond defaults and ultimately company bankruptcies that will echo through our economy.

At some point we need to get out of this boom/bust fossil fuel economy. This will probably delay that through lower energy prices and/or economic contraction.

[Nitram]

38. This will hit Russia very hard. they are already under US sanctions, and oil is their primary

source of income.