Saudi's may be finally ready to crack

http://www.business-standard.com/article/pti-stories/saudi-minister...

I tried to post this yesterday with a much better article that I cannot find today.

Anyhoo, the Saudi's have used their muscle to crush oil prices in a poorly thought out plan they hoped would gut American shale oil producers.

Didn't work out too well for them.

What it did is cause the Americans to become much more efficient and allowed them to become the worlds swing producer, at a gain for opec of a few measly bankruptcies.

Hold onto your mineral rights and your future royalties, I feel a lot more certain of the decent prospect for a price rebound in the next year or so. Just remember, since 2007 oil prices went up to $148, down to 30, back up to 115 and now down to 35, all in just a few years.

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Permalink Reply by Paul Butler on December 16, 2015 at 9:24am

What the Saudis did is text book competitive.

I'm hearing the Saudis used big data to figure out that they have more than enough to sell and they need to sell it now.

These shales are abundant (it's the most common sedimentary rock).

Many more countries are going to come on line with their own shales.

Renewables are going to eat into demand.

Obama just authorized a new program to fund research into the development of smaller and, hopefully, safer nuclear reactors.

If your holding product(energy) and you know new players are about to enter the market with more product, the general rule is you sell as much as you can before you have additional competitive product entering the market.

It ain't nothing more than making hay while the sun shines.

This is just the beginning. 

It's terra incognita, so I can't say what's going to happen.

Knowing that more and more product is going to enter the market---it's counterintuitive to expect prices to rise.

Permalink Reply by David Allen Lilly on December 16, 2015 at 11:46am

Well, I do expect prices to rise and I have plenty of company. Yes there are many shale formations in the world but I don't think many are capable of producing a profit against the cost of recovery.

Also, you raise some interesting points but I have not heard your reasoning for the Saudis behavior until, well, reading your comment.

The Saudis wanted to protect market share and bankrupt the American shale oil producers, that it a pretty widely agreed upon opinion.

And renewables are a joke, in a hundred years they will have made no more dent in the real energy industry as it exists in the fossil fuel realm.

W e don't have to agree, and I don't, mostly, but I respect your opinion.

Permalink Reply by Bob Rock on December 16, 2015 at 2:22pm

I hope with oil at price it is ,are oil reserves are full to rim. plus find more holes to dump it in to.

Permalink Reply by David Allen Lilly on December 16, 2015 at 11:32pm

We need an improving global economy and particularly one improving here at home to burn off some of the over supply.

It would also be advisable for producers to quit pumping so much more than is able to be used, the Saudi's and many if not all in OPEC are doing this on purpose, and we need to be more disciplined as well.

I look for some level of cooperation in the industry to more tightly manage (manipulate through collusion) production, trying to get it in line with what is being used.

Permalink Reply by Joe on December 18, 2015 at 12:46am

I look for some level of cooperation in the industry to more tightly manage (manipulate through collusion) production, trying to get it in line with what is being used.

I believe that is illegal in the USA. Price fixing, monopoly?

Permalink Reply by Joseph-Ohio on December 18, 2015 at 4:18am

Well, looks to me like S. A. / O.P.E.C. have been doing it for decades as the world's 'swing producers' and when they stop throttling the oil supply and flood the market with their oil production it stalls the world's economies (as it appears to me also that the world's economies have acclimated / become accustomed to the 'swing producers' gouging tactics).

Their 'gouging tactics' (coupled with our politicians cooperation) built places like 'Dubai' and keep the desert shieks in Mercedes Benz autos and Mullahs living in opulance, while they grant their 'subjects' free education and health care and whatever else they need cradle to grave; this to a great degree at the expense of our Petro dollars.

We have been paying too much for fuel for decades and by proxy aiding and abetting outright enemy states / countries and footing the bill for their kingdoms / despots / dictatorial tyrants and then even sending our military to risk injury / loss of life / blood / treasure in their support.

All of that sounds / reads like out right stupid to me.

I'm thinking that our Natural Gas and Oil businesses can make plenty of money even at $20.00 / barrel oil - if they want to (unless they would rather 'opt out' and go bust instead).

However I agree that there ought to be practical limits set on how much of our resources can be sold and to who we as a nation are permitted to sell it to.

Work with / sell our calculated quota of production to only our 'vetted' / confirmed allies.

Grow domestic usage of our domestic natural gas.

JMHOs

Permalink Reply by Joe on December 18, 2015 at 5:27am

I fail to see how low oil and gas prices can hurt the American economy. When the price goes up everyone suffers. Every time since the great shortage. Anything requiring energy to make or transport the price went up. Of course it was a trickle up effect everything goes up. Wages too, but we survived.

 When the price of oil started going down the stock market went went down and the news cried the sky's falling the sky's falling but some how some way the stock market came back up. Then it repeated again and again. Now oils down and the stock market is right back up higher than it was before and we still survive.

  How can low prices hurt the USA? Can anyone tell me the % that the price of nat gas has went down since this all started? Well I can tell you this my electric bill and gas bill hasn't went down. The liberal news media takes bad information from crooked politicians, and big business and spews it across the news how our heating bills going down. (The only place anything went down was at the pump and heating oil and, that's been plenty slow getting there.  The way they keep adding new charges and fees, pipeline maintenance fees.

 What did they use before to maintain the pipes?? It was all included in the bill till the crooked big business and politicians figured out how to pull the wool and lie about it. Think about it just like CHK. They say they have to pay gathering, transportation and other cost that they own stock in. I don't know what we can ever do about that. For one thing the politicians don't want anything to go down. That cuts their tax base. Every time the price of anything goes up the government reaps more taxes to steal from us. But! manufacturing and other businesses still have competition amongst them selves and the chinese making it a little easier to compete against imports. How can that part of it be wrong?

 Now if we could just cut the n*ts off the people in the cable, and entertainment industry for robing us blind....   

Permalink Reply by Joseph-Ohio on December 18, 2015 at 10:19am

I don't see anything wrong with low consumer prices for fuel either.

Gas and Oil concerns on the other hand are not all that happy with it as it has cut their profit margin down considerably.

Instead of earning an illustrative 100 bazillion they're only earning an illustrative 36 bazillion selling their oil.

They can't be liking it all that much can they ?

 

 

Permalink Reply by Jim Litwinowicz on December 22, 2015 at 6:58am

While we are all enjoying filling our tanks for gas around $2/gal and lower heating and electrical bills, the sudden drop in crude oil and nat gas process may have negative affects that we will all feel.

The oil and gas development has driven much of the job growth and GDP growth of our economy. But now there are massive layoffs in that field of work. Texas alone will see 100,000 jobs disappear. And these are very well paying jobs. Even lower skilled workers on oil and gas rigs started at $70,000/yr and quickly went to $90,000/yr and higher. Experienced, skilled workers were getting $115,000 and up. Further, since these jobs were in the field in remote areas far from home, they also got food and lodging per diems on top of their wages which boosted local economies. They also paid a lot of taxes and used a lot of local services.

Now drilling rigs are less than half a yr ago and many crews are laid off. Hotels and restaurants in the major drilling areas of Pa are reporting a 30% drop in business and they are also laying of people. Suppliers, truckers, heavy equipment operators are all losing their jobs. Ones still working are getting pay cuts as competition for fewer jobs heats up. But it doesn't stop there.

A lot of related business is also going away. The law firm called Burleson LLP just announced it was closing eight different offices. Almost every law firm in oil patches added people to handle leasing, wills, trusts, ROW issues, and more and are now cutting back people. Title companies, financial services, banks all added people to handle increased demand that no longer see that demand. Many oil companies are closing offices, Shell just closed its office near Pittsburgh laying off 150 people, many that were in the $200,000 range. This has been repeated by hundreds of companies across the the state and the country.

Many of these people bough homes, new vehicles, took expensive vacations. Will they lose their homes? Lose their SUVs? Quit spending money? How will this ripple down the economy? With an expected loss of 300,00 direct jobs and an unknown number of related jobs, what will the total affect be?

But there is an even more pressing related issue. At least two dozen companies are close to going bankrupt because of the heavy debt, usually several billion each, they acquired to grow reserves. If they go under, major banks, hedge funds, private investors and more may be buried in that avalanche. It was a previous crash in crude oil that sparked the Savings and Loan crisis of the 1980s. Even pension funds and unions are heavily invested in the oil biz.

Maybe the cheap gas will stimulate other economic activity to balance the loss of the oil patch dynamics. Maybe the econ will actually be better off. But maybe not.

 
Permalink Reply by Joe on December 23, 2015 at 2:31am

The weak and the strong. The world changing constantly. Should we get rid of the internet to save newspaper jobs? E-mail to save postal jobs? And it goes on. You mean we're right back where we were before anyone heard of Marcellus gas? Before the carpet baggers came to town. Anyone who stuck their neck out on a limb trying to get rich quick knew there were risks. After all who really thought it would go on for ever. The greed to get rich quick rushing in leasing up all the land. Boiler plate leases, lies, corruption. It all comes with money. It was just another BOOM. Anyone can look at the history books and see all of the booms through the history of the United States and before (North America). I feel for all the guys that went out and bought trucks to haul water,sand, and other related products. It was like a gold rush to truckers working more hours than they want but the money rolled in. I worked crane rental moving drilling rigs. Holding wire line fracking. Making more money than I ever made in my life. Did I buy things for my family that was slow coming before? You bet your a** I did. Did I over spend? Maybe a little. But I didn't make any long term financial commitments like a new house fancy cars and other things. That would have been foolish in the short term of my financial success. I was working 70, 80, 90 hrs a week living in motel rooms, on the road all the time. Then the boom took a down turn. Oh well.

 In a different perspective anyone familiar with Butler County saw the Cranberry boom along Rt 79 north of Pittsburgh. Money, greed, deals, property prices. The same thing started in Buffalo Twp East of Pittsburgh off Rt 28. The down to earth grass roots people born and raised there loved the rural community life and fought and fought for yrs to keep from having another Cranberry but slowly lost out to the greedy. The developers. Land owners with get rich sell the farm. But it was not to be and Buffalo Twp is being taken over.  

Permalink Reply by Donald on December 23, 2015 at 3:46am

Vote for Trump, he will put the Saudi's out of business and put a Casino in the middle of their oil fields.the US and Russia will control all the oil and gas in the further.   

Permalink Reply by Paul Butler on December 17, 2015 at 3:23am

I read the information concerning the Saudis in the Financial Times.

The Saudis could double their current production and keep it going for more than 75 years.

I wouldn't be so dismissive of renewables.  Remember, the Stone Age didn't end because we ran out of stones.

The renewable industry, like the Oil & Gas Industry, is full of shills, touts, charlatans and, of course, blow-hards.  All industry has that problem.  The clergy has that problem. 

I've said this before, I'm not trying to prove anything and I don't have a crystal ball.  My posts are, merely, to provide alternative views in a spirit of collegiality.

The more information everybody has--the better.

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