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🛢️ The Perfect Storm Sends Natural Gas Crashing
« Reply #945 on: February 28, 2020, 01:15:29 AM »
https://oilprice.com/Energy/Gas-Prices/The-Perfect-Storm-Sends-Natural-Gas-Crashing.html

The Perfect Storm Sends Natural Gas Crashing
By Julianne Geiger - Feb 27, 2020, 6:00 PM CST


If you’re waiting for natural gas prices to recover, you might be in for a considerable wait, as inventories are expected to hover well above their five year average for the remainder of the year, the EIA has forecast, painting a rather sour picture for the industry that has seen investments stifled due to the lower prices.

In fact, inventories later this year will reach levels never seen before if forecasts prove accurate.

The Nitty Gritty of Nat Gas Supply and Demand

According to the Energy Information Administration Short-Term Energy Outlook (STEO), working natural gas in storage in the Lower 48 will end the current heating season—which ends on March 31—at 1,935 billion cubic feet.

This is 12% above the previous five-year average.

Now, we’re about to head into what the industry refers to as “the refill season”. Normally, the end of the heating season is when inventories are at their lowest. Now, we’re heading into this stockpiling season with inventories that are high. So we will be amassing even more nat gas in inventory as heating demand falls off.

The EIA estimates that we will end the refill season, which runs until the end of October, with 4,029 billion cubic feet. This would be the largest monthly level of nat gas we’ve ever had in storage.

At the end of January, inventories had already reached 2.6 trillion cubic feet.

COVID-19 and the Weather

The COVID-19 outbreak—likely soon to be pandemic—might be the obvious target on which to lay blame for the increasing inventories. After all, it is responsible for demand in crude oil.
Related: 5 Top Alt-Energy Stocks Storming Wall Street

But that is only a piece of the puzzle, with weather, weather, weather topping the list of critical factors that are affecting natural gas inventories.

January 2020 was the fifth warmest January on record—that’s out of over 125 years of data. January 2020 saw average temperatures of 35.5 degrees F across the United States. This is 5.4 degrees more than the 20th Century average, according to the US Department of Commerce’s National Oceanic and Atmospheric Administration.

The problem? It’s just been so warm that the need for heating has been reduced, depressing demand. And while production has not fallen with demand, inventories have bloomed. Add to that unfavorable price scenario the fact that COVID-19 is spooking the market and further denting demand, and you have a perfect storm for lower nat gas prices.

Oftentimes, these lower price points created by subdued demand in one sector courtesy of the mild weather will create additional demand from other segments. Large-volume users such as power plans or iron and steel mills have the ability to switch between nat gas and coal or even petroleum—and they will choose the lowest cost ones. So as natural gas in storage climbs and prices fall, one would expect a bit of an uptick in demand from some of the other sectors.

But it has done little to mediate inventories.

While weather has been the primary driver of the lower nat gas prices, COVID-19 is worth a mention. The virus is expected to strip away 10bn m3 from China’s 2020 gas demand alone, according to Sublime China Information. Most of this demand destruction will be seen in Q1. For China, some are expecting gas demand to return to normal by March, if things don’t get worse—a condition that public health officials are saying is likely to happen.

Production Won’t Fall Off Enough

Natural gas production has shown no signs of slowing throughout 2019. In fact, in 2019, US natural gas production was at record levels, averaging 92.1 billion cubic feet per day. And 2020 isn’t looking any better.
Related: Russia: Coronavirus Impact On Oil Is Worse Than Expected

Towards the end of 2019, average production was higher than at the beginning of 2019, so while the EIA sees monthly production declining in 2020, from 95.4 Bcf/d last month to 92.5 Bcf/d in December, the average for 2020 is still expected to be 2% higher than the average of 2019.

Inventories Up, Prices Down

This weather phenomenon combined with robust production is tanking the price of natural gas. The Henry Hub spot price averaged $2.02 MMBtu. But after the first week of February, prices had fallen to $1.86 MMBtu. Even through the remainder of the heating season, when inventories typically contract, the EIA expects nat gas prices will stay below $2 MMBtu. Prices should tick up in Q2, the EIA says, with an overall average price of $2.53 MMBtu for the year.

Whether its weather or COVID-19, record inventories for nat gas are likely on their way. And with record inventories comes low prices—a fact that offers traders about as much certainty as they’re going to get in this volatile market.

By Julianne Geiger for Oilprice.com
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🛢️ The Odds Are Stacked Against Oil As Recession Looms
« Reply #946 on: March 03, 2020, 01:57:39 AM »
https://oilprice.com/Energy/Crude-Oil/The-Odds-Are-Stacked-Against-Oil-As-Recession-Looms.html

The Odds Are Stacked Against Oil As Recession Looms
By Tsvetana Paraskova - Mar 02, 2020, 4:00 PM CST


The recent slump in Brent Crude prices follows a similar pattern of past slowdowns in global factory output, sparking fears that the market’s fear is not only based on the coronavirus

The recent slump in Brent Crude prices follows a similar pattern of past slowdowns in global factory output, sparking fears that the market’s fear is not only based on the coronavirus

Oil prices slumped by 14 percent in just one week after the market caught the coronavirus panic and feared a significant slowdown in global economy as the outbreak spread to more than 50 countries. 

The oil market joined equity markets in hefty sell-offs as participants feared global oil demand will suffer even more than initially expected from a coronavirus-inflicted economic slowdown.   

Hedge funds and other money managers have been sellers of the equivalent of more than 450 million barrels of the six most important petroleum futures and options since the beginning of 2020, according to estimates from exchanges by Reuters market analyst John Kemp.

The coronavirus outbreak dashed the oil market’s hopes from earlier this year that the phase one U.S.-China trade deal would help global oil demand growth to pick up pace in 2020 from relatively low growth in 2019, due to the trade war and lower growth in China’s economy.

Last week’s sell-offs in oil came after the short selling in oil had slowed down for three consecutive weeks in the week to February 18.

In the week to February 25, hedge funds and other money managers covered shorts in WTI Crude and Brent Crude. The combined net long position—the difference between bullish and bearish bets—actually increased by 33,000 lots to 411,000 lots, and most of the rise was due to short-covering, according to Ole Hansen, Head of Commodity Strategy at Saxo Bank.                                               

This picture of the market, however, was a snapshot as of the week ending February 25, while the carnage on the markets continued the entire week through February 28, so the increased sell-off will show in the Commitment of Traders (COT) report with data to March 3 on Friday.
Related: This Supermajor Is Diving Into The Green Hydrogen Game

But the sentiment in the market has been evident for weeks—traders are pricing in increasingly gloomy forecasts about oil demand growth and economic activity due to the coronavirus outbreak.

Traders and investors fled to safer assets last week, and the yield on the 10-year U.S. Treasury note dropped to a record low. The Fed is signaling that a rate cut is coming soon, with Goldman Sachs even expecting such a cut before the March 17-18 Fed meeting.

Central banks around the world are widely expected step up rate cuts to help economies amid the slowdown in manufacturing activity.

The recent slump in Brent Crude prices follows a similar pattern of past slowdowns in global factory output, such as in the middle of last year or in 2015/2016, and the recessions in 2001-2002 and 2008-2009, Reuters’ Kemp says.   

The carnage in oil markets last week came just a few days before OPEC and its Russia-led non-OPEC partners meet in Vienna on March 5-6 to discuss deeper cuts in response to the price slump and slowing global oil demand. This puts further pressure on the OPEC+ coalition to come up with a unified position of deeper cuts in order to at least prevent another week(s) of plunging oil prices.

“Russia has up until now been holding back, but with oil priced in Russian Ruble falling to an October 2017 low, we may see an increased interest from Moscow in striking a deal,” Saxo Bank’s Hansen said on Friday.

Russia’s President Vladimir Putin told ministers and heads of Russia’s leading oil and gas companies on Sunday that “the current oil prices are acceptable for the Russian budget and our economy.”

Yet, Brent Crude falling to $50 becomes dangerously close to Russia’s breakeven price of $42.40 Brent, especially if OPEC+ do not agree on deeper cuts and send another bearish message of sell-off to the market.

Despite the fact that Russia’s international reserves are enough, “all this does not remove the need for our joint actions including with our foreign partners,” Putin said. 

The OPEC+ format “has already proved to be an efficient tool for ensuring long-term stability in the global energy markets. It has given us additional budget revenues and – this is key – offered possibilities for our oil extracting companies to invest in promising development projects,” Putin said in comments suggesting he continues to view the cooperation with OPEC as positive.

The oil price rout in recent weeks calls for additional action from OPEC and allies just to try to keep oil prices from falling further.

“We believe that anything that falls short of the OPEC+ Joint Technical Committee recommendation of 600Mbbls/d of additional cuts over 2Q20, and extending the current deal through to year-end, will be taken as bearish,” ING strategists Warren Patterson and Wenyu Yao said on Monday. 

By Tsvetana Paraskova for Oilprice.com
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🛢️ SHTF Day ARRIVES in the Oil Market
« Reply #947 on: March 08, 2020, 08:22:19 PM »
Now we are getting SERIOUS!.

RE

Oil crashes by most since 1991 as Saudi Arabia launches price war

By Matt Egan, CNN Business

Updated 10:44 PM ET, Sun March 8, 2020


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New York (CNN Business)Oil prices suffered an historic collapse late Sunday after Saudi Arabia shocked the market by launching a price war against onetime ally Russia.
US oil prices crashed as much as 27% to a four-year low of $30 a barrel as traders brace for Saudi Arabia to flood the market with crude in a bid to recapture market share.
Crude was recently trading down 22% to $32 a barrel. Brent crude, the global benchmark, also plunged 22% to $35 a barrel. Both oil contracts are on track for their worst day since 1991, according to Refinitiv.
The turmoil comes after the implosion of the oil alliance between OPEC and Russia on Friday.

Oil just had its worst day in 11 years as OPEC and Russia fall out over the coronavirus crisis
Oil just had its worst day in 11 years as OPEC and Russia fall out over the coronavirus crisis
Russia refused to go along with OPEC's efforts to rescue the coronavirus-battered oil market by cutting production. The failure of the Vienna meeting left the oil industry shell-shocked, sparking a 10% plunge in oil prices Friday. Oil prices were already stuck in a bear market because of the coronavirus outbreak that has caused demand for crude to fall sharply.
But then Saudi Arabia escalated the situation further over the weekend. The kingdom slashed its April official selling prices by $6 to $8, according to analysts, in a bid to retake market share and heap pressure on Russia.
"The signal is Saudi Arabia is looking to open the spigots and fight for market share," said Matt Smith, director of commodity research at ClipperData. "Saudi is rolling up its sleeves for a price war."
The biggest one-day percentage drop for US oil prices this century occurred in September 2001 when they plunged 15%, according to Refinitiv statistics that go back to 2000.
Analysts said that Russia's refusal to cut production amounted to a slap to US shale oil producers, many of which need higher oil prices to survive.
"Russia has been dropping hints that the real target is the US shale oil producers, because it is fed up with cutting output and just leaving them with space," analysts at energy consulting firm FGE wrote in a note to clients Sunday. "Such an attack may be doomed to failure unless prices remain low for a long time."

The 2014-2016 oil crash caused dozens of oil and gas companies to file for bankruptcy and hundreds of thousands of layoffs. However, the US shale industry emerged from that period stronger and the United States would eventually become the world's leading oil producer.
"The perils of playing a game of brinksmanship with Vladimir Putin were proven in dramatic fashion," Helima Croft, head of global commodity strategy at RBC Capital Markets, wrote in a Friday note to clients. "It is hard to see how the relationship can easily be put back on a solid footing."
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🛢️ Russia Vs. Saudi Arabia: Who Will Win Oil's Price War?
« Reply #948 on: March 09, 2020, 10:10:44 AM »
<a href="http://www.youtube.com/v/oD-hZVlv7Y4" target="_blank" class="new_win">http://www.youtube.com/v/oD-hZVlv7Y4</a>
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Re: Oil Price Crash: Who Cooda Node?
« Reply #949 on: March 09, 2020, 02:51:31 PM »
KSA and Russia smell shale blood and petrodollar weakness imo.  If they weather a couple yrs maybe less they destroy US shale and knock off USD as reserve currency.  Not so sure how KSA will fare on the deal but Russia will be happy.   I personally am of hunch this is absolute global peak oil, once petrodollar cracks and the world goes back to much more of a multicurrency structure at a reduced aggregate oil consumption level.  Loss of USD as reserve currency is loss of global system coherency needed to cohere such an energy guzzling exometabolic system.

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Re: Oil Price Crash: Who Cooda Node?
« Reply #950 on: March 09, 2020, 02:55:27 PM »
Think i am most curious about is what energy prices look like once USD weakens and losses reserve status?  If we had to pay for our own shale energy after this event with say a 30-40% weakened dollar and let the industry turn a profit id guess we'd need prices >$120/bbl.

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Re: Oil Price Crash: Who Cooda Node?
« Reply #951 on: March 09, 2020, 03:14:02 PM »
KSA and Russia smell shale blood and petrodollar weakness imo.  If they weather a couple yrs maybe less they destroy US shale and knock off USD as reserve currency.  Not so sure how KSA will fare on the deal but Russia will be happy.   I personally am of hunch this is absolute global peak oil, once petrodollar cracks and the world goes back to much more of a multicurrency structure at a reduced aggregate oil consumption level.  Loss of USD as reserve currency is loss of global system coherency needed to cohere such an energy guzzling exometabolic system.

I saw a headline;ine this morning where Russia said it could brazen out $25 oil for ten years. Don't know if it's true or not, but it's their marketing position.
https://oilprice.com/Latest-Energy-News/World-News/Russia-Can-Live-With-25-Oil-For-Years.html
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Re: Oil Price Crash: Who Cooda Node?
« Reply #952 on: March 09, 2020, 03:24:36 PM »
Surly, Now way will they need a decade for this.   Shale oil (not so much nat gas) has been a QE enabled stunt the keep the petrodollar thing going and price oil where we need it imo.  The debt load and soon to be wall of declines mean even if Russia and KSA werent going for blood we'd be in trouble the next two yrs anyway. 

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Re: Oil Price Crash: Who Cooda Node?
« Reply #953 on: March 09, 2020, 04:45:36 PM »
If you watched the video I put up from Bloomberg, the Shale Frackers are Hedged for 2020, and will probably survive this year except the weakest ones.

The shakeout comes in 2021.  Both the Ruskies and the Towel Heads can easily make it through to 2021.

We'll have a nice year of Cheap Gas and Happy Motoring ahead!  :icon_sunny:

Cheap Plane Fares also, but where you gonna travel to?  China...out.  Italy...out.  Phillipines...out.  Seattle...out.  lol.

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Re: Oil Price Crash: Who Cooda Node?
« Reply #954 on: March 10, 2020, 03:41:41 AM »
Surly, Now way will they need a decade for this.   Shale oil (not so much nat gas) has been a QE enabled stunt the keep the petrodollar thing going and price oil where we need it imo.  The debt load and soon to be wall of declines mean even if Russia and KSA werent going for blood we'd be in trouble the next two yrs anyway.

Yesterday @4P I turned on CNBC to watch the hired bobbleheads explain away the crash. One analyst talked about the "input price" of shale being $40/bbl. I don't know what "input price" precisely means, but I assume that is their Capex and labor cost input. Given the many past discussions herein about shale being kept afloat by free money for frackers, with past unpaid loans rolled over and remortgaged by ever so eager banks, it's difficult to imagine this act staying together for long.
"Do not be daunted by the enormity of the world's grief. Do justly now, love mercy now, walk humbly now. You are not obligated to complete the work, but neither are you free to abandon it."

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Re: Oil Price Crash: Who Cooda Node?
« Reply #955 on: March 10, 2020, 06:19:02 AM »
If you watched the video I put up from Bloomberg, the Shale Frackers are Hedged for 2020, and will probably survive this year except the weakest ones.

The shakeout comes in 2021.  Both the Ruskies and the Towel Heads can easily make it through to 2021.

We'll have a nice year of Cheap Gas and Happy Motoring ahead!  :icon_sunny:

Cheap Plane Fares also, but where you gonna travel to?  China...out.  Italy...out.  Phillipines...out.  Seattle...out.  lol.

RE

The hedges probably don't matter so much when KSA and Russian realize they can push USD into sov default mode via forced inflation and massive QE4 rounds.  They both have much lower pumping costs and in KSA's case they can probably get access to zero or soon to be negative interest rate money to float the boat while they blow our currency up.  Shale on the other hand has a big wall of junk bonds coming at them they know they can't pay and short of direct nationalization will not get the funds needed to continue producing at current levels.  But really its simple thermodynamics can not be papered over.

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🛢️ Saudi Arabia’s Oil War Could Bankrupt The Kingdom
« Reply #956 on: March 16, 2020, 04:20:30 AM »
They're already Bankrupt.  ::)  Living off the Credit Card.

RE

https://oilprice.com/Energy/Energy-General/Saudi-Arabias-Oil-War-Could-Bankrupt-The-Kingdom.html

Saudi Arabia’s Oil War Could Bankrupt The Kingdom
By Simon Watkins - Mar 15, 2020, 6:00 PM CDT


Those with a functioning memory may have thought that last week’s decision by Saudi Arabia to maximise oil production to crash oil prices and bankrupt U.S. shale producers was an early April Fool’s Day joke. Apparently, though, it is not, and collective amnesia seems to have gripped senior Saudis and other OPEC members alike about how disastrous the last Saudi Arabia-led attempt to destroy the U.S. shale oil industry from 2014 to 2016 actually was. Appalling though the consequences were last time for Saudi and its now-much-poorer allies, this time around things are likely to be much, much, worse.

The last time the Saudis tried this exact same strategy in 2014, it had a much greater chance of success than it does now. Back then, it was widely assumed that U.S. shale producers could not produce oil on a sustained basis for a breakeven price of less than around US$70 per barrel of Brent. Saudi also had record high foreign assets reserves of US$737 billion in August 2014, allowing it real room for manoeuvre in terms of sustaining its SAR-US$-currency peg and covering the huge budget deficits that would be caused by the oil price fall caused by overproduction. In addition, Russia at that point was just an interested observer on the sidelines.

Saudi Arabia was so confident in its plan that in October 2014 during private meetings in New York between Saudi officials and other senior figures in the global oil industry, as analysed in full in my latest book on the global oil markets, the Saudis revealed that the Kingdom was willing to tolerate Brent prices ‘between US$80-90 per barrel for a period of one to two years’. This was a 180 degree turn from the previous understanding by other OPEC members that Saudi was their champion, doing its best to keep oil prices high in order to boost the prosperity of OPEC member states. Saudi, nonetheless, at the New York meeting, made it clear that it had two clear aims in pursuing its overproduction/oil price crashing strategy. The first of these was to destroy (or at least slow down progress in) the developing U.S. shale energy industry and the second was to pressure other OPEC members to contribute to supply discipline. This marked a significant divergence from the acceptable range of prices previously stated by then-Saudi Oil Minister Ali al-Naimi as being: “US$100, US$110, US$95,’ per barrel.
Related: Saudi Arabia Strikes Back At Russia In Key Oil Market

Within the space of just a few months of embarking on this shale-destruction strategy, though, it became extremely clear to the Saudis that they had made a terrible mistake in underestimating the ability of the U.S. shale sector to reorganise itself into a much tighter operation than they had thought possible. It transpired that many of the best operators in the optimal regions, such as the Permian, were able to not just breakeven at price points above US$30 per barrel of Brent but also to make decent profits at points above US$35-37 per barrel area. U.S. shale players, in large part through the advancement of technology, were quickly able to drill longer laterals, manage the fracking stages closer and maintain those fracks with higher, finer, sand.

This allowed for increased recovery for the wells drilled, in conjunction with faster drill times. They also started to gain cost benefits from multi-pad drilling and worked out the optimal well spacing for efficient development, further allowing them to reduce costs. Crucially, the inexorable rise of the U.S. shale sector allowed the U.S. to reduce its energy dependence on Saudi and to broaden out the scope of its geopolitical clout even more by dint of becoming the number one oil producer in the world itself.

Given these developments, during the two years alone (2014-2016) that this Saudi strategy lasted, OPEC member states lost a collective US$450 billion in oil revenues from the lower price environment, according to the IEA. They are still dealing with trying to fill in holes in their foreign exchange reserves and budgets accrued as oil prices were pushed down from over US$100 per barrel of Brent to below US$30 per barrel.

Saudi Arabia itself moved from a budget surplus to a then-record high deficit in 2015 of US$98 billion and spent at least US$250 billion of its foreign exchange reserves over that period that even senior Saudis have said are lost forever. Even before this new oil price war was launched, Saudi Arabia was facing sizeable budget deficits every year until probably 2028 by most projections, with a budget breakeven price per barrel of Brent this year of US$84 (that does say US$84, yes).

So bad was Saudi Arabia’s economic and political situation back in 2016 that the country’s deputy economic minister, Mohamed Al Tuwaijri, stated unequivocally – and completely unprecedented criticism of government policy from a Saudi minister - in October 2016 that: “If we [Saudi Arabia] don’t take any reform measures, and if the global economy stays the same, then we’re doomed to bankruptcy in three to four years.” That is to say, that if Saudi kept overproducing to push oil prices down – just as it is doing right now, yet again - then it would be bankrupt within three to four years.

Three to four years, though, now looks optimistic as it has to be remembered that back in 2016, the Saudis did not expect that the U.S. shale sector would continue to grow in output capability or that the budget breakeven price for Russia would be as low as US$40 per barrel. What this means in purely empirical terms, is that the U.S. and Russia can absolutely afford to sit back for much longer than Saudi with oil prices at or below US$40 per barrel and, quite aside from the absolute level of oil price, both benefit in key broader ways as well.

For the U.S., there are economic benefits which, especially in a year in which there will be negative economic effects from the coronavirus, will mean significant political benefits too. As a rule of thumb, it is estimated that every US$10 per barrel change in the price of crude oil results in a 25-30 cent change in the price of a gallon of gasoline, and for every 1 cent that the average price per gallon of gasoline falls, more than US$1 billion per year in additional consumer spending is freed up. Politically this has enormous ramifications for a sitting president seeking re-election in the U.S., as Donald Trump is.
Related: Yergin: No End In Sight For The Oil Price Crisis

According to NBER statistics, since World War I the sitting U.S. president has won re-election 11 times out of 11 if the U.S. economy was not in recession within 24 months ahead of an election. However, only one president out of seven who went into a re-election campaign with the economy in recession actually won (Calvin Coolidge in 1924). The very idea that any U.S. president would allow the country’s hugely geopolitically important shale sector to be seriously damaged in any way is jejune at best, and within the last few days President Trump has stated that a raft of new measures to support the sector is being considered. These may also include the double-sided winning strategy of using lower priced oil bought from shale producers to boost the U.S.’s Strategic Petroleum Reserve.

For Russia, meanwhile, whose core foreign policy strategy under President Putin has always been ‘create chaos and then project Russian solutions and therefore power into that chaos’ Saudi Arabia’s oil price war could not be better. Firstly, if oil settles back at around the US$40 per barrel of Brent level when Chinese demand comes back in scale at the end of this month, Russia is fine from a budget perspective and its oil companies can produce as much oil as they want. Even if it does not trade around those levels, Russia is still going to benefit from the fact that twice now in the space of less than 10 years Saudi has declared economic war on its only real ally in the world – the U.S.

Already in a controlling position in all key countries in the Shia crescent of power in the Middle East – Lebanon, Syria, Iraq, Iran, and Yemen (via Iran) – Russia continues to work on those countries on the edges of the crescent in which it already directly or indirectly has a foothold. These include Azerbaijan (75 per cent Shia and FSU state) and Turkey (25 per cent Shia and furious at not being accepted fully into the European Union), although others remain longer-term targets, including Bahrain (75 per cent Shia), and Pakistan (up to 25 Shia and a home to sworn-U.S. enemies Al Qaeda and the Taliban).

And all of this comes at a time when the current de facto ruler of Saudi Arabia – Crown Prince Mohammad bin Salman (MbS) – is facing the most serious crisis to his authority. This was underlined only a few days ago when reports came through that Salman had ordered another round-up of his high-ranking opponents (the previous major one was at the end of 2017 in the notorious Ritz-Carlton round-up). This included Prince Ahmed bin Abdulaziz, a younger brother of King Salman, and Prince Mohammed bin Nayef, the King’s nephew and the former crown prince. According to numerous reports, the health of the 84-year old current king, Salman, is very poor, and this has prompted a jostling of senior royal Saudis for the succession.

It should be remembered that MbS was not always the natural successor to the current King: prior to June 2017 when the succession was changed in MbS’s favour, the heir-designate was the recently-arrested Prince Mohammed bin Nayef, whilst the also recently-arrested Prince Ahmed was one of three members of the Allegiance Council (the senior royal organisation that endorses the line of succession), to oppose MBS’s appointment as crown prince in place of his cousin bin Nayef in 2017. Precisely why MbS thinks that potentially bankrupting his country, spending the remainder of its dwindling foreign assets reserves, and alienating its only significant ally in the world is a mystery but whatever the reason both the U.S. and Russia will be perfectly happy to watch on the sidelines to see exactly how it all pans out for MbS.

By Simon Watkins for Oilprice.com
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Offline edpell

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Re: Oil Price Crash: Who Cooda Node?
« Reply #957 on: March 16, 2020, 05:57:04 AM »
I have a bottle of Champagne ready for when KSA dies. Good riddance too bad rubbish.

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🛢️ Oil Plunges As Saudis Boost Exports To Record High
« Reply #958 on: March 18, 2020, 08:20:41 AM »
https://oilprice.com/Energy/Energy-General/Oil-Plunges-As-Saudis-Boost-Exports-To-Record-High.html

Oil Plunges As Saudis Boost Exports To Record High
By Tom Kool - Mar 17, 2020, 2:00 PM CDT


After having instructed Aramco to boost production to unseen levels, Saudi Arabia now plans to boost oil exports in May to a record 10 million barrels per day, causing oil prices to fall once again.

In order to achieve this level of exports, the Kingdom is trying to reduce its domestic consumption, which it expects to replace with natural gas from the Fadhili gas plant.

Saudi Arabia’s Energy Ministry issued a statement on Tuesday claiming that “Saudi Arabia will utilize the gas produced from the Fadhili gas plant to compensate for around 250,000 barrels a day of domestic oil consumption, which will enable the Kingdom to increase its crude exports during the coming few months to exceed 10 million barrels a day,”.

Saudi Arabia may struggle to free up more crude oil for exports in the next couple of months as power consumption is set to increase during the hottest months of the year in the country (May to September). According to the EIA, in 2018, Saudi Arabia reported burning an average of 0.4 million barrels per day (b/d) of crude oil for power generation, the lowest amount since at least 2009.
Related: Is The Oil Price Crash Good For Renewable Energy?

In the meantime, natural gas consumption has been rising steadily since 2009, and is expected to rise this decade.

Saudi

Riyadh has made a 180-degree turn in the last two weeks, after its proposal to deepen the OPEC+ output cut deal by 1.5 million bpd got rejected by Moscow, which despite the gloomy demand picture in oil markets saw no reason to make additional production cuts.

Saudi Arabia’s decision to flood an already woefully oversupplied market has effectively started an oil price war in which Riyadh is aiming to squeeze any competition out of core markets such as Europe and Asia. The Kingdom followed up on its threat to flood the markets with oil by chartering as many as 31 supertankers to ship the extra crude.

In the last couple of days, Aramco has offered their Arab Light and Arab Heavy blends for between $25 and $28 dollar per barrel in Europe, and today’s announcement to increase exports to 10 million bpd could send prices even lower.

This scorched earth tactic from Saudi Arabia is quite surprising, given the fact that the Kingdom has consistently overcomplied with its OPEC+ production quota, which saw its total crude exports fall below 7 million barrels per day in January/February.

As the pain for oil exporters continues to increase, it is unlikely that Saudi Arabia nor Russia will unilaterally take action to once again cut production, as neither of them will want to be seen to have lost the oil price war.

Bob McNally, former energy advisor for President George W. Bush and founder of Rapidan Group was quoted by CNBC as saying that “National prestige is involved here, honor is involved and political power is involved. And political leaders will suffer costs in a war if they believe they are pursuing a greater and more important aim,”.

With none of the parties planning to return to the negotiating table, what is next for oil?

Related: Is $10 Oil On The Horizon?

Most likely, prices are set to fall further until most high-cost producers are squeezed out of the market, or at least until either Riyadh or Moscow can claim some sort of victory by inflicting sufficient damage to opponents.

In the short term, this will likely mean that both Saudi Arabia and Russia and even the UAE will continue to flood the market, or even talk them down in case they cannot free up more oil for exports and that oil prices will fall into the lower $20s, or below.

In its second price forecast in less than two weeks, investment bank Goldman Sachs slashed its price outlook for WTI to just $22 per barrel in Q2, while cutting its outlook for Brent oil to just $20 per barrel.

Goldman cited the combination of the Covid-19 oil demand shock and the price war as the reason for its lower forecast. The bank also believes that oil is likely to stay lower for longer as it will take a long time for inventories to come down again.

By Tom Kool for Oilprice.com
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Offline Eddie

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Re: Oil Price Crash: Who Cooda Node?
« Reply #959 on: March 18, 2020, 01:14:15 PM »
Demand destruction.

I can't remember the last time we had gas this cheap....but according to the internet....looks like it was about 2003 sometime.

Screen Shot 2020 03 18 at 3 08 45 PM
Screen Shot 2020 03 18 at 3 08 45 PM

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