US-Saudi Oil Competition Leverages Pressure on OPEC, Russia

Discussion in 'Americas' started by sorcerer, Nov 20, 2014.

  1. sorcerer

    sorcerer Senior Member Senior Member

    Joined:
    Apr 13, 2013
    Messages:
    6,203
    Likes Received:
    5,119
    Location:
    India
    US shale oil producers and Saudi Arabia find themselves in a desperate competition in the shrinking oil market, driving oil prices down.

    MOSCOW, November 18 (Sputnik) — American producers of shale oil are planning to further boost extraction despite the ongoing slump in global prices, triggering the OPEC nations’ plan to cut exports in order to help prices recover, while Russia may face fiscal difficulties.

    Several major US oil-producing enterprises including Oklahoma-based Devon Energy, Continental Resources and Texan company EOG Resources have announced plans to boost oil production in their most lucrative oil fields, while lowering extraction from their least profitable assets, as reported by Bloomberg
    . This means that US oil production in the short-to-medium-term will continuously increase, contributing to the ongoing slump in global prices.


    Such a decision has exacerbated concern from the OPEC oil-producing syndicate, formally led by US key ally Saudi Arabia. The gravest disturbance was expressed yesterday by Venezuelan President Nicolas Maduro in a televised address, as reported by CNBC, who said he was calling on fellow OPEC members and non-OPEC oil producers to hold multilateral discussions regarding the possibility of cutting extraction in order to push oil prices up. The next OPEC meeting is to be conducted in Vienna on November 27, but Maduro said he is offering an additional discussion prior to the event.

    This coincided with Venezuelan FM Rafael Ramirez’s tour of oil-producing nations, including Russia and the Gulf states.

    “There’s a lot more production coming online this year and in the first half of 2015,” Jason Wangler of Houston, TX-based Wunderlich Securities Inc. said of the US oil extraction situation, as quoted by Bloomberg. “This isn’t a machine that you can turn on and off with a switch. It’s going to take months, if not quarters, to turn it around.”

    US domestic oil production exceeded 9 mln barrels per day (bpd) in the first week of November for the first time since 1983, according to data by the US Energy Information Administration.

    The Venezuelan initiative is unlikely of gain traction from OPEC due to Saudi resistance. As oil prices fall further, nations that ship oil by tankers find themselves in tough competition for their share of the shrinking oil market. China’s economy is slowing and therefore demands less oil. Near-zero growth in Europe and the EU’s initiative to decrease dependence on fossil fuels have undermined Europe’s oil consumption, while Japan, now technically in recession, requires less oil not only due to economic turmoil, but also thanks to its gradual return to nuclear energy.

    Now, the one who first cuts production will lose their precious share of the scarce market.

    “We’re in a battle with Saudi Arabia with regard to market share versus U.S. shale oil,” Scott Sheffield of Pioneer Natural Resources said as quoted by Bloomberg.

    While Saudi Arabia is acting as a more solid market participant, the situation within the US is even more complicated because different oil-extracting companies have to compete against one another, which forces them to drill more wells, pump quicker and deliver faster. US oil production is skyrocketing exponentially for this reason.

    “Any company that comes out and says we’re cutting growth is going to get hit,” said Wangler, a Wunderlich Securities analyst. “It’s not a fun spot to be in. Do you do what makes sense for the oil market, or do you do what makes sense to investors?”

    Another factor affecting oil prices is Iran. The deadline for a nuclear deal is set on November 24, and in case the last round of negotiations is a success, international sanctions will gradually be relieved, meaning Iran will supply even more oil to the global market against ever-shrinking demand. However, analysts at Citi say OPEC export cuts are more likely than an Iranian nuclear deal at this point. But next week’s outcome may prove them wrong.

    Meanwhile, Russia’s FM Anton Siluanov told Bloomberg Russia will slide into recession in 2015 in case oil falls below $60 a barrel.

    “Recession is inevitable in 2015 if the situation worsens,” Siluanov told Bloomberg. “If the oil price declines to $60 per barrel, the economy will have negative growth.”

    “We’ll have to take a more strict approach to the budget and use all our crisis-fighting tools,” Siluanov said. “We’ll have to adjust our budget strategy and review priorities.”

    As of today, Brent crude prices have fallen by 0.37% to $79.02 a barrel.

    US-Saudi Oil Competition Leverages Pressure on OPEC, Russia: Reports / Sputnik international

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

    :popcorn:.

    Game on!!
     
    Kshatriya87 likes this.
  2.  
  3. amoy

    amoy Senior Member Senior Member

    Joined:
    Jan 17, 2010
    Messages:
    5,524
    Likes Received:
    1,548
    Venezuela has already fallen victim to this competition ... http://blogs.ft.com/beyond-brics/2014/10/22/venezuelas-latest-surprise-default-china/ :sucide:

     
  4. Android

    Android Regular Member

    Joined:
    Nov 3, 2014
    Messages:
    52
    Likes Received:
    17
    Location:
    India
    Price below $80 have effected most of oil producing nations,leaving perhaps UAE , Qatar. For Iran anything below $100 would be in deficit and effect it's total revenue same is the case of russia ,soth American countries & SA. US seems to have played its game well,with japan being recession and europe's growth remain almost stagnant US seems to be the only one growing at 3.5% this Q,a furture fall in price for an already ailing russian economy which grew at 0.7% this Q ,would for sure send it into recession.
    Whatever they are upto, non oil producing countries have a great time to make billions of dollars out of it,it will help bring drown India's CAD,bringing down the inflation furture. Early rate cuts and some majore reforms could be icing on the cake.
     
  5. Android

    Android Regular Member

    Joined:
    Nov 3, 2014
    Messages:
    52
    Likes Received:
    17
    Location:
    India
    resechudiling is in long term interest of China,which such heavy reserves you don't need to think about returns so early,for now its all about investing in S.America heavly and taking most of the market share away from the US,which seems to be happening.
     
  6. Ray

    Ray The Chairman Defence Professionals Moderator

    Joined:
    Apr 17, 2009
    Messages:
    43,117
    Likes Received:
    23,545
    Location:
    Somewhere
    I presume it is in the interest of the US to ensure competition so that oil prices slump and Russia is put in dire straits.

    As the Chinese proverb goes - Little Fish eaten, when Big Fish Fight.

    [​IMG]
     
  7. amoy

    amoy Senior Member Senior Member

    Joined:
    Jan 17, 2010
    Messages:
    5,524
    Likes Received:
    1,548
    One man's poison can be another's medicine :taunt:

    China's Crude Oil Imports Surge Despite Slow Demand

    UPDATE 1-Cheaper oil and strong dollar push import prices lower | Reuters

     
    ghost likes this.
  8. Vishwarupa

    Vishwarupa Senior Member Senior Member

    Joined:
    Sep 15, 2009
    Messages:
    2,030
    Likes Received:
    2,209
    But some people estimate that US Shale oil will last only till 2020. It it true? can anyone confirm.
     
  9. Ray

    Ray The Chairman Defence Professionals Moderator

    Joined:
    Apr 17, 2009
    Messages:
    43,117
    Likes Received:
    23,545
    Location:
    Somewhere
    Strategic petroleum reserves is the crude oil inventories (or stockpiles) held by a nation to ward off any internatiional energy crisis.

    China's government-controlled reserves are being completed in three phases. Phase one consisted of a 101,900,000 barrels (16,200,000 m3) reserve, mostly completed by the end of 2008. The second phase of the government-controlled reserves with an additional 170,000,000 barrels (27,000,000 m3) will be completed by 2011. Recently, Zhang Guobao the head of the National Energy Administration also stated that there will be a third phase that will expand reserves by 204,000,000 barrels (32,400,000 m3) with the goal of increasing China's SPR to 90 days of supply by 2020.
    Global strategic petroleum reserves - Wikipedia, the free encyclopedia

    This competition will be a boon for China to fulfil its Strategic Petroleum Reserve target.
     
  10. pmaitra

    pmaitra Moderator Moderator

    Joined:
    Mar 10, 2009
    Messages:
    31,663
    Likes Received:
    17,162
    Location:
    EST, USA
    Is India building its strategic petroleum reserve? PRC is doing it, as @amoy mentioned. This is the time to gobble up the low cost oil that is out there in the market.
     
    Last edited by a moderator: May 10, 2015
  11. pmaitra

    pmaitra Moderator Moderator

    Joined:
    Mar 10, 2009
    Messages:
    31,663
    Likes Received:
    17,162
    Location:
    EST, USA
    Sir, Russia has been buying gold and allegedly dumping US Treasury bonds. If you might have noticed, the gold prices have also fallen recently.
     
  12. asianobserve

    asianobserve Elite Member Elite Member

    Joined:
    May 5, 2011
    Messages:
    7,308
    Likes Received:
    2,976

    Russia may have dumped US Treasuries but it was largely symbolic. Even Russia is calculating that it needs the security of US treasuries as there is no better alternative...
     
  13. pmaitra

    pmaitra Moderator Moderator

    Joined:
    Mar 10, 2009
    Messages:
    31,663
    Likes Received:
    17,162
    Location:
    EST, USA
    I never said Russia dumped the US Treasury bonds. I used the word "allegedly." Bonds being anonymous could have been dumped by anyone and via various channels.

    Assuming Russia dumped them, it was not symbolic. It was more to do with stockpiling gold, than to hurt the US.
     
  14. asianobserve

    asianobserve Elite Member Elite Member

    Joined:
    May 5, 2011
    Messages:
    7,308
    Likes Received:
    2,976

    No, Russia did not dump US bonds. It's US treasuries holdings is so huge that it cannot escape the attention of traders and economists should it dump it.
     
  15. pmaitra

    pmaitra Moderator Moderator

    Joined:
    Mar 10, 2009
    Messages:
    31,663
    Likes Received:
    17,162
    Location:
    EST, USA
    Don't know how anyone would know who dumped it, because the bonds are anonymous. In any case, I don't understand why gold prices have fallen, given that oil prices are also falling. The Swiss are going to hold a referendum on how much bullion to hold, and they are considering raising their stockpile.

    It will be interesting to see where the world economy heads to.
     
  16. asianobserve

    asianobserve Elite Member Elite Member

    Joined:
    May 5, 2011
    Messages:
    7,308
    Likes Received:
    2,976
    This could be a good start: Oil and gold price plunge does not signal a global recession, experts say | Business | The Guardian

    In brief, the explanation is supply glut, weak demand in Europe and Asia (weaker economies) and vast money jumping to stocks (most of it in US).
     
  17. pmaitra

    pmaitra Moderator Moderator

    Joined:
    Mar 10, 2009
    Messages:
    31,663
    Likes Received:
    17,162
    Location:
    EST, USA
  18. asianobserve

    asianobserve Elite Member Elite Member

    Joined:
    May 5, 2011
    Messages:
    7,308
    Likes Received:
    2,976
    Coupled with weak demand and moneyed investors and traders dumping gold in favor of stocks. It is not known how far low gold prices will go down further though and for how long...
     
  19. amoy

    amoy Senior Member Senior Member

    Joined:
    Jan 17, 2010
    Messages:
    5,524
    Likes Received:
    1,548
    The whole world shall welcome the US (back) to the energy arena - the more competition the more merry.

    [​IMG]

    [​IMG]

    The US crude oil production peaked last time perhaps around the Vietnam War?!

    With China's ambitions in South China Sea both US and China are likely to become the Yin-Yang in the energy sector! :lol:

    In South China Sea, China Makes First Big Gas Discovery While Other Countries Look On | ThinkProgress
    [​IMG]
     
  20. ladder

    ladder Senior Member Senior Member

    Joined:
    Mar 28, 2013
    Messages:
    4,751
    Likes Received:
    2,666
    Location:
    India
    Last edited by a moderator: May 10, 2015
    pmaitra likes this.
  21. Ray

    Ray The Chairman Defence Professionals Moderator

    Joined:
    Apr 17, 2009
    Messages:
    43,117
    Likes Received:
    23,545
    Location:
    Somewhere
    connect with

    The US and the West wanting to make Russia bleed over Ukraine, has actually cut its nose to spite its face.

    By manipulating the oil prices to hit the rock bottom through the pliant surrogate Saudi Arabia and OPEC, it sure has hit Russia hard.

    But then, what is Russia compared to China when it comes to the bitter struggle to find the top dog space in global supremacy.

    Russia is no match. But then the Anglo Saxon biases cannot be wished away and so the West and the US have to take on Russia and crush its nose in the dust.

    From the ego standpoint it is a great achievement, but sadly for the West, it has given rise to a Frankenstein that will bite it in the posterior and make it jump and bleed that no medication or surgery can save!
     

Share This Page